ADM reached the settlement without admitting or denying any wrongdoing, and said the Justice Department, which had been conducting its own probe, has closed its investigation without bringing criminal charges.

The agreement draws a line under a years-long scandal that forced the company, one of the world’s largest agricultural traders and processors, to twice revise its financial reports, and sparked heavy share losses and shareholder lawsuits.

WHY IT MATTERS: ADM is one of the world’s largest agricultural traders and processors.

The SEC on Tuesday separately sued ADM’s former Chief Financial Officer Vikram Luthar for his role in the allegedly fraudulent adjustments and filed settled charges against two other top executives.

The SEC settlement includes charges brought against former Nutrition business unit President Vince Macciocchi and Ray Young, who was ADM’s CFO until 2022. Macciocchi has agreed to pay more than $529,000 in fines and other fees, while Young will pay more than $650,000.

The SEC complaint against Luthar, filed in the U.S. District Court for the Northern District of Illinois, accuses him of breaking federal securities laws by helping ADM mislead investors and by failing to properly report and account for the company’s activities.

Regulators allege he played a role in fraudulent conduct, helped ADM violate rules and benefitted from the fraud. The SEC is seeking to bar Luthar from serving as an officer or director of a public company, and force him to pay a penalty and other fees.

Luthar’s attorney Junaid Zubairi called the allegations “meritless” and said ADM’s own investigation found that Luthar had not acted improperly.

A lawyer for ADM declined to comment further. A lawyer for Macciocchi also declined to comment and a lawyer for Young did not respond immediately to a request for comment.

The U.S. Attorney’s Office in Manhattan did not immediately respond to requests for comment on the closing of the criminal case.

In a statement on the company’s website, CEO Juan Luciano said the company is pleased to put the matter behind them and has taken “extensive actions” to enhance internal controls.

ADM shares were near unchanged in after-hours trading on Tuesday.

Probe centred on nutrition unit

Federal prosecutors opened a probe in early 2024 into accounting issues at ADM tied to the performance of its highly touted “Nutrition” unit, Reuters previously reported. The government investigations as well as an internal inquiry led to the exit of Luthar.

The ADM investigation involved internal company transactions that inaccurately reported financial results for the “Nutrition” unit, which was launched in 2018 to accelerate development of high-value specialty ingredients for the food, beverage and animal feed industries.

ADM cut a combined $228 million from Nutrition’s operating profit between 2018 and 2023 as a result of the revisions, company filings show.

News of the accounting irregularities broke in early 2024, sending ADM shares plummeting and heaping pressure on top executives, including Luciano, as top executive compensation had been tied to growth in the Nutrition unit.

The investigation into “intersegment” transactions between the company’s business segments focused on whether ADM deliberately boosted Nutrition’s performance by providing it with below-cost goods from other company units.

The SEC considered ADM’s cooperation in accepting the settlement offer, the regulator said in a statement.

Specifically, the company conducted an internal investigation, voluntarily reported its findings to agency staff, and provided the staff with additional analyses from an outside accounting expert.

ADM’s remedial measures included implementing new internal accounting controls around intersegment transactions, amending its policies and procedures, and testing the effectiveness of its new controls, among other things, the SEC said.

— Additional reporting by Jonathan Stempel and Jasper Ward in Washington and P.J. Huffstutter in Chicago

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Why it matters: ADM is a major purchaser of Canadian crops

Chicago-based ADM said in February it would cut up to 700 jobs and reduce costs by $500 million to $750 million (C$712 million to C$1.02 billion) over the next three to five years, after posting its lowest fourth-quarter adjusted profit in six years. The job cuts would represent about 1.7 per cent of the company’s global workforce.

ADM said in a statement it was critical to ensure its cost structure allows the firm to remain globally competitive.

“The actions the company is taking are part of the targeted workforce reduction and cost saving actions we announced earlier this year,” it said.

The statement did not mention any specific locations, divisions or targets.

Reuters could not confirm the number of job cuts this week.

The new wave of cuts began at ADM’s Swiss office, which is its European headquarters, one source said, speaking on condition of anonymity.

The cuts would be disruptive to ADM’s agricultural services and oilseeds business, said another source, as employees, including experienced traders, worried over who might be targeted next. That unit, ADM’s largest, houses the company’s global crop trading, transportation and storage, and oilseed processing operations.

The division appeared to be the focus for this round of cuts, rather than ADM’s nutrition unit, one of the sources added.

Each region where ADM operates was given specific cost-cutting targets by Chief Financial Officer Monish Patolawala, according to one of the sources.

ADM tapped Patolawala for the job last July as it dealt with multiple U.S. investigations, including a criminal one, related to accounting irregularities.

— Additional reporting by Karl Plume in Chicago

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The U.S. Department of Agriculture is still finalizing the plan, which is likely to prioritize hog and soybean farmers, the products most affected by the trade dispute between China and the United States.

The world’s two largest economies have been embroiled in a 10-month trade war that has cost billions, roiled global supply chains and rattled financial markets. American farmers, who helped carry President Donald Trump to his surprise 2016 election win, have been among the hardest hit.

USDA in 2018 pledged up to $12 billion in aid to farmers to help offset their crop losses and has to date paid $8.52 billion (all figures US$). Trump has said the next round of aid could reach $15 billion.

The United States hiked tariffs on $200 billion worth of Chinese goods last Friday, escalating the trade dispute as the latest round of talks in Washington to resolve it ended with no progress. Beijing responded with retaliatory tariffs, and the escalation may not be over.

Earlier this week soybean prices fell to their lowest in a decade, while benchmark cotton futures dropped to a three-year low.

One industry source briefed on the plan said it was likely to feature a purchasing and direct payments program through USDA’s Commodity Credit Corporation, a Depression-era program created to support farm income, rather than going through Congress to approve the funds.

“This package seems to be driven much more by what’s going in with China,” one of the sources said. “Therefore you might see the payment rates or the percentage rate that each commodity could get quite a bit different,” he said.

USDA did not respond to requests for comment.

‘Fast-track’

While the White House had discussions about another round of aid, no plan was in the works at USDA until last week when Trump announced the second package, one of the sources said, adding that soybean and pork producers were likely to be prioritized.

Kirk Leeds, CEO of the Iowa Soybean Association, said USDA had contacted it and other farm groups for suggestions on a new package last week.

“The program they had before made a lot of sense,” Leeds said. “My anticipation is it’ll look very similar to the payments that we had before.”

The Trump administration wants any trade deal with China to include purchases of more than $1.2 trillion worth of American products, including agricultural commodities and industrial goods.

The countries appeared on track for an agreement before relations soured earlier this month. Sources said Beijing had backtracked on a series of commitments, prompting the United States to implement a previously delayed hike in tariffs on $200 billion worth of Chinese goods.

The “dynamic changed suddenly,” a second source said, noting USDA officials were racing to put something together.

Prolonged economic pain across the American farm belt could complicate Trump’s re-election efforts. Farmers have been key supporters of the president, even as his actions on U.S. trade policy have sunk key crop prices.

One of the sources said an announcement was likely to come next week.

Ted McKinney, USDA’s undersecretary for trade, told a gathering of the National Association of Farm Broadcasting on Tuesday the new package would be ready in days, “not weeks or months,” industry publication Agri-Pulse reported.

–– Reporting for Reuters by Humeyra Pamuk and Chris Prentice; additional reporting by Tom Polansek.

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U.S. law requires ethanol to be blended into gasoline but domestic demand for the biofuel added to gasoline has flatlined in recent years as consumers have opted for greater fuel-efficiency and electric vehicles. Ethanol producers have been forced to look abroad for demand growth.

They had banked on China to buy excess capacity, but punitive tariffs in the last two years have halted buying, exacerbating the industry’s substantial overcapacity. ADM executives acknowledged that problem on Friday when the company reported that profit tumbled 41 per cent in the first quarter.

ADM said Friday it may spin off three large dry mills, which primarily produce only ethanol, after unsuccessfully searching for a buyer for those mills since 2016. At the time, its move to exit ethanol shocked the industry due to ADM’s status as a leading biofuels producer.

ADM chief financial officer Ray Young said on an earnings call that the industry must stop the self-inflicted wounds.

“Our decision to monetize the dry mills is frankly a strategic decision on our part to basically help the industry consolidate,” Young said.

Last week, U.S. ethanol production hit 1.05 million barrels per day, highest in at least five years seasonally, according to U.S. Energy Information Administration data. Inventories climbed to 22.75 million barrels, not far from the record of 24.45 million hit in March.

Producers such as Green Plains and Pacific Ethanol have laid off workers and idled or sold plants to stay afloat during the sustained downturn. Ethanol prices are down 42 per cent in the last five years, while Green Plains and Pacific Ethanol have seen their shares fall 33 per cent and 92 per cent, respectively, in that time.

“We don’t have a demand problem as much as we have a supply problem. There are just too many inefficient plants out there, and they need to go before we see a rebound,” said one ethanol trader on Friday. “It’s not like we are producing DVDs or CDs that no one wants.”

China emerged in 2015 as a significant buyer for the first time, and subsequent plans to use ethanol in gasoline nationwide by 2020 raised hopes that the world’s second largest economy would scoop up excess U.S. supply.

But Beijing hiked import taxes on the biofuel in 2017, and then twice in 2018 as the U.S. and China ratcheted up the stakes in a trade war that has killed demand for U.S. imports. The two countries are still negotiating a trade deal that would end the tariff conflict.

Young said margins will improve with resolution of the trade dispute and purchase commitments from China expected to accompany any pact.

Still, some say that will be a temporary boost.

“Exports may provide some temporary relief,” said Scott Irwin, an agricultural economist at the University of Illinois. “(But) without substantial growth from higher ethanol blends you are looking at situation where the U.S. ethanol industry has to shrink” over the next five-10 years.”

— Reporting for Reuters by Chris Prentice, Jarrett Renshaw and P.J. Huffstutter.

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The United States and China are trying to hammer out a deal to end a months-long trade war that has cost the world’s two largest economies billions and roiled global financial markets and supply chains.

U.S. President Donald Trump’s administration is pressing Beijing to address concerns over Chinese practices on intellectual property rights, forced technology transfer and industrial subsidies.

Washington is also pushing for greater market access for agricultural products by seeking to reduce tariffs, lift bans and overhaul regulatory processes. The United States has asked Beijing to lift its bans on the drug ractopamine, which some U.S. pork producers use to boost hog growth, and on U.S. poultry, said two sources briefed on the discussions who spoke on condition of anonymity.

China’s negotiators have resisted lifting the ractopamine restriction even though Beijing may boost imports of U.S. pork as its own hog herd is devastated by disease, the sources said.

Huge losses in China’s hog herd due to African swine fever have left the world’s largest pork market facing a protein deficit, stoking hopes among U.S. pork and poultry producers.

“I think that China will do anything possible to make it easier for them to import protein,” said Bob Brown, an independent U.S. livestock market analyst. “This is such a gigantic thing,” he said of African swine fever.

Up to 200 million pigs could be culled or die from infections as the disease spreads through China, reducing the nation’s pork output by 30 per cent from 2019, according to Rabobank.

Iowa State University agricultural economist Dermot Hayes said he expects China will import about four million to six million tonnes of pork in 2020, following losses in Chinese herds. The amount imported from the U.S. will depend on a trade deal, because Beijing maintains tariffs on shipments of U.S. pork and has alternative suppliers, he said.

The Chinese poultry market also “has tremendous potential” for U.S. producers, said Jim Sumner, president of the USA Poultry and Egg Export Council in Stone Mountain, Georgia, valuing it at $500 million (all figures US$).

“With China’s situation with African swine fever, they’re going to have a real protein shortage in the near future,” he said.

The U.S. Department of Agriculture projects China’s total chicken imports will surge 68 per cent this year to 575,000 tonnes, not including popular chicken feet, as African swine fever spurs consumers to turn to proteins other than pork. The disease is fatal to pigs but not harmful to humans.

Beijing has banned all U.S. poultry and eggs since January 2015 due to an avian influenza outbreak, which has been over for years. That caused imports to tank after the U.S. shipped $390 million worth of poultry and products to China in 2014. The following year, shipments were less than a fifth of that, at $74 million.

China lifted a similar restriction on poultry from France last month, and last year dropped duties on U.S. white-feathered broiler chickens. A total lifting of the ban would reopen the gates for U.S. poultry to compete in the world’s largest, and best-paying, market for products like chicken feet, and benefit companies such as Sanderson Farms.

While it looks increasingly likely China may lift its ban on U.S. poultry, Beijing is seeking a “two-way street” and would want to be able to export some poultry products to the United States as well, two sources said.

China’s ministry of agriculture and rural affairs did not respond to a request for comment. A spokeswoman for the U.S. Trade Representative’s office declined to comment.

A U.S. meat exporter said officials from the USTR indicated that China will not drop its ban on ractopamine, though trade talks are still ongoing.

Chinese authorities blocked the use of ractopamine in livestock in 2002. They say it can cause health problems in people and is too similar to clenbuterol, an illegal additive in pig feed used to keep meat lean. The European Union also prohibits ractopamine, although the U.S. and other countries say it is safe.

Keeping the ban on ractopamine could benefit companies such as Smithfield Foods, a subsidiary of Hong Kong-listed WH Group that already raises most of its hogs without the drug. WH Group declined to comment. Smithfield Foods did not respond to request for comment.

Other U.S. pork producers that use the drug could benefit if China dropped its ban.

“It’s unfortunate news,” Christine McCracken, senior protein analyst with Rabobank in New York, said of the likely continuance of the ractopamine ban.

In Canada, where ractopamine for hogs is currently marketed by Zoetis under the brand name Engain 20, the drug’s use is allowed only as a feed additive for finishing barrows and gilts weighing at least 70 kg (154 lbs.).

Canada also operates a certification program for pork exports to ensure they originate from pigs never fed and/or exposed to the drug. The program includes record-keeping and audits at the farm, feed mill and slaughter plant levels.

— Reporting for Reuters by Chris Prentice in Washington and Tom Polansek in Chicago; additional reporting by Dominique Patton in Beijing. Includes files from Glacier FarmMedia Network staff.

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U.S. President Donald Trump has sought better terms of trade with the EU, as well as China, Japan, Canada and Mexico. EU negotiators said they would discuss industrial goods including autos, but not agricultural products — a blow to U.S. farmers, who would like to boost access to the lucrative European market.

“We have made very clear agriculture will not be included,” Cecilia Malmstrom told a group of reporters on Wednesday, though she said the two sides had not yet agreed on that issue.

Malmstrom was speaking after meeting with U.S. Trade Representative Robert Lighthizer and ahead of a meeting with U.S. and Japanese leaders to discuss World Trade Organization reform this week.

USTR notified lawmakers in October of its plans to pursue the trade talks with the European Union. The EU was in the final stages of preparing its negotiating mandates for the talks, Malmström said.

In separate remarks to reporters on Wednesday, Republican Senator Chuck Grassley from Iowa said agriculture would need to be a part of the agreement to have support from lawmakers. Iowa is a top corn-producing state.

“I don’t know how anybody in Europe that wants a free trade agreement with us can expect it to get through the U.S. Senate if you don’t want to negotiate agriculture,” Grassley said.

Grassley and Malmstrom were to meet later that day, he said.

Europe has received no assurance that U.S. auto tariffs would be put on hold during the discussions, but believed the European bloc would not be affected by such tariffs while the talks were ongoing, Malmstrom said.

The European Commission executive said it was preparing two mandates — one to cover removal of tariffs on industrial goods and another on areas of possible regulatory co-operation in areas such as pharmaceuticals, medical devices and cyber security.

The mandates would first need to be cleared by the commissioners before being presented to the EU’s 28 member countries for approval.

It was unclear how long this process would take and when formal talks could be held. Experts from both sides will conduct discussions about technical matters this week.

— Reporting for Reuters by Chris Prentice; additional reporting by Philip Blenkinsop in Brussels and David Shepardson in Washington; writing by Lisa Lambert.

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U.S. objections to Canada’s protected internal market for dairy products was a major challenge facing negotiators during talks on the new U.S.-Mexico-Canada Agreement (USMCA), and the issue remains a problem.

White House economic adviser Larry Kudlow on Tuesday said President Donald Trump would sign the deal on the sidelines of the Group of 20 summit in Argentina this week.

But with time running out there are still disagreements on dairy and other issues, and Canadian officials were slightly less emphatic about the chances of the deal being inked on Nov. 30 as originally planned.

“Our objective … (is) to get to a Nov. 30 signing, that’s what we are working towards,” Canadian Foreign Minister Chrystia Freeland told reporters.

Speaking separately, a senior Canadian official said, “We are still tracking towards signature of the agreement but… the discussions around the signing and the details remain to be worked out.”

Officials said differences sometimes emerge as bureaucrats examine language agreed upon by negotiators.

The sources said Ottawa was pushing back against U.S. demands for more information about Canada’s supply management system, a complex arrangement of production quotas and import tariffs designed to protect the domestic industry.

“There’s been good progress, but it’s true that not everything is done. There is some concern on dairy — there are transparency issues with Canada’s pricing scheme,” one of the U.S. sources said.

During negotiations, Trump repeatedly demanded concessions on dairy and accused Canada of hurting U.S. farmers with high tariffs.

Under the pact, Canada agreed to scrap a class of milk that U.S. producers said was tantamount to circumventing anti-dumping rules. It also offered around 3.5 per cent of the domestic market. In exchange, the U.S. backed off efforts to force Canada to scrap supply management.

“The U.S. made a big compromise on that. … We want to know what they will do to prevent another circumvention,” said the source, who asked to remain anonymous.

Ottawa is uneasy over the amount of information Washington is seeking, said a Canadian source briefed on the matter.

“We really don’t want to be renegotiating the agreement,” said a second Canadian source.

The office of U.S. Trade Representative Robert Lighthizer was not immediately available for comment.

Michael Dykes, CEO of the International Dairy Foods Association, said that during the talks Washington sought to ensure it had closed any loopholes that would prevent access on dairy.

“The U.S. wanted greater transparency to avoid any trickery … (it) has a long history of challenges trying to determine what exactly the dairy policy is in Canada,” he said in an interview.

Earlier this month a source said Canada was resisting U.S. attempts to change the USMCA text and the issue might have to be referred to ministers.

— Reporting for Reuters by Chris Prentice and David Ljunggren.

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Pruitt led U.S. President Donald Trump’s aggressive efforts to roll back environmental protections. He drew the ire of farmers and antagonized their powerful lobby in Washington when he relaxed enforcement of a mandate to include biofuels such as ethanol — made from grains — in the country’s gasoline and diesel supply. Biofuels are an important source of demand for corn.

Pruitt resigned on Thursday after heavy criticism in Congress for ethics-related controversies.

His temporary replacement is deputy EPA administrator Andrew Wheeler, a former Senate staffer and lobbyist who had done a stint at the EPA earlier in his career. He is a long-time Washington insider with connections to oil, coal and biofuels.

Wheeler is best known for his work with coal firms such as Murray Energy. He has also consulted for biofuels association Growth Energy and agricultural merchant and biofuels producer Archer Daniels Midland, according to his public financial disclosures.

He takes the helm at a time of uncertainty over the agency’s approach to the U.S. Renewable Fuel Standard (RFS), a 2005 law that requires greater use of biofuels such as ethanol in the nation’s fuel.

Midwest farmers and their representatives say Pruitt weakened the RFS by trying to lower the costs of compliance for oil refiners.

Wheeler may pursue some of the similar goals, biofuels groups say, but they believe he will be more transparent and not “colour outside the lines” as they claim Pruitt did.

It is unclear exactly what Wheeler’s plans are for the RFS, but during a Senate hearing in November, he said in response to questioning that he respected the program as the “law of the land.”

“No one can bank on the outcome, but a fair process is bankable with Andy Wheeler,” Brooke Coleman, head of the Advanced Biofuels Business Council, said on Friday.

Wheeler is more of a pragmatist and likely to pay more heed to the way things are typically done in Washington, said Michael McAdams, head of the Advanced Biofuels Association.

“The difference is … Pruitt had an absolute disdain for Washington,” McAdams said. “Pruitt went behind closed doors and took an authoritative position. That’s not how Andy will operate.”

Biofuels groups said Pruitt’s decisions on the mandate were curbing domestic ethanol consumption. Under Pruitt, the EPA issued mass waivers for small refineries from their annual requirements to use biofuels. Ethanol and farm groups have sued the EPA over the refinery exemptions.

Ongoing discussions among refiners, farm groups, politicians and officials on changes to the RFS have led to a growing rift between two of Trumps constituencies: the oil and farm lobbies.

Trump himself has personally waded into the debate but has been unable to broker a deal that would satisfy both sides. They reached an impasse a month ago when powerful Iowa Republican Senators Chuck Grassley and Joni Ernst fought against some of the changes being pushed by Republican Senator Ted Cruz from Texas and oil refiners.

In a Tweet on Thursday afternoon Ernst said: “I have confidence that Andrew Wheeler will be a good partner at #EPA, and I look forward to working with him on the #RFS.”

The Senate confirmed Wheeler in April with a 53-45 vote, that went mostly along party lines.

— Reporting for Reuters by Chris Prentice and Jarrett Renshaw.

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At the heart of the issue is transparency over ingredients used in food. Packaged foods makers are facing flagging consumer trust and stagnating demand for some core products as consumers opt for foods with simpler ingredient lists.

Many food companies want the government to require manufacturers to include on labels all ingredients that have been genetically modified, known as GMO.

But farmers want the labels to exclude ingredients that have been so refined and processed that they no longer contain any trace of the transformed genes when they are used for food.

GMO crops have had their genes altered using biotechnology.

Nestle, the world’s largest food maker, and rivals including Hershey and Unilever want the U.S. Department of Agriculture to include on the label ingredients from crops that were genetically modified such as canola and soybean oils and sugar from beets.

USDA has asked for feedback on a proposal for required labeling of genetically engineered ingredients after a battle over the issue in states including Vermont sparked the U.S. Congress to pass legislation. USDA has proposed a plan for applying the law. The deadline for public comment is Tuesday.

For farmers, facing a GMO backlash from consumers, the fact that the ingredients no longer contain transformed genes by the time they make their way into chocolates, pasta sauce and cereal should mean they are excluded from the labeling.

“The law has been very clear that the required disclosure is going to be for those crops or ingredients that contain the genetic material,” said Luther Markwart, head of the American Sugar Beets Association in Washington.

The entire U.S. sugar-beet crop is genetically engineered. “For things like sugar and other refined products that don’t contain the genetic material, the law does not apply to us,” Markwart said.

But Nestle, which makes Stouffer’s frozen prepared foods and Lean Cuisine frozen entrees, and Hershey, whose confections include Reese’s Peanut Butter cups, disagree.

“Consumers want to know what is in their food and beverages and we believe that they deserve transparency. It’s at the core of our business,” Nestle spokeswoman Kate Shaw said in an emailed statement, noting the company believes those highly refined ingredients should fall under the requirements.

Hershey’s global head of scientific and regulatory affairs, Martin Slayne, said labeling these ingredients is both important for consistency as well as for “meeting consumer expectations on transparency.”

The Grocery Manufacturers Association, which helped lead many of the food company efforts to prevent state labeling initiatives, said in prepared comments on Tuesday that excluding refined ingredients would result in 78 percent fewer products being disclosed under the federal law.

About 90 per cent of U.S. corn, soybean and beet sugar crops are bioengineered, the trade group noted. Unlike other regions, the U.S. has embraced the technology.

For farmers of sugar beet in states such as Michigan, North Dakota and Idaho, the herbicide-tolerant seeds have boosted yields and profits, and curbed some of the uncertainty of farming.

But many Americans have said they want to know more about what is in their food, including whether bioengineered seeds have been used.

Should USDA not require those ingredients be labeled as genetically engineered, the onus would be on food companies to decide how to label them. That could heighten tension between the companies and their ingredient suppliers.

How a food manufacturer chooses to label bioengineered ingredients that do not fall under the scope of the government requirements could be susceptible to challenge.

“We don’t have any problem with transparency, but there’s been a lot of misinformation out there,” Markwart said. “The challenge is there’s not a lot of space” on a label.

GMO labeling has caused rifts between farmers and foodmakers in the past.

In late 2016, a coalition of farmers criticized Dannon Co. for marketing non-GMO products after the U.S. subsidiary of Danone SA made moves to overhaul its supply chain to reduce the use of the biotechnology in its yogurt products. The farmers said Dannon’s advertising misled consumers.

The Center for Science in the Public Interest, a consumer advocacy group in Washington, agrees with the farmers that their finished ingredients are no different scientifically from their non-GMO counterparts, but said the products should still require labeling.

“USDA should read the statute broadly and provide consumers with as much information as possible, but it should be scientifically accurate,” said Gregory Jaffe, director of the center’s Project on Biotechnology. “They need a different disclosure for those highly refined ingredients.”

— Chris Prentice reports on commodities, food and biofuels for Reuters from New York; additional reporting by Silke Koltrowitz in Zurich.

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EPA administrator Scott Pruitt made the comments during a multi-day tour of the Midwest, as he fended off criticism from farmers and heartland lawmakers that his attempts since last year to overhaul the U.S. Renewable Fuel Standard (RFS) marked a betrayal of Republican President Donald Trump’s promises to support rural jobs.

Those efforts, aimed at helping the oil industry cope with the costs of the RFS, came to a halt last week when the White House delayed indefinitely the announcement of a deal that had been months in the making. The deal would have effectively reduce the amount of corn-based ethanol U.S. refiners were required to blend, while also allowing summertime sales of gasoline containing 15 per cent ethanol, a practice EPA currently bans due to smog concerns.

“He said they have the authority” to allow higher-ethanol gasoline sales year-round, said Bill Pracht, president and CEO of East Kansas Agri-Energy, after Pruitt visited his ethanol plant in the town of Garnett. “He didn’t commit to it as a standalone.”

The corn industry has long sought approval to sell gasoline containing 15 per cent ethanol, a blend called E15, in the summer because it would increase demand for corn-based ethanol. EPA currently bans E15 during summer due to concerns the product contributes to smog, a finding contested by the biofuels industry, which has some research to back its position.

EPA spokesman Lincoln Ferguson confirmed Pruitt’s comments: “The administrator shared that he believes statutory authority to grant the… waiver for E15 exists under the Clean Air Act, and to be effective, would require a subsequent notice and comment rule making process.”

The RFS requires oil refiners to mix increasing volumes of biofuels like ethanol into the nation’s fuel each year, and prove compliance by earning or acquiring blending credits that must be handed in to the EPA.

The law has helped Midwest corn farmers by creating a 15-billion-gallon-a-year market for ethanol, but refining companies have complained it incurs steep costs for them.

The White House deal last week would have allowed U.S. biofuels exports to count, for the first time, toward the annual volumes quotas, reducing the blending burden on refiners and lowering their costs. Farm state lawmakers refused to support that idea, even though it also would have provided the E15 waiver as a concession to the corn lobby.

During his visit, Pruitt added that he still supported allowing exports of ethanol and other renewables to qualify under the RFS, though he said the decision from the White House on that was put on hold, according to Pracht.

“It was important he finally got a glimpse of our industry firsthand,” said Pracht. “This is such an economic driver for our community,” said of his operation, which employs 50 people.

— Reporting for Reuters by Chris Prentice and Richard Valdmanis.

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