EPA Completes Rule Requiring More Ethanol Blended Into 2017 Gasoline Supply

Source: By Amy Harder, Wall Street Journal • Posted: Monday, November 28, 2016

WASHINGTON—Federal regulators finalized a rule Wednesday that raises the amount of ethanol refineries must blend into the nation’s gasoline supply, providing a boost to ethanol companies and drawing criticism from an oil industry that opposes higher levels.

The Environmental Protection Agency issued a final regulation, first proposed in May, requiring refineries to blend 19.28 billion gallons of corn-based ethanol and other biofuels into the gasoline supply in 2017.

That amounts to 1.17 billion gallons more than the requirement for this year, which was 18.11 billion gallons, but it is far less than the 24 billion gallons envisioned by a 2007 law. The EPA is using a waiver in that law allowing the agency to set lower amounts for a variety of reasons, including slower-than-expected development of certain kinds of non-corn biofuels.

The Renewable Fuel Standard, or RFS, first established by Congress as part of a 2005 energy law and significantly expanded in 2007, was designed to help reduce carbon emissions and wean the U.S. off foreign oil by requiring refineries to blend an increasingly large amount of biofuels into the nation’s gasoline supply each year. The EPA, which Congress gave the authority to enforce the mandate, has struggled in recent years to implement it, given the oil boom over the last decade and lack of biofuels infrastructure, among other factors.

Unlike most energy regulations proposed or issued by the Obama administration, President-elect Donald Trump has at times expressed support for the mandate. He won corn-rich Iowa in the general election due in part to his stated support for the policy. Iowa’s GOP leaders are some of the biggest supporters of the mandate, which is fulfilled almost entirely by corn-based ethanol.

That said, if incoming Trump administration officials do want to review and rewrite the latest quotas for any reason, Mr. Trump and GOP leaders in Congress have several avenues for blocking Mr. Obama’s recently completed rules, including this one.

Congress could use a little-known law called the Congressional Review Act to nullify rules that have been finalized within 60 days in which Congress is in session, a period that often extends much longer than a couple of months, since lawmakers aren’t in session every weekday.

Given that the GOP controls both chambers of Congress and the White House, this could be one of the easiest ways to undo Mr. Obama’s regulatory agenda. Some legislative experts say rules issued as far back as May could fall under the 60-day window, because Congress has been in session so few days the second half of this year.

Still, Nov. 20 has been considered the clearer deadline by which the Obama administration must issue rules before the window opens for the incoming Trump administration to stop the rules unilaterally. That is because most regulations requires at least 60 days between a rule being finalized and its taking effect, and if a new administration steps in during that interim period, the incoming president can indefinitely postpone on the rule’s effective date.

Groups representing biofuel companies cheered the news, while the oil industry called on Congress to repeal the policy. Any major overhaul or repeal is unlikely any time soon given the stark divisions across party lines in Washington.

“The move will send a positive signal to investors, rippling throughout our economy and environment,” said Bob Dinneen, president and CEO of the Renewable Fuels Association. “By signaling its commitment to a growing biofuels market, the agency will stimulate new interest in cellulosic ethanol and other advanced biofuels.”

Shares in ethanol companies, including Green Plains Inc. and Pacific Ethanol Inc.,climbed after the EPA’s announcement Wednesday morning.

The American Fuel & Petrochemical Manufacturers, which represents refineries that are required to blend the ethanol, criticized the announcement and called on Congress to undo or overhaul the policy.

“EPA unfortunately finalized a RFS volume requirement that looks to force more biofuel in the fuel supply than consumers want or infrastructure can handle,” said Chet Thompson, president of the association. “Refiners should not have the responsibility to force consumers to use products they either don’t want or that are incompatible with their cars, boats, and motor equipment.”

Corrections & Amplifications: 
Sen. Ted Cruz (R, Texas) won the Iowa GOP caucus. An earlier version of this article incorrectly stated Donald Trump won that contest. (Nov. 23, 2016)

Write to Amy Harder at amy.harder@wsj.com