EPA to Reward Iowa by Holding the Biofuel Mandate Steady

Source: By Jennifer A Dlouhy, Bloomberg • Posted: Thursday, November 30, 2017

The Trump administration is set to keep biofuel quotas for motor vehicles largely unchanged, a move likely to draw tepid applause from Iowa corn growers and disappoint soy-based biodiesel producers.

The EPA will mandate refiners use 15 billion gallons of conventional renewable fuels — primarily ethanol — next year, in a final rule set to be issued Thursday, according to an Environmental Protection Agency official. But the agency also is set to maintain a 2.1 billion gallon quota for soy-based biodiesel in 2019, the official said. The official asked not to be identified discussing the regulation before its release.

The decision shows the administration trying to balance the needs of two competing constituencies for President Donald Trump: Midwest farmers who rely on the mandate to guarantee ethanol demand and oil refiners that insist the requirements are costly, burdensome and impractical.

For more than a decade, federal law has compelled refiners to use renewable fuel — up to 36 billion gallons in 2022 — but tasked the EPA with setting the precise annual quotas. Many lawmakers supported the Renewable Fuel Standard with the expectation that first-generation corn-based ethanol would be replaced by alternatives made from corn stalks, algae or other materials such as switchgrass.

Overall Mandate

Overall, the EPA is requiring 4.29 billion gallons of advanced biofuel in 2018, a slight uptick from the current 4.28 billion gallon quota and a 4.24 billion gallon proposalthe agency outlined in July.

At least 288 million gallons would have to be the cellulosic biofuel from non-edible plant materials, below the current 311 million gallon quota. That’s a modest increase from the EPA’s initial 238 million gallon proposal. Production of cellulosic ethanol has lagged far behind what the measure’s supporters envisioned a decade ago.

But, biodiesel production has grown, and EPA is set to disappoint those producers Thursday in keeping the mandate steady at 2.1 billion gallons.

Biodiesel advocates had argued that number fell far short of potential production, with the industry’s leading trade group pushing for a 2.5 billion gallon target in a Nov. 16 letter to Trump. The proposed — and now final — 2.1 billion gallon quota is so low that it’s “sending the wrong signal to an industry poised for robust, sustainable growth,” the National Biodiesel Board wrote.

Members of that industry trade group swarmed Capitol Hill this week to voice their concerns with the earlier proposal. Industry officials argue they have current capacity to produce 2.6 billion gallons of biodiesel. And they argue that the production of ethanol and biodiesel are increasingly linked, especially as more biodiesel is made using corn oil, an ethanol byproduct.
The 15 billion gallon quota for conventional renewable fuel mirrors the current target and sets up a disappointment for oil refiners that had argued that amount would exceed a 10 percent “blend wall,” or the amount that can be easily blended into the fuel supply.

EPA Administrator Scott Pruitt previously committed to setting final biofuel quotas at levels “equal to or greater than the proposed amounts.” That concession came in an October letter to farm-state senators after they agreed to stop blocking the confirmation of a top EPA official over opposition to possible changes they saw as weakening biofuel requirements.

The final plan shows him sticking by that pledge — but not making aggressive moves to go beyond it.

Trump visited ethanol plants while campaigning for president and promised Iowa’s voters he would protect the mandate if they elected him.

Pruitt is scheduled to meet with farmers and biofuel groups in Nevada, Iowa, on Friday, according to people familiar with the meeting, who asked not to be named because the details haven’t been made public.

— With assistance by Ari Natter