U.S. EPA proposes biofuel mandate cuts in boost to pandemic-hit refiners

Source: By Stephanie Kelly and Jarrett Renshaw, Reuters • Posted: Tuesday, December 7, 2021

Choices at the gas pump including ethanol or no ethanol gas are seen in Des Moines, Iowa, U.S., January 29, 2020. REUTERS/Brian Snyder

NEW YORK, Dec 7 (Reuters) – The Biden administration on Tuesday proposed a reduction in the amount of biofuels that U.S. oil refiners have been required to blend into their fuel mix since the onset of the COVID-19 pandemic.

While the long-awaited decision offers some relief to the U.S. refining industry after the health crisis slammed domestic demand for transport fuels, the industry hit back at the announcement, saying volume requirements proposed for next year would increase expensive compliance costs.

The proposal drew some praise from biofuel industry advocates, who said next year’s requirements would set the policy on the right path.

The announcement marks President Joe Biden’s first major decision on the nation’s biofuel policy and will be seen as a bellwether of his support for the fuel blending law that is backed by farmers but opposed by oil refiners.

The U.S. Environmental Protection Agency, which administers the policy, proposed retroactively to set total renewable fuel volumes at 17.13 billion gallons for 2020, down from a previously finalized rule for 2020 of 20.09 billion gallons.

It also set volumes at 18.52 billion gallons for 2021 and 20.77 billion gallons for 2022.

Both the 2020 and 2021 figures mark a reduction from 2019, when the EPA had required refiners to blend 19.92 billion gallons of biofuels in the nation’s fuel mix.

The EPA also proposed to reduce conventional biofuel mandates, which include ethanol, to 12.5 billion gallons in 2020 and 13.32 billion gallons in 2021. It proposed to set mandates at 15 billion gallons in 2022 with an additional 250 million-gallon supplemental obligation.

β€œTo sustain an ambitious RVO (Renewable Volume Obligation) target for 2022, we had to reinforce the weakened foundations of the program and rebuild the stability that was necessary for growth going forward,” said Joseph Goffman, an EPA official, in an interview with Reuters.

The EPA also proposed a rejection of 65 pending applications for small refinery exemptions – waivers requested by smaller fuel producers seeking to be excused from the blending mandates for financial reasons. The action, which is not final, comes after a court decision that narrowed the situations in which the agency can grant exemptions.

The EPA under former President Donald Trump had dramatically increased the number of such waivers granted to refiners, angering the biofuel industry.

In a concession to the biofuel industry, the U.S. Department of Agriculture, in tandem with the EPA’s announcement, announced $700 million in grants to biofuel producers as COVID-19 relief and another $100 million in support for biofuel infrastructure.

Scott Irwin, an agriculture economist, said the administration’s move to lower mandates would likely trigger lawsuits from angry biofuel producers.

WHITE HOUSE UNDER PRESSURE

Big Oil and Big Corn have sparred over the requirements of the nation’s biofuel policy since its inception more than a decade ago. Merchant oil refiners say the mandates are too costly, while ethanol producers and corn farmers like the mandates as they have helped to create a multibillion-gallon market for their products.

Under the U.S. Renewable Fuel Standard (RFS), refiners must blend billions of gallons of biofuels like corn-based ethanol into the fuel mix, or buy credits, known as RINs, from those that do.

On the campaign trail and in office, Biden gave repeated promises to support rural, clean energy jobs and uphold the RFS.

Biofuel industry advocates, including House of Representative members such as Cindy Axne from Iowa and Angie Craig from Minnesota, disagreed with the agency’s decision to lower 2020 volumes retroactively, saying the decision does not reflect a commitment to renewable fuels and farmers.

On the other hand, the White House has come under intense pressure from merchant refiners – including a plant in Biden’s home state of Delaware – along with union allies to take actions that lower the costs of the credits and help stave off threatened plant closures.

Reuters, citing sources, previously reported that the Biden administration was considering big cuts to the blending requirements. read more

Reporting by Stephanie Kelly and Jarrett Renshaw; Editing by Dan Grebler, David Gregorio, Paul Simao, Mark Porter and Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

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