New York — The U.S. Environmental Protection Agency was expected to propose on Tuesday a reduction in the amount of biofuels oil refiners have been required to blend into their fuel mix since the onset of the COVID-19 pandemic, according to two sources familiar with the matter.
The long-awaited decision will offer some relief to the U.S. refining industry after the health crisis slammed domestic demand for transport fuels, but is likely to upset biofuel producers that have also suffered from the pandemic’s fallout.
The announcement will mark U.S. 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 supported by farmers but opposed by oil refiners.
The sources, who spoke on condition of anonymity, said the EPA will set mandates for the amount of corn-based ethanol refiners had to include in the nation’s fuel mix at around 12.6 billion gallons for 2020, 13.8 billion for 2021, and 15 billion for 2022.
They added that the EPA would also likely announce the rejection of a significant number of small refinery exemptions – waivers requested by smaller fuel producers seeking to be excused from the blending mandates for financial reasons.
The EPA will also likely announce new rules over how the small refinery waiver program is administered, according to the sources. The EPA under former President Donald Trump had dramatically increased the number of such waivers granted to refiners, angering the biofuel industry.
The EPA declined to comment.
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 multi-billion 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. Lowering the mandate would likely be seen by farm-state voters as breaking that vow.
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.
Finalized volume requirements for 2021 are already more than a year late, while requirements for 2022 were due at the end of November.
Refinery advocates have pointed to high RIN prices as a reason to relieve the industry of some blending requirements, but prices have been volatile and have fallen sharply ahead of the EPA’s expected announcement, traders said.
In May, renewable fuel (D6) credits reached their highest level on record at $2 each, but speculation around the future requirements has caused prices to fall. Credits fell on Tuesday to 80 cents each.
In the RIN market this year, merchant refiners such as PBF Energy Inc and CVR Energy Inc were seen building up massive outstanding liabilities in the credits, taking bets that Biden will ultimately side with refiners and roll back RFS mandates, Reuters previously reported.
- Reuters (Reporting by Stephanie Kelly and Jarrett Renshaw; Editing by Dan Grebler, David Gregorio and Paul Simao)
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