Reuters — The U.S. Environmental Protection Agency said on Thursday it will require fuel companies to blend slightly more biofuels into the nation’s gasoline and diesel next year, angering oil refiners who view them as a competitive threat.
The announcement follows weeks of lobbying by Midwestern lawmakers and representatives of the corn industry who wanted the agency to reject recent proposals from the oil industry to water down the U.S. biofuels mandates.
“Maintaining the renewable fuel standard at current levels ensures stability in the marketplace and follows through with my commitment to… upholding the rule of law,” EPA administrator Scott Pruitt said in a news release.
Pruitt is expected to travel to an invitation-only event in Iowa on Friday and highlight the administration’s commitment to the ethanol industry.
The U.S. Renewable Fuels Standard requires refiners to blend increasing amounts of biofuels into the nation’s fuel supply every year as a way to boost U.S. agriculture, slash energy imports and cut emissions.
The law, introduced more than a decade ago by then-President George W. Bush, has been a boon to the corn belt but has upset the oil industry, which sees biofuels as competition and which has been burdened with the costly responsibility of blending.
The 2018 targets require fuel companies to blend 19.29 billion gallons (73.02 billion litres) of renewable fuels into the nation’s fuel supply, up slightly from the 19.28 billion gallons required for 2017.
That will include 15 billion gallons of conventional biofuels like corn-based ethanol, in line with 2017, and 4.29 billion gallons of so-called advanced biofuels, up from 4.28 billion in 2017, the EPA said. Advanced or second-generation biofuels are made from lignocellulosic biomass or woody crops, agricultural residues or waste.
For 2019, the EPA set a target for biodiesel at 2.1 billion gallons, unchanged from 2018.
The targets adhere to the EPA’s proposal made in July for both conventional biofuels and biodiesel, but reverses a proposal by the agency to slightly reduce total advanced volumes to 4.24 billion gallons in 2018.
After consultations with the oil industry, the EPA had opened the door to cuts to the biofuels volumes targets and was considering other ideas to ease the burden on refiners but eventually backed off under heavy pressure from Midwestern lawmakers.
Chet Thompson, president and CEO of American Fuel & Petrochemical Manufacturers which represents U.S. refining companies, said the EPA’s final decision showed it was “bowing the knee to King Corn.”
“We think this action is bad for U.S. manufacturing and American consumers,” he said.
A number of groups representing ethanol growers praised the targets, including the Renewable Fuels Association.
But not everyone representing the biofuels industry was happy. U.S. Senator Chuck Grassley of Iowa, a vocal supporter of the biofuels industry, said he would have liked to see an increase in biodiesel levels in 2019.
“The EPA’s announced renewable volume obligations fall short of the full potential of the U.S. biofuels industry,” he said.
Doug Whitehead, chief operating officer of the National Biodiesel Board, echoed the sentiment.
“EPA administrator Pruitt has disappointed the biodiesel industry for failing to respond to our repeated calls for growth,” he said. “These flat volumes will harm Americans across several job-creating sectors — be they farmers, grease collectors, crushers, biodiesel producers or truckers — as well as consumers.”
Oil refiners meet the targets by acquiring blending credits called RINs, either by earning them by blending themselves or by buying them from rivals. The must hand the RINs into the EPA once a year.
RINs prices were little changed on Thursday, traders said, as the EPA final volumes were in line with expectations.
Prices of the most heavily traded credits, known as a D6, were trading at US89 cents each after the announcement, relatively unchanged from Wednesday’s prices, traders said.
— Reporting for Reuters by Jarrett Renshaw and Richard Valdmanis.