U.S. EPA proposes hike in 2020 biofuel mandate

New mandate set 'below demand,' Grassley says

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Washington | Reuters — The U.S. Environmental Protection Agency (EPA) on Friday proposed refiners increase the volume of biofuels blended into their annual fuel output but did not reallocate the waived amounts under the hardship program, drawing ire from powerful corn and biofuel groups as well as Republican senators.

The EPA is charged with setting biofuel blending requirements for the refining industry as part of the Renewable Fuel Standard (RFS), a more than decade-old regulation that is aimed at helping farmers and reducing U.S. dependence on oil. It also provides waivers to small refining facilities that can prove compliance would cause them financial harm.

RFS and the waiver program, known as the Small Refinery Exemption (SRE) program, have increasingly been at the forefront of a heated political debate between the influential corn and oil lobbies, leaving President Donald Trump struggling to find a balancing act between the two important constituencies as he eyes re-election next year.

The issue has also gained more importance with many 2020 presidential hopefuls looking to secure support in key states such as Iowa, a major ethanol producing state.

Since Trump took office, the EPA has more than quadrupled the number of waivers it has granted, saving the oil industry hundreds of millions of dollars but enraging another key constituency — corn growers — who claim the move threatens demand for their products.

EPA on Friday said it has proposed increasing the volume of biofuels refiners must blend into their fuel annually to 20.04 billion gallons in 2020, up from 19.92 billion gallons in 2019. The proposed mandate included 15 billion gallons of conventional biofuels like ethanol, unchanged from 2019.

Reuters reported the proposed volumes ahead of the announcement in May, citing industry sources.

The EPA also proposed holding the biodiesel mandate at 2.43 billion gallons for 2021, unchanged from 2020. The agency sets biodiesel mandates a year in advance. Corn and ethanol producers have long urged the EPA to lift the figures to make up for the volumes waived under the small refinery hardship program.

The lack of it infuriated biofuel groups and Republican senators from corn state Iowa. “It’s unacceptable that EPA would set biofuel volumes below demand at a time when farmers, biofuels producers and agribusiness owners are forced to shed jobs and close plants,” influential Senator Chuck Grassley said.

“I urge President Trump to compel EPA to reverse course and keep his word to the forgotten Americans who have faithfully stood with him.”

American farmers have been among the most affected by Trump’s trade war with China, which once was a top export market for U.S. agricultural products – although the rural heartland has mostly remained loyal to him.

“EPA appears to be selling out to oil refiners — again — at the expense of rural America,” said Geoff Cooper, president and chief executive of the Renewable Fuels Association.

“Until the EPA reins in the abuse of SREs (small refinery exemptions) and reallocates what has already been lost, billions of gallons of biofuel demand will be destroyed each year as SREs explode around our industry like fireworks above the Washington Monument on the Fourth of July,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association.

Trump has also been increasingly annoyed with the waiver program, sources told Reuters, and ordered a review of it, after hearing from angry farmers during his Midwest tour last month.

The proposed mandate also includes 5.04 billion gallons of advanced biofuels, such as those made from agricultural wastes, up from 4.92 billion in 2019. As part of the advanced biofuel proposal, the agency set mandates for cellulosic fuel at 540 million gallons.

The deadline for EPA to issue the final rule on blending requirements is Nov. 30.

— Humeyra Pamuk is a Reuters correspondent covering U.S. energy policy from Washington, D.C.

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