Trump to Hit Refiners With Biofuels Boost

(Bloomberg) -- Refiners would have to blend 19.88 billion gallons of biofuels into petroleum next year under an administration proposal set to be unveiled Tuesday, as President Donald Trump tries to strike a balance between two competing constituencies.

The Environmental Protection Agency is set to maintain a 15 billion gallon quota for conventional renewable fuels such as corn-based ethanol, even as it gives a modest 3.1 percent increase to overall biofuel-blending requirements in the proposal set to be unveiled Tuesday. The proposed biofuel quotas are detailed in a document obtained by Bloomberg News.

The 2019 target for advanced biofuel would be 4.88 billion gallons, including at least 381 million gallons of cellulosic renewable fuel, such as ethanol made from switchgrass. The EPA is also set to propose a 2.43 billion gallon quota for biodiesel in 2020, a 15.7 percent increase from the 2.1 billion gallons required in 2019.

The EPA proposal does not include a previously drafted plan that would force larger refineries to use more biofuel to make up for smaller refineries’ exemptions.

Agency officials briefly considered incorporating an additional 1.5 billion gallons of biofuel requirements into the proposed quotas with the aim of making up for potential exemptions granted to small refineries.

Because that would have meant redistributing the biofuel burden to larger, non-exempted refineries, oil industry leaders complained, and in response, the EPA jettisoned the plan, at least for now.

For more than a decade, federal law has compelled refiners to use renewable fuel, with the EPA required to set the precise annual quotas. The coming proposal keeps the EPA on track to finalize renewable fuel quotas by Nov. 30, a deadline under federal law.

The proposal follows months of White House-led negotiations over broader biofuel policy changes. Some independent oil refiners have asked the Trump administration to ease the biofuel mandate, saying that it imposes excessive costs, while agricultural interests argue the program is working as Congress intended and any revisions would hurt the Corn Belt.

Ethanol supporters also have criticized EPA waivers exempting some small refineries from the biofuel blending requirements.

Read More: EPA Said Ready to Propose 19.9 Billion Gallon Biofuel Target

The administration has struggled to reach a compromise on the issue that satisfies both oil-refining and agricultural interests.

Americans are projected to consume about 144 billion gallons of gasoline in 2019, slightly higher than 2018 levels, according to the June 12 Energy Information Administration Short-Term Energy Outlook.

Refiners prove compliance with annual biofuel quotas through tradable credits known as Renewable Identification Numbers, or RINs.

Amid volatile prices for those credits and allegations of manipulation, the EPA will ask the public to recommend ways to bolster the market’s transparency. The agency’s proposal asks whether it would be prudent to limit who can trade RINs or how long those credits could be held after they are generated.

©2018 Bloomberg L.P.

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