White House Edges Near Biofuel Plan in Farm-Versus-Oil Clash

The Environmental Protection Agency is set to send a draft of biofuel-blending quotas to the White House for review as soon as Friday afternoon, marking a key step in the Biden administration’s bid to balance competing oil and agricultural interests.

EPA officials have advised lawmakers and industry stakeholders that White House review of the plan is imminent, setting the stage for the agency to formally propose how much renewable fuel must be mixed into gasoline and diesel in 2021 and 2022 within weeks, according to people familiar with the matter. The people asked not to be named discussing the deliberations.

Some lawmakers have been told to expect relatively unchanged requirements -- and even a slight reduction is possible -- which could be a blow to producers of corn-based ethanol and soy-based biodiesel, according to one of the people. 

Efforts to set new requirements have been stalled for months as the administration navigates competing demands from Democratic allies -- including senators representing rural, biofuel-producing states, as well as those with major oil refining assets back home. Oil refining advocates and labor leaders have asked the EPA to set “reasonable” renewable fuel requirements that reflect the pandemic-spurred drop in fuel demand and compensate for 2020 targets they say exceeded blending capacity.

But biofuel backers have warned that any move to undercut quotas risks alienating supporters in the Corn Belt and would be seen as a betrayal of President Joe Biden’s campaign trail promise to protect the U.S. Renewable Fuel Standard program he called part of America’s “bond with our farmers.”

Prices for corn, the main feedstock used to make ethanol, slumped to session lows after the Bloomberg report. Corn futures had already been under pressure from lackluster demand. Futures for soybean oil, used to produce biodiesel, also fell to the day’s lows.

“Should this administration choose to reduce demand for biofuels and blending requirements, this would add another bearish notch to an already fragile grain commodity technical price picture,” Naomi Blohm, senior market adviser at Total Farm Marketing in West Bend, Wisconsin, said Friday in an email.

The Biden administration is wrestling with several pressing biofuel policy questions, after federal courts ruled the EPA has wide latitude to exempt small refineries from the annual blending requirements and tossed out a Trump-era rule designed to boost summertime sales of higher-ethanol gasoline.

©2021 Bloomberg L.P.

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