EPA rebuffs oil and rewards Iowa with steady biofuel quotas
THE TRUMP administration, rebuffi ng oil industry demands for broad changes to the US biofuel mandate, largely maintained the status quo in setting fi nal quotas for how much refi ners must blend into gasoline and diesel.
But the Environmental Protection Agency’s decision drew only tepid applause from Iowa politicians, Midwest corn farmers and producers of soybased biodiesel, who say the targets lowball the industry’s potential production and threaten to discourage new investment.
The fi nal rule shows EPA “is listening to our concerns and taking them into consideration, but it also shows that we have more work to do,” Iowa Governor Kim Reynolds said in an emailed statement. The agency is “discouraging investment and discouraging growth” by keeping biodiesel volumes fl at, she added.
The EPA mandated refi ners use 15 billion gallons of conventional renewable fuels – primarily ethanol - next year, in its fi nal rule issued Thursday.
But, rejecting pleas from biodiesel producers, the agency also maintained a 2.1 billion gallon quota for that soy-based fuel in 2019.
The EPA’s decision illustrates how the administration is trying to balance the needs of two competing constituencies for President Donald Trump, and failing to garner the full support of either.
Midwest farmers and Iowa Senator Chuck Grassley say the mandate is needed to guarantee sufficient ethanol demand; oil refi ners insist the programme is broken and complain a full overhaul is needed.
“Unfortunately it appears that EPA did exactly what Senator Grassley demanded, bowing the knee to King Corn,” Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, said in an emailed statement.
“We think this action is bad for US manufacturing and American consumers and encourage Congress to fi nally fi x the RFS.”
For more than a decade, federal law has compelled refi ners to use renewable fuel – up to 36 billion gallons in 2022 – but tasked the EPA with setting the precise annual quotas.
Many law makers supported the Renewable Fuel Standard with the expectation that fi rst- generation corn-based ethanol would be replaced by alternatives made from corn stalks, algae or other materials such as switchgrass.
The EPA is requiring 4.29 billion gallons of advanced biofuel in 2018, a slight uptick from the current 4.28 billion gallon quota and a 4.24 billion gallon proposal the agency outlined in July.
At least 288 million gallons of that would have to be the cellulosic biofuel from nonedible plant materials, below the current 311 million gallon quota.
That’s a modest increase from the EPA’s initial 238 million gallon proposal.
Production of cellulosic ethanol has lagged far behind what the measure’s supporters envisioned a decade ago.
Brooke Coleman, head of the Advanced Biofuels Business Council, said the EPA’s targets “miss a valuable opportunity to accelerate growth” in cellulosic ethanol production by keeping levels below the 2017 quota.
“Unwarranted cuts to cellulosic biofuel targets send the wrong signal to global investors in this emerging industry,” Coleman said by email.
Compliance with the programme is tracked by credits known as renewable identification numbers. RINs tracking ethanol consumption declined 0.6 per cent to 90 cents, while biodiesel RINs climbed 2.5 per cent to US$ 1.03 apiece, according to broker data compiled by Bloomberg.
The crack spread, a measure of profit margins from refi ning crude oil into fuel, declined, data compiled by Bloomberg show.
Biodiesel production also has grown, and EPA is disappointing those producers in keeping the mandate steady at 2.1 billion gallons.
Biodiesel advocates argued that number fell far short of potential production, with the industry’s leading trade group pushing for a 2.5 billion gallon target in a Nov 16 letter to Trump.