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EPA reverses cut to biofuel mandates: Update

30 Nov 2017, 10.01 pm GMT

EPA reverses cut to biofuel mandates: Update

Adds detail, reaction, near data table.

Houston, 30 November (Argus) — US refiners and fuel importers will blend slightly higher volumes of renewable fuels into the domestic transportation supply next year under final standards released today by the Environmental Protection Agency (EPA).

The final volumes end a volatile year for the Renewable Fuel Standard with a return to the status quo. But the agency did not close the door on some of its most controversial ideas this year surrounding the role of imports in satisfying fuel blending requirements.

Total mandates creep higher by 50mn USG to 19.29bn USG, instead of delivering a cut to 19.24bn USG the administration proposed in July. The mandates include 288mn USG of cellulosic biofuel and 4.29bn USG of advanced biofuels. EPA also proposed holding biodiesel requirements steady into 2019, at 2.1bn USG.

"Maintaining the renewable fuel standard at current levels ensures stability in the marketplace and follows through with my commitment to meet the statutory deadlines and lead the agency by upholding the rule of law," EPA administrator Scott Pruitt said in a statement.

Biofuels groups said the volumes were better than July proposals but fell short of mandates necessary to support growth. Refining groups said the volumes perpetuated a broken program.

EPA sets minimum volumes each year of the cellulosic, advanced, biodiesel and total renewable fuels that refiners, importers and certain other companies must ensure enter the US transportation supply each year. Obligated companies collect markers generated for every gallon of biofuel blended into the supply, called renewable identification numbers (RINs), to prove compliance. Companies that do not blend enough fuel to meet their obligations must purchase RINs from others.

EPA proposed volumes in July that for the first time reduced overall blending mandates because of struggling production of the most advanced renewable fuels, and seemed inclined to reduce volumes even more. EPA pondered the coming consequence of a still-running trade case raising the prices of biodiesel from Indonesia and Argentina, the largest exporters of biodiesel to the US last year. Federal authorities have agreed with the domestic biodiesel industry, which accused exporters of dumping subsidized product on the US market. A final decision may come next week.

EPA under administrator Pruitt more broadly questioned what imports were doing in a program meant to enhance US energy security in the first place.

"Due to their origin outside the United States, imported renewable fuels may not have the same impact on energy independence as those produced domestically," the agency wrote in July.

The agency went further in September, opening comment on whether to reduce mandates by hundreds of millions of gallons due to the trade cases. Pruitt later confirmed the agency also considered allowing US renewable fuel exports to generate RINs. Both changes would slash prices for the credits.

The administration instead was quickly challenged by the legislative strength of the program's supporters. A blitz by state and federal political leaders aligned with agribusiness culminated in a legislative block on the nominee to run the powerful EPA air office in charge of the RFS. Even before public comment on the September posting closed, Pruitt wrote assurances to midwestern, agriculture-focused senators pledging to maintain — or raise — the blending levels proposed in July.

Today's final volumes did not rule out cutting biodiesel requirements in light of the trade cases or excluding imports from consideration of future mandates. Because conditions did not exist to use those ideas today, the agency simply did not need to make a decision yet, it said.

"We need not resolve at this time the interpretive issue regarding whether the term 'domestic supply' should include consideration of imports," the agency said.

And the agency considered a blender's tax credit far more influential than the RFS in domestic biodiesel production. The tax credit expired last year.

Renewable fuel producers offered cautious praise for the standards immediately after the agency published final volumes, but many pushed for higher cellulosic volumes. EPA reduced requirements after overestimating supply for the past two years.

"Unwarranted cuts to the cellulosic biofuel targets send the wrong signal to global investors in this emerging industry," said Brooke Coleman, executive director of the Advanced Biofuels Council.

Refiners, meanwhile, looked to legislators to change a program they have for years sought to end.

"We have seen bipartisan support in Congress to protect American consumers and fix the RFS, and we urge Congress to act," said Frank Macciarola, downstream group director for the industry association API.

4983439

Final 2018 Renewable Volume Obligations
Fuel typeFinal 2017Proposed 2018Final 2018Proposed 2019
Cellulosic biofuel0.173pc0.131pc0.159pc-
Biomass-based diesel 1.67pc1.74pc1.74pc-
Advanced biofuel 2.38pc2.34pc2.37pc-
Renewable fuel10.7pc10.62pc10.67pc-
Obligations in billion gallons
Cellulosic biofuel0.310.2380.288-
Biomass-based diesel 2.002.10*2.102.10
Advanced biofuel 4.284.244.29-
Renewable fuel19.2819.2419.29-
* set in 2016

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