EPA’s biofuel mandates hew to earlier proposals

The Biden administration is set this week to finalize biofuel-blending mandates that largely track plans it already proposed in December, according to several people familiar with the matter.

The U.S. Environmental Protection Agency officials have told industry representatives to expect final 2022 quotas announced Friday to be aligned with last winter’s initial proposal, which laid out a requirement for using 20.77 billion gallons of renewable fuel this year, said the people, who asked not to be named before a formal announcement.

Biden administration officials had deliberated for months over how to set 2022 targets that are high enough to encourage greater use of biofuels without stoking excessive demand for soybeans, corn and other crops used for food and livestock feed.

The EPA also is preparing to issue long-delayed quotas for 2021 that will essentially track actual consumption and retroactively lower previously established targets for 2020, partly to adjust for pandemic-battered fuel demand that year.

The approach reflects a bid by the Biden administration to balance competing agriculture and oil industry interests, while trying to tame record-high gasoline prices and climbing food costs.

Yet it still would be a blow to oil refiners, who have argued for a significant reduction to the 2022 targets, which could require biofuel to make up at least 11.8 percent of transportation fuels.

Refining advocates have argued the requirement would boost prices at the pump by raising industry compliance costs and straining the available pool of tradable credits that are used prove refining quotas have been fulfilled.

But the news last winter — that the EPA was proposing to cut blending compliance retroactively for 2020 and enact a modest increase for 2022 — didn’t make the biofuels industry happy, either.

The Iowa Renewable Fuels Association questioned at the time whether it was even legal to revise the 2020 standard downward, and said the Biden administration intentionally held back until now following through on commitments to help the renewable fuels industry so he’d have some “sugar” to accompany that bad news.

“We urge President Biden to step in and provide a course correction to his EPA in order to realign this proposed rule with his commitments to Iowa voters,” said a statement from Monte Shaw, executive director of the association.

As proposed, the 2022 quota would represent the highest-ever biofuel target EPA has established under the renewable fuel program since its creation 17 years ago. The Biden administration has said one of its goals is to get the Renewable Fuel Standard program "back in growth mode" after a surge of small refinery exemptions from quotas under former President Donald Trump.

The EPA has already rescinded 31 previously granted refinery waivers from 2018 requirements and is on track to deny dozens of pending exemptions from 2019, 2020 and 2021 biofuel-blending quotas. Yet it is also planning to offer small refineries some flexibility in satisfying those earlier targets.

"We continue to see the Biden administration's strategy as equivalent of offering refiners amnesty for market decisions made" during the Trump era, while setting a "strong and predictable" standard going forward, Benjamin Salisbury, director of research at Height Capital Markets, said in a note for clients.

Spokespeople for the EPA didn't respond to requests for comment.

Most of the biofuel gasoline available at stations is E10, containing a 10 percent blend of ethanol. A federal rule prohibits the sale of the higher E15 blend — a 15 percent blend --- during the summer because of air pollution concerns. Biden waived the rule for this summer only, but that will affect only a small fraction of the gas supply nationwide.

Earlier this year, the Iowa Legislature passed and Gov. Kim Reynolds singed into law a requirement that most Iowa gas stations offer E15 on at least one pump by 2026.