Biden curtails biofuels but vows future growth

WASHINGTON — The Biden administration sought Tuesday to thread the needle between warring oil and renewable fuel interests, proposing only modest quotas for the use of biofuels like corn-based ethanol but also moving to block exemptions that have angered agriculture interests for dozens of oil refineries.

The U.S. Environmental Protection Agency called for cutting biofuel-blending quotas retroactively for 2020 — reflecting a sharp drop of fuel use during the height of the pandemic — while outlining targets for this year that track actual consumption, as well as enacting a modest increase for 2022.

In a sign Democratic President Joe Biden’s administration was trying to minimize disruption, the EPA also is proposing to reject bids by dozens of small refineries for waivers from 2019-2021 quotas under the Renewable Fuel Standard program.

About 65 small oil refineries want to be exempted from complying with the biofuel rule, saying it’s too costly. But while the Trump administration infuriated farmers by approving four times as many waivers as did the Obama administration in a similar period, a federal appeals court since has narrowed the criteria for which waivers can be granted. Biden’s EPA says it will reject them all.

That pledge brought some tepid praise from biofuels and agriculture interests — though not much.

The American Farm Bureau Federation said the EPA’s announcement “upholds the integrity” of the biofuel rule if viewed over the course of several years and “by saying no to all 65 pending small refinery exemptions, which have undermined renewable fuel production in the past.”

But the Iowa Renewable Fuels Association questioned 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 the president would have some “sugar” to accompany a dose of 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.

Among the spoonfuls of sugar, according to the association: The U.S. Department of Agriculture is moving to provide as much as $700 million in aid to biofuel producers battered by the pandemic, and the EPA is proposing regulatory changes that could dramatically expand the production of next-generation biofuels processed at multiple facilities.

"This package of actions will enable us to get the RFS program back in growth mode by setting ambitious levels for 2022 and by reinforcing the foundation of the program so that it's rooted in science and the law," EPA Administrator Michael S. Regan said in a statement.

The biofuel requirements come as Biden battles gasoline prices now hovering around a seven-year high and inflationary pressures that threaten to undercut the U.S. economic recovery. The move follows months of deliberations over how to set the targets amid a pandemic-spurred drop in fuel demand and a surge in costs, while still encouraging greater use of biofuels made from corn and soybeans.

The measure responds to some concerns raised by oil refiners and their allies on Capitol Hill, who had argued reductions were critical to address a decline in fuel sales and compensate for 2020 targets they said exceeded blending capacity. EPA already said it is proposing to delay the deadlines for refiners to prove they have complied with quotas for 2020 and 2021.

For 2020, the EPA is taking the unusual step of retroactively revising down the total renewable fuel quota to 17.13 billion gallons, from a 20.09 billion-gallon target established in December 2019. As much as 12.5 billion gallons of that could be fulfilled with conventional renewable fuels, such as ethanol.

The proposal, which, if finalized, would set the highest-ever biofuel quota in 2022, is an attempt to "rebuild the foundations of the program" to support long-term growth, EPA Principal Deputy Assistant Administrator Joe Goffman said.

For the current year, the overall target would be 18.52 billion gallons. The agency is proposing a modest increase for 2022 with 20.77 billion gallons required.

The proposed increase for next year will do little to assuage renewable fuel advocates, who have warned the Biden administration that cuts could "destroy a decade of progress on low-carbon biofuels" and violate Biden's campaign promises.

“While President Biden may have forgotten his promise to Iowans, Iowa farmers and producers and I sure haven’t, and we will work together to fight back against this harmful policy,” said a statement from Republican U.S. Sen. Joni Ernst.

Oil refiners, too, slammed the move and said it would raise costs for consumers while failing to provide environmental benefits.

"So much for the Biden administration being concerned about rising energy costs," said Chet Thompson, chief executive of the American Fuel and Petrochemical Manufacturers trade association. "This proposal would needlessly increase already record-breaking RFS compliance costs which, in turn, will raise the cost of producing gasoline and diesel for U.S. consumers — and it would do so with no corresponding environmental benefit or increase in biofuel blending."

Under the 16-year-old federal Renewable Fuel Standard, fuel importers and refiners must blend biofuels themselves or buy tradable credits that track consumption of the plant-based alternatives. The cost of those credits, known as renewable identification numbers or RINs, has swung wildly this year.

The administration said it is taking steps that could accelerate the production of advanced, next-generation biofuels by allowing RIN credits to go toward more products. Under proposed changes, biofuels that are processed across two locations — such as bio-oils from wood residue or other feedstocks generated at one facility and then made later into finished fuel at another site — would be eligible.