U.S. boosts refiners’ biofuel quotas to record levels

The Obama administration is forcing refiners to use a record amount of biofuel next year, delivering a victory to Midwest farmers at the expense of oil companies that say they are struggling with the program's costs.

Under quotas the Environmental Protection Agency announced Wednesday, refiners must mix 19.28 billion gallons of renewable fuel into the U.S. gasoline and diesel supply next year, including up to 15 billion gallons of traditional, corn-based ethanol.

The mandates are above levels the agency proposed in May and also above last year's requirements. For the first time, the targets match a 15 billion-gallon ceiling that Congress established for conventional renewable fuels in creating a program to boost their use 11 years ago.

The 2017 quotas are certain to increase pressure on Congress and President-elect Donald Trump to overhaul the Renewable Fuel Standard. While Trump is unlikely to rescind the new targets now that they have been finalized, he may support efforts to overhaul it by Congress.

During his campaign, Trump had varying views of the program. In Iowa early this year, Trump said the United States should increase biofuel mandates. But in September, his campaign issued a fact sheet calling for the elimination of the system for buying and selling biofuel blending credits, following criticism from billionaire investor Carl Icahn.

His campaign later reissued the fact sheet without the language opposing the system.

The EPA's decision is a victory for biofuel backers and Midwest leaders who had argued that climbing gasoline demand justified hitting that 15 billion cap. Americans are on track to consume a record 144 billion gallons of gasoline this year, according to an October forecast from the U.S. Energy Information Administration.

'The RFS ethanol volumes announced by the EPA mean higher income for farmers and lower prices for consumers,” said Monty Shaw, executive director of the Johnson-based Iowa Renewable Fuels Association. 'They mean more jobs in rural Iowa and less dependence on foreign oil.”

'This announcement is good news for Iowa, and in particular corn ethanol producers,” U.S. Sen Chuck Grassley, R-Iowa, said in a news release, 'While more work needs to be done to increase levels for biodiesel, this is the first time that the EPA has reached the statutory level for traditional corn ethanol.”

Iowa's other Republican senator, Joni Ernst, who had called for the EPA to follow Congressional intent when the proposed rule initially was released in the spring, and U.S. Rep. Dave Loebsack, D-Iowa, who has served as co-chairman of the House Biofuels Caucus, and Gov. Terry Branstad, among others, also both hailed the action.

'The Renewable Fuel Standard is critical in reducing our dependence on foreign oil, and provides consumers with choices at the pump,” Ernst said.

Bob Dinneen, president of the Renewable Fuels Association in Washington, D.C., said the move 'will send a positive signal to investors.”

'By signaling its commitment to a growing biofuels market, the agency will stimulate new interest in cellulosic ethanol and other advanced biofuels, drive investment in infrastructure to accommodate E15 and higher ethanol blends, and make a further dent in reducing greenhouse gas emissions,” Dinneen said in an emailed statement.

Jeff Broin, chairman of Sioux Falls, S.D.-based POET, the nation's second-largest ethanol producer, praised the EPA for 'holding firm to the letter of the law despite enormous pressure from oil interests.”

Oil companies, however, blasted the move, arguing that the 2017 quotas push them beyond a 'blend wall” where they are forced to mix a higher proportion of ethanol into fuel than the 10 percent level approved for use in all cars and trucks.

Oil companies and industry trade groups unsuccessfully had lobbied the Obama administration to keep total ethanol levels at 9.7 percent of gasoline demand - an amount that would provide a buffer below the conventional 10 percent blend while also accommodating sales of ethanol-free gasoline coveted by boaters.

Frank Macchiarola, downstream group director at the American Petroleum Institute, said the EPA 'has taken a step backward with this final rule.”

And Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, said the 2017 targets are 'completely detached from market realities.”

The final requirements 'force more biofuel in the fuel supply than consumers want or infrastructure can handle,” Thompson said in an emailed statement. 'Refiners should not have the responsibility to force consumers to use products they either don't want or that are incompatible with their cars, boats, and motor equipment.”

Under the EPA rule, refiners will be forced to blend 4.28 billion gallons of advanced biofuels next year, including 311 million gallons of cellulosic ethanol and 2 billion gallons of biomass-based diesel.

The Renewable Fuel Standard, created by Congress in 2005 and expanded two years later, was designed partly to shrink U.S. dependence on foreign crude by requiring refiners to use increasing volumes of biofuel each year - up to 36 billion gallons in 2022. That federal law lays out a target of 24 billion gallons of renewable fuels in 2017, and caps the amount coming from traditional corn starch-derived ethanol at 15 billion gallons.

The EPA rule announced Wednesday does not set an explicit ethanol target. Oil industry-backed legislation pending in the House of Representatives would cap ethanol content at 9.7 percent.