The U.S. Environmental Protection Agency will propose lowering targets starting in 2020 for the nation’s renewable fuel program, decreasing ambitious decade-old goals set by Congress with volumes closer to current output, Reuters — citing two anonymous sources — reported Tuesday.
The reset of the Renewable Fuel Standard is likely to set up a fresh battle between two industries, with corn growers wanting the highest possible targets to spur investment and oil companies eyeing the smallest to reduce costs.
Corn growers earlier this year gained support from President Donald Trump to allow year-round sales of E15, a higher blend of ethanol. But that requires a new rule, which likely won’t be in place until March.
“At this point, we just have to wait and see what EPA proposes” for new volume targets, said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “There will be a notice and public comment period where we and our elected champions will weigh in. At the end of the day, President Trump pledged to protect and uphold the RFS and we expect his EPA to do just that.”
Yet oil groups said lower requirements are crucial for their financial success and future.
“We are going to ask and we expect to see lower volumes across the board,” Derrick Morgan, a lobbyist for the American Fuel and Petrochemical Manufacturers, said in a phone interview.
He said the ethanol targets should be based on gasoline demand.
Congress established the biofuel standard in 2007 to boost the Corn Belt economy and help lessen the need for oil imports. The standard that Congress set expires in 2022, after which the EPA gains more authority to shape the rules.
Under the law, refiners have been required to blend increasing amounts of biofuels like corn-based ethanol into gasoline and diesel each year, or else purchase blending credits from companies that do.
Oil companies say the policy costs them a fortune. Yet it has fallen short of original targets because production has proved more costly and inefficient than expected, even with subsidies.
The two sources, which Reuters said requested anonymity because they are not authorized to speak publicly about the matter, said the EPA was planning to slash the 2022 target to bring it closer to current market realities, but added that the agency had not settled on a number.
Congress had hoped biofuel production volumes under the standard would hit 36 billion gallons by 2022. But the industry in 2018 produced only about 20 billion gallons, with advanced biofuels — made from things like corn fiber and algae — posting the biggest shortfalls.
For the first time, the EPA wants to officially rewrite the congressional targets for 2020 through 2022.
The Trump administration has tried to reduce compliance costs for refiners, drawing the ire of biofuel producers and their backers.
Reuters has reported that the Trump administration has greatly increased the number of waivers it granted refineries to bypass biofuel requirements. The EPA, under then-chief Scott Pruitt, awarded 29 exemptions for the 2017 calendar year, up from 19 in 2016 and just seven in 2015, data shows.
“Under former Administrator Scott Pruitt, EPA broke the spirit of the law by issuing so-called ‘hardship’ waivers to multibillion dollar oil companies exempting them from their legal obligations under the Renewable Fuel Standard,” Iowa Republican Sen. Chuck Grassley said in a statement Tuesday. “EPA systematically undermined the Renewable Fuel Standard, and if the reports are accurate, may now use its weakened state to justify gutting the biofuels program further. Today Acting Administrator (Andrew) Wheeler is in a position to avoid the missteps and abuses of power of his predecessor at the agency.”
Reuters reported Tuesday, citing an unnamed source, that yet another hardship waiver had been granted in 2017 to a Utah refinery operated by oil giant Chevron.
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Chevron, which reported a net income of $9.2 billion in 2017, becomes the largest known company to be awarded a waiver from complying with the biofuel law.
“When an oil company whose net profits surpass the total value of the Iowa corn crop claims it is experiencing ‘hardship,’ you know we’ve reached a new level of absurdity,” said Geoff Cooper, chief executive of the Renewable Fuels Association.
Reuters and Rod Boshart of The Gazette contributed to this report.