The Trump administration announced Oct. 4 that it will issue a proposed rule next week to expand biofuel blending requirements beginning in 2020 with the twin aims of ensuring that more than 15 billion gallons of conventional ethanol can be blended into the nation's fuel supply and that the volume obligation for biomass-based diesel is met.
Targeted for implementation by the end of the year, the U.S. Environmental Protection Agency's proposal will include accounting for exemptions granted to refineries with a capacity of fewer than 75,000 barrels per day, potentially reallocating exempted volumes to larger refineries. The EPA will seek public comment on how that accounting occurs, the official said, but new volume targets will not reallocate exemptions granted in prior years.
Biofuel interests have argued the exemptions have done harm to U.S. agriculture.
The EPA also announced it would initiate a rulemaking process to streamline labeling and remove barriers to the sale of gasoline blended with 15% ethanol, or E15, building on a rule allowing year-round sales of the blend that the Trump administration announced earlier this year.
Petroleum interests expressed frustration with the proposal, and while biofuel interests lauded the proposal, they acknowledged it only marked the beginning of a rulemaking process.
"The plan announced today … re-establishes the [renewable fuel standard, or RFS] as a driver of growth in the production and use of low carbon renewable fuels. … It is important to remember that today's announcement marks the beginning — not the end — of an EPA regulatory process," Renewable Fuels Association President and CEO Geoff Cooper said in an Oct. 4 statement, adding that the organization would engage regulators to ensure "a 15-billion-gallon requirement in 2020 is truly a 15-billion-gallon requirement."
In a joint statement, American Petroleum Institute President and CEO Mike Sommers along with American Fuel and Petrochemical Manufacturers President and CEO Chet Thompson said the proposal places "greater strain on the U.S. manufacturers [President Donald Trump] promised to protect" and threatens "higher costs for consumers."
"The misguided reallocation of volumes punishes companies working to comply with the RFS and is an empty attempt to force more E15 into the fuel supply — a fuel nearly 70 percent of vehicles on the road were not designed to use," they said. "We will vigorously challenge this new policy in the weeks to come and continue advocating for Congress to reform the RFS."
Amid circulating rumors of the proposal, Tudor Pickering Holt & Co. analysts wrote on Oct. 2 that the proposal could raise costs for some refiners.
"With effective biofuel blending requirements going up, we believe this deal is likely to raise [biofuel blending credit] prices for those refiners that don't receive [small refinery exemptions, or SREs]," the analysts wrote. "This is negative for companies like [Valero Energy Corp.] and [PBF Energy Inc.], who are highly exposed to RINS but don't have any refineries small enough … to qualify for SREs. It's a smaller negative for companies like CVR Energy Inc. and HollyFrontier Corp., which have some plants that qualify for SREs and others that don't. … We expect minimal impact to the rest of the group."
