The US Environmental Protection Agency said Tuesday it was considering cutting by up to 15% how much advanced biofuel and biodiesel must get mixed into the US fuel supply in 2018 and 2019, based on a potential spike in biodiesel prices.
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The agency said new US duties expected on imports of biodiesel from Argentina and Indonesia, coupled with the expiration of a federal tax credit at the end of 2016, could disrupt biodiesel supply and drive up prices.
It asked industry in a regulatory notice to weigh in on that possibility and comment on whether EPA has statutory authority to cut volumes under the Renewable Fuel Standard. As of early Tuesday afternoon, there was no closing date for the comment period.
"EPA remains concerned about the high cost of advanced biofuels," the notice said.
RIN prices quickly reacted to the notice, plunging after a morning uptick.
Biodiesel (D4) RINs for 2017 compliance traded as low 95 cents after S&P Global Platts assessed them at $1.0375 on Monday. Ethanol (D6) RINs also tumbled, trading as low as 75 cents after Platts assessed them at 83.5 cents Monday.
In July, EPA proposed requiring refiners and blenders to mix 19.24 billion gallons of total renewable fuel, including 4.24 billion gallons of advanced biofuel, in 2018. It proposed the 2019 biodiesel blending mandate at 2.1 billion gallons.
Cutting the advanced biofuel and biodiesel portions of the blending mandate would also lower the total volume to keep conventional ethanol's share from climbing above 15 billion gallons.
EPA said the expiration of the $1/gal biodiesel blenders tax credit at the end of 2016 has had a significant impact on the effective price of biodiesel sold to blenders.
"We also expect the price of biodiesel used in the US could increase further following a recent preliminary determination by the Department of Commerce that it would be appropriate to place countervailing duties of 41%-68% on imports of biodiesel from Argentina and Indonesia," the notice said.
The Commerce Department is expected to make a final decision on the countervailing duty orders on December 29.
A biofuels trader said the cuts contemplated by EPA would zero out any gains domestic biodiesel producers were hoping to realize from countervailing duties.
"It was like, 'Here you go, we will impose duties on imports. Oh and by the way, for that we are reducing demand domestically,'" the trader said.
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