Houston — The Trump administration's proposal Friday to boost ethanol blending and make up for lost demand from small refinery waivers drew support from the US biofuel industry, but oil refiners saw little in the deal to address their concerns and signaled that court battles would continue.
The Environmental Protection Agency said it would propose a supplemental rulemaking to expand volumes starting with the 2020-21 mandate, ensuring that more than 15 billion gallons of conventional ethanol will be blended into the US' fuel supply.
"This will include accounting for relief expected to be provided for small refineries," EPA said in a statement.
Related story: RINs jump, then retreat after US EPA biofuels-blending announcement
The proposal would "seek how to and at what levels to project" small refinery waivers for 2020, with ranges informed by the last three compliance years, an EPA official said on a background call for reporters, without giving more details.
EPA said it aims to release the proposal next week and approve it later this year after a public-comment period.
The agency also promised to propose a rulemaking to streamline E15 labeling and remove other barriers to its sale, after the Trump administration earlier this year lifted the ban on summertime E15 sales.
In response to refiner concerns about Renewable Identification Number prices spiking as a result of the policy changes, EPA said it would "continue to evaluate the options for RIN market transparency and reform."
US Senator Chuck Grassley, an Iowa Republican who has been at the center of negotiations on the issue, said the plan would fix EPA's waiver process and help farmers and biofuel producers going forward.
"The president listened to all points of view and delivered," Grassley said. "Small refineries can still apply for waivers, while biofuels are able to blend the legally required amount."
Grassley said EPA promised to "make up for waived volumes in advance ... implementing the law as intended."
Growth Energy CEO Emily Skor said the policy changes would ensure that biofuel blending targets "are truly met each year." She said EPA would look at a three-year average of volumes exempted by small refinery waivers to recalibrate future mandates.
HIGHER BIODIESEL IMPORTS
Refiners were not viewing Friday's outcome as a "win-win" deal for both sides.
"It's certainly disappointing that after months of discussion and a recognition that there's been no impact on biofuel blending, to see a proposal that does nothing to help the corn farmer, is only going to raise compliance costs and force the use of higher-priced foreign biofuel," said Brendan Williams, vice president of government relations for refiner PBF Energy.
"It's extremely unlikely in the flat or declining gasoline-demand environment that we're going to hit 15 billion gallons in the near future, even with E15," Williams added. "Refiners will be forced to overcomply with the advanced pool, which also applies to conventional."
Bracewell lawyer Scott Segal, who works with independent and small refiners, said "the devil will be in the details" and it will be a tall order for EPA to clear procedural hurdles without drawing fresh lawsuits from obligated parties.
"To the extent that expanded volume of ethanol use is predicated on the existence of small refinery exemptions, there is no authority to do so under the Clean Air Act," he said. "In fact, any attempt to undermine the effectiveness of SREs as a safety valve under the act will run counter to the statute and applicable case law."
The American Petroleum Institute and American Fuel & Petrochemical Manufacturers promised to fight the proposed changes, calling it a rushed announcement "equivalent to changing the rules in the middle of the game."
"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% of vehicles on the road were not designed to use," the trade groups said in a joint statement.
Anger in farm country over the small refinery waivers and the impact of the US-China trade dispute has gotten the attention of President Donald Trump, who is counting on Midwestern states for his re-election campaign. On August 29, Trump promised a "giant package" that would benefit the biofuel industry.
The latest battle flared up August 9, when the EPA issued 31 waivers exempting smaller refineries from the RFS.
Biofuel makers argue the waivers have gutted demand and led to a wave of ethanol plant closures, while oil refiners argue they have not hurt ethanol production, sales, or demand.
RINs prices did not react to Friday's announcement.
S&P Global Platts Thursday assessed D6 ethanol RINs for 2019 compliance at 24 cents/RIN and 2018 credits at 14 cents/RIN. On August 9, when the latest waivers were announced, D6 RINs were at 19.75 cents/RIN for 2019 and 15.5 cents/RIN for 2018.
RINs are tradable credits EPA issues to track production and use of alternative transportation fuels. For corn-based ethanol, one gallon of ethanol yields one RIN.
-- Meghan Gordon, firstname.lastname@example.org
-- Edited by Valarie Jackson, email@example.com