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Highlights

Non-exempt refiners will have to blend waived volumes

EPA projects 2020 waivers equivalent to 770 million RINs

Ethanol RINs fall 7.25 cents since EPA announced deal

Washington — Refineries that process more than 75,000 b/d would have to blend more biofuel or buy more renewable fuel credits starting next year to make up for volumes waived for smaller refineries, under changes proposed Tuesday by the US Environmental Protection Agency.

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EPA said the proposed changes to the 2020-21 Renewable Fuel Standard effectively increase the percentage standards that apply to non-exempt refineries to offset future small refinery waivers and "help ensure that the required volumes are met."

The proposal increases the overall blending mandate by the equivalent of 770 million Renewable Identification Numbers, which is the average of the past three years of hardship waivers granted to small refineries.

S&P Global Platts Tuesday assessed D6 ethanol RINs for 2019 compliance at 16.75 cents/RIN, down 1 cent from Monday. Trading was heard as high as 18.50 cents/RIN prior to the announcement.

D6 RINs have fallen 7.25 cents/RIN since EPA announced October 3 that it would propose a supplemental rule expanding the 2020-21 mandate.

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.

Market sources contacted by Platts were unable to reach consensus on which portion of the announcement dropped prices from their intraday high.

EPA will hold a hearing on the proposed changes October 30, followed by a 30-day comment period. The final supplemental rule is not expected to meet EPA's November 30 deadline for publishing the final 2020-21 blending volumes.

'GREATER LEGAL CERTAINTY'

US Department of Agriculture Deputy Secretary Stephen Censky said earlier Tuesday he was confident the changes to the 2020-21 mandate would be in place by the end of the year and that they would hold up against court challenges from the refining industry.

"The president is very insistent that 15 billion gallons means 15 billion gallons," Censky told reporters at the Global Ethanol Summit, referring to the conventional ethanol blending mandate. "EPA and USDA are fully on board with that."

Biofuel makers pressed for the changes after EPA expanded its use of small refinery waivers over the past two years, leading biofuel credit prices to plummet.

The proposal released Tuesday did not contain any provisions on streamlining E15 labeling or evaluating RIN market transparency, as EPA had promised when it announced the outline of the deal October 3.

Censky said EPA could have made the changes within the final 2020-21 mandate due November 30, but it opted to issue a supplemental rule and take public comments to provide "greater legal certainty" against challenges.

"That's what everyone wants, that kind of certainty for the industry," he said.

Censky added that USDA is developing a program to boost E15 adoption, after the Trump administration lifted the summertime ban on sales of gasoline blended with 15% ethanol. He had few details, saying it was in the early stages.

HIGHER BIODIESEL IMPORTS

Oil refiners dispute that EPA's small refinery waivers have hurt ethanol production, demand or exports.

"There is no evidence that arbitrary expansions in mandated ethanol use will come from domestic production," the Fueling American Jobs Coalition said in a statement. "If history is any guide, additional volume almost certainly will be satisfied by imports, not American ethanol production."

Brendan Williams, vice president of government relations for refiner PBF Energy, said refiners will not be able to blend 15 billion gallons in the near future, even with E15, given projections of flat or declining gasoline demand. He expects refiners will use biodiesel imports to meet the higher mandate.

(Recasts headline and lede with details from proposal, adds details throughout)

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Jordan Young, jordan.young@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com