By Stephanie Kelly and Jarrett Renshaw
(Reuters) - The Biden administration on Wednesday increased the amount of biofuels that oil refiners must blend into the nation's fuel mix over the next three years, but the plan has angered the biofuel industry, which says mandates for corn-based ethanol and biodiesel are not high enough.
The U.S. Environmental Protection Agency has finalized biofuel blending volumes at 20.94 billion gallons in 2023, 21.54 billion gallons in 2024 and 22.33 billion gallons in 2025. That compares with the initial proposal announced in December of 20.82 billion in 2023, 21.87 billion in 2024, and 22.68 billion in 2025.
But the finalized volumes include just 15 billion gallons of conventional biofuels like corn-based ethanol in all three years, plus a 250 million-gallon supplemental amount for 2023. That represents a decline from the initial proposal, which included 15 billion gallons of conventional biofuels in 2023 and 15.25 billion gallons in both 2024 and 2025.
The plan also has modest increases to biomass-based diesel volumes compared with the proposal, despite a major lobbying push from groups that produce biodiesel, renewable diesel and sustainable aviation fuel to boost volumes higher.
The announcement drew strong rebukes from ethanol and biodiesel advocates.
"The industry responded to signals from the Biden administration and Congress aiming to rapidly decarbonize U.S. fuel markets, particularly aviation, marine, and heavy-duty transport, and make clean fuels available to more consumers," said Kurt Kovarik, vice president of federal affairs with Clean Fuels, a biodiesel group. "The volumes EPA finalized today are not high enough to support those goals."
Iowa Secretary of Agriculture Mike Naig said the finalized mandates fail to fully support benefits that biofuels can provide to farmers and consumers.
The Renewable Fuels Association called the reductions in ethanol mandates "inexplicable" and "unwarranted."
The final rule marks a new phase in the U.S. Renewable Fuel Standard program, which is more than a decade old and frequently pits the powerful oil and biofuel industries against each other. Under the RFS, oil refiners must blend billions of gallons of biofuels into the nation's fuel mix, or buy tradable credits from those that do.
Ethanol producers and corn farmers like the mandates because they provide a market for their products, while the oil industry finds the requirements too pricey.
While Congress set out specific goals for the program through 2022, the law expands the EPA's authority for 2023 and beyond to change the way the RFS is administered.
The EPA said the finalized rule would reduce reliance on foreign sources of oil by between 130,000 to 140,000 barrels per day over 2023-2025.
U.S. renewable fuel credit prices dropped 8% following the news, trading at $1.34 each from as much as $1.46 each the day prior, traders said. Biomass-based credits dropped to $1.38 each from $1.48 each the previous day.
The futures market fell sharply in reaction to the lower-than-expected biofuel mandates, with most Chicago Board of Trade soyoil contracts locked down their daily 4 cent-per-lb trading limit. The soyoil market had rallied to its highest in nearly 3-1/2 months last week.
OTHER PROVISIONS
The EPA also set out a series of regulatory changes in the final rule, in an effort to strengthen the agency's implementation of the RFS program.
The agency will modify provisions for biogas-derived renewable fuels to ensure that biogas is produced from renewable biomass and used as a transportation fuel, as well as to allow for the use of biogas as a biointermediate.
Absent from the rule, however, was a much-anticipated pathway for electric vehicle manufacturers to generate lucrative credits under the RFS, though it was included in the original proposal in December. Reuters previously reported that the administration was planning to abandon the scheme over worries about lawsuits.
The plan would have given EV automakers, such as Tesla (NASDAQ:TSLA), credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or land fills.
The EPA said on Wednesday it will continue to assess stakeholder comments it received on the EV scheme, and it will work on potential paths forward for it.
The American Fuel and Petrochemical Manufacturers said it was pleased to see the EPA abandon the EV program, saying the RFS is a liquid fuels program that should not include electric vehicles.
Category 2023 2023 Final 2024 2024 Final 2025 2025 Final
Proposed Proposed Proposed
(bln
gallons)
Cellulosic 0.72 0.84 1.42 1.09 2.13 1.38
biofuel
Biomass-ba 2.82 2.82 2.89 3.04 2.95 3.35
sed diesel
Advanced 5.82 5.94 6.62 6.54 7.43 7.33
biofuel
Non-cellul 5.10 5.10 5.20 5.45 5.30 5.95
osic
advanced
Convention 15.0 15.0 15.25 15.0 15.25 15.0
al
Total 20.82 20.94 21.87 21.54 22.68 22.33
renewable
fuel
Supplement 0.25 0.25 N/A N/A N/A N/A
al
Standard
*units are
bln
gallons