NEW YORK (Reuters) - The U.S. Environmental Protection Agency will propose reallocating biofuel blending obligations waived under its small refinery exemption program to other refiners, in an announcement that could come as early as Friday, according to two sources familiar with the agency’s plans.
The move is a nod to biofuel groups frustrated with the agency’s broad expansion of the waiver program under the Trump administration, but will antagonize refining companies who say it will unjustly increase their regulatory costs.
U.S. renewable fuel credits tied to ethanol jumped by a nickel on Wednesday on the news, hitting 28 cents apiece, according to two traders.
The EPA is expected to make the announcement as part of the release on Friday of the agency’s proposed annual biofuel blending mandates under the U.S. Renewable Fuel Standard (RFS), one source told Reuters.
The RFS requires refiners to blend biofuels like ethanol into the fuel pool or buy compliance credits from those who do. Refineries with capacity of less than 75,000 barrels per day can seek waivers from the program if they can show that complying would cause them significant financial damage.
The EPA under administrator Scott Pruitt has roughly tripled the number of waivers issued compared with the previous administration, drawing criticism that he is gutting the program. Biofuel groups say the waivers have cut the ethanol mandate from 15 billion gallons to 13.5 billion gallons.
Under the proposed reallocation, refiners that do not receive exemptions would be forced to make up the volumes waived to others. The sources were not certain how the EPA planned on handling those reallocations, which the refining industry has said it would strongly oppose.
“Our view is reallocating volumes would obviously conflict with public and private statements on the issue,” said Frank Macchiarola, group director of downstream and industry operations at the American Petroleum Institute.
Macchiarola said the move would be a breach of trust and add to the burden of the program on all the refiners that do not qualify for the exemptions.
EPA spokesman Jahan Wilcox did not respond to a phone call and email seeking comment.
Last week, the EPA drew criticism when it said it could not reallocate volumes retroactively without an act of Congress, which at the time dashed hopes of the biofuel industry.
Reporting by Jarrett Renshaw; Editing by Chizu Nomiyama and Lisa Shumaker