NEW YORK (Reuters) - The U.S. government will require energy companies to use a record amount of biofuel next year, a victory for Midwest farmers that supply ethanol makers over oil firms that say using more biofuels in gasoline and diesel is costly and unachievable.
The Renewable Fuel Standard (RFS) program, signed into law by President George W. Bush in 2005, was designed to curb greenhouse gas emissions, promote energy independence and boost rural economies by raising demand for biofuels.
The Environmental Protection Agency (EPA) in a statement on Wednesday set the target for total renewable fuel use at 19.28 billion gallons for 2017, higher than the 18.8 billion gallons the EPA initially proposed in May. The EPA bumped up the volumes after the U.S. government revised its 2017 gasoline demand forecast.
The total requirement marked a 6 percent rise from this year’s 18.11 billion gallons and was larger than some in the industry had expected.
The EPA is required to set annual targets by the RFS for how much ethanol and biodiesel needs to be blended with gasoline and diesel.
The requirements include 15 billion gallons for conventional biofuel, which is mainly corn-based ethanol. That marked the first time the EPA has hit a target laid out by Congress in 2007.
EPA set the advanced biofuels mandate at 4.28 billion gallons, confirming figures Reuters previously reported. The advanced biofuels category includes a variety of fuels considered more environmentally friendly than ethanol.
Wednesday’s plan marked the final RFS mandates from the Obama administration, which biofuels advocates previously said had fallen short of targets to promote their fuels.
The administration began to pull back on the targets in 2013 due to what it described as marketplace challenges. Those challenges have eased as low oil prices lifted fuel demand, making the 2007 Congressional volume targets easier to reach.
“These final standards will boost production, providing for ambitious yet achievable growth of biofuels in the transportation sector,” EPA Acting Assistant Administrator for Air and Radiation Janet McCabe said in a statement.
The move marked a victory for the U.S. ethanol industry after years of battling regulators to increase the mandates to the 15-billion-gallon target.
Biofuels groups have taken the EPA to court over whether the agency has the authority to lower the targets. The oil industry has said the targets were unachievable due to the “blend wall,” the saturation point for ethanol content in gasoline.
The final plan drew praise from biofuels advocates and criticism from the oil industry.
“The move will send a positive signal to investors, rippling throughout our economy and environment,” said Bob Dinneen, president and chief executive officer of the Renewable Fuels Association.
Shares in oil refiners Tesoro Corp, Valero Energy Corp and HollyFrontier Corp were down. Shares of biofuels producers Green Plains Inc and Pacific Ethanol Inc rose after the news.
Stephen Brown, Tesoro’s vice president and counsel, said that the plan is “unworkable” as it forces use of biofuels beyond the blend wall and said it highlights the need for a legislative overhaul of the program.
The agency established the requirements for biomass-based diesel at 2.1 billion gallons for 2018.
The increase in the advanced fuel category for 2017 is also a potential boost for biodiesel, and sent benchmark soyoil futures traded in Chicago surging by the daily price limit on Wednesday.
Additional reporting by Julie Ingwersen; Editing by Simon Webb and Meredith Mazzilli