June 4, 2018 / 2:09 PM / 14 days ago

Biofuel credits drop ahead of expected White House policy announcement

NEW YORK (Reuters) - Prices of U.S. biofuels blending credits hit fresh five-year lows on Monday as expectations mounted the administration of U.S. President Donald Trump would soon announce plans for an overhaul of the biofuels program, traders said.

FILE PHOTO - A biodiesel vehicle is seen at Dogpatch Biofuels filling station in San Francisco, California January 8, 2015. REUTERS/Robert Galbraith

The announcement, which could come as early as Monday, will include plans to count ethanol exports toward federal biofuels usage quotas under the U.S. Renewable Fuel Standard and allow year-round sale of fuels with a higher blend of ethanol, two sources briefed on the matter said.

Prices of renewable fuel Renewable Identification Number (RIN) credits fell to 18 cents a piece, under pressure from the expectations, traders said. That was down from 22 cents apiece on Friday, plumbing fresh five-year lows.

White House spokeswoman Kelly Love did not respond to a request for comment.

The expected proposals follow a series of discussions hosted by the White House between lawmakers, industry players, and cabinet officials seeking to plot the future of the troubled RFS, a regulation that requires refiners to blend increasing volumes of biofuels such as ethanol into gasoline and diesel.

The policy that has helped corn farmers over the years by creating a 15-billion-gallon per year market for ethanol, but refiners complain it is too costly.

The Environmental Protection Agency, which administers the RFS, is currently preparing its proposal for volumes requirements for 2019.

Under the RFS, refiners must earn or purchase blending credits and then hand them in to the EPA to prove they are meeting the annual volumes requirements.

Prices for those credits have tumbled for months amid news of the administration’s efforts to overhaul the program and as the EPA ramped up its use of hardship waivers for refineries that can show they would struggle financially to comply.

The new plan is intended to provide both the corn and oil industries benefits: the oil industry wants biofuel exports to count toward annual quotas because it will reduce the blending burden on refiners, and the corn lobby backs expanding high-ethanol gasoline sales because it will grow demand for corn.

But the new plan could instead backfire by triggering legal challenges, sources said.

The head of Renewable Fuels Association, which represents ethanol producers, said the idea that biofuels exports should count toward annual quotas is a “cold slap in the face to farmers.”

“They are undermining both domestic and foreign markets,” RFA’s Bob Dinneen said, noting that foreign buyers will see the move as a direct subsidy.

The oil industry has also opposed expanding high-ethanol gasoline sales, mainly because increasing biofuels content in fuel displaces petroleum and eats into its market share.

Reporting by Jarrett Renshaw and Chris Prentice in New York and David Shepardson in Washington; Editing by Chizu Nomiyama and Susan Thomas

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