U.S. agency lifts 2019 biofuels mandate, drawing mixed reaction

WASHINGTON (Reuters) - The U.S. Environmental Protection agency on Friday lifted its annual blending mandate for advanced biofuels, drawing praise from the U.S. biofuels industry, but disappointment that the government had not done more to protect the agricultural market.

FILE PHOTO: The U.S. Environmental Protection Agency (EPA) sign is seen on the podium at EPA headquarters in Washington, U.S., July 11, 2018. REUTERS/Ting Shen

Under the U.S. Renewable Fuel Standard, oil refiners must blend increasing amounts of biofuels into their fuel each year or purchase blending credits from those that do.

The EPA on Friday lifted its requirement for advanced biofuels by 15 percent for 2019, while keeping the volume for conventional biofuels like corn-based ethanol steady. The figures were the same as reported by Reuters on Thursday ahead of the official release, in an article citing an internal agency document.

Republican Senator Chuck Grassley from farm state Iowa welcomed the increase in the advanced biofuels requirement, but slammed the EPA for its refusal to reallocate biofuel volumes that had been previously waived under the small refinery exemptions program, one of the most controversial issues dividing the U.S. corn lobby and the oil industry.

“I’m disappointed the rule didn’t reallocate waived volumes to make up for the damage done by former Administrator Pruitt,” Grassley said in a statement.

Small refineries can be exempted from the RFS if they prove that complying would cause them financial strain.

Since President Donald Trump’s election and under the former EPA administrator Scott Pruitt, who stepped down in July, the EPA has vastly expanded the number of waivers it has handed out to small refineries, in a bid to reduce the refining industry’s regulatory compliance costs.

The move has infuriated the U.S. farmbelt, which argues the program erodes demand for biofuels.

“The latest EPA rule is ... a missed opportunity to correctly account for billions of gallons of ethanol lost to refinery exemptions,” Growth Energy CEO Emily Skor said in a statement. “Until these are addressed properly, we’re still taking two steps back for every step forward.”

But recently, signs have emerged of a potential shift.

The Trump administration has temporarily put on hold the processing of current waiver applications as the EPA and the Department of Energy review the scoring system used to evaluate them, sources familiar with the matter told Reuters this week.

Senator Grassley said he was glad the EPA could revisit the practice, citing a meeting with Acting EPA Administrator Andrew Wheeler on Thursday over the issue.

“The handling of these applications is ripe for review. There’s no good reason oil companies making billions of dollars in profits should be exempted from following the law as passed and intended by Congress,” he said.

The 2019 mandate here includes 4.92 billion gallons for advanced biofuels, up from the EPA's initial proposal in June of 4.88 billion and above the 4.29 billion that had been set for 2018, the EPA said. The requirement for conventional biofuels remains at 15 billion gallons for 2019, on par with 2018, and the same as proposed by the agency in June, it said.

Reporting by Humeyra Pamuk and Richard Valdmanis; editing by Jonathan Oatis and Rosalba O’Brien