U.S. EPA to keep biofuel mandates steady in 2021-22 due to coronavirus -sources

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NEW YORK, May 20 (Reuters) - The U.S. Environmental Protection Agency's biofuel blending mandates for this year and next are likely to be in line with those of 2020 as the agency accounts for weaker fuel demand since the onset of the coronavirus pandemic, three sources familiar with the matter said.

That would spare the U.S. refining industry the added costs associated with the usual annual expansion in renewable volume obligations under the Renewable Fuel Standard, at the expense of biofuel producers and the corn industry which depend on regular increases to grow their businesses.

The RFS requires refiners are meant to blend billions of gallons of biofuels like corn-based ethanol and biodiesel into their fuel, or buy tradable credits from those that do. The required amount of biofuels can increase each year, in hopes of reducing foreign petroleum imports and helping farmers.

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The EPA administers the program and is meant to propose new volumes mandates yearly. But the administration of former President Donald Trump delayed the 2021 proposal because of the pandemic, and ahead of an election in which he was courting voters in both the oil and farm sectors.

The agency is now intending to issue both the 2021 and 2022 volumes proposals this summer. read more

In its last finalized ruling, which came out at the end of 2019, the EPA mandated that refiners must blend 20.09 billion gallons of renewable fuel into nation's fuel mix for the 2020 compliance year. The mandate included 15 billion gallons of conventional biofuels like ethanol, with the rest including other forms of biofuels.

The upcoming volume proposals are due to include requirements that are largely the same, the three sources said, citing the impact of the coronavirus pandemic.

The agency likely was also guided by volume targets set by Congress under the RFS for conventional biofuels and non-cellulosic advanced biofuels, one source said.

The Biden administration this summer is also expected to lay out how electric vehicles could qualify for tradable credits under the RFS, Reuters has reported. This could add automakers into the fractious mix of RFS stakeholders. read more

Both the oil and biofuel industries have battled over the RFS for years. The biofuels industry likes it because it has vastly expanded their market. But refiners dislike it because it requires them to displace their own products with biofuels, while at the same time shelling out cash for blending or blending credits.

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Reporting by Stephanie Kelly and Jarrett Renshaw; Editing by David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

A New-York-based correspondent covering the U.S. crude market and member of the energy team since 2018 covering the oil and fuel markets as well as federal policy around renewable fuels.