API, Ethanol Groups Clinch Deal on US Biofuel Bill

by Cole Martin (Argus Media) The American Petroleum Institute (API) and ethanol groups have agreed on reforms to US biofuel policy that they would like to see, teeing up a last-minute lobbying campaign to get the provisions included in federal budget legislation this month.

API and ethanol supporters that include the Renewable Fuels Association and Growth Energy have aligned around limiting refineries' future exemptions from biofuel mandates and making some changes to a bipartisan bill that would permit a higher-ethanol gasoline blend, according to four people familiar with the deal and draft text shared with Argus.

The groups' final framework — which they will pitch to lawmakers in the hopes of swiftly adding it to government spending bills this month — would authorize sales of up to 15pc ethanol gasoline (E15) year-round. Summertime sales of ethanol blends above 10pc are restricted in most of the US because of rules meant to minimize smog.

If passed into law, the deal would be a major victory for ethanol producers who have long claimed wider access to the typically-cheaper blend would benefit farmers and drivers alike. Oil majors have grown more comfortable with E15 too, preferring consistent nationwide rules to costly workarounds like a looming shift in the midcontinent to a boutique fuel blend that would allow more ethanol.

While the E15 fix would take effect immediately, the energy groups want to keep existing rules around biofuel quotas and exemptions in place through 2027. Under the current system, the Environmental Protection Agency (EPA) requires oil companies to blend minimum volumes of biofuels while allowing hardship exemptions for some small refineries that annually process no more than 75,000 b/d of crude.

Starting in the 2028 compliance year, relief would be awarded only to companies that process 75,000 b/d or less across all their refineries and that also maintain that eligibility each year. These smaller facilities would win automatic 75pc exemptions from biofuel quotas starting in 2028 without having to apply each year, effectively ending discretion for regulators to choose which refineries deserve exemptions.

Under the proposal, EPA starting in 2028 also would not require larger oil companies blend more biofuels to offset exemptions granted to their smaller rivals.

This longer phase-in would address concerns from some energy lobbyists that more immediate changes could delay EPA's work to finalize new blend mandates. The agency wants to finalize new blend quotas for 2026 and 2027 in the coming weeks.

Fuel fight

The draft bill's text could change as lobbyists pitch the agreement to lawmakers and try to minimize backlash from oil refiners, people familiar with the matter said. But there is little time for more negotiations, with advocates of the deal pushing Congress to include it in legislation to fund government agencies after 30 January. Lawmakers have expressed similar urgency.

There may be "news soon" on updates to the existing E15 bill draft, bill sponsor and US senator Deb Fischer (R-Nebraska) said in an online interview with Brownfield Ag News this week.

The current deal would be a substantial blow to refiners that have won exemptions for small units in the past but run too many larger facilities to qualify under the proposed rules, including independent refiners Delek and Par Pacific. Other merchant refiners worry that the biofuel lobby will use wider ethanol access as a pretext to push for higher blend mandates in future years, which they say risks refinery closures.

The American Fuel & Petrochemical Manufacturers chief executive told Argus this week that his refinery members were divided over E15 talks. API had surprised its traditional oil refining allies last year by teaming up with ethanol interests on a larger biofuel policy package.

Other biofuel producers have long wanted tighter restrictions on hardship waivers than the latest deal, another hiccup for negotiations. Particularly controversial among farm advocates is a holdover provision from the current E15 bill to grant some small refiners active credits they can use toward future mandates.

API, the Renewable Fuels Association and Growth Energy as well as chief Senate bill sponsors Fischer and Shelley Moore Capito (R-West Virginia) did not immediately reply to requests for comment. READ MORE