Biden Weighs Small Cut to Biofuel Targets in Nod to Refiners

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June 16, 2021

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by Jennifer A. Dlouhy and Kim Chipman (Bloomberg/Yahoo!) The Biden administration is developing targets for biofuel that are likely to be relatively flat or even lower as it seeks to balance the interests of blue-collar refining workers and advance a clean-energy agenda.

The Environmental Protection Agency is set to propose renewable fuel requirements within weeks, according to several people familiar with the strategy who asked not to be named before a formal announcement.

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Prices for some of those credits have hit all-time highs this year on expectations the Biden administration would impose more ambitious quotas and stop exempting refineries from them. Corn and soybean prices have also climbed on expectations of more demand from biofuel makers.

Instead, the EPA is considering more modest targets under the Renewable Fuel Standard program, according to three people familiar with the matter who asked not to be identified describing internal deliberations. The agency is also moving to abandon a plan for incorporating waived quotas that had been adopted under former President Donald Trump.

The move responds to pressure from refining advocates who have warned about mounting costs for the tradeable compliance credits.

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Democrats from the president’s home state of Delaware, including Governor John Carney and Senators Tom Carper and Chris Coons have asked the EPA to give refineries more time to satisfy last year’s quotas and ensure new 2021 requirements reflect the pandemic-spurred drop in fuel demand. Labor leaders also have also pressed President Joe Biden to set “reasonable” blending quotas and compensate for 2020 targets they say were “well above the amount of biofuels that could possibly be blended into the fuel supply.”

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Those options include maintaining or reducing blending requirements for 2021, while also ending a short-lived practice of incorporating estimated waived quotas.

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EPA staff are working to approve new biofuels for use under the program, a move that could expand production of alternative fuels as well as RINs associated with them. EPA officials also have been asked to consider delaying the deadline for fulfilling 2021 quotas, a move it already took for 2019 and 2020.

It is unclear how the EPA will address a lingering 2017 court ruling that found the agency improperly waived 500 million gallons worth of quotas in 2016. Biofuel supporters have pressured the agency to incorporate those requirements, while refining advocates have suggested ways they could be mostly set aside.

Complicating matters, the Supreme Court is set to rule within weeks — and as soon as Thursday — on a case that tests the EPA’s ability to exempt small refineries from annual blending quotas. The Biden administration already urged the high court to limit those exemptions, and it isn’t expected to widely issue waivers even if the Supreme Court disagrees. READ MORE

Why All This Breast-Beating about Faltering Petroleum Refineries? Wouldn’t It Be Better if They Stop Producing Fossil Fuels and Move to Renewables? (Advanced Biofuels USA)

White House OMB reveals expected timelines of 2 RFS rules (Ethanol Producer Magazine)

Grassley On Supporting Biofuels And American Energy Independence (Office of Senator Chuck Grassley (R-IA); includes VIDEO)

Ethanol RINs drop to three-month low as White House sets blending mandate dates (S&P Global/Platts)

PRESSURE’S ON: (Politico’s Morning Energy)

U.S. lawmakers urge EPA to reject exempting refiners from biofuel mandates (Reuters)

Ethanol Blog: Democratic Lawmakers Call on Biden Administration to Uphold RFS (DTN Progressive Farmer)

Ethanol Blog: Ethanol, Ag Groups Lambast Oil Refiner Attempts to Gain RFS Relief (DTN Progressive Farmer)

Biofuel groups ask EPA to resist calls for RFS waivers (Ethanol Producer Magazine)

U.S. refiners amass over $1 billion biofuel liability as Biden admin mulls relief (Reuters)

Biofuel groups ask EPA to resist calls for RFS waivers (Ethanol Producer Magazine)

Biden EPA May Offer Refiners Small Biofuel Concession (RigZone)

Refiners ramp up pressure on Biden for relief from high biofuels costs (Houston Chronicle)

Farming Groups Push Biden to Hold ‘Strong’ on Biofuel Quotas (Bloomberg Law)

Ethanol Blog: Ethanol, Ag Groups Lambast Oil Refiner Attempts to Gain RFS Relief (DTN Progressive Farmer)

Fuel for Thought: US Refiners, RINs and the RVO (S&P Global)

Excerpt from Ethanol Producer Magazine: The Biden administration has signaled its intent to issue a notice of proposed rulemaking to develop post-2022 Renewable Fuel Standard regulations before the end of 2021. A proposed rule to set annual RFS renewable volume obligations (RVOs) for 2021 and 2022 is expected to be released in July 2021.

Both rulemakings were discussed in the administration’s 2021 Spring Unified Agenda and Regulatory Plan, which was published by the White House Office of Management and Budget on June 11.

According to information posted to the OMB website, a notice of proposed rulemaking to set annual RVOs under the RFS is scheduled to be released in July, with the rule finalized in December 2021. The brief abstract published on the rule does not indicate which compliance years the proposed rule will address. The U.S. EPA, however, failed to issue a proposed rule to set 2021 RFS RVOs last year. As such, the rulemaking is expected to include proposed RVOs for both compliance years 2021 and 2022.

A separate notice of proposed rulemaking scheduled for publication in December 2021 will address the future of the RFS program. Statutory provisions in the Clean Air Act governing the RFS provide target RVOs through 2022. For years 2023 and later, the EPA must set RVOs based on an analysis of factors specified in the statute. According to the OMB, the rulemaking scheduled for release in late 2021 is scheduled to be finalized in December 2022 and will establish RVO requirements beginning in 2023.

The 2021 Spring Agenda and Regulatory Plan also addresses other regulations of interest to those in the biofuels and biorefinery industries.

A notice of proposed rulemaking to amend the EPA’s Fuels Regulatory Streamlining rule is scheduled for release in August 2021.

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In addition, the USDA is set to issue a final rule related to its Biopreferred program in July 2021. READ MORE

Excerpt from Office of Senator Chuck Grassley: Last week, Reuters reported the Biden administration is considering ways to allow U.S. oil refiners to not meet their biofuel blending requirements.

This same Administration has proposed hundreds of billions in subsidies for electric vehicles but failed to include any support for biofuels infrastructure, which play a vital role in our nation’s transportation sector.

Need I remind my colleagues, President Biden promised in his campaign to “promote and advance renewable energy, ethanol, and other biofuels to help rural America and our nation’s farmers.” He’s not keeping his promise.

Unfortunately, despite the Administration’s emphasis on the environment and climate, their recent actions contradict that and undermine their entire credibility.

The biofuel industry has proven that ethanol reduces greenhouse gas emissions from motor fuel by almost half.

Almost every vehicle on the road can run on at least E-10 ethanol. Many retailers are now selling more E-15 ethanol and other higher blends like E85.

According to the Energy Information Administration, by 2050, 81 percent of new vehicle sales will still be gas-powered or flex fuel.

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No matter what the EPA or Big Oil says about the impact of its waivers to oil companies making billions in profits, farmers and biofuels producers know and feel the negative impact.

Any attempt to exempt oil refiners from their biofuels obligation is a blatant bailout.

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By adding more biofuels to our energy mix, we can reduce emissions from dirty oil while keeping transportation costs low for working families.

Unfortunately, despite the Administration’s emphasis on environment, it seems like biofuels don’t appear to be much of a priority.

And now, it looks like labor unions have been co-opted by Big Oil and are doing their bidding with the White House.

President Biden is now faced with a decision.

He can lower greenhouse gases with biofuels or he can side with Big Oil to destroy biofuel demand by illegally tampering with the RFS, just as the Obama and Trump administrations did with Small Refinery Exemptions.

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I encourage President Biden, EPA Administrator Regan and my colleagues from across the aisle to keep it clean.

Does President Biden want to be known as Big Oil Biden? READ MORE

Excerpt from Politico’s Morning Energy: PRESSURE’S ON: Fifteen Democratic lawmakers are warning the Biden administration against taking any steps to exempt oil refiners from biofuel blending mandates under the Renewable Fuel Standard — something Biden is reportedly considering , amid pressure from unions and oil-state senators. The lawmakers, led by Midwestern Democratic Sens. Amy Klobuchar of Minnesota and Cheri Bustos of Illinois, warn that doing so would run the risk of “directly undermin[ing] your commitment to address climate change and restore integrity to the RFS,” they wrote.

Instead, they called on the administration to stabilize the renewable fuels marketplace by setting strong blending targets in the proposed rule for the 2021 and 2022 Renewable Volume Obligations and by responding to a court remand to reinstate 500 million gallons of blending requirements waived from 2016’s targets. READ MORE

Excerpt from DTN Progressive Farmer: “Oil refiners claiming hardship are using the RFS as a scapegoat for unrelated executive actions to appease dissatisfied investors,” the groups wrote in the letter.

“For example, the Monroe Energy (Delta Airlines) refinery is struggling, but not because of the RFS. Refinery executives admitted in an internal memorandum that it has sacrificed profits at the refinery to boost profits at the airline, ‘acting against its own financial interest to try to maintain lower jet fuel prices and save the nation’s second-largest airline money on fuel, its top operating expense.'”

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“Philadelphia Energy Solutions also blamed the RFS for threatening union jobs,” the letter continues.

“However, it was later uncovered that private-equity investors in the refinery were simultaneously cutting worker pensions and health benefits, taking out operating loans against the refinery, ultimately directing over $600 million to the same outside investors funding a pipeline that cut off the facility from cheap crude oil — all while liquidating RINs (Renewable Identification Numbers) needed for compliance before declaring bankruptcy.” READ MORE

Excerpt from Reuters: U.S. merchant refiners have amassed up to a $1.6 billion shortfall in the credits they will need to comply with U.S. biofuel laws, according to a Reuters review of corporate disclosures, an apparent bet that the Biden administration could let them off the hook or that credit prices will fall.

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PBF posted outstanding biofuel and emissions credit obligations for the first quarter of 2021 amounting to $848.3 million, up from $118.4 million for the same quarter a year ago, according to the Reuters review. The company did not say how much of the $848.3 million was related to outstanding compliance obligations.

CVR, owned by billionaire investor Carl Icahn, meanwhile posted a biofuel credit liability of $342 million, up from $6 million a year earlier, according to the review. Par Pacific’s biofuel credit liability at the end of March was $126 million, according to the company’s first-quarter earnings call.

Reuters was unable to determine the company’s RIN liability for the first quarter of 2020.

Reuters had already reported last month that Delta’s outstanding credit shortfall at the end of the first quarter was $346 million, up from $33 million at the end of March last year.

Par Pacific declined to comment on this article, but said during its earnings call: “The Renewable Fuel Standard allows you to defer settlement for up to two consecutive compliance years. So, what this would do is this would allow us to defer settlement of our ‘21 compliance year until the 2023 timeframe,” William Monteleone, Par Pacific’s chief financial officer, said.

Refiners could avoid some of the outstanding liabilities if the Biden administration chooses to reduce or waive the U.S. mandates, as some lawmakers and refining industry representatives have requested to help the industry. READ MORE

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