Jarrett Renshaw and Stephanie Kelly

NEW YORK (Reuters), Tuesday’s proposal by the Biden administration to reduce biofuels required for U.S. oil refining plants since the onset COVID-19.

After the national demand for fuels had been severely affected by the recent health crisis, the U.S. decided to ease the pressure on its refining sector.

The proposal was criticized by both the oil sector (which claimed that the measures weren’t enough) and biofuels industry (which said the retroactive decision to reduce blending volume mandates would harm farmers).

“This decision is an about-face by President Joe Biden who campaigned on his supposed support for renewable fuels,” said Republican Senator Joni Ernst of Iowa, a major corn and ethanol producing state.

According to her, the announcement would “slash biofuel demand and have long-lasting and devastating consequences for Iowa’s farmers and producers.”

American Petroleum Institute represents U.S. crude oil industry and stated that the administration would best serve the public’s interest by keeping compliance volumes achievable. It said it was currently studying the proposal.

The U.S. Environmental Protection Agency, which oversees this policy, made Biden’s initial major biofuels policy determination. It proposed to retroactively set 2020 total renewable fuel volume at 17.13 Billion Gallons. This was a decrease from the 20.09 trillion gallons that had been the final rule before the outbreak of the coronavirus.

The volumes were set at 18.52 Billion Gallons in 2021, and 20.77 Billion Gallons in 2022. [nW1N2R904O]

While the 2020 and 2021 figures represent a decline from the 2019 figure, when the EPA mandated refiners that blend 19.92 trillion gallons biofuels into the nation’s fuel mixture, the 2022 proposal represents an increase.

The EPA proposed a rejection for 65 pending small refinery exemptions applications – Waivers requested by fuel producers to be exempted from blending mandates due to financial reasons. This action isn’t final and follows a court ruling that limited the circumstances in which exemptions can be granted by the agency.

Ex-President Donald Trump had significantly increased waivers for refiners under his EPA, angering producers of biofuels.

The U.S. Department of Agriculture announced, along with the EPA’s announcement that it would grant $700M in COVID-19 relief to biofuel producers and $100 million to support biofuel infrastructure as a concession.

Scott Irwin (an agriculture economist) stated that moving to lower mandates 2020-2021 could trigger lawsuits from biofuel producers angry.

The EPA proposed higher volumes in 2022, according to some biofuel producer groups.

WHITEN HOUSE UNDER PRESSURE

The U.S. Renewable Fuel Standard requires that refiners blend in billions of gallons biofuels – mainly corn-based ethanol – into their fuel mixture or purchase credits (known as RINs) from other companies who do. The policy’s requirements have been a source of contention between Big Oil and Big Corn for more than ten years.

The mandates have been criticized by merchant oil refiners as being too expensive, but ethanol producers and farmers love them because they helped create a multibillion dollar market for their products.

Biden made repeated pledges on the campaign trail as well as in his office to help rural jobs with clean energy and preserve the RFS.

The White House had since come under intense pressure from merchant refiners – including a plant in Biden’s home state of Delaware – to take actions that lower the costs of the credits and help stave off threatened plant closures in the wake of the coronavirus pandemic that slashed gasoline demand.

Reuters reported previously, citing sources that Biden was contemplating big reductions to the blending requirements.

After falling to 80 cents on Tuesdays (the lowest for nearly a whole year), the price of RINs recovered and traded at 95 cents today. On May 2, RINs set a new record of $2. This was due to concerns that the refinery industry wouldn’t be able generate sufficient credits to satisfy the regulations.

Reuters reported that merchant refiners like PBF Energy (NYSE 🙂 Inc or CVR Energy(NYSE 🙂 Inc started building huge outstanding liabilities in credit, betting that Biden would eventually side with refiners.