The Obama administration is forcing refiners to use a record amount of biofuel next year, delivering a victory to Midwest farmers at the expense of oil companies that say they are struggling with the program’s costs.
Under quotas the Environmental Protection Agency announced Wednesday, refiners must mix 19.28 billion gallons of renewable fuel into the U.S. gasoline and diesel supply next year, including up to 15 billion gallons of traditional, corn-based ethanol.
The mandates are above levels the agency proposed in May and also above last year’s requirements. For the first time, the targets match a 15 billion-gallon ceiling that Congress established for conventional renewable fuels in creating a program to boost their use 11 years ago.
The 2017 quotas are certain to increase pressure on Congress and President-elect Donald Trump to overhaul the Renewable Fuel Standard. While Trump is unlikely to rescind the new targets now that they have been finalized, he may support efforts to overhaul it by Congress.
During his campaign, Trump had varying views of the program. In Iowa early this year, Trump said the U.S. should increase biofuel mandates. But in September, his campaign issued a fact sheet calling for the elimination of the system for buying and selling biofuel blending credits, following criticism from billionaire investor Carl Icahn. His campaign later reissued the fact sheet without the language opposing the system.
The EPA’s decision is a victory for biofuel backers and Midwest leaders who had argued that climbing gasoline demand justified hitting that 15 billion cap. Americans are on track to consume a record 144 billion gallons of gasoline this year, according to an October forecast from the U.S. Energy Information Administration.
Bob Dinneen, president of the Renewable Fuels Association, said the move “will send a positive signal to investors.”
“By signaling its commitment to a growing biofuels market, the agency will stimulate new interest in cellulosic ethanol and other advanced biofuels, drive investment in infrastructure to accommodate E15 and higher ethanol blends, and make a further dent in reducing greenhouse gas emissions,” Dinneen said in an emailed statement.
Jeff Broin, chairman of POET, the nation’s second-largest ethanol producer, praised the EPA for “holding firm to the letter of the law despite enormous pressure from oil interests.”
Oil companies blasted the move, arguing that the 2017 quotas push them beyond a “blend wall” where they are forced to mix a higher proportion of ethanol into fuel than the 10 percent level approved for use in all cars and trucks. Oil companies and industry trade groups had unsuccessfully lobbied the Obama administration to keep total ethanol levels at 9.7 percent of gasoline demand – an amount that would provide a buffer below the conventional 10 percent blend while also accommodating sales of ethanol-free gasoline coveted by boaters.
Frank Macchiarola, downstream group director at the American Petroleum Institute, said the EPA “has taken a step backwards with this final rule.”
Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, said the 2017 targets are “completely detached from market realities.”
The final requirements “force more biofuel in the fuel supply than consumers want or infrastructure can handle,” Thompson said in an e-mailed statement. “Refiners should not have the responsibility to force consumers to use products they either don’t want or that are incompatible with their cars, boats, and motor equipment.”
