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EPA reduces ethanol requirement, citing reduced demand

WASHINGTON – The Biden administration lowered annual production requirements for ethanol and other biofuels on Tuesday to account for declining demand due to the coronavirus pandemic.

At the same time, the administration decided to reject requests by small oil refineries to be exempted from ethanol requirements, saying they had failed to demonstrate that the exemptions were justified under the Clean Air Act.

Taken together, the actions reflect the administration’s “commitment to reset and strengthen” the Federal Renewable Fuels Standard, or RFS, “after years of mismanagement” by the Trump administration and market disruptions of gasoline resulting from the COVID-19 pandemic, officials said. .

The actions announced on Tuesday will allow officials “to put the RFS program back into growth mode by setting ambitious levels for 2022 and strengthening the program’s foundation so that it is anchored in science and the law,” said Michael Regan, administrator of the Environmental Protection Agency, which sets ethanol requirements under the RFS.

Federal law requires refiners to blend billions of gallons of biofuels into the nation’s gasoline supply or purchase credits from refineries that blend. Refineries can apply for waivers if they can prove that meeting ethanol quotas would create financial hardship for their businesses.

The ethanol industry struggled last year as gasoline consumption declined because workers stayed home instead of commuting and vacation trips were cut short. As fuel sales started to pick up, the demand for ethanol increased, pushing prices higher.

Additionally, Midwestern farmers had a good growth year for corn, and the plentiful supply moderated corn prices, lowering input costs for ethanol producers. The combination of higher demand and lower input costs has pushed ethanol profits to near record highs.

The oil industry has pushed the EPA to set its corn-based ethanol requirement for 2020, 2021, and 2022 at current usage levels. Currently, most of the gasoline sold in the United States contains 10% ethanol, and petroleum refiners want government requirements met with that level of sales.

In a demonstration of the quirks of the RFS program, the EPA on Tuesday set production targets for calendar years 2020, 2021 and 2022. The agency proposed 12.5 billion gallons of corn-based ethanol for 2020, 13.3 billion gallons for 2021 and 15 billion gallons for 2022. The 2020 figure is down from the 15 billion gallons forecast by the Trump administration and close to the actual amount of corn ethanol produced. ‘last year. Volumes for 2021 are also close to expected production volumes.

The Renewable Fuels Association, an ethanol lobby group, called the retroactive reduction in 2020 targets “unprecedented” and unfair, but said it welcomed the 2022 projection of 15 billion gallons of gas. corn ethanol.

Senator Chuck Grassley, R-Iowa, a strong advocate for ethanol, criticized the decision to adjust the 2020 targets in the last month of 2021. He called it “a boon to Big Oil” and asked, “What’s stopping the administration from cutting 2022 obligations down the line?” It is a shame and an outrage for the producers of Iowa and anyone who cares about our environment. ”

The EPA’s action also contradicts Biden’s campaign promise to “promote and advance” ethanol and other biofuels, Grassley said.

“I don’t want to hear a word about President Biden’s so-called climate priorities again until he puts his money where his mouth is and delivers cleaner, cheaper biofuels to Americans, just like he does. promised the Iowians during the election campaign, “he said.

Despite this, ethanol groups applauded the EPA’s decision to deny all pending small refinery exemption requests, following a court ruling earlier this year.

The EPA package “represents a modest step in the right direction for ethanol producers and farmers across the country,” said RFA President and CEO Geoff Cooper.

The American Fuel & Petrochemical Manufacturers, which represents refineries, said the 2022 proposal “would unnecessarily increase already record RFS compliance costs” and increase gasoline and diesel prices.

“The RFS is broken and needs to be fixed. The EPA’s proposal will only make matters worse for refiners and consumers, ” said Chet Thompson, group chairman and CEO.

While the law sets criteria for the ethanol industry to meet, it also allows the EPA to waive targets if it determines that the program is causing serious economic or environmental damage due to inadequate domestic supply. .

The Energy Information Administration said gasoline used for cars and trucks fell to 8 million barrels per day last year, a 14% drop from 2019 and the lowest level of consumption since 1997. Since ethanol is blended into the country’s gasoline supply, a decline in gasoline use has resulted in a decline in the demand for ethanol.

The 2020 target is well below the 30 billion gallons mandated for 2020 by Congress when the ethanol law was significantly expanded almost 15 years ago. The EPA has not met the ethanol volume requirement in the 2007 law since 2013.


Pitt reported from Des Moines, Iowa.

ABC News

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