OREANDA-NEWS. November 24, 2016.  Federal regulators today set biofuel blending mandates for next year that for the first time in the program's history reach the maximum possible volume of corn ethanol blending.

The Environmental Protection Agency (EPA) published final requirements today that require refiners, importers and other companies to ensure biofuels equal to 10.7pc of their production for the domestic market next year enter the US fuel supply.

Final volumes under the Renewable Fuel Standard (RFS) do not require any use of corn-based ethanol, but leave a 15bn USG hole in a portion of the mandates that the ubiquitous fuel has consistently filled — the maximum volume for the fuel under statute. A proposal issued in May had recommended 14.8bn USG.

Prices for conventional ethanol renewable identification numbers (RINs) used to prove compliance for the program traded as high as 95?/RIN immediately following the volume publication, up from a midpoint of 86.5?/RIN yesterday. Biomass-based diesel shot higher to 112?/RIN from a midpoint of \\$104.25?/RIN before falling.

"Today's standards are significantly higher than have been achieved in the past and will drive significant growth in renewable fuel use beyond what would occur in the absence of the requirements," the agency said in the final rule.

But the agency also repeated that companies obliged under the law to increase biofuel blending are under no obligation to use conventional ethanol. It expects a combination of renewable diesel fuels and ethanol, rather than solely ethanol, will be use to meet the mandate. The ethanol trade group Renewable Fuels Association (RFA) estimates it will reach 14.4bn USG this year.

"What it does is send an enormously positive signal to the marketplace that there is going to be a growing market for biofuels, period," RFA chief executive Bob Dinneen said. "The oil industry narrative that says there is no way that we can blend more than 9.7pc I think is now completely shattered."

The agency also defended leaving alone an estimated 1.54bn RINs banked by obligated parties. That estimate could fall depending on how companies comply with 2016 rules.

Obligated companies use percentages issued by the EPA to determine individual renewable volume obligations (RVOs). Percentages for biomass-based biodiesel and cellulosic ethanol were unchanged for 2017 compared with the May proposals. Total advanced biofuel blending increased to 2.38pc from the 2.22pc proposed in May.

The final numbers leave mandates even higher above the so-called ethanol blendwall, which describes the difficulty and increased investment needed to push biofuels blending further beyond 10pc of gasoline and diesel production.

The refining industry looked to Congress to change the program next year.

"Today's announcement only serves to reinforce the need for Congress to repeal or significantly reform the RFS," trade group API's head of downstream Frank Macciarola said.

EPA must each year determine biofuel blending mandates under the RFS. The agency in May proposed volumes that increased advanced biofuel blending by 10pc for 2017 while leaving corn-based ethanol blending lower than statutory levels.

Obligated companies must prove compliance each year by submitting RINs generated when biofuels blend into conventional fuel. Companies with blending capacity can generate their own RINs, while merchant refiners or importers without such infrastructure may purchase the credits from those who blend fuel.

Conventional ethanol RIN prices so far this year averaged 50pc higher than the same period of 2015. Prices plummeted in May 2015 after EPA caught up on three years of overdue mandates, issuing retroactive blending requirements that matched volumes already reached in 2014 and made clear that the agency would hold to a controversial interpretation of its authority to reduce the mandates each year.

The credits shot higher in May this year on proposed mandates that lifted requirements to blend advanced biofuels while leaving volumes filled by conventional, corn-based ethanol short of the 15bn USG authorized by statute.

The RFS became law under the Bush administration, but the departing Obama administration oversaw its formative growing pains. Initial assumptions about the organization of the US energy industry, the ability of advanced biofuels to reach commercial-scale production and, above all, a ravenous US demand for gasoline failed to bear out, complicating administration of the policy.

"This is the death rattle of a dying administration," said Daniel Simmons, vice-president of the pro-oil group American Energy Alliance.

President-elect Donald Trump offered mixed signals on the program while campaigning in 2016. Trump said the program and corn ethanol should be protected in a speech in Iowa, one of the nation's top corn-producing states. But sharp critics of the mandates, including CVR Energy owner Carl Icahn, have called for changes to the program.

One hotly debated proposal this year, to include more blenders as obligated parties under the law, merited only one mention in a footnote of the 131-page final rule published today. US independent refiner and ethanol producer Valero, which along with Icahn has pushed that change, called its omission a failure.

"While our company is committed to producing biofuels to satisfy the growing market for these products in the US, we are concerned that the EPA has been so distracted by the debate over the RVO that it has not focused on a significant near-term crisis in the RINs market," the refiner said.


Fuel type 2016 Proposed 2017 Final 2017
Cellulosic biofuel 0.128pc 0.173pc 0.173
Biomass-based diesel 1.59pc 1.67pc 1.67pc
Advanced biofuel 2.01pc 2.22pc 2.38pc
Renewable fuel 10.1pc 10.44pc 10.7pc