US Boosts Biofuel Quotas as Gas Prices Surge

biofuel refinery
POET ethanol biorefinery in Gowrie, Iowa. (Daniel Acker/Bloomberg)

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The U.S. is ordering refiners to boost the use of biofuels such as corn-based ethanol, as the Biden administration tries to strike a balance between competing political and economic pressures while gasoline prices soar.

The Environmental Protection Agency is requiring refiners to mix 20.63 billion gallons of renewable fuels into gasoline and diesel this year, a 9.5% increase over last year’s target. In a final rule being posted online June 3, the agency also said it was retroactively paring the 2020 biofuel-blending quota to 17.13 billion gallons and setting the overall 2021 target at 18.84 billion gallons to reflect actual consumption.

The mandates come as President Joe Biden battles record-high gasoline prices, climbing food costs and inflationary pressures that threaten the economic recovery as well as Democrats’ grip on Congress after the November midterm elections. EPA said the moves were meant to help put the nation’s Renewable Fuel Standard program into a growth mode and help propel market demand for alternatives to petroleum-based gasoline and diesel.

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“We are laser-focused on providing more options for consumers at the pump, and today we are taking steps to increase the availability of homegrown biofuels,” EPA Administrator Michael Regan said in a statement. “Today’s actions will help to reduce our reliance on oil and put the RFS program back on track after years of challenges and mismanagement.”

Refiners argued the 2022 target is so ambitious it would also boost industry compliance costs with some of the burden passed on to consumers at the pump. Refining advocates and their allies in Congress had unsuccessfully appealed to the administration for a significant reduction, arguing that the 2022 target is contingent on promised renewable diesel production coming online and will strain the available pool of tradable credits known as RINs that are used to prove quotas have been fulfilled.

The 2022 quota “is bewildering and contrary to the administration’s claims to be doing everything in their power to provide relief to consumers,” said Chet Thompson, head of the American Fuel and Petrochemical Manufacturers association. “Unachievable mandates will needlessly raise fuel production costs and further threaten the viability of U.S. small refineries, both at the expense of consumers.”

Biofuel producers, however, cheered the administration’s approach for 2022, saying it recognizes the industry’s room for growth.

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The plan restores “integrity and stability” to the RFS program and puts it “on solid footing for the future,” Geoff Cooper, head of the Renewable Fuels Association, said in an emailed statement.

The final 2022 target hews close to an earlier proposal advanced last year to require some 20.77 billion gallons of renewable fuels. As many as 15 billion gallons of the new target could be fulfilled with conventional renewable fuels, such as ethanol, with advanced biofuels supplying at least 5.63 billion gallons.

Refiners and fuel importers also will be required to blend an additional 250 million gallons of biofuels this year on top of the quotas in an EPA bid to address a court-ordered rebuke of six-year-old targets. The EPA is also rejecting applications from 69 small refineries seeking exemptions from earlier quotas spanning 2016 to 2021.



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