Exclusive-Biden weighing cuts to 2022 ethanol blending mandate proposal
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[January 13, 2022]
By Jarrett Renshaw and Stephanie Kelly
(Reuters) - The Biden administration is
considering lowering the 2022 ethanol blending mandate below the
proposed 15 billion gallons amid backlash from the oil refining lobby
and unions arguing the shrinking U.S. ethanol industry can no longer
support the target, according to two sources familiar with the
administration’s thinking.
U.S. President Joe Biden vowed to bring some normalcy back to laws
requiring refiners to blend biofuels like corn-based ethanol into the
nation’s gasoline pool after his predecessor, Donald Trump, took
unprecedented steps to relieve refiners from the requirement.
But Biden is finding it difficult to live up to his promise. The
COVID-19 pandemic has dampened fuel consumption and triggered a handful
of ethanol plant shutdowns. Higher regulatory costs have refiners
threatening to close refineries and shed high-paying union jobs.
In December, the Environmental Protection Agency issued a long-awaited
biofuel blending mandate proposal that cut ethanol requirements for 2020
and 2021 but restored them to 15 billion gallons for 2022. Farmers and
biofuel producers criticized the rollbacks but welcomed the restoration
this year.
But, in recent weeks, administration officials have considered rolling
back the 15 billion gallon mandate when the final rule is issued later
this year, the two sources told Reuters.
![](http://archives.lincolndailynews.com/2022/Jan/13/images/ads/current/debbiesfloral_lda_010521.png)
"EPA remains committed to the growth of biofuels in America," said Nick
Conger, an EPA spokesperson. "We look forward to reviewing the robust
comments that we receive from all stakeholders before finalizing our
rulemaking later this year."
The administration had initially planned to set the 2022 ethanol mandate
at 14.1 billion gallons, Reuters previously reported, but went with 15
billion gallons under pressure from Farm-Belt Democrats like Senator
Tammy Duckworth of Illinois.
“The White House is caught between a rock and a hard place. On one hand,
they want to support the agricultural and biofuel industry, but they
have been bombarded by unions and refiners who say there’s not enough
ethanol and they are listening,” said one of the sources familiar with
the discussions.
Under the Renewable Fuel Standard, refiners must blend biofuels like
ethanol into their fuel pool or buy tradable credits, known as RINs,
from refiners who do. Merchant refiners like PBF Energy and Monroe
Energy have long complained that the cost of purchasing RINs threatens
their plants.
While cuts to the 2020 and 2021 ethanol mandate briefly lowered RIN
costs, they have since rebounded. RINs are trading about 50% higher from
the around 80 cents after the mandates were announced in December.
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![](../images/011322PIX/news_f11.jpg)
An ethanol plant with its giant corn silos next to a cornfield in
Windsor, Colorado July 7, 2006./File Photo
![](http://archives.lincolndailynews.com/2022/Jan/13/images/ads/current/graue_preowned_010822.png) After Reuters reported the news on
Wednesday, RIN prices fell about 6% to $1.20 each. Margins to
produce gasoline fell to an intraday low of $17 per barrel, before
recovering.
Mike Burnside, Policy Analyst at the American Fuel & Petrochemical
Manufacturers, a leading refining trade group, told the EPA during a
hearing on the blending mandate proposal that its 2022 targets are
out of step with demand.
"EIA (the Energy Information Administration) projects that gasoline
consumption in 2022 will be below 2019 demand, so it is unreasonable
to propose 15 billion gallons for conventional biofuel in 2022 as if
the pandemic never happened and we are back to normal," Burnside
said.
ETHANOL PLANTS SHUT
The U.S. ethanol industry has seen a number of facilities shut down
in the last few years, and the industry had to deal with reduced
fuel demand because of the coronavirus pandemic. There were 197 U.S.
ethanol plants at the beginning of 2021, down from 201 a year
earlier, EIA data showed.
Some ethanol companies have strayed from production of the
corn-based fuel.
For instance, a company formerly known as Pacific Ethanol Inc said
in 2020 it would change its name to reflect its focus on specialty
alcohols used in beverages and sanitizers instead of fuel. It is now
Alto Ingredients Inc.
"I don't see anyone running to invest more," said Ed Hirs, who
teaches energy economics at the University of Houston.
Still, the ethanol industry enjoyed higher margins and increased
production in the later half of 2021.
In November, margins to produce ethanol in the Corn Belt increased
to $1.82 per gallon, the highest since 2014, Refinitiv Eikon data
showed. They have since fallen to about 37 cents per gallon.
U.S. ethanol production in October rose to the most since 2017,
according to the EIA.
"The administration has indicated blending requirements will remain
strong and at 15 billion gallons for 2022, and we have every
expectation that they will deliver on that promise," said Growth
Energy Chief Executive Emily Skor, in response to the news on
Wednesday.
(Reporting By Jarrett Renshaw and Stephanie Kelly, Editing by Chizu
Nomiyama and Marguerita Choy)
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