WASHINGTON (Reuters) - The U.S. Environmental Protection Agency could grant fewer waivers exempting small refineries from the country’s biofuel policy as lower prices for blending credits have reduced the cost of compliance, the agency’s administrator Andrew Wheeler told Reuters on Thursday.
The Trump administration’s use of such waivers to save the oil industry money has become a lightning rod of controversy for the powerful corn lobby, which claims the exemptions have been over used and threaten demand for corn-based ethanol at a time farmers are already struggling.
Under the U.S. Renewable Fuel Standard (RFS) program, refiners must blend certain volumes of biofuels like ethanol into their fuel each year or purchase credits from those that do. But small refineries with a capacity of less than 75,000 barrels per day can get waivers if they prove that compliance with RFS would cause them significant financial strain.
Under the administration of President Donald Trump, the EPA has granted far more exemptions than in the past, including to plants of profitable oil giants such as Exxon Mobil Corp .
In an interview, Wheeler said the prices of biofuel credits, called the Renewable Identification Numbers or RINs, have fallen, easing the financial strain on refineries complying with the biofuel blending requirements.
“The RIN prices have been relatively low and relatively calm since last spring so that would tell me that there should be less economic harm in the refining industry right now than there was a year ago,” Wheeler said.
“There’s more than just the price of RINs for economic harm but just by that factor alone, I’d think maybe there would be fewer refinery exemptions because of that,” he said.
Wheeler’s comments to Reuters moved the U.S. biofuel credits, which went from 8 to 13 cents each for 2018, and 16 to 19 cents each for 2019.
Wheeler also said the agency was expecting to receive recommendations from the Department of Energy by the end of the week on which biofuel waiver applications that are pending should be granted. Some 39 refineries have filed applications for small refinery waivers for the 2018 compliance year.
“Our technical guys then take a look what DOE sends us. If they send us 30 of them in one day, it may take us a while to process all of them. If we get one or two ... it would be a little bit easier to process them if they’re scattered,” Wheeler said.
He added that final decisions on the petitions were to be made after receiving the DOE input.
U.S. Republican Senator Chuck Grassley, of Iowa, wrote a letter to the DOE on Wednesday seeking information on how the agency scores the applications. The EPA has ignored recommendations from the DOE to limit the waivers in the past, and Grassley wants more details on the disagreements.
Oil companies have long complained that speculation in the RIN market has inflated prices and cost them hundreds of millions of dollars - one of a long list of complaints by the industry about U.S. biofuel policy.
Wheeler said he believed the EPA’s proposed reforms of the RIN market were going to satisfy both the corn and oil industries. “The RIN price mechanisms should help bring down and keep the price of RINs lower and stable which the oil industry likes, and the E15 is something that the ethanol industry likes,” he said.
He was referring to the EPA rule allowing year-round sales of higher ethanol blends of gasoline, a move Trump promised to corn farmers, and said it would be completed and ready by June - in time for the summer driving season.
Expanding sales of so-called E15 is meant to boost U.S. demand for ethanol and help farmers struggling with low commodity prices and weak export markets.
Wheeler also said the agency was on “solid ground” legally against potential lawsuits. The oil refining industry has promised to sue to block the move.
Additional reporting by Valerie Volcovici, Timothy Gardner, David Shepardson; Editing by Chizu Nomiyama and Tom Brown