Exclusive: EPA to recommend lower U.S. biofuel blending mandates below 2020 levels - sources

© Reuters. Signage is seen at the headquarters of the United States Environmental Protection Agency (EPA) in Washington, D.C., U.S., May 10, 2021. REUTERS/Andrew Kelly/Files

By Stephanie Kelly and Jarrett Renshaw

NEW YORK (Reuters) - The U.S. Environmental Protection Agency is expected to recommend to the White House lowering the nation's biofuel blending mandates below 2020 levels, in what would be a blow to the biofuels industry, two sources familiar with the matter said on Friday.

The mandates have become a political snare for the Biden administration, as the rules typically pit oil refiners against farmers and the biofuels industry. The administration has so far had to consider how to tackle setting the obligations amid a global pandemic without angering either constituency. It also has had to weigh the optics of favoring refiners in rule-making, as it adopts aggressive targets away from fossil fuels.

With its current plan, the EPA is looking to align mandates with actual production levels, which have slumped during the coronavirus pandemic. The mandates determine the amount of biofuels that oil refiners must blend into their fuel mix.

The proposals could change during a formal interagency review process.

The EPA did not comment for this article.

Under the U.S. Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the fuel mix, or buy tradable credits, known as RINs, from those that do. Refiners can also apply for exemptions to the mandates if they can prove the obligations would do them financial harm.

Mandates for 2021 have already been delayed by more than half a year because of the coronavirus pandemic. The administration is expected to release proposals for 2021 and 2022 at the same time.

RINs have slumped in the last two days on market speculation surrounding the mandates. Renewable fuel (D6) credits traded at $1.42 each on Friday, down from $1.50 in the previous session, traders said. Earlier this week, credits were trading above $1.60.