Exclusive: EPA to urge U.S. biofuel blending mandates below 2020 levels, sources say

© 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 reducing federal biofuel blending mandates for 2021 to below 2020 levels in what would be a blow to the biofuels industry, two sources familiar with the matter said on Friday.

The EPA also is expected to make a separate recommendation to boost the blending mandates for 2022 above the previous two years, according to the sources, who spoke on condition of anonymity.

In the short term, the agency is looking to lower the amount of biofuels that refiners are required to blend into the U.S. fuel pool because the COVID-19 pandemic has sapped fuel demand. The move could be a risk for President Joe Biden's administration, as some could view it as favoring oil refiners over the lower-carbon biofuels industry even as the administration presses companies to reduce emissions.

The EPA is expected to propose the 2021 and 2022 mandates at the same time, the two sources said. The proposals could change during a formal interagency review process.

The EPA declined to comment on the matter.

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 pandemic.

RINs have slumped in the past 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.

Biofuel producers rely on the national blending mandate to get their products into the U.S. fuel market. Cutting the mandate would hurt their market share. The mandates are intended to reduce U.S. reliance on imported oil.