The Biden administration Tuesday slashed its production requirements for ethanol and other biofuels, citing reduced demand due to the COVID-19 pandemic.
Administration officials also moved to deny petitions to exempt small refineries from their obligations under the federal Renewable Fuel Standard (RFS), saying that they weren’t able to show exemptions were justified under the Clean Air Act.
Michael Regan, administrator of the Environmental Protection Agency (EPA), which sets ethanol requirements under RFS, said the actions will enable officials “to get the RFS program back in growth mode by setting ambitious levels for 2022 and by reinforcing the foundation of the program so that it’s rooted in science and the law.”
“Together, these actions reflect the Biden Administration’s commitment to reset and strengthen the RFS program following years of mismanagement by the previous administration and disruptions to the fuels market stemming from the COVID-19 pandemic,” the EPA said in a news release.
The move was swiftly met with criticism from both lawmakers and industry officials, with Republican Sen. Joni Ernst of Iowa, a major corn and ethanol producing state, asserting that the decision “is an about-face by President Joe Biden who campaigned on his supposed support for renewable fuels.”
Ernst said the announcement will “slash demand for biofuels and have devastating, long-lasting consequences for Iowa farmers and producers.”
The American Petroleum Institute, which represents the U.S. oil industry, said the administration “would best serve the public interest by keeping compliance volumes feasible” and said it was studying the proposals.
U.S. refiners are required under federal law to either blend billions of gallons of biofuels in the country’s gasoline supply or purchase credits from blending refineries. Waivers can be sought by refineries if they are able to prove that their companies will suffer financial hardship by meeting the ethanol quotas.
The ethanol industry struggled during the onset of the COVID-19 pandemic last year as workers stayed at home due to stringent lockdowns. As the country began to reopen, and fuel sales picked up, demand for ethanol increased, driving up prices.
In addition, Midwest farmers had a good growing year for corn and the abundant supply moderated corn prices, lowering the input costs for ethanol producers. The combination of higher demand and lower input costs pushed ethanol profits to near record levels.
The petroleum industry has been pushing EPA to set their obligation for corn-based ethanol for 2020, 2021, and 2022 at the levels of current use. Currently most gasoline sold in the United States is 10 percent ethanol, and petroleum refiners want the government requirement to be met with that level of sales.
The EPA on Tuesday set production targets for calendar years 2020, 2021, and 2022, proposing 12.5 billion gallons of corn-based ethanol for 2020, 13.3 billion gallons for 2021, and 15 billion gallons for 2022. The 2020 figure is down from a projected 15 billion gallons set by the Trump administration and close to the actual amount of corn ethanol produced last year. Volumes for 2021 also are close to expected production volumes.
