President Donald Trump had instructed the EPA to develop the plan to reform the multi-billion-dollar market as a way to help the oil refining industry, which had long complained that speculation was driving up costs for the credits they must acquire to comply with the nation’s biofuel law.
Trump had asked that the EPA’s reform be finalized prior to June 1 to coincide with the agency’s move to expand sales of gasoline blended with higher levels of corn-based ethanol, or E15, a measure meant to help farmers by expanding the market for corn.
But the sources, who asked not to be named, said there was not enough time to finalize most of the elements in the EPA’s initial draft plan, which had been drawn up in March, in time for this month’s launch of the E15 rule.
It is unclear whether a narrowed-down version of the market reform plan will limit the intended benefits to refiners.
The U.S. Renewable Fuel Standard requires refineries to blend biofuels into their gasoline and diesel each year, or purchase credits, called RINs, from those who do. The policy has helped farmers by creating a 15 billion gallon-a-year market for corn-based ethanol, but refiners have increasingly complained that compliance costs them a fortune – particularly when RIN prices are high and volatile.
The EPA’s initial plan to reform the RIN market, drafted in March, would have barred trading by non-industry players, publicized large positions, improved price transparency, imposed limits on credit “hoarding,” and provided the EPA with increased market-monitoring powers.
But while the administration has rushed through the rulemaking process to ensure the E15 proposal lands before the June 1 kickoff to summer driving season, under intense pressure from the corn lobby, some portions of the biofuel trading reform agenda were too complicated to complete within the same time frame, the sources told Reuters.
“We hear that only one (of the reform proposals) is ready to be finalized at the same time as the E15 decision, but it’s unclear which one,” said one of the sources. “Basically, EPA has dropped everything else to get E15 done by June 1.”
The source said that he expected the EPA would likely finalize the abridged version of the plan at the same time as E15 and then “continue to consider the existing comments on the other (reform proposals).” The source did not have a sense of how long it might take for the agency to consider the other reform proposals.
Three other sources also told Reuters they had been informed by the agency that work to finalize the initial set of market reform proposals had not been completed, and that next week, a less ambitious version would be unveiled that focuses on increasing market transparency and limiting hoarding of RINs.
EPA spokesman Michael Abboud would not comment on whether the RIN market reform plan would include all of the elements in the initial proposal when it is unveiled, but said the agency was adhering to Trump’s request that it address problems in the RIN market.
“The premise of this story is inaccurate,” Abboud said in emailed comments. “EPA’s final action, which will be signed by the summer driving season, is consistent with the President’s direction last year and will help increase transparency and prevent price manipulation in the RIN market.”
Writing by Richard Valdmanis; Editing by Marguerita Choy