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EPA Proposes Biofuel Mandate Cut In Win For Oil Refiners

The Environmental Protection Agency has proposed a retroactive reduction in biofuel mandates, effective 2020, in very welcome news to oil refiners who have been complaining of the costly mandates.

Citing two unnamed sources familiar with the proposal, Reuters reports that the document was sent to the White House to be reviewed on Thursday, adding that it will likely deepen the rift between oil refiners and biofuels producers whose interests are at complete odds in the fuel blending department.

"The proposal aims to get the (Renewable Fuel Standard) program back on track while addressing challenges stemming from decisions made under the prior administration," the EPA said in a statement as quoted by Reuters.

Earlier this month, Bloomberg quoted other unnamed sources as saying that some lawmakers had been told to brace for relatively unchanged requirements—or even a reduction in the amount of renewable fuel that must be blended, much to the ire of the corn lobby.

While the battle between refiners and corn growers is long-running one, this year, there’s a new participant: the American Bakers Association. With rising prices for agricultural commodities amid continued supply chain disruptions, the chances are high that bread and other baked goods could also become more expensive. With corn an essential agricultural commodity used widely in the baking industry, last month the ABA started lobbying the Biden administration to either reduce or at least halt the rise in biofuel mandates.

An earlier Reuters report said the EPA was expected to propose a reduction in mandates for last year and this year but an increase for 2022. This might anger corn farmers but it would bring much-needed relief to refiners who are already having to contend with lower margins as fuel demand recovery has been uneven at best. Several smaller refiners, according to Reuters, have accumulated some $1 billion in biofuel mandate credit dues since the start of the year.

By Charles Kennedy for Oilprice.com

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