By Stephanie Kelly and Jarrett Renshaw
NEW YORK -The U.S. Environmental Protection Agency on Thursday proposed giving oil refiners more time to prove compliance with the nation’s 2020 and 2021 biofuel blending mandates.
The move comes as the EPA considers industry requests to soften the mandates as the coronavirus pandemic has crushed overall fuel demand.
Several oil refiners have slowed or stopped buying compliance credits in a bet the EPA would ease the requirements, putting them at risk of hundreds of millions of dollars in liabilities if the agency decides against them.
Under the U.S. Renewable Fuel Standard oil refiners must blend billions of gallons of biofuels into their fuel mix each year, or buy the compliance credits – known as RINs – from those that do. RINs must typically be turned in to the EPA shortly after a compliance year ends.
The EPA, however, has delayed decisions on 2021 blending obligations, and is expected to miss a deadline to finalize 2022 obligations by the end of the month.
The refining industry and its backers have also requested waivers on 2020 requirements based on the COVID-19 impact.
The EPA has yet to decide on those requests.
The RFS has been a battleground between independent refiners and the biofuel industry for years.
The standard has helped farmers and biofuel producers build up a multi-billion gallon market, but oil refiners say the costly requirements threaten to put smaller refineries out of business.
The EPA said on Thursday it would extend the 2019 compliance deadline only for refineries with a capacity of 75,000 barrels per day or less.
The agency previously extended deadlines for 2019 for small refiners, and for 2020 for all obligated parties. It will also change the way in which future compliance deadlines are determined. The extensions will help ensure that each year’s deadline falls after the standards for the subsequent compliance year are known, it added.
This would help guarantee that parties can fully comply with their obligations, the agency said.
After the news, RIN credit prices eased to $1.07 each, from $1.10 in the previous session, traders said.
The biofuels industry expressed frustration at the news on Thursday.
“There’s no good reason for EPA to kick the can down the road again, which only adds uncertainty and instability to the marketplace,” said Renewable Fuels Association President Geoff Cooper.
The American Fuel & Petrochemical Manufacturers, an oil trade group, called the decision a commonsense administration decision, but said it was also waiting for more decisions from the EPA.
“Clarity about future obligations is needed in order for facilities to align around their individual compliance strategies,” AFPM said.
Refiner PBF Energy Inc has amassed an up to $1.3 billion credit liability, one of the industry’s biggest short-positions on RINs.
(Reporting by Stephanie Kelly and Jarrett Renshaw; Editing by Dan Grebler and Richard Chang)