The Environmental Protection Agency (EPA), which has the authority to issue the exemptions, denied 26 petitions from 15 small refineries who applied for waivers for the 2016-2018 and 2021-2023 compliance years, the agency said on Friday. There are still two pending petitions.

The agency also disclosed which oil refiners submitted petitions in July 2022 or later, as well as which oil refiners are participating in an alternative compliance schedule that allows them flexibility in complying with biofuel blending laws.

Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do. The EPA can, however, award exemptions to some small refiners if they prove that the obligations cause them undue harm.

Biden has been trying to set the United States on track to reduce carbon emissions in the fight against climate change, with a goal of net-zero emissions by 2050.

The administration has not yet extended a waiver to any refinery, reversing the policy of former President Donald Trump, whose administration granted 34 exemptions to oil refiners for the 2017 compliance year alone.

The EPA consulted with the Department of Energy on Friday’s waiver decisions and found that none of the petitioning small refineries demonstrated they face disproportionate economic hardship caused by their RFS compliance, the agency said.

New transparency

The EPA publicized on Friday the names of refiners that submitted small-refinery exemption petitions from July 2022 or later. The agency added this information to its website to reflect its commitment to transparency around RFS decisions, it said.

Refiners that submitted petitions included Calumet Montana Refining and Ergon Refining. Their petitions were denied.

The agency also publicized the names of refiners that are using an alternative schedule to prove RFS compliance. Among those listed were Sinclair Wyoming Refining Company and Kern Oil and Refining Company.

Data from the EPA showed 17 small refineries have opted into the alternative compliance schedule for the 2020 compliance year, the only compliance year shown in the data. The group had retired 360 million credits to show compliance, and had 510 million credits outstanding, EPA’s website showed.

— Stephanie Kelly is a Reuters correspondent covering the U.S. oil industry from New York City.

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The long-awaited decision offers some relief to the U.S. refining industry after the health crisis slammed domestic demand for transport fuels, but is likely to upset producers of corn-based ethanol and other biofuels that have also suffered from the pandemic’s fallout.

The announcement marks U.S. President Joe Biden’s first major decision on the nation’s biofuel policy and will be seen as a bellwether of his support for the fuel blending law that is backed by farmers but opposed by oil refiners.

The U.S. Environmental Protection Agency, which administers the policy, proposed to retroactively set total renewable fuel volumes at 17.13 billion gallons for 2020, down from a previously finalized rule for 2020 of 20.09 billion gallons.

It also set volumes at 18.52 billion gallons for 2021 and 20.77 billion gallons for 2022.

Both the 2020 and 2021 figures mark a reduction from 2019, when the EPA had required refiners to blend 19.92 billion gallons of biofuels in the nation’s fuel mix.

The EPA also proposed to reduce conventional biofuel mandates, which include ethanol, to 12.5 billion gallons in 2020 and 13.32 billion gallons in 2021. It proposed to set mandates at 15 billion gallons in 2022 with an additional 250 million-gallon supplemental obligation.

“To sustain an ambitious RVO (Renewable Volume Obligation) target for 2022, we had to reinforce the weakened foundations of the program and rebuild the stability that was necessary for growth going forward,” said Joseph Goffman, an EPA official, in an interview with Reuters.

The EPA also proposed a rejection of 65 pending applications for small refinery exemptions — waivers requested by smaller fuel producers seeking to be excused from the blending mandates for financial reasons. The action, which is not final, comes after a court decision that narrowed the situations in which the agency can grant exemptions.

The EPA under former President Donald Trump had dramatically increased the number of such waivers granted to refiners, angering the biofuel industry.

In a concession to the biofuel industry, the U.S. Department of Agriculture announced in tandem with the EPA’s announcement $700 million in grants to biofuel producers as COVID-19 relief and another $100 million in support for biofuel infrastructure (all figures US$).

Scott Irwin, an agriculture economist, said the administration’s move to lower mandates would likely trigger lawsuits from angry biofuel producers.

White House under pressure

Big Oil and Big Corn have sparred over the requirements of the nation’s biofuel policy since its inception more than a decade ago. Merchant oil refiners say the mandates are too costly, while ethanol producers and corn farmers like the mandates as they have helped to create a multibillion-gallon market for their products.

Under the U.S. Renewable Fuel Standard (RFS), refiners must blend billions of gallons of biofuels like corn-based ethanol into the fuel mix, or buy credits, known as RINs, from those that do.

On the campaign trail and in office, Biden gave repeated promises to support rural, clean energy jobs and uphold the RFS. Lowering the mandate would likely be seen by farm-state voters as breaking that vow.

The White House has come under intense pressure from merchant refiners — including a plant in Biden’s home state of Delaware — along with union allies to take actions that lower the costs of the credits and help stave off threatened plant closures.

Reuters, citing sources, previously reported that the Biden administration was considering big cuts to the blending requirements.

Finalized volume requirements for 2021 were already more than a year late, while requirements for 2022 were due at the end of November.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw.

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Wheat futures fell on profit-taking and spillover pressure from lower soybeans, although concerns about global supplies limited declines.

Corn was lower much of the session but closed firmer on end-of-week positioning and concerns that rains would only be beneficial for a small share of the crop that is maturing later than normal.

“There were good rains overnight and more rain in the forecast for Iowa and Minnesota. That’s going to help late-filling corn and soybean crops in that area,” said Brian Hoops, president of Midwest Market Solutions.

Grain traders welcomed more U.S. corn and soybean export sales, although sales volumes have been mostly routine, he said.

The U.S. Department of Agriculture (USDA) on Friday confirmed 129,000 tonnes of U.S. soybeans sold to China and 150,000 tonnes of corn sold to Colombia.

Worries about reduced demand from biofuel producers continued to hang over corn and soybean prices.

The U.S. Environmental Protection Agency has recommended retroactively lowering biofuel blending mandates for 2020, two sources familiar with the matter said, after the agency on Thursday sent a proposal on the mandates to the White House for review.

Chicago Board of Trade November soybeans fell three cents to $13.23-1/4 a bushel but ended 2.5 per cent higher on the week (all figures US$). December corn futures gained three cents to $5.53-3/4 a bushel for a 3.1 per cent weekly gain, their fourth in five weeks.

CBOT December wheat fell 6-3/4 cents to $7.32-1/2 a bushel, with losses tempered by concerns about tightening global supplies amid reduced harvests in Russia and elsewhere. The contract was up 0.6 per cent on the week.

Russian agriculture consultancy Sovecon cut its wheat export forecast to the lowest in five years, due in part to a smaller crop.

— Reporting for Reuetrs by Karl Plume in Chicago; additional reporting by Sybille de La Hamaide in Paris and Colin Packham in Canberra.

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The move could provide immediate relief to oil refiners that have to comply with the blending requirements. It also is likely to drag the Biden administration further into a clash between oil refiners and the biofuels industry over the requirements.

Under the U.S. Renewable Fuel Standard program, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradeable credits, known as RINs, from those that do.

Farmers and biofuel producers argue that reducing mandates harms demand for their products, though refiners reject that claim and say the costs of the program puts blue-collar refinery jobs at risk.

The EPA confirmed Thursday it had sent the biofuel blending proposal to the White House’s Office of Management and Budget (OMB).

“The proposal aims to get the (Renewable Fuel Standard) program back on track while addressing challenges stemming from decisions made under the prior administration,” an EPA spokesperson said in a statement.

The agency was also expected to recommend to the White House reducing mandates for 2021, while boosting mandates for 2022 above the previous two years, Reuters reported last week, citing sources.

The agency did not provide details on the proposal or confirm Reuters’ reporting.

Lowering mandates retroactively for 2020 could benefit in particular merchant refiners such as PBF Energy and Delta Air Lines’ Monroe Energy, which slowed or halted purchases of renewable fuel credits this year as they lobbied the Biden administration for regulatory relief.

Those refiners and others had amassed earlier this year a more than US$1 billion shortfall in the credits they need to comply with the mandates, an apparent bet that the Biden administration would let them off the hook or that the credit prices would fall.

The deadline for refiners to prove compliance with the 2020 requirements was extended in April to Jan. 31, 2022. Reducing the mandates would help refiners who have outstanding obligations for that compliance year.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw.

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Wheat also gained as the U.S. dollar softened and as weekly export inspections topped trade expectations.

Corn was flat to weaker, capped by forecasts for a large U.S. crop and worries over demand from biofuel producers after news last week that the Environmental Protection Agency would recommend reducing federal biofuel blending mandates.

Grain and oilseed futures had fallen sharply last week as worries about global economic growth and rising coronavirus infections pressured broader markets. Crude oil and metals climbed on Monday and global equities markets rose as investor concerns that the U.S. Federal Reserve would soon begin changing its accommodative monetary stance faded.

“The macros are taking the foot off the throat of commodities today, except for corn. Traders are still very nervous about the biofuel RINs and what kind of exclusions will be given to refiners,” said Mike Zuzolo, president of Global Commodity Analytics.

Chicago Board of Trade December corn fell 1-1/2 cents to $5.35-1/2 a bushel, after hitting a six-week low in the session (all figures US$). November soybeans gained two cents to settle at $12.92-3/4 a bushel.

CBOT September wheat rose 5-1/2 cents to $7.19-3/4 a bushel.

The U.S. Department of Agriculture (USDA) said on Monday that 657,854 tonnes of U.S. wheat were inspected for export last week, higher than expected. Corn and soybean inspections were in line with trade forecasts.

Late last week, Pro Farmer newsletter forecast U.S. corn and soybean production above the latest USDA projections.

USDA is due to update weekly crop conditions later on Monday. Analysts, on average, expect corn and soybean conditions to decline slightly.

— Reporting for Reuters by Karl Plume in Chicago; additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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Soyoil futures fell more than five per cent on reports that the U.S. Environmental Protection Agency (EPA) will recommend lowering the nation’s biofuel blending mandates for 2021.

Wheat futures followed the weaker trend. Chicago Board of Trade December wheat closed Friday at $7.28-1/4 a bushel, down 14-1/2 cents from Thursday, while Minneapolis (MGEX) December spring wheat closed at $9.02-1/4, down 2-1/4 cents (all figures US$).

CBOT November soybeans settled down 29-1/4 cents at $12.90-3/4 per bushel after dipping to $12.77-1/4, the contract’s lowest since June 28.

Benchmark December soyoil settled down 3.27 cents at 56.65 cents/lb., paring losses after falling its daily 3.5-cent maximum. CBOT December corn ended down 13-3/4 cents at $5.37 a bushel after hitting $5.32-1/2, its lowest since July 26.

Soyoil is the main U.S. feed stock for biodiesel fuel and corn is used for ethanol. The EPA is expected to recommend to the White House reducing federal biofuel blending mandates for 2021 to below 2020 levels, two sources familiar with the matter said on Friday, in what would be a blow to the biofuels industry.

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.

Grains faced additional pressure from concerns about global economic growth amid rising coronavirus cases, which have weighed down crude oil and boosted safe-haven assets like gold.

“We are seeing a risk-off session,” said Terry Reilly, senior analyst with Futures International in Chicago. “There are global economic concerns … That is shaking up the commodity markets in general,” Reilly said.

Commodity funds hold a net long position in CBOT corn and soybean futures, leaving those markets prone to bouts of long liquidation.

Also, forecasts called for beneficial rains through this weekend in the Dakotas and surrounding U.S. crop areas that have struggled with months of drought.

“The heaviest rainfall is expected in North Dakota, which should finally begin to ease dryness, although the rain is likely coming too late to dramatically improve crop yields,” space technology company Maxar said in a note.

Meanwhile, the Pro Farmer Midwest Crop Tour, which concluded late Thursday, projected above-average corn yield prospects in Iowa and below-average prospects in Minnesota.

After the CBOT close, Pro Farmer projected that U.S. farmers would harvest a corn crop of 15.116 billion bushels and a soybean crop of 4.436 billion bushels, both larger than the USDA’s latest estimates.

— Reporting for Reuters by Julie Ingwersen in Chicago, Gus Trompiz in Paris and Naveen Thukral in Singapore.

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The Reuters report that the U.S. Environmental Protection Agency was pondering ways to provide relief to oil refiners accelerated end-of-week profit-taking pressure as forecasters called for some crop-boosting rains in parts of the U.S. Midwest and northern Plains.

“The biofuel news spooked the market, you’ve got some rains in the Dakotas … and the palm oil was down four to five per cent overnight. That is all weighing on it,” said Craig Turner, senior ag broker at Daniels Trading.

Chicago Board of Trade July soybeans were down 35-1/2 cents at $15.08-1/2 a bushel and down 4.8 per cent on the week, the sharpest weekly drop since mid-January (all figures US$).

July corn was down 14-1/2 cents at $6.84-1/2 a bushel but finished the week up 0.2 per cent, its second straight weekly advance.

July soyoil futures dropped by as much as the daily 3.5-cent trading limit and settled down 3.48 cents at 66.98 cents/lb.

Ahead of an eagerly awaited U.S. corn and soy acreage report due at the end of the month, grain markets will focus on weather in the United States and in South America, where drought has cut corn production in Brazil but good weather has boosted the Argentine crop.

Wheat futures also eased on Friday, led by sharply lower spring wheat prices after recent rains in top producer North Dakota.

CBOT July wheat fell three cents to $6.80-3/4 a bushel and K.C. July hard red winter wheat was 2-1/4 cents lower at $6.38. Minneapolis (MGEX) spring wheat for July delivery was 10-3/4 cents lower, at $7.64-3/4 a bushel.

— Reporting for Reuters by Karl Plume in Chicago; additional reporting by Gus Trompiz in Paris and Colin Packham in Canberra.

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Reuters had reported last week that U.S. President Donald Trump, under the advice of his allies in the Midwest, ordered his Environmental Protection Agency to deny the waivers because they had become a lightning rod of controversy in the Farm Belt, an important political constituency.

“This decision follows President Trump’s promise to promote domestic biofuel production, support our nation’s farmers, and in turn strengthen our energy independence,” said EPA administrator Andrew Wheeler in a statement announcing the agency was denying 54 applications that the Department of Energy had reviewed.

Refiners say the waivers are crucial for reducing regulatory costs for small fuel producers and keeping them in business, but the corn lobby argues the exemptions undermine demand for corn-based ethanol at a time farmers are already suffering from the impacts of a trade war with China.

RFS compliance

Under the U.S. Renewable Fuel Standard (RFS), refiners must blend some 15 billion gallons (57 billion litres) of ethanol into their gasoline each year or buy tradable credits from those that do. Small refiners have also been able to seek an exemption if they can prove financial harm from the requirements.

The Trump administration has roughly quadrupled the number of exemptions given out to refiners in a trend that had angered the biofuel industry.

In January, an appeals court handling a case initiated by the biofuel industry cast a cloud of doubt over the EPA’s waiver program, ruling that waivers granted to small refineries after 2010 should only be approved as extensions. Most recipients of waivers in recent years have not continuously received them.

That triggered a wave of requests for retroactive relief by refiners seeking to comply with the court decision. Since March, 17 small refineries in 14 states submitted 68 petitions, Wheeler said in a memo. The Department of Energy, which advises EPA on the waiver requests, had transmitted its findings on 54 of the petitions.

“(T)hese small refineries did not demonstrate disproportionate economic hardship from compliance with the RFS program for those RFS compliance years,” Wheeler said.

It is unclear what will happen to refining facilities that had benefited from waivers in recent years that are non-compliant with the court’s ruling. But sources told Reuters the administration may seek to offer them another form of financial relief to compensate.

It was also not immediately clear how this would affect 28 pending waiver applications for 2019 and three pending applications for 2020.

The Trump administration’s decision on Monday is a major victory for biofuel advocates in the long-standing battle between the deep-pocketed Corn and Oil lobbies.

“This is outstanding news for biofuels producers, farmers, and RFS integrity,” said Iowa Renewable Fuels Association executive director Monte Shaw. “With gap year waivers denied, the number of refiners eligible to even apply for — let alone receive — an RFS exemption going forward is reduced to single digits.”

Some in the oil industry criticized the decision. “EPA has turned a blind eye to merchant refineries and their workers in key battleground states like Pennsylvania, Ohio and Texas,” said the Fueling American Jobs Coalition, a group that includes union workers and independent refiners.

Trump over the weekend also tweeted that he would allow states to permit fuel retailers to use their current pumps to sell gasoline with higher blends of ethanol, or E15, a move that could help lift ethanol sales.

“Today’s announcements will help provide more certainty to our biofuel producers, who have for too-long been yanked around by the EPA, and help increase access to E15, which drives up demand for corn and ethanol,” said Iowa Senator Joni Ernst.

— Reporting for Reuters by Stephanie Kelly in New York.

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The issue once again places Republican President Donald Trump in a tough spot between two important constituencies, both of which have been pushed to the brink of collapse by the pandemic because of flagging consumption, disrupted supply chains and reduced workforces.

The oil refining industry and its backers have asked the Trump administration to help the industry weather the pandemic by suspending a regulatory requirement that they blend billions of gallons of corn-based ethanol into their gasoline each year, arguing it is a cost many facilities can not currently afford.

The corn lobby, meanwhile, has been pushing for the blending requirements, mandated under the U.S. Renewable Fuel Standard, to be expanded to help farmers who have seen demand for their crop drop swiftly as biofuel plants across the country go idle.

While the refining and corn industries have clashed for years over the biofuel blending requirements, the issue is now being framed as a matter of survival.

“We’re talking about a multi-billion-dollar compliance cost that is going to impact whether some can continue operating the same way,” said Geoff Moody, senior director of government relations for the American Fuel and Petrochemical Manufacturers trade group, which represents refiners.

On Wednesday, the governors of Texas, Oklahoma, Utah and Wyoming asked the Trump administration for a nationwide waiver exempting the oil-refining industry from the blending laws to help it survive, adding heft to a similar request made by Louisiana the week before.

Biofuel and farm groups slammed the idea.

“We remind the administration that oil refiners are not the only ones suffering from the economic fallout of the current situation,” said Brian Jennings, the head of the American Coalition for Ethanol, which had asked the administration earlier this month to expand ethanol blending requirements.

“Ethanol producers, and the farmers supplying them corn, are suffering a proportional economic disaster,” he said.

A spokesperson for the Environmental Protection Agency (EPA), in charge of overseeing the RFS, said the agency is watching the situation closely and “will make the appropriate determination at the appropriate time.”

Demand meltdown

U.S. demand for gasoline has fallen by about a third due to the coronavirus pandemic, which has roiled daily life and prompted residents to shelter at home, according to the U.S. Energy Information Administration.

As a result, refiners have slashed output and seen gasoline profit margins fall to the lowest since 2008.

While many refiners were in strong cash positions at the start of the coronavirus pandemic, others that have spent much of their cash acquiring new plants, such as PBF Energy, are significantly more distressed.

Valero Energy, one of the biggest refining companies in the United States, meanwhile, warned of an up to US$2.1 billion first quarter loss due to the coronavirus pandemic, and plans to defer tax payments and certain planned expenses in its refining and ethanol businesses.

Top refiner Marathon Petroleum, meanwhile, has idled a plant in New Mexico due to falling demand.

But the ethanol industry is being crushed too.

Nearly half of U.S. ethanol production capacity has been idled as a result of the falling fuel demand, according to Geoff Cooper, the head of the Renewable Fuels Association. Further, output cuts disrupt local demand for corn as producers buy less of the feedstock.

“A general waiver at this point would only serve to close more ethanol plants and kill more jobs across rural America,” Cooper said.

The refining and corn industries have long disagreed about U.S. biofuel policy, most recently clashing over the Trump administration’s use of exemptions for small refining facilities in financial distress.

A federal court in January ruled that Trump’s EPA had granted such exemptions inappropriately, a decision that is likely to dramatically reduce the number of such waivers issued in the future.

— Stephanie Kelly reports on the U.S. energy and fuels sector for Reuters from New York; additional reporting by Laura Sanicola.

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The decision could undermine President Donald Trump’s support among farmers, an important constituency in the November 2020 election. Some U.S. farmers have already been hurt by the United States’ prolonged trade war with China.

“The administration is moving forward to finalize the 2020 RVO (renewable volume obligations) in line with the agreement that the President made this fall,” White House spokesman Judd Deere said.

Deere confirmed he was talking about a proposal unveiled by the U.S. Environmental Protection Agency in October, which was intended to compensate the biofuel industry for the administration’s expanded use of refinery waivers, but which the industry has largely panned as insufficient.

Under the U.S. Renewable Fuel Standard, oil refiners are required to blend some 15 billion gallons of corn-based ethanol into their gasoline every year, but small facilities can be exempted if compliance would hurt them financially.

The Trump administration’s EPA has roughly quadrupled the number of the so-called Small Refinery Exemptions, something corn farmers and biofuel producers say has deeply undercut demand for ethanol.

The oil industry says the waivers are needed to preserve blue-collar refining jobs and disagrees with the claim that the waivers destroy demand.

The EPA plan, devised after weeks of negotiations with both the oil and biofuel industries to resolve the issue, would raise the biofuels volumes that some refineries must blend in 2020 based on U.S. Energy Department recommendations for volumes that should be exempted.

Biofuel interests wanted the regulation to be based on volumes that have actually been waived, since the EPA has routinely waived more blending volumes than the DOE has recommended.

On Tuesday, more than 1,700 farmers and biofuel advocates sent a letter to Trump, criticizing EPA’s proposal and asking him to directly intervene in the debate.

By then, the decision had already been reached. White House economic adviser Larry Kudlow told the Iowa Corn Growers Association during a meeting in Washington on Tuesday that the administration was sticking with the EPA’s proposal, two sources familiar with the matter said.

The plan is expected to be finalized by Friday, one source said. The final rule for 2020 blending requirements is already past its end-November deadline.

“EPA has reviewed all comments received during the comment period from the public and we plan to finalize the rule this winter,” EPA spokesman Michael Abboud said.

Support across key Midwestern states helped propel Trump to the presidency in 2016, a trend he is hoping to replicate in next year’s election.

But some farmers have threatened to withdraw support because of his administration’s handling of biofuel policy.

The biofuels news, however, comes amid progress in the United States’ trade war with China, a dispute that has been especially damaging to U.S. farmers.

It also comes as Congress readies a vote on the nation’s new trade pact with Mexico and Canada, an agreement also expected to boost farmers’ fortunes.

Renewable fuel (D6) credits for 2019 traded at 12.75 U.S. cents each on Wednesday, down from 13.25 in the previous session, traders said.

— Reporting for Reuters by Stephanie Kelly in New York and Jarrett Renshaw in Philadelphia.

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