The delay now under discussion could please domestic oil refiners that have invested in the bio-based diesel sector but would risk frustrating U.S. farmers and biofuel producers.

WHY IT MATTERS: The Trump administration’s proposal to reduce incentives for imported biofuels raised concerns it would reduce demand for Canadian canola.

The proposal for the Environmental Protection Agency to slash the value of renewable fuel credits given by the U.S. government for imported biofuels was initially pitched this year as part of Trump’s “America First” energy agenda, aimed at boosting domestic production and reducing reliance on foreign supply, and was meant to take effect Jan. 1.

The Environmental Protection Agency is now weighing a plan to delay implementation of that proposal until 2027 or 2028, the sources told Reuters, speaking on condition of anonymity.

The EPA said it is reviewing public comments ahead of issuing final rules in the coming months. The agency declined to comment on whether it is considering a delay. The White House did not respond to requests for comment.

Affordability concerns

Big Oil, led by the influential American Petroleum Institute industry group, had argued that limiting credits for foreign supply could constrain availability and push fuel prices higher — an outcome the White House is eager to avoid as affordability remains a central political concern heading into next year’s congressional elections.

Under the proposed cuts in credits for imports, the EPA would allocate only half as many tradable renewable fuel credits to imported biofuels and biofuel feedstocks as to domestic ones. The shift has significant implications for bio-based diesel, which relies on imports to meet federal mandates.

The decision on a possible delay is one of several high-profile regulatory moves by the administration that the fuel industry is closely watching.

Others include finalizing 2026 biofuel blending mandates, determining whether to allow year-round sales of gasoline blended with 15 per cent ethanol, or E15, and deciding how or whether to require larger refiners to compensate for exempted gallons under the small refinery waiver program.

The protracted U.S. government shutdown and efforts to resolve a logjam of small refiner requests for exemptions from U.S. biofuel laws have also contributed to delays in resolving regulatory moves related to biofuels, the sources said.

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The EPA meeting signals that the agency may be closer to releasing fresh biofuel blending quotas for the Renewable Fuel Standard (RFS) for at least the next two years, a first test of President Donald Trump’s promised support of the biofuel industry.

Why it matters: The rise and fall of the American biofuel market can affect Canadian farmers’ crop marketing prospects

Big Oil and the Farm Belt’s biofuels makers are traditional competitors for share in the multibillion-dollar U.S. gasoline market, but they have come together to form a consensus at the request of the White House in recent months in hopes of avoiding the type of clashes that defined the first Trump administration.

The coalition is likely to push for biomass diesel mandates in the range of 5.5 billion to 5.75 billion, according to a coalition document viewed by Reuters. That is up from its current level of 3.35 billion gallons, which the biofuel industry says is far below production capacity.

The coalition has settled on a corn-based ethanol blending mandate at 15 billion gallons, despite a push by some who wanted to see 15.25 billion gallons, according to two sources familiar with the discussions.

The EPA did not respond to requests for comment.

The coalition, led by the American Petroleum Institute (API), is showing some signs of splintering, however, ahead of Tuesday’s meeting.

A group of truck stop operators and fuel retailers involved in the effort is boycotting the meeting after a dispute over whether they could voice concerns about raising biomass diesel quotas without restoring a blenders tax credit that expired in December.

The splinter group says the blenders tax credit helped keep prices down for consumers, and its replacement – a producer tax credit known as 45Z- is incomplete and has been proven ineffective.

“This will not only hurt Americans’ financial standing, it will also create exceedingly difficult political challenges for the Agency and the White House,” the splinter group said in a letter to EPA administrator Lee Zeldin on Tuesday.

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That background may put Rollins at odds with farm state lawmakers at her nomination hearing on Thursday and revive concerns in the powerful corn and biofuel lobbies about Trump’s mixed record on ethanol during his first term in office.

“The hearing is a perfect occasion to renounce the misleading and demonstrably false statements made about ethanol by some of her colleagues more than a decade ago,” said Geoff Cooper, president and CEO of the Renewable Fuels Association, an ethanol trade group.

Rollins was president and CEO of the Texas Public Policy Foundation from 2003 to 2018, during which time the oil industry-backed nonprofit argued that government support for ethanol contributed to higher emissions and rising food and fuel prices.

The oil industry has seen ethanol as a threat to its share in the gasoline market, and says a federal mandate requiring the biofuel to be blended in to the nation’s fuel supply costs it a fortune in compliance costs.

“As a way to save the planet, not many policies are worse than government-backed ethanol. It’s bad for the economy, bad for the environment, doesn’t reduce greenhouse gases, and has led to rapidly rising food prices,” said one article published by the Texas group in 2012.

In 2017, Rollins endorsed Kathleen Hartnett White, the longtime director of the group’s energy program, to serve as Trump’s chair of the White House’s Council on Environmental Quality. The White House later withdrew her nomination after a contentious hearing that included criticism of her ethanol positions from farm state senators.

White had supported a 2008 effort by then-Texas governor Rick Perry to partially waive the ethanol blending program, known as the Renewable Fuel Standard, in the state. The Environmental Protection Agency, which administers the program, denied Perry’s request.

During Rollins’ tenure, the group also called for the elimination of farm subsidies in a 2016 report titled “The Policymaker’s Guide to Corporate Welfare.”

The report said offering loan guarantees to farmers to start or expand their operations “introduces distortions into the marketplace.”

The USDA issues billions of dollars in direct and guaranteed loans each year to support the domestic farm economy.

Rollins, who served as acting director of the White House Domestic Policy Council during Trump’s first term, is set to appear before the Senate Agriculture Committee for her nomination hearing on Thursday.

“Brooke Rollins will work to enact the President’s agenda, and you can look to President Trump’s past statements of support for biofuels to understand the Administration’s position on this issue,” said Anna Kelly, a spokesperson for the Trump administration transition team.

During his 2017-21 term, Trump boosted corn-based ethanol by enabling year-round sales of higher ethanol blends of gasoline, but also angered the ethanol industry by expanding the use of waivers exempting small refiners from the federal blending requirement.

Ethanol trade group Growth Energy said it supports Rollins’ nomination and believes the Trump administration will support the ethanol industry’s priorities.

During the Biden administration, Rollins led the America First Policy Institute, a policy organization closely tied to Trump which has expressed skepticism about climate change.

More than 400 state and national agriculture groups wrote to Senate agriculture committee leaders John Boozman and Amy Klobuchar on Jan. 15 to endorse Rollins.

“Her close working relationship with incoming President Trump will ensure that agriculture and rural America have a prominent and influential voice at the table when critical decisions are made in the White House,” the letter said.

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The U.S. Treasury Department issued the guidance, saying it provides new details on how to ensure fuels meet certain emissions-reductions criteria to access the subsidy, and adding that a crucial climate model upon which the program relies will be available in the coming days.

“This guidance will help put America on the cutting-edge of future innovation in aviation and renewable fuel while also lowering transportation costs for consumers,” said Deputy Secretary of the Treasury Wally Adeyemo.

“Decarbonizing transportation and lowering costs is a win-win for America.”

Biofuels groups were less enthusiastic, saying the guidance left several final decisions to President-elect Donald Trump’s administration.

“This long-overdue guidance is far from complete – it still lacks the critical details that are needed to help ensure that American biofuel producers and their farm partners can lead the world in clean fuel production,” said Growth Energy CEO Emily Skor.

Reuters reported earlier on Friday that the administration intends to release the program’s climate model next week, but that it will not include adjustments for so-called climate smart agriculture practices – like no-till farming – which the ethanol industry hoped it could use to meet lifecycle emissions requirements.

“While we appreciate the work of (U.S. Agriculture) Secretary (Tom) Vilsack to champion our issues on behalf of rural America, today’s announcement falls short of providing the information that our industry and its farm partners need, including a model for an expanded number of eligible decarbonization technologies and guidance on climate smart agriculture (CSA) practices,” Skor said.

“We look forward to working with the next Administration to fill in the gaps left by today’s announcement,” she said.

Trump has vowed to repeal Biden’s 2022 Inflation Reduction Act, which launched the program, to pay for the extension of his tax cuts, but doing so would require support from Congress.

Biden’s administration set a target to generate 3 billion gallons of sustainable aviation fuels by 2030.

Air travel contributes around 2.5 per cent of global greenhouse gas emissions, making it a big target in the fight against climate change.

—Reporting by Stephanie Kelly in New York

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The inclusion would mark a hard-fought victory for the ethanol industry, which has wanted year-round E15 (fuel comprising 15 per cent ethanol) sales as a way to boost demand for its products.

Reuters reported earlier on Tuesday that the plan was expected to make it into the bill.

The plan would also provide credits to some refiners that prove compliance with the U.S. Renewable Fuel Standard (RFS), which mandates that refiners blend billions of gallons of biofuels into the nation’s fuel mix or buy credits from those that do, the sources said.

Those credits would be given to small refiners who had petitioned the U.S. Environmental Protection Agency, which administers the RFS, for an exemption from the mandates during compliance years 2016-2018 but either had been denied or had an outstanding petition as of Dec. 1, 2022, one of the sources said.

The language in the provision follows a bill sponsored by U.S. Senator Deb Fischer from Nebraska, the third biggest corn-producing state.

“My bill puts an end to years of patchwork regulations and uncertainty – year-round, nationwide E15 will now be a reality,” Fischer said in a statement after the funding bill text was released.

The biofuels industry welcomed the provision.

“We are very pleased to see that the long-awaited fix allowing year-round E15 is included in this package,” said Geoff Cooper, president of the Renewable Fuels Association. “We remain hopeful that the continuing resolution will move swiftly through Congress and to the President’s desk for signature.”

The plan also includes language that the EPA and the Commodity Futures Trading Commission would review all applicable fuel blending credits, known as RINs, and submit to Congress a report to reduce manipulation of the renewable fuel market.

Currently, sales of E15 are effectively blocked from June to September. Adding ethanol to gasoline is known to increase smog pollution in hot weather, but research has shown little difference between E15 and the more-widely available E10 blends.

The provision would likely nullify a controversial decision by the U.S. government in February to approve a request from Midwestern governors to allow year-round E15 sales only in their states, starting in 2025.

Some oil refiners had argued that allowing E15 in select states as opposed to nationwide could prompt localized fuel price spikes and supply issues.

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“Much depends on U.S. policy not only with regards to renewable fuels but also trade, both of which have potential to squeeze Canadian producers. For now, however, the future looks bright,” wrote Justin Shepherd, senior economist with FCC, in analysis posted online on July 24.

Canada exported nearly 1.4 million tonnes of refined and crude canola oil to the U.S. from January to April.

American biofuel tax structures, and credits coming into effect next year, may harm Canadian biofuel exports as only U.S. production of biodiesel or renewable diesel will be eligible for the credits, Shepherd said.

“For now, however, canola oil producers are taking advantage of the increased demand to fill U.S. capacity and, as a result, we can expect the majority of oil to flow south,” he added.

In Canada, production of biodiesel and renewable diesel spiked in the first few months of the year. Renewable diesel is set to eclipse biodiesel, which until the end of 2023 took second place to ethanol as the main renewable fuel.

Renewable diesel is more chemically similar than biodiesel to petroleum-based diesel and makes a simpler swap. Earlier this year, new renewable diesel plants came online and doubled Canada’s monthly capacity.

Canadian fuel blenders have been increasing the amount of ethanol blending into gasoline, Shepherd wrote. Government blending mandates have contributed, but ethanol is also an economical fuel enhancer that can raise the octane in finished gasoline.

In April, the most recent data point, ethanol accounted for 10 per cent of finished gasoline. This is a new high, Shepherd said.

Ethanol production has been relatively flat in Canada since 2020, with any gains coming from greater efficiency in processing.

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The U.S. government has established goals of scaling up SAF production to three billion gallons by 2030 and 35 billion gallons by 2050. Most of that fuel is expected to be made using agricultural feedstocks, at least initially.

Domestic canola groups have flagged Canadian and U.S. biofuel as a major growth avenue for the oilseed.

The projections created a resurgence of the food-versus-fuel debate that first surfaced during the ethanol boom of the late-2000s, when critics also worried that crop markets bound for the gas tank would pressure food streams.

That’s outdated thinking, according to a panel of SAF manufacturers who presented at the Agri-Pulse Ag & Food Policy Summit earlier this year.

Alex Menotti, vice-president of government affairs, policy and sustainability at LanzaJet, said his company just opened the world’s first ethanol-to-jet SAF plant in Georgia. It will be converting 10 million gallons of ethanol per year into SAF and diesel.

The plant represents one-third of total current U.S. SAF production.

The country is a long way from meeting its goal of three billion gallons, or 10 per cent of all jet fuel use in the United States.

However, Menotti said he is confident the ambitious target will be achieved. LanzaJet plans to produce one-third of that total without compromising food supplies.

There is plenty of excess ethanol production in the U.S. due to the electrification of light duty vehicles in that country, he argued. Ethanol demand for those vehicles isn’t what it once was. SAF offers a way to mop up that excess.

“Alcohol-to-jet can solve a lot of problems, frankly,” he said.

He framed SAF as a redistribution of existing ethanol production and said there likely won’t be huge spikes in new production.

Alan Weber, founding partner of MARC-IV, is helping promote alternative oilseed crops that will be used to make SAF.

The company is focused on crops such as camelina, covercress, brassica carinata and winter canola. All those can be grown as cover crops, a practice linked to improved soil health.

Weber said the feedstocks are geographically complementary to each other. Camelina will be grown in the Pacific Northwest and Plains region of the U.S.; covercress is suited to the Midwest; winter canola is slated for the mid-south and carinata can be grown in the far south between Texas and Florida.

These newcomers will not eat up food-producing acres, Weber said. For instance, camelina can be planted during the fallow years in a wheat-fallow-wheat rotation in the Pacific Northwest. Covercress is planted after the corn harvest in the Midwest and harvested before soybean planting.

That helps the feedstocks achieve low carbon intensity scores sought by SAF manufacturers.

Weber also noted that corn and soybean yields have increased by 30 per cent over the past two decades thanks to new practices and innovation. For soybeans, that translates to an extra 12 bushels per acre, resulting in another 12.5 billion pounds of soybean oil production per year.

The renewable fuel sector consumed 13 billion pounds of soybean oil last year, almost entirely covered by the productivity increases.

“We’re going to continue to innovate, and the feedstocks will be there,” Weber said.

Tim Obitts, chief executive officer of Alder Renewables, said his firm is building its first commercial plant that will convert woody biomass, agricultural residues and purpose-grown energy crops into SAF and other products.

The company is using residues as its feedstock, such as nut shells, sugar bagasse, sawdust and regenerative grasses such as miscanthus that will be grown on fallow land.

He said farmers are in the driver’s seat when it comes to SAF.

“You are above ground oil wells,” said Obitts, but one thing concerns him.

“There’s going to be a clash between Europe and the U.S.”

The European Union won’t allow sugar and corn to be used to create jet fuel, he noted. U.S. corn farmers are also battling to get their government to recognize corn ethanol as an eligible feedstock, and most analysts believe that will eventually happen.

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They expected an announcement at last week’s 2024 Commodity Classic convention, the annual gathering of U.S. corn, soybean, wheat and sorghum growers.

But that didn’t happen. U.S. secretary of agriculture Tom Vilsack told growers the government needs more time to sort things out.

He said the announcement will come in a matter of weeks rather than months.

Vilsack did deliver some good news for growers.

“I’m confident now that indeed the GREET model will be part of the guidance that will be provided by Treasury,” he said.

GREET is an acronym for the Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions and Energy Use in Transportation lifecycle model for assessing greenhouse gas emissions.

It is a model developed by the U.S. Department of Energy.

American corn farmers are relieved that GREET will be one of two models available for determining which feedstocks are eligible for the lucrative SAF tax credits contained in the U.S. Inflation Reduction Act.

The other model is the European International Civil Aviation Organization (ICAO) model.

“Corn would never qualify under that model,” said Harold Wolle, president of the National Corn Growers Association.

“That’s why we’re supporting the GREET model.”

There is a lot at stake because the SAF tax credit amounts to US$1.25 per gallon for each gallon of SAF in a qualified mixture.

The U.S. government has set a target of having three billion gallons of domestic SAF production by 2030, up from 10 million gallons today.

Most of the biofuel buzz in agricultural markets has surrounded soybean oil being used to make renewable diesel.

However, Wolle said the SAF market for corn ethanol could be massive as well.

He noted that corn ethanol is selling for about $1.50 per gallon in the U.S. versus the typical gas price of $3 per gallon, so it is a very competitive fuel on its own accord.

Soybean-based renewable diesel is far more expensive than conventional diesel by comparison, so it is a market that is completely reliant on tax credits.

Wolle also noted that it takes about 1.6 to 1.7 gallons of ethanol to make one gallon of jet fuel, so that three-billion-gallon market for SAF is even bigger than it sounds.

Vilsack said he is keen on ensuring that as many feedstocks as possible qualify for SAF production.

He said it took a lot of convincing by him and others to ensure that the SAF Interagency Working Group understood the importance of embracing the GREET model.

The next step is ensuring that the working group uses the most current data to make sure the GREET model concludes that corn ethanol meets the threshold of reducing lifecycle GHGs by at least 50 percent.

“It’s complicated and we’re working through it,” Vilsack told reporters following his speech to delegates.

Wolle said the U.S. corn industry desperately needs a new source of demand because right now there is too much supply of the crop, which is causing prices to crash.

“It’s the bright, shiny light on the horizon,” he said.

“We need to have more usages for corn.”

That is why he wants Vilsack and other government leaders to get it right rather than rushing the decision.

—Sean Pratt writes for the Western Producer.

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That would also be good for Canadian grain and oilseed prices if it happens.

The highest corn prices so far this year occurred during the first two days of January, and they have been heading lower since.

The odds of those prices remaining that high through spring is slim based on data compiled from the last couple of decades, according to Ed Usset, grain marketing economist with the University of Minnesota.

“In 16 of 20 years the corn market found a way to take out those highs set in January,” he told delegates attending the 2024 Commodity Classic.

Soybean prices are less reliable than corn, but there is also a good chance that market will take out the January high. It has done so in 17 of the last 20 years.

So, is corn heading back to US$5 per bushel?

“I don’t guarantee anything, but I think this is strong evidence that it could happen,” said Usset.

He has “no clue” what could cause the rally. He could offer up 10 reasons and it would be the 11th that would trigger the bull run.

But the upshot is that farmers with unpriced corn or soybeans in their bins might want to hold on a little longer and wait for better prices this spring.

He also thinks there is reason to be long-term bullish on grains and oilseeds because of the exploding renewable diesel industry.

Sixteen proposed new U.S. soybean crush plants will create more than 600 million bushels of new annual demand for the crop.

“I know things feel very bearish right now, but I like to think there is potential for this to create some turmoil in the market,” said Usset.

“This is an echo of the boom that occurred 15 years ago in the ethanol industry.”

That boom bolstered the price of corn, which in turn elevated prices for soybeans, wheat and just about every other crop farmers grow.

That begs the question — should farmers change their marketing strategy once the return to a bull markets arrives?

The short answer is no, said Usset.

He is a firm believer in growers knowing their cost of production and pricing 80 percent of their grain with pre- and post-harvest marketing efforts rather than accepting the harvest price.

Iowa corn growers who used that strategy achieved an average 37 cent per bu. premium over growers who took the harvest price between 1989 and 2002.

“That’s 37 cents a bu. on every bushel of corn produced over a 34-year period,” said Usset.

“You can see the advantage of pulling together pre- and post-harvest marketing.”

For soybeans, the advantage was nearly $1 per bu. and for hard red spring wheat in the Red River Valley it was 27 cents.

Usset analyzed the same data during the “golden age” of the ethanol boom between 2007 and 2013, comparing it to the seven-year periods before and after the boom.

The average price of Iowa corn during the seven-year boom was higher than the maximum price in the seven-years before and after the boom.

“That’s some good times,” he said.

The important thing to note is that the grower who used pre- and post-harvest marketing strategies outperformed those who took the harvest price in all three of those periods, said Usset.

—Sean Pratt writes for the Western Producer.

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The government currently restricts sales of E15 gasoline, or gasoline with 15 per cent ethanol, in summer months due to environmental concerns over smog, though the biofuel industry says those concerns are unfounded.

The corn-based ethanol industry has been fighting for years for year-round sales of E15 but was frustrated by the 2025 start date, one year later than proposed.

In 2022, the governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin made the request for year-round E15 sales, saying the move could help lower pump prices by boosting fuel volumes.

Some oil refiners have argued that allowing E15 in select states as opposed to nationwide could prompt localized fuel price spikes and supply issues.

The delay enables President Joe Biden’s administration to put off potential price spikes stemming from the decision until after the 2024 U.S. presidential election in November. Two states the decision affects, Wisconsin and Minnesota, are battleground states in this year’s contest.

Inflation and the economy are key vulnerabilities for Biden’s re-election campaign.

The Environmental Protection Agency had sent a final rule on the proposal to the White House in December with an effective date of April 28, 2024. The new timeline would push the effective date to April 28, 2025.

“By extending the implementation date, this final action reduces the risk of gasoline supply issues this summer and the price impacts that could have come with 2024 implementation,” an EPA official said on Thursday.

The EPA did not comment on whether it would issue a temporary waiver enabling E15 sales this summer.

“We cannot speculate about the 2024 summer driving season. We will continue to monitor the situation, consult closely with the Department of Energy, and be prepared to act should conditions warrant,” the agency said.

After the news, the Renewable Fuels Association, a biofuels trade group, called on the administration to take action to ensure consumers have access to E15 this summer, and said it was disappointed over the new rule’s 2025 start date.

The American Petroleum Institute, an oil industry group, meanwhile, said it supported a legislative solution that would allow year-round sales of E15 nationwide.

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