The Environmental Protection Agency Monday issued final regulations that ease the annual requirements for ethanol in gasoline, a response to market restraints and other conditions that are preventing the Obama administration from meeting goals laid out in a 2007 law.
That law compelled refiners to blend an increasing amount of biofuels into the U.S. gasoline supply each year. While the 2007 law set out goals for ethanol use, the EPA was charged with mandating the quotas on a year-by-year basis.
The agency is two years behind in crafting the quotas, putting the agency in the awkward position Monday of issuing the rules retroactively for 2014 and 2015 as well as establishing the mandate for 2016.
For 2014, the agency retroactively set the total amount of ethanol to be blended at 16.28 billion gallons, roughly what was actually produced. For 2015, EPA set the total level at 16.93 billion gallons, close to the estimated production for this year. And for next year, the agency set a level of 18.11 billion gallons, a significant jump.
EPA had faced a court-ordered deadline to issue the 2014 and 2015 levels by Monday.
Under the new figures, the levels of ethanol required to be in refiners’ fuel mix will increase less than they would have under the 2007 law. The final quotas are slightly higher than a proposal EPA rule issued in May, due in part to increased gasoline consumption in the U.S. spurred by cheap gas prices.
Shares of major ethanol makers jumped on the announcement that the EPA will boost U.S. renewable fuel targets above those laid out in the agency’s earlier proposal. Shares of Green Plains (O:GPRE), a main US ethanol supplier, up 4.5%, while Pacific Ethanol (O:PEIX) rises 17.5% and N:ADM, largest-capacity ethanol producer, pares losses, down 0.01% on Monday.
Monday’s announcement coincides with the start of a two-week United Nations summit in Paris, where President Barack Obama is touted the U.S. commitment to tackling climate change. The biofuel mandate isn't mentioned in the U.S. submission to the negotiations, however, reflecting the way policy makers now put less emphasis on the approach as a central part of reducing the nation’s fossil fuel consumption.
Still, EPA officials Monday cited the new rule as an important step.
“With today’s final rule, and as Congress intended, EPA is establishing volumes that go beyond historic levels and grow the amount of biofuel in the market over time,” Janet McCabe, the acting assistant administrator for EPA’s Office of Air and Radiation. “Our standards provide for ambitious, achievable growth.”
Biofuels represent about 10% of total gasoline consumption in the U.S. since 2011, with nearly all of that coming from corn-based ethanol.