By Stephanie Kelly and Jarrett Renshaw
NEW YORK (Reuters) - The Biden administration is expected to announce a rule this year that would detail annual biofuel blending mandates for the refining industry for a three-year period instead of just for one, three sources familiar with the discussions said.
The switch to a multi-year target would be aimed at providing longer-term certainty to the refining and biofuels industries, which have battled nearly constantly over the annual mandates since they began more than a decade ago under the U.S. Renewable Fuel Standard (RFS).
"They're trying to put together a proposal for 2023, 2024 and 2025 where once they put the proposals together, then they don't have to go back in and they don't have to change and modify the volumes," said one of the sources, who requested anonymity to speak candidly about the discussions.
The EPA has been ordered to propose a rulemaking for 2023 mandates by Nov. 16, according to a legal document in July.
The Environmental Protection Agency, which administers the RFS, declined to comment for this article.
Under the RFS, oil refiners must blend billions of gallons of biofuels into the nation's fuel mix, or buy tradable credits known as RINs from those that do. The policy aims to reduce energy imports, help farmers, and cut greenhouse gas emissions.
While Congress set out specific goals through 2022, the law expands the EPA's authority to change the way the RFS is administered. Starting next year, the agency will have leeway to set multi-year mandates and make other changes.
Previously, sources told Reuters the EPA is studying ways to use the RFS to support electric vehicles, sustainable aviation fuel and hydrogen. The EPA has not shared its plans.
The annual rulemaking process had created a nonstop lobbying battle over the mandates for the powerful oil and corn lobbies. The oil industry says the requirements are expensive and threaten blue-collar refinery jobs; the agriculture industry likes the mandates which boost demand for products such as corn-based ethanol.
Both sectors welcome a multi-year rulemaking to increase market certainty, but some worry the shift could unintentionally distort markets if long-term mandates over- or under-shoot actual demand.
An unexpected slump in energy demand in 2020 due to the COVID pandemic, for example, led the EPA to trim biofuel blending mandates for that year. Biofuel advocates, meanwhile, say rising public subsidies for the industry could also grow production in unexpected ways.
The Inflation Reduction Act, a massive climate legislation deal, included extended credits for biodiesel and incentives for sustainable aviation fuel needed to reduce emissions from the airline industry. Both fuels already qualify for credits under the RFS.