(Corrects last name of Renewable Fuels Association president to Dinneen from Dineen in paragraph 5)
NEW YORK, Sept 28 (Reuters) - Prices for U.S. renewable fuel credits continued to tumble on Thursday, traders said, on reports the U.S. Environmental Protection Agency was considering a plan that would significantly increase the amount of credits on the market.
The most popular fuel credits, known as D6, fell to 66 cents in early trading, a 15-cent drop since Wednesday and the lowest price since May, traders said.
The EPA is weighing a change to U.S. biofuels policy that would allow exports of ethanol to count toward the country's annual biofuels volumes mandates, Reuters reported Wednesday.
The plan, still in its infancy, faces significant legal and political headwinds if the agency moves forward. It is unclear whether the EPA has the unilateral authority to make such a sweeping change or needs congressional blessing.
“The notion of allowing exported biofuels to qualify towards an oil company’s RFS renewable fuel volume obligation would be a gross misinterpretation of the letter and spirit of the Energy Independence and Security Act of 2007, designed to enhance - not export - U.S. energy security," Bob Dinneen, head of the Renewable Fuels Association, said on Thursday.
Senate Judiciary Committee Chairman Chuck Grassley, an Iowa Republican, took to Twitter on Tuesday to criticize a separate proposal from the EPA to reduce biodiesel volumes in 2018 and 2019.
"Trump promised 2b pro biofuels & pro rural America/Pruitt RFS proposal =anti biofuels &anti rural America / EPA not doing what @POTUS said," Grassley wrote.
The addition of credits for exported ethanol would lower prices and costs for merchant refiners, who have said the program would bankrupt the industry. Under the program, refiners must either blend renewable fuels into the fuel pool or buy credits from those who do.
Earlier in the week, the EPA said it was considering cutting how much advanced biofuel and biodiesel must be mixed into the American fuel supply in 2018 and 2019, based on a potential spike in biodiesel prices.
Credit prices could fall to as low as 30 cents each if the EPA implemented both proposals, Aakash Doshi, an analyst at Citigroup Inc in New York, wrote in a report.
Shares for Green Plains Inc and Pacific Ethanol were down 2 percent and 3 percent respectively on selling stemming from worries about changes to the renewable fuels standard, traders said.
Futures for soyoil, used to make biodiesel, dropped to a 2-1/2-month low on the Chicago Board of Trade amid uncertainty about U.S. blending requirements, traders said. (Reporting by Jarrett Renshaw and Michael Hirtzer; editing by Marguerita Choy and Tom Brown)