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By Stephanie Kelly, Jarrett Renshaw and Humeyra Pamuk
NEW YORK, Oct 2 (Reuters) - The U.S. Environmental Protection Agency may use partial small refinery exemptions under the Trump administration's biofuels deal to help farmers and boost ethanol consumption, two sources familiar with the matter said on Wednesday.
The move would be aimed at reducing the impact of the waivers, which free refineries from their obligations under the Renewable Fuel Standard - a law requiring ethanol and other biofuels be blended into the nation's gasoline.
In August, the Trump administration granted 31 waivers, angering farmers and ethanol producers that say the waivers cut demand and hurt them financially.
Since President Donald Trump took office, the EPA has vastly expanded its use of such waivers, giving them to refineries owned by huge, profitable companies like Exxon Mobil Corp and Chevron Corp . It has also routinely provided full exemptions to refineries even when the Department of Energy has recommended only partial relief for those facilities.
The proposal to use partial waivers is part of a larger deal that Trump promised related to ethanol, hashed out after a series of meetings with biofuel officials, farm- and oil-state senators and refining executives in September, the sources said.
Other components of the deal, most of which have already been reported by Reuters, include boosting blending quotas for the coming years based on a three-year rolling average of total biofuels gallons exempted from the RFS mandate. The plan would also aim to increase consumer access to E15 gasoline, a gasoline blend with 15 percent ethanol, as opposed to the more common E10 blends.
The pending deal is unlikely to include any price caps for the biofuel blending credits that refiners must earn or purchase to comply with the RFS, a measure the oil industry had been seeking as a concession in the biofuel deal, the sources said.
The administration aims to announce the final biofuels deal next week, sources previously told Reuters.
While the RFS is intended to help farmers and reduce U.S. imports of petroleum, the EPA can exempt small refineries from the regulation if they can prove that compliance would cause them disproportionate economic hardship.
The Department of Energy is charged with assessing the applications and providing the EPA with recommendations before the EPA makes a final decision.
Trump's EPA has disregarded DOE advice on waivers in the past, Reuters has reported, marking a break from the Obama administration’s EPA, which had often either adopted energy department recommendations or, when it did not, ruled against exempting oil refiners.
The agriculture industry has said the waivers cut ethanol demand, hurting growers already suffering from lost foreign markets due to the U.S. trade war with China. The oil industry, however, counters that the exemptions protect refining jobs and have no impact on the amount of ethanol used. (Reporting by Stephanie Kelly, Jarrett Renshaw and Humeyra Pamuk Editing by Chizu Nomiyama and Tom Brown)