October 15, 2019 / 5:21 PM / 2 months ago

UPDATE 2-Trump administration proposes plan to raise U.S. biofuels use -EPA

(Adds industry comment)

By Stephanie Kelly

NEW YORK, Oct 15 (Reuters) - The Trump administration, in an effort to mend fences with the powerful corn lobby, proposed a deal on Tuesday to offset waivers for oil refiners exempting them from the nation's biofuel blending requirements.

The proposed plan would calculate the volume of biofuels U.S. refiners have to blend by using a three-year average of exempted gallons as recommended by the Department of Energy, the Environmental Protection Agency said.

This will potentially boost demand for biofuels like ethanol, a response to farmers outraged by the EPA's decision in August to exempt 31 oil refineries from their obligations under the nation's Renewable Fuel Standard (RFS).

The plan was announced as a supplement to proposed 2020 blending rules, which requires the refining industry to blend ethanol and other biofuels into the nation's gasoline. As part of the RFS, EPA can exempt small refineries if they prove compliance would cause disproportionate economic hardship.

Some biofuels industry leaders were skeptical about the proposal.

"The supplemental notice contains a never-before-discussed proposal to estimate small refinery exemptions, with no assurance that the estimate will come close to actual exemptions," the National Biodiesel Board said in a statement.

Trump's EPA had vastly expanded its use of the provision allowing small refining facilities to seek waivers if they can prove compliance would cause them disproportionate financial hardship. That angered farmers, who saw it as a way to undercut ethanol demand.

Oil companies have consistently resisted measures to expand the biofuels market, which they view as a competitor. Refiners complain that the requirements under the RFS cost them greatly.

Small facilities owned by oil majors such as Exxon Mobil and Chevron Corp have been among those to secure recent exemptions.

EPA will hold a public hearing on the proposal on Oct. 30, followed by a 30-day comment period for public input before the agency finalizes the rules later this year, it said.

The plan would not change proposed volumes for 2020 and 2021, EPA said. In July, the EPA called for the refining industry to add 20.04 billion gallons of biofuels, including 15 billion gallons of ethanol, into fuel in 2020.

"The proposed adjustments would help ensure that the industry blends the final volumes of renewable fuel into the nation's fuel supply and that, in practice, the required volumes are not effectively reduced by future hardship exemptions for small refineries," EPA said. (Reporting by Stephanie Kelly; Editing by Alexander Smith and Tom Brown)

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