US Oil Group Challenges Trump Plan to Cut Biofuel Import Credits

NEW YORK, Aug 14 (Reuters) - A top U.S. oil trade group on Thursday joined a chorus of complaints against a new government proposal to slash incentives for biofuel imports, testing the Trump administration's resolve to keep the policy in the upcoming months. The mounting criticism puts the White House in the position of having to side with either farmers looking to prioritize domestic supply, or refiners seeking cheaper feedstock - both groups loyal to President Donald Trump.

At issue is a proposal from the Environmental Protection Agency in June that would allocate only half as many tradable renewable fuel credits to imported biofuels and biofuel feedstocks as to domestic ones. The shift, which could be finalized before the year's end, has significant implications for bio-based diesel, which relies on imports to meet federal mandates. The U.S. Renewable Fuel Standard (RFS) requires refiners to blend billions of gallons of biofuels into the fuel market, or buy credits known as RINs from those that do to demonstrate compliance with the program. The Farm Belt, specifically soybean farmers, hailed the proposed shift as a victory, arguing the RFS was always intended to boost domestic production and that countries like China were flooding the market with cheap supply.

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But the oil industry argues the U.S. lacks enough feedstock to meet the federal quotas without imports, tightening an already stretched domestic market and driving prices higher. "As proposed, it is unworkable and would have significant harmful effects on the overall RFS program and could place upward pressure on fuel costs," the American Petroleum Institute said in a letter to the EPA on Thursday seen by Reuters, urging the complete removal of the import proposal. The API also questioned the legality of the proposal in separate comments seen by Reuters, signaling the deep-pocketed trade group could be prepared to go to court to challenge the administration. Refiners and farm groups were earlier this year unified on bio-based diesel, with both arguing that federal quotas needed to be higher. However, the shift on imports caught both industries by surprise. For Stefan Erasmus, it’s a step in the right direction in ensuring that he maximizes production while protecting the environment.

Even within trade groups, sentiment around the imports proposal is divided. "There is not consensus among our members on the proposal to reduce the RIN value for fuels produced domestically from foreign feedstock," Clean Fuels Alliance America, a biodiesel group, said in comments submitted to the EPA.