The U.S. Environmental Protection Agency on Friday proposed cutting the quotas for the use of renewable fuels in gasoline, lowering the mandate for corn ethanol this year and next from the 15 billion gallons required by law.
After delaying rules for using ethanol, biodiesel and cellulosic fuels for more than a year, the EPA said corn ethanol levels should be set at 13.4 billion gallons this year and 14 billion gallons for 2016. The quota for biodiesel would increase to 1.7 billion gallons this year and 1.8 billion gallons next.
The agency also set requirements for 2014 at the level produced by the industry.
"We believe these proposed volume requirements will provide a strong incentive for continued investment and growth in biofuels," said Janet McCabe, the EPA official in charge of the program. "But we must recognize real-world impediments to the growth of biofuels in the marketplace."
The agency said it would issue the final standard by Nov. 30 after receiving public comment and holding a hearing June 25 in Kansas City, Kan. It will return to the program's timeline for issuing annual rules after the current proposal is finalized, the agency said.
The announcement cut the value of certificates known as Renewable Identification Numbers, or RINs, issued by the EPA to track compliance. The value of ethanol RINs for 2015 plunged 19 percent to 48 cents Friday, according to StarFuels Inc., a Jupiter, Fla.-based alternative energy broker.
The RINs are attached to each gallon of biofuel and refiners can trade them to other parties once they've consumed renewable fuel.
Ethanol and oil industry advocates have battled over whether targets in the 2007
Energy Independence and Security Act are obsolete because gasoline demand has grown more slowly than forecast.
The legislation required refiners to use 20.5 billion gallons of renewable fuels this year and 22.25 billion in 2016, based on 2007 fuel consumption forecasts. EPA has the legal authority to adjust those totals, and set the overall levels for renewable fuels at 16.3 billion gallons and 17.4 billion gallons respectively.
Separately, the U.S. Department of Agriculture pledged $100 million in matching funds to states Friday to expand the use of special fuel pumps that allow drivers to blend more ethanol into their gasoline.
The agency has long championed these so-called blender pumps, and the announcement on the same day as the renewable fuel proposal lets the administration of President Barack Obama demonstrate that it still supports the fuel, which in the U.S. is produced mostly from corn.
"They are committed to the industry," Agriculture Secretary Tom Vilsack said of the EPA. "They also have to work in the real world, relative to how much gas is being consumed, and that is the result of the higher CAFE standards that are having to be increased."
Bloomberg News reporter Alan Bjerga contributed to this report from Washington.