Report about blending mandates sends US biofuels lower

The US biofuel markets slumped on Tuesday after reports emerged saying the Environmental Protection Agency would not reallocate previously exempted biofuel mandates into its 2019 blending requirements.

The S&P Global Platts benchmark Chicago Argo assessment tumbled 3.9 cents to $1.1935/gal, the lowest level in 13 1/2 years, since reaching $1.1750/gal on May 26, 2005.
US Midwest B100 SME biodiesel fell 11.7 cents on the day to be assessed at $2.5260/gal. D4 biodiesel RINs for 2018 plunged 7.25 cents to 40.75 cents/RIN.

The markets all dropped sharply after the a published report said that the EPA was not expected to deviate much from its proposed 2019 blending mandates first published in June. Those proposed levels drew the ire of the biofuels industry, which argued that the mandates should have included volumes that the agency had exempted in previous years.

The subject of the exemptions have become a hot-button issue for the domestic biofuels industry and its supporters on Capitol Hill. Under EPA rules, a refinery with a capacity of less than 75,000 b/d can seek a waiver that would allow it not to comply with blending mandates if it can demonstrate the compliance creates a severe economic hardship. Approximately 10% of US refining capacity comes under the 75,000 b/d limit.

If the waiver is granted after the mandates are finalized, the agency does not reallocate those volumes. Critics of the exemptions say the exemptions amounts to a back-door way of avoiding the mandates and destroys demand for biofuels. Refining interests contest those arguments.

In its annoucement in June, the EPA proposed a modest increase in the 2019 mandates compared with 2018, with the entirety of the increase allocated to non-biodiesel advanced biofuels. The proposal calls for a total renewable mandate of 19.88 billlions gallons in 2019, compared with 19.29 billion gallons in 2018.