U.S. EPA to Propose Biofuels Standards This Spring: Official

The U.S. Environmental Protection Agency plans to offer a proposal for Renewable Fuels Standards for 2014, 2015, and 2016 this spring, and will use actual production levels to determine last year's mandated volumes, an official said on Thursday.

The agency will address all three years at once and plans to look at broader changes to address long-term issues of demand as well as arguments from refiners that ethanol blending capacity has hit its peak, said Christopher Grundler, a director at the EPA's Office of Air Quality and Transportation, at an industry conference in Grapevine, Texas.

Further, the agency will likely set mandated volumes for 2014 that are near last year's actual production levels.

"It will be based on what actually happened," Grundler told Reuters on the sidelines of the conference.

The EPA is late in designating volumes for ethanol and other biofuels to be blended into the domestic fuel supply. The agency has struggled to increase the mandated levels as designated in a plan laid out by Congress in 2007 as growth of overall fuels demand has slowed.

Last year, makers of ethanol and other renewable fuels pumped out more than 17 billion gallons, above the revised target of 15.2 billion the EPA proposed in late 2013.

The vast majority of that was corn-based ethanol, which rose to a record of 14.3 billion gallons in 2014, according to government data. That could put the volumes allotted for ethanol blending at about 13.5 billion gallons, as export markets accounted for just a sliver of that output at 836 million gallons, according to estimates from industry group Renewable Fuels Association.

Grundler said he could not give specific plans for determining the 2015 volumes, but said the agency hopes to get on track in setting targets for the 2016 year. The EPA is meant to issue mandates for a year of fuel blending by November of the preceding year.

The EPA has been inundated with public comments after proposing in 2013 sharp cuts to blending volumes for ethanol and other biofuels.

Broader changes to the RFS program are needed, he said.

"We have to address flat and, indeed, declining gasoline demand," Grundler said. "For the next few months, we are regrouping."

Grundler said industry expectations that the EPA could propose the targets by March would not likely be met.

When asked for a more specific timeline, Grundler said: "I define spring as (ending) midnight June 21."

(Reporting by Chris Prentice; Editing by James Dalgleish and Chris Reese)