Future of Biofuels Hinges on Industry Agreement
Haley Zaremba

Last month, U.S. oil and biofuel groups banded together in an unlikely alliance to protest chaos and uncertainty in the nation’s biofuels policy. As anxieties have mounted over how a trade war with Canada would impact the sector, actors have become increasingly vocal about the need to establish rules for biofuel waivers and quotas under the current administration. 

"While our organizations have not always agreed on every detail, we have joined together in recognition of the critical role liquid fuels serve in the American economy, to advance liquid fuels, and ensure consumers have a choice of how they fuel their vehicles," the groups wrote to Lee Zeldin, the new EPA administrator. "We believe strong, steady volumes for conventional biofuel targets, biomass-based diesel, and advanced fuels would more accurately reflect the availability and ongoing investments in feedstocks and production capacity.”

Now, in response to this industry unease, Donald Trump is telling oil and biofuels companies to hash it out themselves. On Thursday, Trump “asked oil and biofuels producers to hash out a deal on the next phase of the nation's biofuels policy to avoid the kind of political clashes that marked his first term” according to reporting from Reuters based on information from “four people familiar with the matter.” 

Whatever number for quoatas that the two industries arrive at will likely be adopted into policy by the Trump administration. "It makes it easier for (the Trump administration) to arrive at whatever number they arrive at if they are hearing from groups that have historically been at the opposite sides of this," said Will Hupman, API's vice president of downstream policy.

The biggest policy measure in question is the U.S. Environmental Protection Agency’s Renewable Fuel Standard (RFS), which sets blending quotas for how much biofuel is required to be mixed into petroleum for the U.S. market. RFS mandates determine volumes for a matter of two or three years and govern the EPA’s “multibillion-dollar compliance credit market.”

RFS quotas – also known as renewable volume obligations (RVOs) – require certain levels of biofuels (such as products like corn-based ethanol, manure-based biogas, and wood pellets) to be blended into the national fuel mix to supplement petroleum-based fossil fuels. ‘Renewable fuel’ is an umbrella term used by the EPA to encompass “fuel produced from planted crops, planted trees, animal waste and byproducts, and wood debris from non-ecological sensitive areas and not from federal forestland,” according to a summation from Grist.

During the last Trump presidency, the biofuels sector took a hit for more liberal issuing of waivers allowing small refineries to bypass laws requiring a certain level of biofuels blending. And many industry insiders expected this pattern to continue in the second Trump presidency. Already, the number of petitions for exemptions from the Renewable Fuel Standard, which operates at a federal level, “has risen dramatically in recent months” according to the University of Illinois economist Scott Irwin. There are currently 139 such petitions pending for compliance years 2016-2025, according to reporting by Agri-Pulse this week.

Now, the biofuels industry is coming off a multi-year boom, with record-breaking demand. But there is serious concern that the honeymoon will soon be over. Tensions during the current term have been ramped up significantly by tariffs on Canadian imports, as feedstocks from Canada have become an integral part of the United States biofuels industry. A lack of policy clarity has led many to assume the worst, and biodiesel plants on both sides of the border have slowed down production or been shelved entirely. 

"If this uncertainty drags on, which is what we expect, the biodiesel and renewable diesel industry will contract but not disappear. It will shrink, painfully at times," said Paul Niznik, director of energy at Capstone LLC in Houston. “The contraction of the green fuels sector could also hurt rural communities and efforts to decarbonize the economy,” added Reuters. 

While the announcement on Thursday could speed up the policy process by putting the decision-making back in the hands of the industry, it may be no easy task for Big Oil and biofuels interests to come to a quick consensus.

By Haley Zaremba for Oilprice.com 

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the Bay Area, and music/culture reviews.

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