The Environmental Protection Agency (EPA), which has the authority to issue the exemptions, denied 26 petitions from 15 small refineries who applied for waivers for the 2016-2018 and 2021-2023 compliance years, the agency said on Friday. There are still two pending petitions.

The agency also disclosed which oil refiners submitted petitions in July 2022 or later, as well as which oil refiners are participating in an alternative compliance schedule that allows them flexibility in complying with biofuel blending laws.

Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do. The EPA can, however, award exemptions to some small refiners if they prove that the obligations cause them undue harm.

Biden has been trying to set the United States on track to reduce carbon emissions in the fight against climate change, with a goal of net-zero emissions by 2050.

The administration has not yet extended a waiver to any refinery, reversing the policy of former President Donald Trump, whose administration granted 34 exemptions to oil refiners for the 2017 compliance year alone.

The EPA consulted with the Department of Energy on Friday’s waiver decisions and found that none of the petitioning small refineries demonstrated they face disproportionate economic hardship caused by their RFS compliance, the agency said.

New transparency

The EPA publicized on Friday the names of refiners that submitted small-refinery exemption petitions from July 2022 or later. The agency added this information to its website to reflect its commitment to transparency around RFS decisions, it said.

Refiners that submitted petitions included Calumet Montana Refining and Ergon Refining. Their petitions were denied.

The agency also publicized the names of refiners that are using an alternative schedule to prove RFS compliance. Among those listed were Sinclair Wyoming Refining Company and Kern Oil and Refining Company.

Data from the EPA showed 17 small refineries have opted into the alternative compliance schedule for the 2020 compliance year, the only compliance year shown in the data. The group had retired 360 million credits to show compliance, and had 510 million credits outstanding, EPA’s website showed.

— Stephanie Kelly is a Reuters correspondent covering the U.S. oil industry from New York City.

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The U.S. Environmental Protection Agency has finalized biofuel blending volumes at 20.94 billion gallons in 2023, 21.54 billion gallons in 2024 and 22.33 billion gallons in 2025. That compares with the initial proposal announced in December of 20.82 billion in 2023, 21.87 billion in 2024, and 22.68 billion in 2025.

But the finalized volumes include just 15 billion gallons of conventional biofuels like corn-based ethanol in all three years, plus a 250 million-gallon supplemental amount for 2023. That represents a decline from the initial proposal, which included 15 billion gallons of conventional biofuels in 2023 and 15.25 billion gallons in both 2024 and 2025.

The plan also has modest increases to biomass-based diesel volumes compared with the proposal, despite a major lobbying push from groups that produce biodiesel, renewable diesel and sustainable aviation fuel to boost volumes higher.

The announcement drew strong rebukes from ethanol and biodiesel advocates.

“The industry responded to signals from the Biden administration and Congress aiming to rapidly decarbonize U.S. fuel markets, particularly aviation, marine, and heavy-duty transport, and make clean fuels available to more consumers,” said Kurt Kovarik, vice-president of federal affairs with Clean Fuels, a biodiesel group. “The volumes EPA finalized today are not high enough to support those goals.”

Iowa Secretary of Agriculture Mike Naig said the finalized mandates fail to fully support benefits that biofuels can provide to farmers and consumers.

The Renewable Fuels Association called the reductions in ethanol mandates “inexplicable” and “unwarranted.”

The final rule marks a new phase in the U.S. Renewable Fuel Standard program, which is more than a decade old and frequently pits the powerful oil and biofuel industries against each other. Under the RFS, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do.

Ethanol producers and corn farmers like the mandates because they provide a market for their products, while the oil industry finds the requirements too pricey.

While Congress set out specific goals for the program through 2022, the law expands the EPA’s authority for 2023 and beyond to change the way the RFS is administered.

The EPA said the finalized rule would reduce reliance on foreign sources of oil by between 130,000 to 140,000 barrels per day over 2023-2025.

U.S. renewable fuel credit prices dropped eight per cent following the news, trading at $1.34 each from as much as $1.46 each the day prior, traders said (all figures US$). Biomass-based credits dropped to $1.38 each from $1.48 each the previous day.

The futures market fell sharply Wednesday in reaction to the lower-than-expected biofuel mandates, with most Chicago Board of Trade soyoil contracts locked down their daily four cent/lb. trading limit. The soyoil market had rallied to its highest in nearly 3-1/2 months last week.

Other provisions

The EPA also set out a series of regulatory changes in the final rule, in an effort to strengthen the agency’s implementation of the RFS program.

The agency will modify provisions for biogas-derived renewable fuels to ensure that biogas is produced from renewable biomass and used as a transportation fuel, as well as to allow for the use of biogas as a biointermediate.

Absent from the rule, however, was a much-anticipated pathway for electric vehicle manufacturers to generate lucrative credits under the RFS, though it was included in the original proposal in December. Reuters previously reported that the administration was planning to abandon the scheme over worries about lawsuits.

The plan would have given EV automakers, such as Tesla, credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or landfills.

The EPA said on Wednesday it will continue to assess stakeholder comments it received on the EV scheme, and it will work on potential paths forward for it.

The American Fuel and Petrochemical Manufacturers said it was pleased to see the EPA abandon the EV program, saying the RFS is a liquid fuels program that should not include electric vehicles.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw; additional reporting by Mark Weinraub.

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Biden wants to fight climate change by reducing fossil fuel use in America’s transport sector, currently the source of around a quarter of the country’s greenhouse gases.

Under the plan, announced by the Environmental Protection Agency, oil refiners will be required to add 20.82 billion gallons of biofuels to their fuel in 2023, 21.87 billion gallons in 2024, and 22.68 billion gallons in 2025.

Those volumes will include more than 15 billion gallons per year of conventional biofuels like corn-based ethanol, with the rest made up by advanced fuels like those made from switchgrass, animal fats, or methane from dairy farms and landfills.

The U.S. government estimates that the lifecycle greenhouse gas emissions from biofuels can be more than 40 per cent lower than straight gasoline, meaning adding them to the fuel mix can help fight climate change.

The proposal marks the latest chapter for the more-than-decade-old Renewable Fuel Standard (RFS), under which oil refiners are required to blend billions of gallons of biofuels into the nation’s fuel mix or buy tradable credits from those that do.

While Congress set out specific goals for the program through 2022, the law expands the EPA’s authority for 2023 and beyond to change the way the RFS is administered.

Electric vehicles

In addition to boosting mandated volumes, the EPA hopes to use the reset to introduce a pathway for electric vehicle makers to generate credits. That would recognize the possibility that electric vehicles could be charged using power from the grid generated by biofuels like landfill or agricultural methane.

The EPA proposal foresees electric vehicle manufacturers such as Tesla generating as many as 600 million credits called e-RINs in 2024, and 1.2 billion of them by 2025. Under the scheme, one e-RIN would be generated for every 6.5 biofuel-powered kilowatt hours in an EV battery.

The idea got mixed reviews.

“We’re encouraged that the Biden administration continues to recognize the powerful role that the RFS can play in decarbonizing transportation,” said Brooke Coleman, executive director of the Advanced Biofuels Business Council.

He said the proposal could help “unleash years of pent-up innovation in advanced and cellulosic biofuels.”

The Renewable Fuels Association, a biofuels trade group, also welcomed the proposal, saying it “solidifies a role for the Renewable Fuel Standard in future efforts to reduce carbon emissions and enhance our nation’s energy security.”

Geoff Moody, an executive at the refinery trade group American Fuel and Petrochemical Manufacturers, said the EPA’s proposal was flawed.

“For the final rule, EPA must go back and set conventional volumes that are aligned with consumer demand and infrastructure realities,” he said. “It must also hold true to the legacy of RFS as a liquid fuels program — not an electric vehicle program — by rejecting yet another massive regulatory subsidy for electric vehicle manufacturers.”

Meanwhile, a spokesperson for the Alliance for Automotive Innovation said the group supports an e-RIN program, and pointed to a previous comment that the group made that said an e-RIN program will help accelerate the U.S. electric vehicle market.

A Tesla representative was not immediately available.

The EPA’s biofuel mandate for the current year is 20.88 billion gallons, which includes the annual volume requirement of 20.63 billion plus a supplement of 250 million gallons for volumes that were not blended in previous years.

The biofuel industry got a boost this year from passage of the Inflation Reduction Act, which provides significant subsidies to the biodiesel and sustainable jet fuel industries in the form of tax credits.

Refiners such as Marathon Petroleum and PBF Energy Inc have converted units at their oil refineries to produce renewable diesel to take advantage of growing demand and government subsidies.

Lawmakers are also pushing a bill that would expand sales of higher volume ethanol blends of gasoline called E15, something advocates say could help reduce pump prices while supporting farmers.

Reuters previously reported the details of the EPA proposal on Wednesday, citing sources.

Renewable fuel credits traded on Thursday between $1.65 and $1.70 each, down from as high as $1.84 the previous session, traders said.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw.

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The EPA set biofuel blending mandates for 2022 at 20.63 billion gallons and retroactive volume mandates for 2021 at 18.84 billion gallons and for 2020 at 17.13 billion gallons. Though it denied the oil refiners’ exemption petitions, the agency said it would allow extra time for small refiners to meet their 2020 blending obligations.

The EPA in December proposed to set volumes for 2022 at 20.77 billion gallons, for 2021 at 18.52 billion gallons and for 2020 at 17.13 billion gallons.

The volume mandates, typically set ahead of time each year, were delayed due to the fallout of the coronavirus pandemic, which severely reduced U.S. energy demand.

“Together, these actions reflect the Biden administration’s commitment to reset and strengthen the RFS (U.S. Renewable Fuel Standard), bolster our nation’s energy security and support homegrown biofuel alternatives to oil for transportation fuel,” EPA spokesperson Tim Carroll said.

The decision on the mandates has involved White House staff members, who have had to weigh how the policy could affect record-high gasoline prices, surging food costs and inflation, and Farm Belt constituents. Higher mandates can raise demand for corn and impose costs on fuel producers.

Under the Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the nation’s fuel pool or buy credits from those that do. The credits, known as RINs, are used by oil refiners and importers to show compliance with mandates.

Small refiners can receive an exemption from the requirements if they can prove financial harm from the mandates.

The law has been a hotbed of controversy, typically pitting the powerful oil and corn lobbies against each other.

Friday’s announcement was welcomed by biofuel advocates, as the EPA set volumes for conventional biofuels, which includes ethanol, at 15 billion gallons for 2022.

“While the previous administration sold out to Big Oil, President (Joe) Biden is taking unprecedented steps to bolster markets for family farmers and drive economic growth in rural America,” said Democratic U.S. congresswoman Cheri Bustos of Illinois.

The oil refining industry said the decision to set 2022 volumes that high threatens the viability of small refineries. Refiners have long said that the obligations are too pricey.

“It’s clear that the biofuel thresholds are now unattainably high,” said Mike Smith, with the United Steelworkers union, which represents workers employed by the refining industry.

Reuters first reported the 2020-2022 biofuel volumes earlier on Friday.

— Reporting for Reuters by Jarrett Renshaw and Stephanie Kelly.

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In a ‘proposed decision’ released in April the U.S. Environmental Protection Agency (EPA) recognized canola oil’s value as an environment-friendly alternative to fossil-based fuel — a move that’s expected to add new demand for the crop.

“This is a positive step forward in securing a canola oil pathway in the growing U.S. renewable diesel and sustainable aviation fuel markets, putting canola on a level playing field with other oilseed crops,” Jim Everson, Canola Council of Canada (CCC) president, said in a news release April 18 after EPA said canola oil-based renewable diesel, jet fuel and other biofuels qualify as “advanced biofuels” under the Renewable Fuel Standard (RFS) program.

“In addition to the environmental benefits, this will also help diversify markets and support value added processing, creating opportunities for the entire canola sector.”

The CCC is optimistic EPA will come to the same conclusion this summer when it releases its final decision, Everson said in an interview April 19.

“The fact that EPA has come to the position that it has, after all its analysis, I think bodes very well for the industry,” he said.

Why it matters: Canola, already one of Canada’s most economically important crops, could see even stronger demand as the world seeks lower carbon fuels in the fight to slow climate change.

A statement from The White House said: “This action demonstrates EPA’s commitment to approving new petitions for renewable fuels that can provide greenhouse gas benefits as well as reduce reliance on petroleum fuels.”

The CCC worked with the Canadian Oilseed Processors Association on a U.S. Canola Association petition to the EPA in 2020 to approve canola oil as a feedstock for renewable diesel, jet fuel and other biofuels, Everson said. Renewable diesel and renewable jet fuel are chemically similar to petroleum and are increasingly used in existing vehicles and aircraft to help decarbonize the transportation sector.

The EPA found canola-based renewable diesel, jet fuel and other fuels were 60 to 69 per cent lower in carbon emissions than petroleum-based fuels, Everson said. The EPA’s threshold for sustainable fuels is a 50 per cent cut in emissions, he added.

“We have some analysis that the canola council has done a little while ago that shows canola as a feedstock in biofuels can reduce GHG’s (greenhouse gases) by up to 90 per cent relative to regular fossil petroleum diesel,” he added.

Part of canola’s advantage is its high proportion of oil to meal. But because of production practices, including minimum- and no-till, Canadian canola production sequesters more carbon than some other producers.

Canola oil is increasing being used in biodiesel and renewable fuels, but it remains one of the healthiest food oils in the world, Everson said.

“It’s low in sat (saturated) fats, no-trans fats and all the right fats and oils.” he said. “It’s an attractive and very flexible oil. And demand for vegetable oil generally continues to increase globally as well so there’s going to be a lot of continued demand for canola.”

In fact, some observers might conclude canola oil demand is exceeding supply, following months of prices almost double what they often have been.

How much demand for canola-based fuel will increase, especially in the U.S., is difficult to predict, Everson said. The same is true when it comes to forecasting American canola production. Last year the U.S. planted just 2.152 million acres of canola. Most of that — 1.75 million acres — was seeded in North Dakota.

In January the U.S. Department of Agriculture predicted U.S. canola acres would remain unchanged in 2022, providing an opportunity for Canadian canola farmers.

However, despite very high new-crop prices, Statistics Canada estimated April 26 that Canadian farmers would seed 20.9 million acres this spring, down seven per cent from last year.

While canola prices are high, so are production costs, StatCan said. Some of the decline might be due to concerns about the drought continuing.

The CCC’s target is for Canada to produce 26 million tonnes of canola by 2025. Given annual plantings shouldn’t go much higher so land can be properly rotated to reduce canola pests, the CCC is focused on boosting canola yields to 52 bushels an acre, from the current 40.

Last year, despite 22.5 million acres of Canadian canola, drought cut average yields to 25 bushels, with production hitting just 12.6 million tonnes.

Canola yields typically bounce back following a poor yield, Everson said.

While the 26 million-tonne canola production goal might not be achieved in just three years, setting production targets has worked before, Everson said. Certainly strong canola prices and announcements for expanded and new Canadian crushing plants send a strong market signal for increased production, he added.

“So it’s all about trying to work with the producer to make sure they have the crop inputs that are necessary and we have the research going on in the private sector and the public sector to focus on increased yields,” Everson said.

— Allan Dawson is a reporter for the Manitoba Co-operator at Miami, Man.

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The powerful senator, who represents the largest ethanol-producing state in the country, told Iowa Public Television that low biofuel credit prices negated refiners’ complaints that they are suffering financial hardship and deserve waivers from complying with laws to encourage more biofuel use.

“They screwed us…when they issued 31 waivers,” Grassley told the broadcaster. “Compared to less than 10 waivers during all the Obama years…What’s really bad isn’t a waiver, it’s that it’s been granted to people who aren’t in hardship,” he said.

He added that he would take up the issue with President Donald Trump.

Reuters earlier reported that it was Trump who gave the green light to EPA Administrator Andrew Wheeler to go ahead with the waiver decisions, a move that infuriated corn growers while pleasing the refining industry.

Sources told Reuters that Trump wanted the issue off his desk and gave Wheeler the go-ahead to announce the 31 exemptions out of 40 applications.

“The president has heard from all sides and in the end he has had enough of it,” one source familiar with knowledge of the matter said.

On Friday, EPA’s website showed two more petitions have been submitted, bringing the total number of applications to 42. EPA had approved 31 of them while denying six.

U.S. corn and oil industries are at loggerheads over EPA’s implementation of the Renewable Fuel Standard, a more than a decade-old federal policy that requires refineries to blend corn-based ethanol into their gasoline or buy credits from those that do.

But small facilities can secure exemptions from the program if they can prove to the EPA that complying would cause them financial hardship.

Since Trump took office, the EPA has more than quadrupled the number of waivers it has granted to refineries, including some operated by giants Exxon Mobil and Chevron Corp., saving the oil industry hundreds of millions of dollars, but enraging farmers who say the exemptions threaten demand for one of their staple products.

Refiners dismiss the argument, saying ethanol demand has not been affected.

Iowa is a swing state that Trump carried in the 2016 presidential election and is potentially crucial for his re-election efforts next year. Farmers in the state have also chafed under Trump’s trade war with China that has sapped demand for agriculture products.

Trump had ordered the revamp of the waiver program in June, after hearing from angry farmers during a trip to Iowa but nearly two months of inter-agency negotiations failed to change the outcome in corn growers’ favour.

— Humeyra Pamuk is a Reuters correspondent covering U.S. energy policy from Washington, D.C.

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The new documents, part of a lawsuit that began last year, could provide the most complete explanation to date of how the Environmental Protection Agency vastly expanded the number of small refinery hardship biofuel waivers under former administrator Scott Pruitt, including by granting exemptions to oil majors Exxon Mobil and Chevron.

The expansion of the waiver program saved the oil industry hundreds of millions of dollars but angered farmers in the nation’s heartland, who said it crushed the credit prices that are an integral part of the ethanol industry.

According to the documents, filed by the Advanced Biofuels Association (ABFA), the EPA in 2017 stopped considering whether compliance with the Renewable Fuel Standard (RFS) would prevent a refinery from making money and being competitive.

Instead, the agency considered primarily whether compliance would cause a “disproportionate” impact on the facility, an easier hurdle to clear.

Under the RFS, refiners must mix biofuels like ethanol with their gasoline and diesel, but smaller refineries can be exempted if they can prove that complying would cause them measurable financial harm.

ABFA, which represents 35 companies responsible for 4.4 billion gallons of renewable fuel production around the globe, is asking a federal judge to rule whether the EPA’s expansion of the waiver program was legal, which they argue depresses demand for their biofuel.

The Department of Energy traditionally scored the hardship applications on a two-prong matrix that considered whether the RFS posed a disproportionate hardship, and whether the plant could remain viable if required to comply.

Prior to May 2017, a refinery would have to pass both tests to get an exemption, ABFA alleged, citing EPA correspondence with a refiner it said it had obtained.

“In prior decisions, EPA considered that a small refinery could not show disproportionate economic hardship without showing an effect on ‘viability,’ but we are changing our approach,” the EPA wrote in 2017 to an unnamed refiner, according to an excerpt included in the court filing.

The EPA went on to say that “RFS obligations may impose a disproportionate economic hardship when it is disproportionately difficult for a refinery to comply with its RFS obligations — even if the refinery’s operations are not significantly impaired.”

The EPA turned over documents related to 48 applications for waivers to the ABFA as part of the legal discovery process. In 24 cases, the Energy Department gave the applicant a viability score of zero, meaning the RFS would have no impact on the refinery’s ability to stay competitive and profitable, but the EPA still granted the waiver, ABFA alleged in the court documents.

The EPA also routinely ignored the department’s recommendations to grant partial exemptions and instead granted full exemptions, ABFA alleged in court documents.

An EPA official said the agency had no comment.

The trade group has asked a federal court in Washington to rule on the legality of the expansion of the hardship waivers under Pruitt. The scoring system has faced judicial scrutiny in the past, with judges in different circuits siding with and against the agency.

In an often cited case, the 10th U.S. Circuit Court of Appeals in Denver ruled in 2017 that the EPA had in the past used too strict a definition of viability that required the applicant to prove complying with the RFS would cause the plant to shut or the company to file for bankruptcy.

While the EPA did not announce the changes publicly, the agency clearly sent the message to refiners, ABFA said. Oil majors such as Chevron and Exxon Mobil, who did not apply for waivers in the past, were granted exemptions at their smaller refineries, Reuters previously reported.

Billionaire Carl Icahn, a one-time Trump adviser who helped Pruitt land the job at the EPA, was also granted exemptions at his smaller refineries owned by CVR Energy after previously been denied them by the Obama administration.

In all, the number of exemptions granted went from seven in 2015 to at least 29 in 2017, EPA data shows.

The EPA is set to decide on 37 additional pending applications for 2018 by the end of the month, a move that will be closely watched by the corn and oil industries.

— Jarrett Renshaw reports on the U.S. energy sector for Reuters from New York.

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Trump has arranged a series of talks between Big Corn and Big Oil since late last year amid rising concern in the White House over the U.S. Renewable Fuel Standard (RFS), a law requiring refiners to mix biofuels such as corn-based ethanol into their fuel.

The decade-old policy was intended to help farmers and reduce petroleum imports but has increasingly divided farmers and energy companies — two of Trump’s most important constituencies. A refining company in the key electoral state of Pennsylvania in January blamed the RFS for its bankruptcy.

A source who attended Thursday’s meeting at the White House said Trump told the gathering of lawmakers and corporate executives that he supports a proposal from the refining industry to cap the price of biofuels blending credits that refiners must acquire to comply with the RFS.

Prices for the blending credits — which refiners must either earn or purchase — have surged in recent years, upsetting companies that in some cases are spending hundreds of millions of dollars on them.

The source, who asked not to be named because he is not authorized to speak publicly on the discussion, said Trump also expressed support for expanding sales of high-ethanol gasoline — a tweak long-sought by ethanol producers.

The Environmental Protection Agency bans the use of gasoline containing 15 per cent ethanol during the summer months, a move intended to reduce ozone emissions and smog during the peak driving season.

The two ideas, combined, represented a “win-win” solution for the oil and corn industries that could help them break their deadlock, Trump told the meeting, according to the source.

The White House said after the meeting that talks on the issue would continue: “Today’s meeting is a part of the ongoing effort to best understand the many differing views on this issue, and the president looks forward to continuing this discussion,” it said in a statement.

Republican Senator Charles Grassley of corn state Iowa, who attended the meeting, said the talks did not yield any final decisions, but that an “emerging solution” could include allowing year-round sales of 15 per cent ethanol fuel.

He added he opposes a credit price cap, saying such a move could put “thousands of jobs in rural America” at risk.

No specific price cap level was discussed at Thursday’s meeting, according to the source, but Republican Senator Ted Cruz of Texas, who has been driving efforts to tweak the RFS on behalf of refiners and who attended the meeting, has proposed limiting credit prices to 10 cents each — a fraction of their current value (all figures US$).

Prices for the credits, called RINs, dropped 10 cents to 53 cents each after the meeting, according to traders.

Cruz said in a statement with Republican Senator Pat Toomey of Pennsylvania that he was “encouraged that President Trump recognizes the importance of providing relief from crushing RINs costs and expanding the potential market for ethanol.”

“We are making real progress, and, with the president’s leadership, we believe we can and will ultimately solve the problem,” according to the statement.

‘Continue to play out’

The biofuels industry had mixed reaction to the meeting, generally supporting the idea of year-round sales of high-ethanol blend gasoline but worried by the proposed price cap for credits, which some in the industry worry would curtail investment in new blending facilities.

“The president very clearly understands that the path forward is to allow sales of E15 year-round, promote growth, and put more RINs on the market,” said Emily Skor, chief executive of biofuels producer Growth Energy.

“Nothing new was discussed in this meeting. Removing accountability from oil companies would deprive millions of Americans the freedom to choose less expensive, homegrown biofuels and imperil countless jobs and family farms across America’s heartland,” said Jeff Broin, CEO of leading U.S. ethanol producer POET.

“This issue will continue to play out.”

Sources told Reuters that a number of companies were represented at Thursday’s meeting, including Valero Energy, Delta Air Lines’ Monroe Energy, PBF Energy, and Philadelphia Energy Solutions. PES last month blamed the RFS for its bankruptcy.

PBF said after the meeting that the discussion was “productive” and looked forward to further discussions.

While small refiners are generally supportive of the proposed reforms, large integrated refiners that have blending facilities and retail operations have less to gain from a RIN price cap.

The biofuel industry was represented by officials from POET and Green Plains Inc, along with others.

— Jarrett Renshaw reports on the U.S. energy sector for Reuters from New York.

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“We’re about to flip the calendar into March, when people start paying more attention to the conditions in the U.S.,” said Rich Feltes of RJ O’Brien in Chicago.

Attention for the past few months has been focused on Argentina, where crops are being harvested in drought conditions.

Over the past week, the drought continued to affect CBOT markets, with March corn rising from $3.6575 per bushel on Feb. 21 to $3.745 per bushel at close Wednesday, and March soybeans rising to $10.45 from $10.3525 in the same period.

“We’re putting out new highs in everything but soybean oil. I mean, it’s all driven by this Argentine situation, the ongoing outlook for dryness, and we got a couple of new elements,” Feltes said.

A Bloomberg article Monday, detailing how Argentina’s drought has affected commodity markets, attracted outside institutional investment supporting the market, Feltes said.

There is concern for a potential shortage of soybean meal due to drought in Argentina, the world’s largest exporter of soymeal. Traders aren’t concerned about a shortage of soybeans, just meal, Feltes said.

In the U.S., concern is mounting over the southern Plains, where a lack of precipitation over the winter has led to drought conditions. Along the upper Mississippi and Ohio rivers, there has been excess moisture, causing flooding and halting grain shipments.

There has also been concern in the ethanol sector, with oil refineries pushing for the U.S. Renewable Fuel Standard to be changed to require less ethanol to be mixed into fuel.

U.S. President Donald Trump held meetings Tuesday regarding potential changes but no decisions were made. This won’t end the debate, Feltes said.

“The refiners are making a very strong case that they’re getting stiffed with the cost of managing compliance in the ethanol mandate… I think you could make a strong policy statement that it is not and so I think Trump’s looking for a shared-burden type of outcome.”

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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Trump has called the talks between Big Corn and Big Oil amid rising concern in the White House over the U.S. Renewable Fuel Standard (RFS), a law requiring refiners to mix biofuels such as corn-based ethanol into their fuel.

The decade-old policy was intended to help farmers and reduce U.S. petroleum imports but has increasingly divided farmers and energy companies — two of Trump’s most important constituencies. A refining company in the key electoral state of Pennsylvania last month blamed the RFS for its bankruptcy.

The meeting on Tuesday included Republican Senators Ted Cruz of Texas and Pat Toomey of Pennsylvania — both from major oil-refining states — along with Charles Grassley and Joni Ernst of major corn grower state Iowa.

“No deal made,” said Grassley in a Twitter post after the meeting, adding the proposals discussed were “not ‘win-win'” and would “destroy ethanol demand.”

Cruz issued a statement saying the meeting was “positive and productive” and added that Trump had requested another session this week. “After that meeting, I believe we are likely to arrive upon a win-win solution,” Cruz said.

White House spokeswoman Sarah Sanders confirmed the Tuesday meeting on biofuels and said: “We’re going to continue having conversations.”

Under the RFS, refiners must cover the costs of blending increasing volumes of biofuels such as ethanol into the nation’s gasoline and diesel each year. To prove compliance with the program, they have to acquire credits called RINs, either by earning them through blending or by buying them.

As biofuels volume quotas have increased over the years, so have prices for the credits. That has been good news for companies that blend the fuels, but refiners that do not have blending facilities are facing rising costs.

Oil refiner Philadelphia Energy Solutions (PES), which employs more than 1,000 people in the Philadelphia area, filed for bankruptcy protection last month and blamed the regulation for its demise.

Reuters reported that other factors may also have played a role in the bankruptcy, including the withdrawal of more than $590 million in dividend-style payments from the company by its investor owners (all figures US$).

Sources told Reuters the PES would have a representative at the next White House meeting, likely on Thursday.

Ernst and Grassley have both said they disagree with critics who say RINs are harmful to refiners, underscoring the fact that the two sides cannot even agree on the facts, let alone the solutions. They point out other refiners, such as Valero Energy Corp and Marathon Petroleum Corp, are pulling in solid profits despite the biofuels regulation.

America’s biggest ethanol producers include Archer Daniels Midland and POET LLC.

Handful of options

At least four options aimed at reducing the cost of RINs were up for consideration, two sources familiar with the agenda of the White House meeting said.

One was to count U.S. ethanol exports toward annual biofuels volume mandates, something not currently permitted under the policy. Another was to place a hard cap on the price of a RIN, and a third was to limit RIN trades to blenders and refiners — essentially to remove market speculation, the sources said.

To sweeten the deal for the corn industry, any deal would have likely included a waiver to allow gasoline containing 15 per cent ethanol to be sold year-round. Sales of high-ethanol blends are currently restricted during the summer due to concerns over smog.

Discussions could also look at solutions focused more directly on refiner PES, like waiving its current RIN obligation valued at about $350 million, the sources said. But such a move would likely draw a backlash from other refiners who have no hope of receiving such a waiver.

While the White House meetings have focused on fixes that could be implemented with executive or regulatory action, there is a separate legislative effort to alter the RFS, led by Republican Senator John Cornyn of Texas. But it too faces stiff resistance from corn states.

— Jarrett Renshaw reports on the U.S. energy sector for Reuters from New York; writing by Richard Valdmanis.

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