US EPA denies petition to waive advanced biofuels requirements

NEW YORK (Reuters) -- US environmental regulators have denied a request from oil refiners to waive some of their advanced biofuels use requirements from 2016, in what is likely to be one of the Obama administration's final decisions on the controversial program.

The denial, published on Environmental Protection Agency's website on Wednesday, comes just days before President-elect Donald Trump takes office and as his nominee for EPA chief was being questioned in a Senate hearing.

The Renewable Fuel Standard (RFS) program was signed into law in 2005 and designed to boost a renewable fuel industry annually. It requires oil companies to use increasing volumes of biofuels including cellulosic ethanol, which is produced of plant waste material.

AFPM and others from the oil industry have spent years lobbying EPA to lower the biofuels requirements, saying they are unachievable.

The EPA in a Jan. 17 letter to the American Fuel and Petrochemical Manufacturers (AFPM) said it was denying the group's request to waive some of the volumes that previously the agency said would be required for use in 2016, citing short supplies.

Oil groups have previously taken EPA to court over these waivers. In December 2016, AFPM asked the EPA to waive the requirements that were in excess of real production of the advanced fuel last year.

The agency established a waiver credit system to help oil companies meet annual targets set by Congress for required use of cellulosic ethanol, a biofuel made of plant waste. Development of this advanced fuel industry has been slower than lawmakers expected when they established annual targets in 2007.

AFPM said total cellulosic production was below the total requirements targeted for 2016 last year, and monthly data from EPA through November suggests that to be the case.

However, EPA said in its statement that the supplies are adequate based on last year's production and carryover stocks of compliance credits from previous years.

EPA added the companies also can buy waiver credits as an alternative. The agency set the requirements for use of cellulosic biofuel at 230 million gallons for 2016.

AFPM slammed the EPA's decision, saying the Obama administration rushed to finalize it.

"Paying a tax for fuels that do not exist doesn't incentivize future cellulosic production and only further increases the costs of this broken program," President Chet Thompson said in an emailed statement.

Reporting by Chris Prentice; editing by Jonathan Oatis

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