KANSAS CITY, Kansas - Archer Daniels Midland Co and ethanol supporters on Thursday challenged a U.S. government plan for biofuels use, saying it will not push past the "blend wall" because of a niche market for biofuels credits.
Hundreds gathered in Kansas City, Kansas , for a hearing to criticize the U.S. Environmental Protection Agency on a proposal for biofuels announced in late May.
The hearing comes just weeks after the EPA proposed cutting volumetric use targets below those laid out by Congress in 2007.
EPA said its proposal will push, rather than break, through the blend wall, which some say is impossible to get through without major infrastructure changes.
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It is a key pillar of Big Oil's criticism of the Renewable Fuel Standard program. Companies including Chevron Corp said on Thursday it is reason for reform or repeal.
But biofuels supporters said that blend wall may not even be breached with the proposal for next year's use, looking to the niche ethanol compliance credit market for proof.
Weak targets and a "significant carryover" mean the proposal will not push through that threshold, said Craig Willis , president of ADM's ethanol group, at the hearing. ADM produces some 1.7 billion gallons of the biofuel each year.
Refiners will buy the excess supplies, built up over the past year or so, rather than blending greater amounts of fuels.
Prices of ethanol Renewable Identification Number (RIN) credits have plunged this month as blenders and traders offloaded them after the EPA unveiled biofuel quotas that were considered easy to each.
The hearing offered the first public insight into the arguments that two of the most powerful U.S. sectors will use over the coming months to influence the nation's biofuels policy.
For corn farmers and ethanol producers that have plowed billions of dollars into biofuels and created new jobs, the quota is not high enough.
Oil companies can blend a gallon of ethanol into gasoline to generate a RIN or buy a credit from another company.
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The EPA has underestimated the amount of credits available by 400 million gallons, said Geoff Cooper of the Renewable Fuels Association, a biofuels group.
Refiners have complained about high costs of RINs compliance. Credit prices surged in 2013 when they worried they would not have enough to meet targets.
"Dipping into the RIN bank will encourage marketplace hoarding and add greater uncertainty to the market," said Brian Carron, a marketer for refiner HollyFrontier Corp.
