UPDATE 1-EPA proposes big reduction in 2014 ethanol blend volume -document
NEW YORK, Oct 10 (Reuters) - The U.S. Environmental Protection Agency has proposed a deep cut in the amount of ethanol that must be blended into U.S. gasoline next year, according to an agency document seen by Reuters.
In a historic retreat from an ambitious 2007 law and a victory for refiners, the agency proposes a "significant" reduction in the overall renewable fuel requirements to 15.21 billion gallons, far less than the 18.15 billion gallon 2014 target established by law, the documents show.
That would reduce the volume of corn-based ethanol to about 800 million gallons less than this year's 13.8 billion gallons, a bigger reduction than many industry observers had been expecting. The law had required 14.4 billion gallons for 2014.
The figures match those reported earlier on Thursday by news agencies including Reuters, but the document also includes previously unreported details on the EPA's proposal. The agency laid out three different approaches, one calling for a larger volume of corn-based ethanol and one calling for less, but it advocated the 13 billion gallons in the middle.
A spokeswoman for the EPA was not immediately able to comment on the documents, and said that due to the government shutdown she may not be able to provide a rapid reply. Reuters has not been able to independently confirm the authenticity of the documents, or whether they were subsequently updated.
The EPA's proposal is laid out in the first 14 pages of an Aug. 26 draft notice of proposed rulemaking and a Sept. 6 presentation, dates that coincide with the timing of its submission to the White House Office of Management and Budget (OMB), which must approve the rule. It is not clear whether the documents are identical to those submitted to the OMB.
To get the volumes that low, the agency intends to tap into a waiver authority under the 2007 law that allows it to scale down required volumes under certain situations, such as a lack of available supply of the fuels or economic hardship. It intends to use the "inadequate supply" justification.
The OMB is not expected to make a decision until after the government shutdown.
Speculation and media reports about the potential reduction in the blending levels ripped through financial markets on Thursday, spurring a major rally in the shares of independent refiners, which have been paying hundreds of millions of dollars to buy ethanol credits to cover their blending obligations.
Shares of refiner PBF Energy surged by 12 percent, and those of Valero Energy gained nearly 5 percent, while corn futures in Chicago tumbled more than 1 percent on the prospect of reduced demand for corn-based ethanol. Ethanol credits, known as Renewable Identification Numbers, slipped to 40 cents.
The proposal, if ultimately approved, would mark a significant victory for U.S. oil companies, which have been lobbying regulators and Congress to cut biofuel blending mandates, which had been eating into their market share.
It would also mark a significant blow to the U.S. corn ethanol industry, which has been urging regulators to keep the ambitious blending targets required under the law.
Already, some ethanol groups are threatening to sue the EPA, which administers the fuel blending program, if it lowers its volume target.
"We will pursue every option," said Bob Dinneen, president of the Renewable Fuels Association, which represents the ethanol industry in Washington, D.C. Lowering the target to such volumes is illegal, he said.