EPA Fixes targets with Oil Groups

Oil refiners who have complained that federal regulators missed deadlines to issue rules on blending renewable fuels into the nation's supply of gasoline and diesel fuel are set to get long-awaited targets from the U.S. Environmental Protection Agency.

Under a deal the EPA announced on Friday with two oil industry groups who had sued it over persistent past delays, the EPA said it will propose draft biofuel use targets for 2015 by June 1.

The agency also said it plans to re-propose biofuel targets for 2014 using the actual volumes of renewable fuels that were consumed last year and to issue targets for 2016. Neither of these moves was part of the legal settlement.

Bush administration-era legislation aimed at reducing U.S. reliance on foreign oil requires refiners such as Valero Energy Corp, Tesoro Corp and PBF Energy Inc to blend renewable substances such as ethanol, made primarily from corn, into gasoline and diesel. It requires increasing levels of biofuels to be used annually through 2022.

Refiners and biofuel producers have complained that repeated EPA delays in setting renewable fuel use requirements each year have led to uncertainty and volatility in biofuel markets.

The EPA blamed its tardiness on the program's complexity. Christopher Grundler, director of the agency's air quality office, said that by completing targets for 2014 through 2016 this year, the agency could get the program back on track.

"Missing a deadline is not an option," Grundler said on a call with reporters.

The agreement was reached in response to a lawsuit filed in March by the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers, both industry groups. It will commit the environmental regulator to finalizing biofuel use targets for 2014 - which were proposed but not adopted - and 2015 by November 30 of this year.

Oil groups and biofuel supporters welcomed the deal.

"No one has benefited from the delays in setting annual renewable volume obligations," said Bob Dinneen, head of the Renewable Fuels Association, a biofuel trade group.

The EPA is supposed to issue final targets by the end of November each year before the targets take effect, but it has not finalized 2014 blending requirements or proposed draft 2015 targets.

(Reporting by Ayesha Rascoe and Valerie Volcovici; Editing by Kevin Drawbaugh and Christian Plumb)