The Biden administration has once again dealt a blow to Illinois-based Archer Daniels Midland Co. (ADM) and similar agricultural companies with the recent announcement of increased quotas of biomass-based diesel fuel. The quotas include how much renewable fuel must be blended into the U.S. gasoline and diesel supplies.
The EPA is now requiring the usage of 2.82 billion gallons of biomass-based diesel, a 2.2 percent increase from last year. For 2024 and 2025, the quotas have been set at 3.04 billon and 3.35 billion. Overall, the EPA is requiring a record amount of renewable fuel to be mixed into gasoline and diesel over the next three years, up to 22.33 billion gallons in 2025. Biomass is a renewable organic material that comes from plants and animals and is generally made from soybean and canola oil.
The EPA is also limiting the amount of conventional ethanol that could be used to fulfill quotas in 2024 and 2025 to 15 billion gallons in each year, a reduction from the 15.25 billion gallon target it had previously proposed. Initial reactions in the stock market were negative for biofuel producers that use crops to make products, including ADM.
ADM operates seven ethanol plants in Illinois, Iowa, Nebraska and Minnesota, with a total production capacity of 1.6 billion gallons. The ethanol is produced from corn feedstock through an optimized process that simultaneously produces large amounts of animal feed. Ethanol is a cleaner burning fuel that when added to gasoline can increase octane rating and reduce harmful emissions. Nearly 30 percent of Illinois corn crops are utilized for ethanol production, compared with 57 percent of Iowa corn crops.
The Biden administration had campaigned on promises to promote ethanol, but the push continues both nationally and in Illinois for electric vehicles. That could limit future markets for all liquid fuels, whether they are made from plants or petroleum. Federal quotas for plant-based fuel at the new low level ignores a surge in production and wave of investment in new manufacturing facilities.