By Jarrett Renshaw
NEW YORK (Reuters) - The heads of the U.S. Environmental Protection Agency and Agriculture Department are scheduled to meet on Tuesday to winnow down proposals to lower the cost of the nation's biofuels policy to oil refiners, according to two sources familiar with the matter.
The meeting in Washington marks the latest development in the Trump administration's efforts to find common ground between the rival oil and corn industries over the future of the Renewable Fuel Standard, a law requiring refiners to blend biofuels like ethanol into the nation's gasoline and diesel.
The program has created a vast new market for Midwest corn farmers, but refiners have complained the regulation costs them hundreds of millions of dollars a year - creating a rift between two of Trump's key electoral constituencies.
EPA chief Scott Pruitt and Agriculture Secretary Sonny Perdue will draft a list of options for President Donald Trump to choose from during their meeting on Tuesday, according to the sources, who asked not to be named discussing the confidential matter. It is unclear whether the list will include a broad range of options mooted by both sides during recent negotiations hosted by the White House, or whether it will provide narrower recommendations, the sources said.
Officials for the EPA and Agriculture Department did not respond to requests for comment.
The RFS requires refiners to blend increasing amounts of biofuels into their fuel each year, or buy credits, known as RINs, from those that do. As biofuels volumes have increased, the price of RINs has too. Merchant refiners such as Valero and bankrupt Philadelphia Energy Solutions say the costs have become too burdensome.
Trump told lawmakers and industry officials in a closed-door meeting earlier this month that he supported a temporary cap on the price of RINs at 10 cents each, according to a source who attended but asked not to be named.
But a group of corn-state lawmakers told Trump in a letter last week that a cap would have "severe and immediate" consequences to farmers and the biofuels industry, by reducing incentives for blending.
Trump also said he supported expanding sales of high-ethanol gasoline year-round – a tweak long sought by ethanol producers, according to the source.
Credit costs have fallen roughly 40 percent in the past three weeks amid the political uncertainty, trading at 40 cents each on Monday, traders said.
(Reporting by Jarrett Renshaw; Editing by Richard Valdmanis and Peter Cooney)