*

Proposed rule could increase RIN and fuel prices, study

finds

*

US net short on yellow grease, tallow, and canola oil

*

ADM, Bunge, Cargill may see negative effects from global

operations

By Stephanie Kelly and Jarrett Renshaw

NEW YORK, Aug 1 (Reuters) - The Trump administration's

push to discourage the use of foreign feedstocks in domestic

biodiesel could lead to higher energy prices for U.S. consumers

and restricted domestic production, according to some refining

and biofuel trade groups.

The warning reflects ongoing friction between President

Donald Trump's Environmental Protection Agency and the

administration's traditional allies in the energy and

agriculture industries over biofuels policy.

Trump has promised to slash consumer energy costs, but is

also trying to advance his America First agenda to support

domestic production through trade protectionism - which can

often make costs go up instead.

At issue is a proposal from the EPA in June that would for

the first time allocate only half as many tradable renewable

fuel credits to biodiesel that is either imported or made with

foreign feedstocks.

Under the Renewable Fuel Standard, refiners must blend large

volumes of biofuels into the U.S. fuel supply or purchase the

credits, called RINs, from those that do.

While meant to help domestic farmers and producers, the new

proposal - set to be finalized this autumn - would place

unprecedented demand on domestic raw materials needed to make

biodiesel like soybean oil, used cooking oil, and animal fat, in

a market that currently must look abroad to meet its needs.

Meanwhile, restricting the number of RINs that can be

generated through such imports will raise credit prices, with a

potential spillover impact on diesel and home heating oil,

according to the industry groups.

"This credit restriction ... will jeopardize the economic

viability of renewable fuel production assets and raise overall

compliance costs for all obligated parties, which ultimately

harms U.S. consumers," Chet Thompson, head of the American Fuel

and Petrochemical Manufacturers group representing refiners,

said in a July 25 letter to top Republican lawmakers.

The Advanced Biofuels Association also said the policy could

mean ramped up consumer costs, by putting a $250 per metric ton

premium on domestic versus imported feedstocks, according to a

study it commissioned.

"Economic analysis shows this would impose significant costs

on U.S. biorefineries, raise fuel prices for millions of

Americans, and benefit only a narrow set of stakeholders," ABFA

President Michael McAdams said in a statement.

The White House and EPA declined to comment directly on the

price concerns, saying the administration is still seeking

public comment on the proposal until August 8.

Others in the biofuel industry backed the proposal.

"American farmers need all the demand they can get. We

should be developing our capacity here, rather than relying on

imported used cooking oil from China, or giving Brazilian

feedstocks preferential treatment at the expense of U.S.

producers and their farm partners," said Emily Skor, CEO of

Growth Energy.

However, U.S. companies such as ADM, Bunge

and Cargill that have global assets and process U.S. soy, as

well as foreign companies with significant U.S. operations, will

likely see negative effects. That includes Australia's Nufarm ( NUFMF )

, which contracts with farmers in South America to grow

new oilseed crops.

UNCERTAIN NUMBERS

The biofuel industry had not been seeking the import shift

in EPA's June proposal, according to multiple renewable fuel

lobbyists and company officials.

The White House has since held several meetings with

industry officials to hear about potential unintended

consequences of the changes, according to multiple sources.

The EPA's proposal in June was meant to set out biofuel

blending mandates for the next two years.

It included a quota of 7.12 billion biomass-based diesel

RINs for 2026 - a measurement of the number of tradable credits

generated by blending the fuel - and projected that mandate

would lead to the blending of 5.61 billion gallons.

The biofuels industry and the American Petroleum Institute,

an oil trade group, had banded together to lobby the

administration to set biomass-based diesel mandates to at least

5.25 billion gallons. The mandate was just 3.35 billion gallons

in 2025.

Still, there are scenarios in the EPA's accounting that

could lead to a lower volume outcome.

If all the biodiesel and renewable diesel used in the U.S.

next year came from domestic feedstocks, for example, the RIN

mandate would yield just 4.45 billion gallons, according to

several industry analyses reviewed by Reuters.

Ditching the penalty on imported feedstocks could help raise

that number, according to the analyses.

"That probably aligns with what the administration was

trying to do in terms of supporting the agricultural side and

farmers," said one industry analyst, who asked to remain

anonymous to speak candidly.