(New throughout, adds details from meeting)
By Stephanie Kelly and Jarrett Renshaw
NEW YORK, Sept 11 (Reuters) - White House officials on Wednesday urged U.S. biofuel producers to accept the administration's offer to raise biofuel blending mandates next year by 5% even if it falls short of their demands, and said a deal must be reached by Friday, three sources familiar with the matter said.
The message was delivered by members of the White House's National Economic Council in a closed-door meeting with officials from major biofuel producing companies like Louis Dreyfus and Archer Daniels Midland, according to the sources, who asked not to be named.
Another meeting between White House officials and members of the refining industry was set for later Wednesday afternoon, three other sources told Reuters, part the Trump administration's long-running effort to thread the needle between two crucial political constituencies that have clashed over biofuel policy.
Last week, the administration told biofuel producers it would be willing to lift the amount of biofuels that oil refiners must blend into the fuel pool under the U.S. Renewable Fuel Standard by 1 billion gallons in 2020 above current proposed levels, to help the industry weather a downturn.
President Donald Trump in August infuriated the Midwest corn belt by greenlighting the U.S. Environmental Protection Agency to exempt 31 oil refineries from the requirement to blend biofuels, a far higher number of waivers than the Obama administration had granted.
The agriculture industry has said the expanded use of such waivers is undermining a 15 billion gallon market for corn-based ethanol at a time farmers are already losing export sales from the U.S. trade war with China.
While biofuel producers want an increase in blending mandates next year, they also want assurance that such an increase is not a once-off measure. They have asked that the administration force large oil refineries to make up for any exempted gallons through a process called "reallocation," which would ensure the increases to biofuel blending mandates recur annually in proportion to the number of waivers granted by the EPA.
"We remain hopeful that President Trump will move swiftly to protect farmers and biofuel workers, but efforts to reverse the damage will be meaningless unless the agency acts now to stop the bleeding and accurately account for lost gallons from this point forward, beginning in the 2020 biofuel targets," the National Corn Growers Association, the American Soybean Association, Growth Energy, the Renewable Fuels Association, the National Biodiesel Board, and Fuels America said in a joint statement.
It was unclear if the Friday deadline was hard, or just a negotiating tactic. The White House told biofuel representatives at the meeting that to increase the mandates, the administration would have to reopen a proposed rule published in June that already set the 2020 proposed mandates at just over 20 billion gallons, including 15 billion gallons of ethanol. They said reopening it must be done by Friday to stay on track for the rule to be finalized by the end of November.
White House officials were expected to meet later on Wednesday with representatives from oil refiners including Phillips 66 and Marathon Petroleum Corp to discuss the biofuel plan, sources said.
It was unclear what the White House intends to tell the industry, which has resisted efforts to expand ethanol blending mandates.
Trump promised last month in a Tweet that he would deliver farmers a "giant package" related to ethanol, and said he had also saved oil refineries from going bust.
Under the RFS, small oil refineries of 75,000 barrels per day of capacity or less can apply for waivers from the EPA if compliance would cause them disproportionate financial hardship.
The Trump EPA has handed such waivers to refineries owned by profitable companies like Exxon Mobil, Chevron Corp , as well as billionaire Carl Icahn, according to Reuters reporting. (Reporting by Stephanie Kelly and Jarrett Renshaw; Editing by Susan Fenton, Chizu Nomiyama and David Gregorio)
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