Biofuels Proponents Urge EPA to Change Supplementary Proposal

Source: By Jordan Godwin, OPIS • Posted: Thursday, October 31, 2019

YPSILANTI, MICH. — Biofuels industry proponents on Wednesday urged the U.S. Environmental Protection Agency (EPA) to consider changing its proposed supplemental rulemaking for how it will factor in small-refinery exemptions (SREs) in setting annual Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS).

About 60 biofuels advocates, mostly representing fuel and feedstock producers, testified before EPA here, saying the proposal would cause further harm to their industries.

In its supplemental rulemaking proposal released on Oct. 15, EPA said it would project the volume of gasoline and diesel that would be lost to RFS compliance through SREs based on a three-year rolling average of the relief recommended by the U.S. Department of Energy (DOE), including petitions where DOE had recommended the agency provide partial exemptions.

American Coalition for Ethanol (ACE) CEO Brian Jennings said the prospective calculation methodology “betrays” what was represented to the industry in negotiations with the Trump Administration, calling it a “classic bait-and-switch.”

“Refiners should no longer be allowed to drive the RFS into the ditch,” Jennings said. “It’s time for EPA to finally take back the keys to the program.”

Renewable Fuels Association (RFA) President and CEO Geoff Cooper cited a six-fold increase in the reduction of blending requirements in the three-year period from 2016 to 2018 when compared to the three-year period from 2013 to 2015. Cooper added that proving economic hardship under the SREs should be more difficult for small refiners considering the depression of Renewable Identification Number (RIN) credits values.

“Unfortunately, the proposed supplemental rule bases its estimates of gasoline and diesel that will be exempted in 2020 on the historical recommendations for exempted volumes it received from the Department of Energy rather than the actual exemptions it has granted,” Cooper said. “The problem with this proposal is that EPA has typically ignored DOE recommendations in deciding SRE petitions.”

Growth Energy CEO Emily Skor urged EPA to use the rolling average of actual exempted volumes from the three most recently completed compliance years in the final rule, as she said was promised by the administration.

“As drafted, EPA’s plan fails to accurately account for lost gallons and betrays President Trump’s promise to rural America,” Skor said. “It cuts the fix we were promised in half, if not more, and destroys what may be our last chance to bring back the ethanol plants that have shut down and help ease the burden facing American farmers.”

National Biodiesel Board (NBB) Director of Regulatory Affairs Kate Shenk echoed Skor’s calls to change the way it considers the exemptions in the final rule, adding that the agency should limit the number of SREs it issues.

National Corn Growers Association (NCGA) Ethanol Action Team member Brian Thalmann said Midwest farmers have been disproportionately harmed by EPA’s recent actions around the RFS.

“We’re in the thick of harvest and, quite frankly, I would rather be in the field. But the issue we’re discussing today is too important to corn farmers like me not to be here,” Thalmann said. “I have a simple message — when it comes the Renewable Fuel Standard, we need EPA to follow the law. As farmers, we follow rules put in place by state and federal agencies, including the EPA. We are simply asking EPA to do the same for us.”

Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw emphasized what a tremendous loss the 2019 compliance year could be for the ethanol industry. Iowa Secretary of Agriculture Mike Naig also testified, painting a bleak picture of the economic harm done to farmers in his state.

“Ethanol plants have been shut down and hundreds of families have been impacted by those closures,” Naig said. “They’ve been forced to make hard, life-changing decisions because of EPA’s failure to uphold President Trump’s promises.”

About a dozen petroleum industry advocates also testified against the proposals on Wednesday morning.

“The misguided policy to exempt small refinery exemptions punishes the companies already complying with the standard,” American Petroleum Institute (API) senior policy advisor Patrick Kelly said. “Reallocating these exemptions distorts the competitive marketplace.”

Tim Hogan, Director of Motor Fuels for the American Fuel & Petrochemical Manufacturers (AFPM), said his group opposes reallocation of SRE volumes and said the SREs are a symptom of a larger problem that the RFS mandates are unrealistic.

“Biofuels groups have established a false narrative that biofuel volumes have been lost or unrealized — this is verifiably false,” Hogan said. “Government data shows year-over-year increases in ethanol blend rates.”

Fueling American Jobs Coalition representative Alex Gazmararian said EPA’s proposal of forecasting future SREs is “arbitrary and capricious,” calling the proposal “unlawful.”

“The supplemental proposal is deeply flawed because it’s based on the false premise that SREs destroy ethanol demand,” Gazmararian said. “Independent analysis and empirical data alike prove these exemptions have no impact on ethanol production, while keeping RFS compliance costs in check.”