Governors' Biofuels Coalition

U.S. EPA could land in court over its decision to waive the federal biofuel mandate for one of the nation’s biggest refiners, an ethanol trade group said.

The American Coalition for Ethanol said EPA’s waiver for three refineries owned by Andeavor runs afoul of the renewable fuel standard, which allows such waivers for small refiners that show the fuel-blending mandate would cause financial hardship.

“Waiving RFS obligations based on ethanol use thresholds violates the intent of the RFS and invites litigation,” said Brian Jennings, the ethanol group’s CEO.

The coalition was among several pro-ethanol groups that criticized EPA’s move, first reported yesterday by Reuters.

Jennings suggested the waiver could open a new chapter in the legal fight over how EPA implements the RFS, which requires refiners to blend ethanol into fuel or buy renewable fuel credits to demonstrate compliance. Refiners complain that the program is too costly, especially when prices rise for the credits, known as renewable identification numbers, or RINs.

Jennings told E&E News today that while his organization doesn’t disagree with granting waivers to small refiners that can prove the requirement is a hardship, the leniency wasn’t intended for big refiners like Andeavor, which reported more than $1 billion in profits last year.

“On what planet does Andeavor’s 2017 net profit of $1.5 billion constitute ‘disproportionate economic hardship’ for a ‘small refiner’?” Jennings said in a statement. “Refiners are reporting billion-dollar profits today while farmers are facing their fifth year of prices at or below the cost of production.”

He added in an interview with E&E News today that ACE believes EPA is misapplying a part of the law that otherwise makes sense.

“If a refinery can prove that, fine,” Jennings said. “I think it’s being misapplied.”

Sen. Chuck Grassley (R-Iowa), the Senate’s leading advocate for ethanol, said in a statement that he plans to write to EPA Administrator Scott Pruitt, seeking more information.

“Giving big corporations like Andeavor a free pass when other companies are required to follow the law of the land isn’t just unfair, it may be illegal,” Grassley said. “The executive branch is required to follow the law as passed by Congress. There are legitimate questions being raised about whether EPA is following the law with these exemptions.”

In its report, Reuters said the waiver was granted about a month ago to three of Andeavor’s smallest refineries. EPA doesn’t disclose the waivers publicly, citing the possibility that private financial information of small refineries might be compromised.

Citing an agency source, Reuters today reported that EPA granted waivers to 25 refineries last year, far more than the six or seven in a typical year.

Growth Energy, a biofuel industry group, criticized the secrecy as well. “The public deserves to know exactly which companies are getting millions of dollars in handouts behind closed doors,” said Growth Energy CEO Emily Skor.

A petroleum industry source told E&E News, “The flood of small refiner waiver requests EPA has received — most from companies that are likely RIN short and truly threatened from sky-high RIN costs — is more proof that Congress and the administration need to act to address a broken RIN system.”

In addition, the source said, RIN prices have tumbled from nearly a dollar each to around 40 cents, even though ethanol consumption has climbed this year. That supports the refining industry’s position that controlling RIN prices won’t necessarily hurt ethanol demand, he said.

Changes to the renewable fuel credit market could include price controls, for instance, which merchant refiners and their advocates in Congress have sought. Some lawmakers are also seeking changes to the overall RFS, including limits on how much ethanol must be blended into gasoline (E&E Daily, March 9).

The American Coalition for Ethanol and other pro-ethanol groups successfully sued EPA during the Obama administration for waiving biofuel volume requirements for 2014-2016, saying the agency had overstepped its authority. In that case, the U.S. Court of Appeals for the District of Columbia Circuit said Congress intended the RFS to generate increasing volumes of renewable fuel (Greenwire, July 28, 2017).

EPA’s decision on Andeavor is the latest setback for biofuel advocates who had hoped the Trump administration’s publicly stated support of the RFS would result in a more favorable stance. The agency recently agreed to ease RFS requirements for Philadelphia Energy Solutions, a refinery in Pennsylvania that has cited RIN costs for its bankruptcy. In that case, PES said RINs had become one of the refinery’s biggest expenses, outpacing labor.

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