EPA reverses course on refinery exemptions

Source: By Marc Heller, E&E News reporter • Posted: Tuesday, October 15, 2019

EPA said today it will start giving small petroleum refineries partial exemptions from biofuel blending requirements next year, reversing the agency’s approach of approving or denying them in full.

The new approach, spelled out today in a proposed rule, will help maintain minimum volumes of biofuel to be blended into the nation’s fuel supply while allowing some refineries to bypass blending requirements in cases of economic hardship, the agency said.

“The proposed adjustments would help ensure that the industry blends the final volumes of renewable fuel into the nation’s fuel supply and that, in practice, the required volumes are not effectively reduced by future hardship exemptions for small refineries,” EPA said in a news release.

Today’s proposal follows an announcement earlier this month that the Trump administration had settled on a new way to preserve biofuel mandates while minimizing negative effects on refineries that say meeting the renewable fuel standard (RFS) hurts them financially.

The proposal doesn’t change the biofuel volumes proposed for next year and 2021, which haven’t been finalized, EPA said. Rather, today’s proposal would affect how annual renewable fuel percentages are calculated — a formula that helps determine the number of gallons a refinery must blend into fuel to meet RFS requirements.

That’s in addition to the partial exemptions and would add a new wrinkle to an already complicated policy. If a refinery doesn’t blend fuel, the alternative is to buy renewable fuel credits.

Reaction

Biofuel and petroleum groups both criticized the proposal, for different reasons.

Ethanol groups said it seems to take a step back from the approach the administration hinted at earlier this month and could result in greater exemptions overall.

“Today’s supplemental proposal is a step backward,” said Geoff Cooper, president and CEO of the Renewable Fuels Association.

Cooper added, “It falls short of delivering on President Trump’s pledge to restore integrity to the renewable fuel standard and leaves farmers, ethanol producers and consumers with more questions than answers. It is baffling to us that the proposal sets the three-year average of exempted volume using the very same DOE recommendations that EPA blatantly ignored over and over.”

The Iowa Renewable Fuels Association said the proposal backs away from the core of what ethanol supporters thought was coming in a new policy.

“Instead of standing by President Trump’s transparent and accountable deal, EPA is proposing to use heretofore secret DOE recommendations that EPA doesn’t have to follow. That means there is no guarantee that RFS exemptions will be accounted for in the RFS,” the Iowa group said.

Ad campaign

Critics of biofuel mandates said EPA looks to overstep its authority and said the idea of partial exemptions “is based on a false premise that fair treatment of smaller refineries hurts ethanol demand.”

As the proposal emerged today, a petroleum industry group said it’s launching an ad campaign against increased biofuel mandates, including a spot during tonight’s broadcast of a Democratic presidential debate.

The American Fuel & Petrochemical Manufacturers said the ads will cost in the six figures and include messages from unionized refinery workers in Ohio and Michigan opposed to biofuel increases. They’ll be broadcast in the Washington, D.C., area, including during tonight’s presidential debate on CNN.

The ads come as the Trump administration pursues policies to maintain conventional ethanol volumes at a minimum of 15 billion gallons a year and to encourage greater sales of higher-ethanol fuel called E15.

Officials announced those goals earlier this month, saying a formal proposal with more details would soon be published in the Federal Register.

In a statement today, AFPM President and CEO Chet Thompson said increasing biofuel volumes would break with the administration’s “America First” mantra.

“Expanding an already unworkable mandate would jeopardize high-paying, quality refining jobs, increase imports and threaten higher fuel costs for consumers,” Thompson said.

“President Trump would be well-served to recognize that increasing biofuel volumes to appease ethanol interests undermines the very communities at the center of his ‘America First’ and ‘Energy Dominance’ agendas.”

Credit system changes

The administration also proposes changes to the system of renewable fuel credits, which companies buy and sell as part of the RFS, to make the market more transparent.

Small refineries would still be able to petition EPA for exemptions from the biofuel blending requirements, as spelled out in the RFS law, although officials are looking for ways to ensure that the volumes exempted are made up from other sources.

Small refinery exemptions, made in cases of economic hardship, have emerged as one of the more sensitive aspects of the RFS and a point of contention with biofuel industry groups. EPA recently awarded 31 such exemptions.

The agency also declined some petitions, including a request from Sinclair Wyoming Refining Co. That company filed a lawsuit in the 10th U.S. Circuit Court of Appeals, complaining that EPA didn’t explain the reasoning behind the denial.

The agency said it made the decision after the Department of Energy recommended turning down the petition, but officials at EPA didn’t elaborate on the refinery’s specific situation, the company said.

Sinclair Wyoming has received exemptions in the past, along with detailed information about EPA’s decision, the company’s vice president for government relations, Adam Suess, said in a declaration filed in the case Oct. 4. EPA asked the court to dismiss the case; Sinclair Wyoming has appealed.

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