EPA’s free pass for refiners could land it in court

Source: By John Siciliano, Washington Examiner • Posted: Friday, April 6, 2018

The corn ethanol camp is gearing up for a new legal fight with the Environmental Protection Agency at a time when President Trump was supposedly negotiating a “win-win” deal between ethanol producers and oil refiners.

The emerging fight stems from a decision that was made under the “cover of darkness,” with no oversight, according to Bob Dinneen, the ethanol industry’s top lobbyist in Washington, who assailed news that the EPA exempted Andeavor, the fifth-largest refinery company in the country, from having to comply with the Renewable Fuel Standard.

On top of that, a bankruptcy court in Delaware approved a settlement between the EPA and the big East Coast refinery Philadelphia Energy Solutions, exempting it from all outstanding obligations to blend ethanol under the RFS. The company filed for bankruptcy protection in January, blaming the hundreds of millions of dollars in ethanol credits it had to spend to comply with the RFS for its economic woes.

The ethanol industry blasted the court for not considering its concerns, saying the decision sets a harmful precedent inflicting harm on demand for corn-based fuels. But that appears to be only the beginning of EPA’s strategy of setting refiners free from the RFS.

The EPA exempted three of Andeavor’s smallest refinery facilities, which one refining industry lobbyist called a tenth of the company’s production and not worth the outrage of ethanol groups that are calling on EPA Administrator Scott Pruitt to explain himself.

The total production is “so small after all” and not worth the “hair on fire” response by ethanol groups. The industry source promised that the Andeavor move was just the beginning of EPA exemption process. Even larger integrated oil companies, such as Exxon Mobil, are expected to seek RFS waivers for their smaller refineries, the lobbyist said.

But the ethanol industry doesn’t see these refiners as fitting the bill for being granted exemptions. Even if they have small refiners as part of their fleet, overall they just don’t fit the definition of a small refinery under the law.

“Any claims the RFS is negatively impacting the oil industry are absurd, much less the fifth-largest refiner in the country which posted a profit of nearly $1.5 billion last year,” Dinneen said.

“Suffice it to say we are exploring all our options to return the RFS to what the statute intended and what the president has supported,” Dinneen said in a statement issued by the organization he heads, the Renewable Fuels Association.

“All options” typically includes considering lawsuits and court action, which the ethanol industry isn’t shy in doing when it thinks the EPA is falling short of its legal obligations under the RFS.

The program mandates the blending of corn ethanol, primarily, along with other biofuels into the nation’s gasoline and diesel supplies.

Even a more glaring hint at legal action came from the rest of Dinneen’s statement detailing the shortcomings in EPA’s legal interpretation of its authority to give refiners, especially very large ones, exemptions under the program’s “hardship waiver” clause for small refineries.

The waiver is meant for refiners that produce less than 75,000 barrels per day of fuel and “may only be granted if EPA determines, based on supporting evidence in the petition, that compliance with Renewable Fuel Standard obligations will impose disproportionate economic hardship on the refinery in the year for which the exemption is requested,” Dinneen pointed out, citing EPA’s own interpretation of the law.

Another top ethanol lobbyist, Emily Skor, the president and CEO of the group Growth Energy, raised those problems and more in a strongly worded letter sent to Pruitt Wednesday.

Both she and Dinneen fear that the Andeavor decision was just the tip of the iceberg, with more refiners seeking exemptions than are publicly known.

“To date, EPA has still not disclosed which refiners received exemptions from 2016 or 2017,” Dinneen said. “No one really knows how far these exemptions go, or how many total companies have received these waivers.”

Skor was more to the point in her letter, asking Pruitt to cease and desist from issuing, or even considering, any new waiver applications until it opens the process to public scrutiny and comment. That would help “to help assure all stakeholders that the new expansion of small refinery waivers are consistent with the goals of the RFS,” Skor wrote.

Skor also wants Pruitt to hand over information on the number of refineries that have applied for this waiver since the RFS’ rules were finalized eight years ago. She also wants the EPA’s plan on how it will make up for the lost ethanol gallons blended in gasoline because of the exemptions.

And she wants assurances from Pruitt the the timing of the exemptions “is not intended to shroud the process in secrecy and prevent stakeholders from commenting about lost gallons through the annual RFS rulemaking process.”