Ethanol industry wants to revive case on RFS exemptions

Source: By Marc Heller, E&E News reporter • Posted: Thursday, August 1, 2019

The ethanol industry wants to rekindle a legal fight to force EPA to change how it lets petroleum refineries avoid their renewable fuel standard requirements.

The Renewable Fuels Association and other groups asked the U.S. Court of Appeals for the District of Columbia Circuit to resume proceedings on a challenge they had filed last year, and which the court had agreed to put aside while EPA responded to the industry’s demands.

At issue is whether EPA should reallocate to other refineries the volumes of biofuel it lets certain refineries avoid blending into fuel for reasons such as economic hardship. The RFA and other groups say EPA should reallocate the waived volumes in order to keep the overall biofuel program on track, but the agency is still weighing the question.

In asking the court to lift a stay on the case, the groups said that EPA hasn’t adequately responded to the complaint and that the agency seems to be denying their request in practice by not addressing the question in its latest proposal for biofuel volumes in 2020.

“Thirteen months have passed since the filing of the petition, without even a proposed substantive response from EPA,” the groups said in their court filing yesterday. “Meanwhile, the Agency has shown through various actions that it is not genuinely considering the Coalition’s administrative petition and has in effect denied it.”

EPA has granted the exemptions retroactively after setting annual required volumes as part of the RFS. Small refinery exemptions granted in cases of economic hardship have climbed in number during the Trump administration, enough to forgo nearly 2 billion gallons of ethanol in 2017, according to the ethanol industry. That represents about 9.5% of the required volume for the year.

Petroleum refiners oppose reallocating exempted volumes, and they say the exemptions are legally required when a small refinery can illustrate that meeting the biofuel blending requirement — or buying renewable fuel credits as an alternative — would be economically harmful.

The industry’s complaints come as EPA holds its annual hearing today in Michigan on proposed biofuel volumes for the next year.

In granting exemptions, EPA has followed the law and adhered to recent court cases that determined the agency had been too restrictive in considering them during the Obama administration, Frank Maisano, senior principal at Bracewell LLP, an energy-focused firm representing the Fueling American Jobs Coalition, said in testimony for the hearing.

The percentage of ethanol blended into gasoline has climbed during the period of the increased refinery exemptions, Maisano said.

EPA’s proposed volumes for next year are a point of contention, with ethanol groups saying they’ll be undermined if the agency grants more exemptions and petroleum groups saying they’re too ambitious. The agency proposed an uptick in total renewable fuel, from 19.92 billion gallons this year to 20.04 billion gallons next year.

“A requirement as aggressive as the 2020 proposal can only lead in one direction: skyrocketing RFS compliance costs that threaten jobs at U.S. refineries and potentially hike consumer energy prices,” Maisano said.

Ethanol groups said that the proposed volumes, called renewable volume obligations, appear to meet RFS requirements but that the reality may fall short.

“The proposed 2020 RVO marks the second compliance year EPA is professing to follow statutory volumes on paper but, in reality, is allowing refiners to escape their lawful responsibility to blend renewable fuel with the petroleum products they make,” Katie Fletcher, communications director for the American Coalition for Ethanol, said in testimony for the hearing.