Ethanol Watches EPA Warily on RFS

Source: By Chris Clayton, DTN Ag Policy Editor, and Todd Neeley, DTN Staff Reporter • Posted: Friday, January 15, 2021

EPA Gives Refiners Extra Time to Meet RFS Requirements as New Exemptions Possible

The ethanol industry is watching to see what EPA Administrator Andrew Wheeler does regarding the Renewable Fuel Standard before Wheeler leaves the agency next week. (DTN file photo)
The ethanol industry is watching to see what EPA Administrator Andrew Wheeler does regarding the Renewable Fuel Standard before Wheeler leaves the agency next week. (DTN file photo)

OMAHA (DTN) — Members of Congress and the biofuels industry are scrambling over EPA Administrator Andrew Wheeler potentially reversing course and approving more renewable fuel exemptions for small petroleum refiners in the last days of the Trump administration.

EPA is considering 32 requests by petroleum refiners to exempt them from 2019 Renewable Fuel Standard blend obligations. Industry sources have told DTN a decision on new exemptions by EPA Administrator Andrew Wheeler is “imminent.” Wheeler now has less than a week in office to take any such action to help the refiners at the expense of the biofuels industry.

A statement in a new EPA proposed rule sent a signal Thursday that EPA may not act on any new small-refinery exemptions (SREs). EPA stated, “Due to the ongoing litigation, we take no position on the availability of SREs for the 2019 compliance year.”

Geoff Cooper, president and CEO of the Renewable Fuels Association, pointed to that line as a “good sign” and said he’s hopeful it means EPA will not attempt to unlawfully grant midnight-hour SREs in the last five days of the Trump administration.

Earlier in the week, RFA had threatened legal action against EPA if Wheeler approved any further small-refinery exemptions (SREs). EPA’s new proposal, though, would grant refiners more flexibility and an extension to comply with the RFS for 2019 and 2020. Under the proposal, refineries producing less than 75,000 barrels of oil per day would have until Nov. 30, 2021, to meet 2019 RFS blend requirements, and until Jan. 31, 2022, to meet the 2020 RFS obligations. EPA cited the economic struggles of refineries due to COVID-19 as the reason for the extensions.

In its proposed rule — which will be published in Friday’s Federal Register — EPA pointed to the benefits to refiners from delaying their blend requirements for 2019 and 2020. But the extension proposal does not mention any impacts those delays could have on ethanol producers or demand for feedstocks such as corn or soybeans.

These moves come as ethanol production is down about 14% from the same week a year ago and corn used for ethanol is down 11% over the same period.

Biofuel backers in Congress are reacting to the possible EPA refinery exemptions by writing letters to Wheeler and President Donald Trump asking them not to pull the trigger on new SREs.

Sen. Chuck Grassley, R-Iowa, said Thursday that any SREs approved by EPA now “would be a devastating blow to the biofuels industry and to agriculture.”

Grassley added he was surprised by rumors that EPA could approve new refinery exemptions based on some calls he and fellow Iowa Sen. Joni Ernst had with Wheeler shortly after the November elections. “Wheeler told Sen. Ernst and me that he would take no action granting additional waivers until the Tenth Circuit case on small refineries was decided in the courts,” Grassley said.

That was before the U.S. Supreme Court announced it would hear the small-refinery exemption cases out of the Tenth Circuit Court of Appeals, in which the appeals court had ruled last year that EPA illegally granted waivers to three companies in 2016. Refiners that were subjects of that case will argue their case before the Supreme Court in the spring.

Grassley and other Republican senators wrote Wheeler on Thursday, asking him not to approve any new waivers. A group of Democratic senators wrote a similar letter to Wheeler on Monday. Once any new refinery exemptions are approved, Grassley said, there’s nothing the incoming Biden team could do to stop Wheeler’s actions.

Members of the House Biofuels Caucus on Tuesday wrote a letter to Trump asking him to follow the Tenth Circuit ruling and not allow a new set of exemptions before he leaves office next week.

“We are alarmed by reports that the Environmental Protection Agency may issue numerous pending 2019 small-refinery exemptions despite ongoing legal action and commitments from top EPA officials that this would not occur,” the caucus said in the letter. “Granting any of these waiver requests will further devastate America’s rural communities as they continue to struggle amidst a difficult economy.”

Twenty-three members of the House who signed the letter said the exemptions are “contrary to legislative intent.”

“This news arrives at the worst time possible as the biofuels industry continues to reel from the economic impacts caused by the COVID-19 pandemic,” the letter said.

Also on Tuesday, American Coalition for Ethanol CEO Brian Jennings reached out to EPA Inspector General Sean W. O’Donnell, asking the agency to monitor EPA’s decision on the 2019 waivers.

“Unfortunately, we understand that Administrator Wheeler and other political appointees at EPA are considering granting a significant number of these waivers on their way out the door to the private sector,” Jennings said in a letter. “We are unaware of any substantive change in circumstance surrounding whether to grant or deny these waivers. In fact, the Supreme Court’s decision to hear the refiner appeal gives more clarity about when the legal challenges will be complete.

Chris Clayton can be reached at: Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

Todd Neeley can be reached at: Todd.Neeley@dtn.com

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