Grassley asks DOE to explain refinery mandate exemptions

Source: Marc Heller, E&E News reporter • Posted: Monday, April 15, 2019

Sen. Chuck Grassley this week asked the Department of Energy for more information about small refineries exempted from biofuel mandates.

In a letter Wednesday to Energy Secretary Rick Perry, the Iowa Republican asked for details about how the department recommends exemptions to EPA, the agency that decides on refineries’ petitions to be temporarily spared the mandates under the federal renewable fuel standard.

EPA has sharply increased the number of exemptions granted since President Trump took office, including 48 exemptions in 2016 and 2017. Administrator Andrew Wheeler has said his agency takes the recommendation of DOE in granting waivers, which are based on economic hardship.

“I would like to understand what has changed in DOE’s approach to evaluating such requests that would explain the sudden surge in the number of exemption extensions granted to small refineries over the last two years,” Grassley said.

Litigation on the issue has shown that DOE, in many cases, didn’t find that the cost of compliance with biofuel mandates would threaten a refinery’s profitability. Grassley asked Perry whether he is aware of any exemptions EPA granted against the recommendation of DOE.

During the Obama administration, EPA lost a related lawsuit filed by companies that argued the administration had been too stingy in granting exemptions, which are set out in the RFS law.

Refineries that don’t blend ethanol into fuel are required to buy renewable fuel credits to show compliance. Prices for the credits surged in recent years but have tumbled since EPA starting granting the exemptions.

Ethanol industry groups say the exemptions have undercut demand enough to reduce ethanol consumption, including a decline in 2018 for the first time in years. But the effect is hotly debated.

The U.S. Energy Information Administration recently cut its forecast for biomass-based diesel production this year, citing low prices for renewable fuel credits.

In December, agricultural economics expert Scott Irwin at the University of Illinois, Urbana-Champaign, said data he reviewed didn’t suggest the exemptions have seriously undercut demand for ethanol. Small refinery exemptions don’t affect demand for ethanol in E10 fuel, which is the standard sold in most gas stations, and the amount of ethanol devoted to higher blends such as E10 and E15 is statistically small, he said.

The exemptions may have reduced the effective ethanol mandate from 15 billion gallons to 13.9 billion gallons, but any reduction in ethanol demand has been “very, very small,” Irwin said, perhaps no more than 70 million gallons annually.