Refineries prospects on ethanol waivers dwindle

Source: By James Osborne, Houston Chronicle • Posted: Thursday, September 24, 2020

WASHINGTON – U.S. refineries have relied on waivers from the Trump administration to avoid a federal law requiring they blend billions of gallons of ethanol into their gasoline each year.

But their ability to continue using the so-called small refinery exemption — awarded to smaller refineries that can prove financial harm from the mandate— is now falling into question.

Last week, the Environmental Protection Agency announced it would not award exemptions on more than 50 waiver applications. With roughly 50 applications pending, refineries have all but written off their hopes of getting further relief from the mandate.

“Reading (EPA’s) press release and what they’ve done so far it doesn’t look promising,” said Derrick Morgan, senior vice president at the trade group American Fuel and Petrochemical Manufacturers. “I’m sure companies will try to purse their objectives in court, but I’m not expecting to see those waivers granted anytime soon.”

Earlier this year the 10th Circuit Court of Appeals in Denver ruled that exemptions could only be granted to refineries that had been awarded them continuously since 2010, ruling out all but two refineries from consideration.

Refineries have since applied to the EPA for waivers from earlier years in the decade to establish a record, but EPA’s decision last week virtually halted that gambit, drawing cheers from farmers in Iowa whose corn crops supply ethanol production.

Now ethanol lobbyists are calling on the EPA to reject the rest of the waiver applications, maintaining the practice has cut into ethanol demand, hurting farmers.

“Last week’s action falls considerably short of undoing the damage EPA has done to our industry by essentially allowing refiners to cheat on the (ethanol blending mandates),” said Brian Jennings, CEO of the American Coalition for Ethanol. “It was a step in the right direction.”

The administration’s decision comes with the election just weeks away and the Midwest vital to the re-election prospects of President Donald Trump. Last week, Sen. Joni Ernst, R-Iowa, who is in a tight re-election race herself, praised Trump as helping to “provide more certainty to our biofuel producers, who have for too long been yanked around by the EPA.”

In siding with farmers on waivers, Trump risks alienating oil and gas workers in states like Pennsylvania and Ohio. Fuel demand has dropped during the coronavirus pandemic, and refineries have watched profits plunge, raising the specter of layoffs.

But Trump, who has pledged to expand the U.S. oil and gas industry, appears willing to take that risk against a Democratic opponent in Joe Biden who is calling for a shift away from fossil fuels to combat climate change.

“The presidents made promises to protect blue collar manufacturing jobs, and that’s what refiners are,” Morgan said. “It’s been one disappointment after another.”