Refiners get a pass on ethanol use requirements

Source: Marc Heller, E&E News reporter • Posted: Friday, March 15, 2019

EPA granted five more waivers from ethanol-blending requirements to small petroleum refineries today, sparking criticism from the industry.

The agency said it approved five economic hardship waivers retroactively to the 2017 compliance year, freeing refineries from federal renewable fuel standard requirements. EPA doesn’t disclose the identity of the refiners that receive exemptions, which have sometimes been large companies such as Exxon Mobil Corp. and Chevron Corp., according to news reports based on companies’ public filings and other sources.

Ethanol industry groups criticized the move, and petroleum industry sources defended EPA’s action.

Exemptions for economic hardship are necessary to maintain a robust refining industry and can protect against the price spikes to consumers that can happen when refineries close, said Scott Segal, a partner and energy industry analyst with Bracewell LLP’s Policy Resolution Group.

In addition, he said, EPA’s methods for granting the exemptions are set in law, based on refiners making the case for a disproportionate economic hardship.

The American Coalition for Ethanol said that farmers who benefit from sales of corn for ethanol are “long-suffering from lost market opportunities and low prices,” and that some farmer-owned ethanol plants are considering suspending operations, largely because of decreased demand for ethanol that the industry blames on exemptions granted by EPA the past two years.

The coalition’s chief executive officer, Brian Jennings, criticized EPA for granting the exemptions without mandating that other refiners pick up the lost fuel-blending obligations. The move, he said, would undermine demand just as another move meant to boost ethanol — year-round sales of fuel with 15 percent ethanol — is in the works at EPA.

“Any benefit of selling E15 year-round will be wiped out until and unless EPA gets back to the rule of law when it comes to these refinery waivers under the renewable fuel standard. That’s why ACE has joined with others to petition EPA to reallocate waived gallons and to litigate certain [small refinery exemptions] in court,” Jennings said.

Ethanol groups blame small refinery exemptions for lower ethanol consumption in 2018, despite ethanol prices being lower than gasoline. But the petroleum industry has pushed back, citing research at the University of Illinois questioning that assertion. University economist Scott Irwin has written that there’s little evidence the exemptions have affected the percentage of ethanol in the nation’s fuel supply.

EPA’s granting of exemptions attracted attention in Congress as well.

But Sen. Chuck Grassley (R-Iowa) told E&E News today that he would want to see the specifics of the exemptions before commenting on them.

“There’s probably some legitimate waivers, so my question would be are they within the law or not within the law,” said Grassley, who added that he believed former EPA Administrator Scott Pruitt went beyond his authority in granting many exemptions.

Asked whether he had confidence in EPA Administrator Andrew Wheeler’s handling of the RFS, Grassley said, “A heck of a lot more than in Pruitt.”