The Folly and Cynicism of Gap-Year Waivers

Source: By Geoff Cooper, RFA • Posted: Monday, August 17, 2020

The RFA urges the ethanol industry to keep fighting to protect the Renewable Fuels Standard and ‘holding EPA’s feet to the fire,’ using whatever means necessary to ensure the agency follows the law and stops treating the RFS like a ‘moving target.’

When in mid-June the U.S. Environmental Protection Agency revealed it was considering 52 new small refinery exemption requests from oil refiners, going as far back as the 2011 compliance year, many of us reacted with anger, but not necessarily with surprise. And few of us would be shocked if the EPA actually tried to grant some of these new petitions, as our faith in the agency’s ability to properly implement the Renewable Fuel Standard is highly diminished.

But we cannot give up. We have to keep fighting to protect the RFS and holding EPA’s feet to the fire, using whatever means necessary to ensure the agency follows the law.

Two days after Administrator Andrew Wheeler hinted publicly that EPA was receiving these gap-year waiver requests, we sent a letter calling on him to “clarify that small refinery exemption extension petitions for past compliance years are inconsistent with the RFS and will not be entertained by the agency,” and to “expeditiously deny any petitions that have already been received, or that are received going forward, for past compliance years.”

The same day Wheeler spilled the beans, U.S. Department of Energy Under Secretary Mark Menezes testified in the Senate about these prior-year exemption petitions. He called the petitions “gap filings” intended to establish, without regard to merit, a continuous string of exemptions “to be consistent with the Tenth Circuit decision,” which came about when RFA, the National Corn Growers Association, National Farmers Union and the American Coalition for Ethanol challenged waivers EPA granted that were not extensions of prior ones, as required by law.

In its decision, the Tenth Circuit actually anticipated that refiners might try to skirt the ruling with gap-year filings and noted the absurdity of such an approach. The court explained the irrationality of allowing refiners to send in retroactive waiver requests: “by that logic, the EPA could grant a 2019 petition seeking a small refinery exemption for calendar year 2009—more than a decade after the fact.” And this is exactly what refineries are doing—pretending there could have been a hardship years ago that could justify the granting of an exemption today.

RFA is also aware of refineries resubmitting previously rejected petitions for prior compliance years. The Tenth Circuit likewise addressed this possibility, noting that it would not support a misreading of the statute under which “EPA would also be empowered to grant a re-submitted extension petition for an earlier year even though the agency had previously denied that very petition.”

Historically, EPA has recognized the importance of processing exemption petitions before the annual compliance deadline to ensure that parties have adequate time either to comply with the program or, if they receive an exemption, to sell their RINs to other parties. Even in arguments defending its authority to receive and consider exemption petitions “at any time,” EPA has only contemplated that petitions will be received within the compliance year for which an exemption is sought, or shortly thereafter.

More generally, granting petitions for past compliance years flatly contradicts EPA’s position that, once annual volume standards have been set and compliance has occurred, modifying those standards “would inappropriately render the standards a moving target.”

And that is precisely what the Renewable Fuel Standard has become under this current administration: a moving target. As the Tenth Circuit court put it in its decision, “EPA data show that the approach followed by the agency from 2016-forward has opened up a gaping and ever-widening hole in the statute.” Eighty-five petitions have been granted by this EPA for the compliance years 2016-2018, and only eight have been rejected. For 2019 there are 27 pending, and one for 2020. Now, we have 52 more pending for earlier years as refiners try to rig the system.

If EPA were to finally adhere to its 90-day deadline for reviewing exemption petitions, we would expect to learn more about the outcome of these petitions in September. As a decision against renewable fuels would have an impact on many rural voters’ decisions a few months later, we can only expect EPA to ignore the deadline and kick the can down the road a little further. Either way, EPA and the administration need to be held accountable.

Author: Geoff Cooper
President and CEO