Wyoming refineries stung by decision; Barrasso rebukes administration after EPA denies relief

Source: By Camille Erickson Casper Star-Tribune • Posted: Sunday, September 20, 2020

CASPER — The Trump administration delivered another blow to Wyoming’s oil refineries when the U.S. Environmental Protection Agency denied relief to several small operators struggling to meet biofuel standards this month.

Oil refineries across the country must blend a certain amount of plant-derived fuel into their gasoline product under a program called the Renewable Fuel Standard. When drivers go to refill their gas tanks in the U.S., chances are a bit of corn ethanol or soybean biodiesel is mixed in with the gasoline.

But some refineries, including ones in Wyoming, have said the biofuel requirements are economically prohibitive and apply for annual exemptions from the standards. The EPA has historically extended what it calls “hardship relief” to these smaller operators struggling to meet the fuel standards. But recent decisions by the EPA and a federal court have placed that relief on the line.

The loss of access to such relief could have severe economic consequences on the facilities transforming crude into fuel in Wyoming, industry representatives said.

Sen. John Barrasso, usually a staunch supporter of the president’s agenda, delivered a rare rebuke of the Trump administration’s decision to deny hardship relief this week and leave the federal court decision unchallenged.

“The administration promised to protect small refineries. Today’s announcement by EPA breaks that promise,” Barrasso said. “It is one of many poor decisions which have already contributed to the loss of one small refinery in my home state of Wyoming.”

HollyFrontier, a petroleum refinery based in Cheyenne, announced in June it would lay off 200 workers and transition to processing renewable fuels. The facility had functioned as a petroleum refinery for 86 years.

“If the administration doesn’t find an alternative means to provide relief quickly, our nation is likely to lose additional refineries,” Barrasso added. “That would be a disaster for American workers and the refineries that fuel our economy.”

In January, a panel of judges in the 10th U.S. Circuit Court of Appeals determined the federal government was overextending relief to refineries. The ruling effectively made exemptions from renewable energy standards for many small refineries inaccessible going forward.

The judge concluded the EPA — charged with managing the renewable energy standards program — had overextended its authority. Refineries that failed to apply for relief continuously each year, or were denied relief along the way, should not be entitled to relief moving forward, the judge ruled.

Despite pressure from Wyoming lawmakers and oil refineries, the EPA determined it would not request a rehearing of the federal trial.

Oil refineries HollyFrontier and CVR Energy filed a petition urging the Supreme Court to review the Tenth Circuit’s decision.

Based on the court ruling and its own analysis, the EPA subsequently denied many ‘gap-filling’ petitions for the years 2011 to 2018 submitted by 17 small refineries asking for hardship exemptions.

According to EPA Administrator Andrew Wheeler, the decision “follows President Trump’s promise to promote domestic biofuel production, support our nation’s farmers, and in turn strengthen our energy independence.”

But Wyoming’s oil refineries disagreed.

“Small refinery hardship relief — just as Congress had planned — provides some reprieve to small refineries from the overwhelming and costly burdens of the (Renewable Fuel Standard) program,” Adam Suess, vice president of government and external relations for the Sinclair Companies, said in support of the refineries’ court filing. “Congress provided the potential for this relief because it predicted — quite rightly, we now see — that the RFS program would disproportionately affect small refineries.”

Sinclair Wyoming Refining Company’s 2018 petition for relief was denied and the company sued the EPA. The litigation is ongoing.

In 2005, Congress created the Renewable Fuel Standard. The program sought to lower greenhouse gas emissions by requiring companies refining or importing crude oil to incorporate certain types of biofuel, such as corn ethanol, into transportation fuel supply.

These days, most American drivers purchase gasoline blended with some amount of biofuel when they fill up their tanks.

The EPA sets a renewable volume obligation for refineries to meet each year. To comply, oil refineries can blend biofuel into their gasoline and diesel fuel.

But often that’s not enough.

In addition to blending gasoline with biofuels, they also turn to the open market to purchase credits, known as “renewable identification numbers,” to meet these standards.

When establishing the mandate, some lawmakers anticipated smaller operations would likely be hit harder than larger ones by the requirements. Small refineries were therefore able to apply for exemptions from the program.

Parties must demonstrate that meeting the biofuel standards would cause disproportionate economic hardship. According to the statute, a small refinery is a company processing an average of fewer than 75,000 barrels per day. Compared to larger refining companies, smaller operations can face resource and capital constraints, according to refinery representatives.

Critics of the exemptions say the relief delivers a blow to ethanol producers’ and farmers’ bottom line. Biofuel standards have helped prop up demand for corn.

Others, like the American Petroleum Institute, recommended the government not appeal the 10th Circuit ruling, saying the relief caused “regulatory uncertainty” for some refineries.

After the court decision, the cost of some renewable identification numbers, or credits, increased substantially. The steep price for compliance could cripple smaller refineries, many opposing the ruling argue.

“We hope the President and EPA Administrator (Andrew) Wheeler feel a sense of responsibility when (Renewable Fuel Standard) compliance costs become even more untenable for refineries of all sizes,” the American Fuel and Petrochemical Manufacturers President and CEO Chet Thompson said in a statement. “The legacy of this Administration’s handling of (the program) will be fewer union refining jobs, facility closures, reduced U.S. refining capacity, and increased imports of foreign biodiesel.”

To Suess, of Sinclair Companies, the Trump administration’s recent support of biofuels will likely shutter more of the nation’s smaller refineries and hurt consumers.

“(The Renewable Fuel Standard) will cost many people very good jobs, will lead to domestic energy insecurity and ultimately harm all American voters,” Suess said. “We’re moving towards a larger entitlement for the biofuels industry at the cost of the American consumer.”