A Plan to Reallocate Waived Biofuels

July 16, 2018

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(Red River Farm Network) The ethanol industry will continue to pursue a fix for the damages brought on from EPA’s issuing of small refinery waivers. Ahead of a public hearing Wednesday, Renewable Fuels Association Executive Vice-President Geoff Cooper says there is a plan to reallocate lost volumes in the November RVO numbers. “We’ve got to stop immediately these small refinery exemptions. Not only that, we want the EPA to take some steps to repair some of that damage and help our industry out. There are several ways they can do that. One of which would be to establish RVP parity for E15 and higher ethanol blends.” Cooper says the RFA met with EPA’s Acting Administrator Andrew Wheeler in his previous role. Cooper thinks Wheeler will be more open minded than former EPA Administrator Scott Pruitt. READ MORE

Ethanol Industry Still Fighting for Lost Volumes Due to Waivers (Hoosier Ag Today)

EPA provides data on 2016, 2017 RFS waivers in letter to Grassley (Ethanol Producer Magazine)

EPA Waivers Make Deep Cuts in RFS (Energy.AgWired.com)

Daily on Energy: World’s oil production stretched to make up for supply disruptions (Washington Examiner)

EPA Reportedly Ditches Hardship Waiver Fix (Southeast AgNet Radio Network)

EPA 2019 RFS Proposed Rulemaking: What You See Is Not What You Get (FarmDocDaily)

EPA Docs Show Oil's Influence on RFS: Documents, Schedule Suggest Pruitt Changed Biofuel Reallocation Plan After Meeting With Sens. Cruz, Toomey (DTN The Progressive Farmer)

ABFA asks Congress to halt RFS small refinery exemptions (Biomass Magazine/Advanced Biofuels Association)

Ethanol Blog: Republican Senators Urge Wheeler to not Reallocate Biofuels Gallons Lost to Waivers (DTN The Progressive Farmer)

Biodiesel advocates say RFS growth is futile if waivers continue (Biodiesel Magazine)

Excerpt from DTN The Progressive Farmer: The EPA was set to reallocate gallons lost in the Renewable Fuel Standard to small-refinery waivers, but that proposal was pulled within days after a series of meetings and phone calls that then EPA Administrator Scott Pruitt had with lawmakers from oil states and RFS stakeholders.

As part of the rulemaking process on the latest proposed RFS volumes, which are slated for a public hearing on July 18, the agency on Wednesday posted a number of documents to regulations.gov showing the interagency process that took place prior to the proposal's release. That interagency review includes USDA, EPA and the Office of Management and Budget.

In addition, after Pruitt resigned earlier this week, the EPA posted an updated Pruitt calendar (https://www.epa.gov/…) that includes his schedule in the days ahead of the release of the proposed volumes on June 26.

EPA estimates it waived about 2.25 billion gallons of biofuels for 2016 and 2017. The ethanol and agriculture industries have pressed the agency to reallocate those lost gallons to other refiners. In the weeks leading up to the release of the RFS volumes proposal, Pruitt told two different groups of agriculture and ethanol organizations two different stories when asked about the agency's ability to reallocate RFS gallons.

During a visit to East Kansas Agri-Energy's ethanol plant in Garnett, Kansas, on June 12, Pruitt said the agency could reallocate gallons. The next day in South Dakota, Pruitt told an ag group, "Counsel worries reallocating lost RINs (renewable identification numbers) retroactively isn't legal."

REALLOCATION PROPOSED

According to a June 19 interagency review document, the EPA proposed raising the total overall percentage of renewable fuels in the gasoline pool from 10.88% to 11.76% -- just days after Pruitt's visits to Midwest states that also included a stop in Nebraska. That bump in renewable fuel percentages was expected to make up at least some gallons lost to waivers. The proposed bump in percentages came one day after a morning meeting Pruitt had with U.S. Secretary of Agriculture Sonny Perdue in Washington, D.C.

In a June 20 interagency review document, EPA personnel appeared to indicate it was legal to reallocate gallons to larger refiners.

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Geoff Cooper, executive vice president of the Renewable Fuels Association, said the document seems to contradict Pruitt's concerns about the legality of reallocation.

"EPA was saying that it believes the law compels them to account for small-refiner exemptions prospectively," Cooper said. "In other words, EPA was saying the best way to observe the spirit and intent of the law is to account for expected exemptions and reallocate those volumes to larger refiners."

PRUITT CALLS

Also on June 20, Pruitt's calendar shows he had phone calls with RFS opponents Sen. Ted Cruz, R-Texas, and Sen. Pat Toomey, R-Pa. Both have called for RFS reform, claiming the RIN system was hurting small refiners. Cruz advocated for a cap on RIN prices.

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Then, according to a June 22 draft of the RFS proposal, documents posted to regulations.gov show the percentage of renewable fuels dropped back to 10.88% from 11.76% -- within two days of the calls with Cruz and Toomey and RFS stakeholders.

Interagency review documents also show that a recommendation to restore a 500-million-gallon RFS shortfall in the latest volume proposal was not adopted by the agency. In a 2016 ruling in favor of biofuels interests, the U.S. Circuit Court of Appeals for the District of Columbia Circuit had ordered EPA to restore that shortfall.

On Thursday, the EPA indicated in a letter to Grassley that it intends to continue in the same direction with the small-refinery waiver program.

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Read the EPA documents here: https://www.regulations.gov/document?D=EPA-HQ-OAR-2018-0167-0103 READ MORE

Excerpt from Biomass Magazine/Advanced Biofuels Association: Within the letter, (Advanced Biofuels Association Executive Director Michael) McAdams notes that the EPA is scheduled to hold a hearing July 18 on its proposed rule to set 2019 renewable volume obligations (RVOs) under the RFS, along with the 2020 RVO for biomass-based diesel. “EPA has asked the public to refrain from commenting, however, on any issues concerning EPA’s issuance of small refinery waivers,” he wrote. “We write to urge you to ensure EPA begin implementing a more transparent, rules-based process for issuing these waivers. Until this new process commences, the agency should refrain from issuing any additional small refinery waivers.”

McAdams notes that under the previous EPA administrator, the waivers were issued in a manner that undermined Congress’s objectives when it crafted the RFS and undercut many businesses’ investment-backed expectations. “We are optimistic that under new leadership EPA will implement the RFS in a more equitable, transparent manner that better aligns with its statutory directive,” McAdams continued. “To do so effectively, however, it must be willing to hear and respond to the public’s comments on the small refinery waivers because these waivers have a significant impact on the reality of the standards EPA is proposing.”

The letter notes that the EPA has granted nearly 50 retroactive RFS waivers for 2016 and 2017. “These waivers lowered demand for renewable biofuels, thereby diminishing the value of investments that the advanced biofuels industry made in response to Congressional policy,” McAdams wrote. “The waivers undermine the integrity, stability, and fairness of the program by rewarding companies looking to dodge their obligations and punishing companies that have planned responsibility to comply with the law. Moreover, these exemptions discourage investments in this market and in new technology. Finally, these exemptions do not address the flaws in the RFS; only comprehensive legislative reform will address the challenges in the program.”

In the letter, McAdams indicates that the EPA has withheld information regarding the recipients of the waivers and its reasoning for granting the waivers. Due to the lack of transparency in the waiver process, the ABFA has filed a lawsuit against the EPA and a Freed of Information Act request. The letter notes that more than 10 FOIA requests have already been filed on the topic, but none have received any response. “At a minimum, information about EPA’s decision-making process for granting exemptions on the grounds of disproportionate economic hardship should be made public,” McAdams wrote.

McAdams asks Congress to direct the EPA not to grant any additional exemptions until the pending lawsuits filed by the ABFA and Renewable Fuels Association are decided. “Since the agency has failed to respond to Congressional inquiries on the matter, the federal court must be able to exercise oversight and render judgement on whether EPA’s process for determining disproportionate economic hardship is lawful,” McAdams said.

“We are optimistic that under new leadership, the agency will act more responsibly,” he continued. “Should EPA continue to grant these small refinery exemptions without any accountability to Congress or stakeholders, however, the comments collected on the proposed 2019 RVO are meaningless. Without knowing to what extent these exemptions are undercutting the annual mandate, impacted parties are left in limbo while renewable fuels markets plummet.” READ MORE

Excerpt from DTN The Progressive Farmer: A group of 21 Republican United States senators have asked EPA Acting Administrator Andrew Wheeler to not reallocate biofuels gallons to larger refiners, lost from small refinery Renewable Fuel Standard waivers, in a letter to the agency on Thursday.

The senators signing on include James Inhofe, R-Okla.; Orrin Hatch, R-Utah; Mike Enzi, R-Wyo.; R-Ga.; John Barrasso, R-Wyo.; Roger Wicker, R-Miss.; James Risch, R-Idaho; Joe Manchin, R-W.V.; John Boozman, R-Ark.; Pat Toomey, R-Pa.; Mike Lee, R-Utah; Jeff Flake, R-Ariz.; Ted Cruz, R-Texas; Shelley Moore Capito, R-W.V.; Bill Cassidy, R-La.; James Lankford, R-Okla.; Tom Cotton, R-Ark.; Steve Daines, R-Mont.; David Perdue, R-Ga.; John Kennedy, R-La.; and Cindy Hyde-Smith, R-Miss.

In the EPA's latest renewable volume obligation proposal the agency said in 2016 and 2017, it approved 49 of 53 small refinery waiver requests, totaling more than 2 billion gallons of biofuels waived from the RFS. Former EPA Administrator Scott Pruitt pulled out of a proposal at the last minute that would have reallocated those gallons to larger refiners, after pressure from refining interests in the days before the latest RVO proposal was made public.

Earlier this week Wheeler indicated in a press interview that the agency may allow year-round E15 sales, but only as part of a deal that would include RFS changes favorable to refiner interests. READ MORE