EPA Needs to Reallocate Gallons from RFS Waivers

by Geoff Cooper (Renewable Fuels Association/Ethanol Producer Magazine) : Incoming RFA President and CEO Geoff Cooper addresses the small refiner exemptions issued by the U.S. EPA last year, and how they affect the ethanol market -- The U.S. EPA remains committed to meeting the statutory deadline for finalizing the 2019 Renewable Fuel Standard renewable volume obligations (RVOs) by Nov. 30. While that’s good news, we hope the final rule accounts for the significant damage the small refiner exemptions have caused to the ethanol industry and farmers across the country. Otherwise, the annual requirement for conventional renewable fuels like ethanol will be rendered meaningless and will stand in opposition of President Donald Trump’s support of a strong RFS.

In late June, EPA proposed a total renewable fuel volume of 19.88 billion gallons, of which 4.88 billion are advanced biofuel, including 381 million gallons of cellulosic biofuel. That leaves, on paper, a 15 billion-gallon requirement for conventional renewable fuels like corn ethanol.

But issuing small refiner exemptions after the RVO rule is finalized—which EPA did for the 2016 and 2017 RVO rules and what the agency could do for the 2018 rule—essentially reduces the actual required blending volumes to levels below those specified in the final rule. We explained that in comments to the agency on the 2019 RVO proposal. “Thus, we do not consider the volumes that appear in the proposed rule to be authentic, meaning the preamble’s analyses of the impacts of the 2019 proposed volumes are flawed and indefensible,” RFA wrote to EPA in comments on the proposal.

Specifically, EPA has acknowledged granting 49 retroactive exemptions from the RFS program to small refineries in 2016 and 2017 without adjusting the applicable percentage obligation to shift those volume obligations to nonexempt obligated parties.

Additionally, during an Aug. 1 hearing by the Senate Environment and Public Works Committee, EPA Acting Administrator Andrew Wheeler said he does believe the RFS should be implemented in a manner consistent with the original intent of Congress. Clearly, lowering the conventional ethanol RVO below the statutory level through illegal waivers is not consistent with Congressional intent.

What can be done? We are asking EPA to “ensure that the RVOs are administered in a manner that is consistent with the statutory purpose of the program” by accounting for the small refiner waivers prospectively, RFA noted in its comments to EPA. In fact, EPA acknowledged it has the authority and obligation to do so. “In a draft of the proposed rule that was submitted to the White House Office of Management and Budget for interagency review, EPA properly included projections of exempted volumes of gasoline and diesel from small refineries. The effect of including these exemptions in the RVO calculation is to increase the RVO percentage for remaining obligated parties, ensuring that the statutorily specified volumes of renewable fuel are in fact blended with gasoline and diesel. However, the administrative record shows that just days before the proposed rule was made public, EPA inexplicably deleted the provisions that would have effectively reallocated the projected small refiner exemptions,” RFA noted. READ MORE

Excerpt from DTN The Progressive Farmer: Unless the EPA changes the way it considers small refinery waiver requests to the Renewable Fuel Standard, the ethanol industry could continue to suffer major market losses in the years to come, according to the University of Missouri's Food and Agriculture Policy Research Institute's recently published update to its March 2018 U.S. baseline outlook for agricultural and biofuel markets. Economists at FAPRI, conclude the industry could lose about 4.6 billion gallons of domestic demand and almost $20 billion in lost sales revenue in the next six years, if the agency continues to grant waivers at its current rate.

The RFS allows certain small refineries -- those that produce 75,000 barrels or less per day -- to petition EPA for a temporary extension of an exemption.

To date, EPA has yet to make public details regarding how it determines who qualifies for small refinery exemptions. That includes the fact it has granted an exemption, names of exempted refineries, the volume of biofuels exempted, the years covered by the exemptions, as well as EPA's analysis of whether a small refinery would be subject to disproportionate economic harm by complying with the RFS.

Earlier this year, RFA, Growth Energy and other organizations filed a lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit. In addition, RFA, the National Corn Growers Association and others filed a lawsuit in the U.S. Court of Appeals for the 10th Circuit in Denver on specific exemptions granted by EPA. READ MORE