Advanced BioFuels USA

by Helena Tavares Kennedy (Biofuels Digest)  EPA might have a new name in some circles – Exemptions for Petroleum Agency – thanks to the 31 small refinery waivers issued on Friday which has the biofuels and agriculture industries reeling after promises made by President Trump to look into why big oil companies were getting these exemptions intended for small biorefineries and how exactly decisions were being made on the waivers. An icy blow straight to the heart of American farmers and the biofuels industry…making many feel like Anna – angry, hurt, shocked, yet trying to survive and not ready to give up.

First, a look at the numbers:

40 exemption requests received

31 exemptions issued

6 denied

3 withdrawn or ineligible

13,420 Estimated Volumes of Gasoline and Diesel Exempted (million gallons)

1,430 Estimated Volumes of Gasoline and Diesel Exempted (million gallons)

Those are the EPA numbers. But let’s take a look behind those numbers.

First, is it really a surprise given that a week ago Reuters reported that EPA Administrator Andrew Wheeler said that the waivers weren’t impacting ethanol demand in a negative way? That was a hint at what was coming this week…the shocking approval of 31 waivers.

Responses to the EPA announcement include more numbers…that the EPA is threatening to destroy an additional billion gallons of critical biofuel demand – on top of the 2.6 billion gallons already destroyed over the last two years, that the EPA has granted 53 RFS waivers since early 2018, including to big oil companies. So how bad is it?

The reactions

It’s negative nelly. For anyone in the impacted industries, it’s nothing but bad news.

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 If nothing else, it is pushing people to fight even harder for biofuels and American farmers. From lawsuits and petitions, organizations are coming together to try and balance things out more fairly. 

So who is to blame? What can be done?

Here’s a recap of some of the reactions so far with their own answers to those questions:

The Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw placed the blame directly on President Trump saying he broke his RFS promise to Iowa voters, even referring to fecal matter:

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Other than a resolution of the China trade situation, the only hope for a near-term boost for biofuels producers would be for EPA to follow the law and account for the estimated number of refinery exemptions when finalizing the pending 2020 RFS blending level rule. This would allow the EPA to reallocate the exempted gallons and end the demand destruction.

Brian Jennings, CEO of the American Coalition for Ethanol (ACE) said:

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“The Agency’s actions on the 2018 waiver requests reinforces our decision to join with others to challenge EPA’s handling of certain Small Refinery Exemptions in Court and petition for EPA to account for lost volumes of renewable fuel resulting from the unprecedented number of retroactive waivers granted by the Agency that we recently asked the court to move forward on due to no response from EPA.”

National Biodiesel Board (NBB)’s Kurt Kovarik, Vice President of Federal Affairs, said that the impact from the exemptions “likely will put biodiesel producers out of business” 

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“A small refinery processing 75,000 barrels of oil per day can produce nearly 1 billion gallons of gasoline and diesel per year. The refinery’s annual RFS obligation would create demand for nearly 20 million gallons of biodiesel or renewable diesel, which are the most widely available advanced biofuels. Dozens of biodiesel producers across the United States produce less than 20 million gallons each year.”

Kovarik continued, “Biodiesel producers are already shutting down facilities and laying off workers, due to loss of demand. The ongoing demand destruction will undercut the industry’s investments and choke off markets for surplus agricultural oils, adding to the economic hardship that farmers are facing. … ”

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Emily Skor, CEO of Growth Energy said in a statement strongly titled, “Trump EPA Shatters Rural Hopes with 31 New Refinery Exemptions:”

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President Trump must move quickly if there is any hope of repairing the damage. If he won’t hold the EPA accountable, then he’s failing to uphold the commitment he’s made to rural America.”

Geoff Cooper, President and CEO of the Renewable Fuels Association (RFA) said:

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“There is absolutely no evidence whatsoever that small refineries are suffering ‘disproportionate economic harm’ due to the RFS, meaning the entire EPA decision-making process is a sham. Making matters worse, the process remains cloaked in secrecy and bias, and there is mounting evidence that the administration is continuing to grant full exemptions against the recommendations of the Department of Energy—and even against the advice of some EPA officials.”

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Lynn Chrisp, President of the National Corn Growers Association (NCGA) said:

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You can step up for farmers today by reining in RFS waivers. Farmers expect the RFS to be kept whole by accounting for waived gallons and bringing more transparency to EPA’s secret process.”

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Well, now that waiver question has been answered and the industry is feeling a little less like Olaf and a little more like Anna after getting a shocking bolt of ice into the hearts of American farmers and biofuel producers. But like Anna, ag and biofuels industries are not giving up and are fighting even harder than ever for survival.  READ MORE

 EPA Announces Biofuel and Small Refinery Exemption Priorities (Environmental Protection Agency)

RFS Small Refinery Exemptions (Environmental Protection Agency)

EPA awards 31 small refinery waivers (Agri-Pulse)

Trump’s EPA grants 31 small refinery waivers from biofuel laws, angering corn lobby (Reuters)

ETHANOL, FARM GROUPS SWIFTLY CONDEMN MORE EPA WAIVERS (Brownfield Ag News; includes AUDIO)

EPA Grants Exemptions: Agency Grants Small-Refinery Exemptions, Points to Work on E85, Atrazine (DTN Progressive Farmer)

Farm and Biofuel Groups Dismayed by EPA Refinery Waivers (AgWired.com)

EPA grants 31 RFS small refinery exemptions (Feedstuffs)

EPA Announces 31 Small Refinery Exemptions, Ethanol Groups Outraged (AgWeb Farm Journal)

In Controversial Move, EPA Grants 31 Small Refiner Exemptions for 2018 Compliance Year (Pro Farmer)

RIN values drop 40% as US EPA announces 2018 Small Refinery Exemptions (S&P Global Platts)

EPA grants 31 Renewable Fuel Standard waivers: Update (Argus Media)

EPA Exempts 31 Oil Refineries From Biofuel Blending Quota (Bloomberg Environment)

EPA grants 31 refinery waivers on ethanol, angering farmers (Houston Chronicle)

EPA Issues Raft Of Refinery Waivers, Angering King Corn (Hot Air)

More Refiner Bailouts: A Broken Promise that Will Haunt Rural America (Renewable Fuels Association)

JOINT NCGA-ASA OP-ED URGES PRESIDENT TO SUPPORT RENEWABLE FUEL STANDARD (National Corn Grower Association)

Farm, ethanol leaders react bitterly to latest small refinery waivers (Fence Post)

EPA DENIES SIX APPLICATIONS FROM REFINERIES SEEKING EXEMPTIONS FROM RFS MANDATES: (Washington Examiner)

DISAPPOINTMENT–AND OUTRAGE–OVER EPA’S RFS WAIVERS (Brownfield Ag News)

EPA WAIVERS ANGER ETHANOL INDUSTRY & LAWMAKERS (News Dakota)

EPA’s Granting Of 31 Hardship Waivers Leaves Sen. Grassley Skeptical (Iowa Public Radio)

CountryMark explains stand on RFS small refiner exemption (Indiana Prairie Farmer)

NEBRASKA ETHANOL BOARD COMMENTS ON REFINERY BIOFUEL WAIVERS (KNEB/Nebraska Ethanol Board)

Toledo Spotlights RFS Threat to Refineries (American Fuel & Petrochemical Manufacturers)

RFA CEO Surprised by New Waivers (Energy.AgWired.com)

Trump Administration Weighs Further Boost to Ethanol–Policy changes could include fewer exemptions to mandates, helping farmers stung by China tariffs (Wall Street Journal)

Excerpt from Environmental Protection Agency:  EPA will announce its final decisions related to 31 small refinery exemptions and 6 application denials this afternoon on its web page, Public Data for the Renewable Fuel Standard – Small Refinery Exemptions (https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions). Under EPA’s Renewable Fuel Standard (RFS) program, a small refinery may be granted a temporary exemption from its annual Renewable Volume Obligations (RVOs) if it can demonstrate that compliance with the RVOs would cause the refinery to suffer disproportionate economic hardship. EPA evaluates submissions to determine whether an exemption may be granted, based on information presented by the petitioning refinery and on the statutory and regulatory requirements for exemption.

EPA is proud to announce its intention to further explore opportunities to remove regulatory burdens that prevent marketplace entrance and growth to natural gas, flexible fuel vehicles, and E85 fuels. EPA welcomes the opportunity to engage with stakeholders to explore deregulatory options in the coming months to ensure that it plays its part in supporting American farmers and consumers. READ MORE

From Environmental Protection Agency Small Refinery Exemptions:  Section 211(o)(9)(A)(i) of the Clean Air Act (CAA) and 40 CFR 80.1441(a)(1) exempted small refineries from the Renewable Fuel Standard (RFS) program through compliance year 2010. CAA section 211(o)(9)(A)(ii) authorized EPA to extend the exemption for two years. For 2011 and 2012, 24 small refineries were granted an exemption under this provision. Beginning with the 2013 compliance year, small refineries may petition EPA annually for an exemption from their RFS obligations. EPA may grant the extension if it determines that the small refinery has demonstrated disproportionate economic hardship per CAA section 211(o)(9)(B) and 40 CFR 80.1441(e)(2). EPA’s decision to grant an exemption has the effect of exempting the gasoline and diesel produced at the refinery from the percentage standards of 40 CFR 80.1405. The exempted refinery is not subject to the requirements of an obligated party for fuel produced during the compliance year for which the exemption has been granted.

EPA intends to coordinate the timing of future small refinery exemption decisions and updates to this RFS data website such that refineries receiving exemptions and other interested parties receive the same RIN market information at the same time.  READ MORE

Excerpt from Agri-Pulse:  According to an industry source, prices for Renewable Identification Numbers — the credits tracking compliance with the RFS — dropped by about half immediately after news of the decisions began swirling. Prices for D6 RINs — the RINs for renewable fuels like corn ethanol — dropped from about 20 cents per credit to 11 cents. Lower prices could be reported when transactions are reported on Monday.

In a message to Agri-Pulse, a source said “2018 vintage D6 RINs are about to be worthless, so all the refiners are dumping theirs.”

Biofuel supporters were optimistic that a June visit to Iowa had brought the attention to President Donald Trump’s mind and could lead to a change in how the administration addressed the waivers. After National Corn Growers Association Vice President Kevin Ross raised concern about SREs during Trump’s speech to celebrate regulatory action to allow year-round E15 sales, Trump reportedly ordered EPA to reexamine the issue.

“Meetings took place … conversations were had … but that’s really all we heard,” American Coalition for Ethanol CEO Brian Jennings told Agri-Pulse. “The message that rural America has been trying to send to the Trump administration about the damage that these small refinery exemptions do has not broken through.”

But for the oil industry, the waivers are a huge boost. Exempting a facility from RFS compliance relieves a major potential cost to the facility.

“Capital planning is difficult without knowing whether your refinery needs to set aside millions of dollars for RIN purchases,” said LeAnn Johnson with the Small Refiners Coalition.

The Fueling American Jobs Coalition — a group representing of small refinery workers among other stakeholders — calls the waivers “absolutely necessary to ensure that the RFS avoids punitively damaging our country’s critical refining sector.”

“SREs provide a critical safety valve for the country’s most vulnerable refineries, and are essential to implementing the RFS in a balanced manner that supports U.S. biofuel production while protecting American refining jobs and consumer fuel supplies,” the coalition said.  READ MORE

Excerpt from Reuters:  Trump’s EPA granted 35 of the 37 applications it received for the 2017 year, including for refineries owned by companies like Exxon Mobil and Chevron Corp, and billionaire investor Carl Icahn, vastly expanding the program.

Both the oil and corn industries have been awaiting the 2018 decisions for months.

Those decisions had been ready in June, industry sources told Reuters, but Trump intervened after a trip to Iowa where he heard angry feedback from farmers about the waiver program. He ordered members of his Cabinet to review the waiver program based on those complaints.

The EPA, the Agriculture Department and the Department of Energy have been in discussions about the program since, but no reform proposal has emerged. Sources briefed on the matter have said the oil lobby appears to have garnered support for a mostly-unchanged waiver program.

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Renewable fuel (D6) credits for 2019 last traded on Friday at about 11 cents each, down from 20 cents on Thursday, traders said, following news of the looming waiver decisions. READ MORE

Excerpt from Pro Farmer:  EPA also denied a request for the 2016 compliance year and one for the 2017 compliance year that had previously been showing as pending in the data until the update on Friday.

The news was criticized by other biofuel supporters. House Ag Committee Chairman Collin Peterson (D-Minn.) in a statement said: “The administration tried to bury bad news for rural America by quietly approving 31 more waivers this Friday afternoon that undermine the Renewable Fuel Standard (RFS) and the market for corn. On Wednesday, I hosted a packed forum at Farmfest with Secretary Perdue where farmers raised this issue again and again. Farmers are on the front lines of the tariff war and this announcement by the EPA will only make things worse.”

Rep. Cheri Bustos (D-Ill.) called the waivers “another blow to the pocketbook for farm communities across the Midwest. Time and again, this administration has gone behind closed doors to rig the system for big oil and undermine the Renewable Fuel Standard.”  READ MORE

Excerpt from S&P Global Platts:  D6 RINs began the day trading at 20 cents/RIN, were assessed at 19.75 cents/RIN at 1:30 pm CDT before falling and were heard trading as low at 12 cents/RIN.

The last time S&P Global Platts assessed 2019 D6 RINs below 12 cents/RIN was March 20.

SREs are given to refineries with a capacity of less than 75,000 b/d that demonstrate that compliance with the Renewable Fuels Standard causes “disproportionate economic hardship.”

One key issue is that the EPA has not reallocated the mandate volumes that the small refineries would have been required to meet back into the program, which therefore has the practical effect of reducing mandates and lowering biofuel demand.

“The Trump administration wanted to break renewables,” a source said of the reports.  READ MORE

Excerpt from Iowa Public Radio:  “Seems to me the bottom line is that EPA is undermining the congressional intent in the (Renewable Fuel Standard),” (Senator Chuck) Grassley (R-IA) said, “and it’s surely hurting farmers in Iowa and rural America.”

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Grassley says he’s skeptical all the companies getting waivers really need them.

“We need to get as much information and find out how much of a hardship this stuff is,” he said, “and we need transparency of the rationale for these waivers.”

Companies that get public dollars should not be allowed to hide behind claims of proprietary information, Grassley said, and the public should be able see the details EPA used in granting the waivers.

Grassley added he was “shocked” to see that EPA did deny some of the requested waivers, but not enough to quell his skepticism.  READ MORE