EPA Weighs Lifting Ethanol Requirements for Oil Refiners

April 19, 2020

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by Rebecca Beitsch (The Hill) The Environmental Protection Agency (EPA) is weighing whether to let oil refineries skip on adding ethanol to their fuels, a move being requested by governors in oil-rich states who say the industry can’t afford the expense of blending in biofuels as oil prices plummet.

Oil prices hit a new low Friday amid a number of administration efforts to ease financial pressure on the industry. Ethanol producers, however, say they have likewise been affected as the economy tanks due to the coronavirus.

In a letter to the EPA sent earlier this week, five governors from oil-producing states said their refineries should be off the hook from meeting legal requirements to add ethanol to their products, arguing the oil industry is in too dire of financial straits to do so. READ MORE

Coronavirus Sparks New Clash Between Big Corn & Big Oil Lobbies. The Corn & Ethanol Report 04/17/2020 (Inside Futures)

Oil-state governors seek renewable fuel waiver for refiners -- Refiners say the economy's swoon makes the requirements too costly. Biofuel backers say their industry is suffering as well (Roll Call)

COVID-19 Cited in Waiver Request -- Governors in Five States Asked EPA for Renewable Fuel Standard Waiver (DTN Progressive Farmer)

Governors Request Help For Small Refineries From EPA (Wyoming Public Radio)

US oil companies in call to halt biofuel blending as prices fall (Biofuels International)

RFA to EPA: Oily Waiver Request Deserves Speedy Rejection (Renewable Fuels Association)

RFA on AgriTalk: Oil States Wrong to Seek RFS Waiver (AgriTalk)

OIL STATE GOVERNORS ASK EPA TO WAIVE 2020 RFS (Brownfield Ag News)

10 years after BP spill: Oil drilled deeper; rules relaxed (PBS NewsHour)

U.S. oil and gas rig count continues steep declines (Houston Chronicle)

Drop in Demand for Ethanol Hurts Corn Farmers (Alton Daily News)

Growth Energy Joins U.S. Governors Calling on USDA to Protect Biofuel Jobs, Farm Communities (Growth Energy)

Growth Energy Condemns Oil-Backed Effort to Steal Biofuel, Farm Markets (Growth Energy)

CONSIDER THE RISKS: (Politico's Morning Energy)

Oil industry seeks reduced biofuels obligations; Iowa Sens. Chuck Grassley, Joni Ernst resist (Omaha World-Herald)

U.S. energy industry steps up lobbying for Fed's emergency aid: letters (Reuters)

Parsing Trump's bailout tweet (Politico's Morning Energy)

API: LET'S GET A REDO OF THOSE BIOFUEL VOLUMES: (Politico's Morning Energy)

Ethanol Blog: Petroleum Interests Ask EPA to Conduct New 2020 RFS Rulemaking (DTN Progressive Farmer)

Trump pledges financial aid to oil industry (Politico)

Matt Schweigert: Time for officials to honor ethanol deals (Madison.com)

Excerpt from Wyoming Public Radio: Joanne Ivancic, executive director of Advanced Biofuels USA, a non-profit educational organization, said biofuels shouldn't be targeted given COVID-19 and international conflict led to economic pain in the oil and gas industry.

"The sad part is that the same problems are impacting the whole biofuels industry, and perhaps even more than they're hurting the oil industry because nearly half of the ethanol production, for example, has been halted," she said.

Domestic ethanol production has dropped by 45 percent since March 6. In the same timespan, domestic crude oil production has dropped by only 5 percent.

The letter argued the Clean Air Act doesn't say a waiver depends on RFS compliance being the only economic factor in play.

Ivancic said the biofuel industry will certainly fight back if the EPA does grant the waiver. READ MORE

Excerpt from DTN Progressive Farmer: Geoff Cooper, president and chief executive officer of the Renewable Fuels Association, said the agency has rejected similar requests and should do so now.

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"Clearly, these governors are experiencing an acute shortage of facts and reality too. It's clear they know absolutely nothing about how the Renewable Fuel Standard actually works. They outrageously claim that a waiver is needed because of 'depressed demand for transportation fuel.' But because EPA translates the RFS into a percentage each year, the renewable fuel blending requirements already adjust in tandem with changes in gasoline and diesel consumption."

Cooper said if COVID-19 led to a 15% drop in gasoline and diesel demand, for example, the renewable fuel blending requirements drop by the same amount.

"The EPA has no authority to grant relief when the RFS itself is not the cause of the 'severe economic harm,' a fact that has been reconfirmed by EPA multiple times in the past when it denied similar nonsensical waiver requests," he said.

"The governors themselves acknowledge the problems facing refiners today are driven by COVID-19 and cratering oil prices, not the RFS." READ MORE

Excerpt from Roll Call: A spokesman for Grassley said the renewable fuel policy is “the law of the land” and that “any attempt by EPA to rewrite the RFS statute would be illegal.”

Renewable fuel trade groups said the governors’ demands were outrageous and would hurt rural jobs.

“This is an offensive attempt by refiners to steal markets from struggling biofuel producers and farmers,” said Emily Skor, CEO of the biofuels trade group Growth Energy. “Any move to unravel the RFS now would dim any hopes of economic recovery in rural America, where so many in the U.S. biofuel industry have been impacted by furloughs and plant closures, and millions of farmers are struggling to stay afloat.” READ MORE

Excerpt from Growth Energy: “Biofuel plants are the beating heart of the rural economy, and strong support from USDA is vital to keeping U.S. agriculture intact through the worst of this crisis,” said Growth Energy CEO Emily Skor. “Ethanol production provides jobs for our communities, a market for our farmers, sanitizer for our hospitals, animal feed for livestock operations, clean fuel for our vehicles, and vital carbon dioxide (CO2) for meatpackers, and municipal water treatment. We’re grateful to rural champions like Governors Reynolds, Walz, Ricketts, and Noem who are standing shoulder-to-shoulder with America’s biofuel industry to keep our vital supply chain moving.

“As more plants are forced to close, the damage will only continue to spread. We urge lawmakers and the USDA to take immediate, additional steps that are still needed to keep our plants open and protect the economic engine that will fuel America’s recovery.”

Signed by U.S. Governors Kim Reynolds of Iowa, Tim Walz of Minnesota, Pete Ricketts of Nebraska, and Kristi Noem of South Dakota, the letter also offered a powerful rebuke against recent oil-backed efforts to “waive blending requirements under the Renewable Fuel Standard for petroleum refineries.” They note, “Using this global pandemic as an excuse to undercut the RFS is not just illegal; it would also sever the economic lifeline that renewable fuels provide for farmers, workers and rural communities across the Midwest.” READ MORE

Excerpt from Growth Energy: “We’ve seen the courts reject this kind of abuse before. Even oil companies admit that biofuel credits don’t impose a real cost on refiners. We see this as a non-starter and call on this administration to focus on restoring – not destroying – rural jobs.” READ MORE

Excerpt from Politico's Morning Energy: CONSIDER THE RISKS:Nine Democratic senators urged Federal Reserve Chairman Jerome Powell to consider the long-term risks of purchasing corporate debt from oil and gas companies through new emergency programs created as part of the coronavirus economic stimulus. Senators — including Sherrod Brown (Ohio), the ranking Democrat on the Banking Committee, Brian Schatz (Hawaii), Sheldon Whitehouse (R.I.) and Elizabeth Warren (Mass.) — called for more transparency of the twin programs that are offering up to $750 billion in market liquidity. They said they're wary the Trump administration could look to provide aid to "specific industries with financial weaknesses that are only partially attributable to the COVID-19 pandemic."

They argued the Fed initiatives could create future financial strain if used to buy up bonds from oil and gas companies with overvalued assets that companies might not be able to develop under more stringent climate policies. "Fossil fuel companies face an inevitable repricing of their assets as consumer preferences continue to shift and governments around the world act on climate change, with or without the United States," the senators wrote in a letter. READ MORE

Excerpt from Reuters: The U.S. energy industry has asked the Federal Reserve to change the terms of a $600 billion lending facility so that oil and gas companies can use the funds to repay their ballooning debts, according to a letter seen by Reuters.

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Even before the oil price slump in early March, U.S. shale producers were under huge pressure from investors to reduce costs and bolster returns. With many carrying significant debt loads and earnings declining, shale producers have been preparing for possible Chapter 11 bankruptcy filings.

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They also asked for the program’s maximum loan size of $25 million be raised so natural gas companies “can meet their obligations.”

Natural gas companies, especially those in the Appalachian region, have struggled for months as commodity prices were depressed by oversupply. READ MORE

Exerpt from Politico's Morning Energy: PARSING TRUMP'S BAILOUT TWEET: Trump promised on Tuesday to bail out U.S. oil companies, a day after crude oil futures prices dove into negative territory for the first time ever. In a tweet, Trump said he instructed his Energy and Treasury secretaries to come up with a plan to "make funds available so that these very important companies and jobs will be secured long into the future!"

The president's tweet represents a shift in rhetoric from last week when he said the industry would withstand the pain in the oil market. But, as POLITICO's Ben Lefebvre reports, some energy officials worry that focusing aid on an industry more typically known for its deep pockets and political power could set off a political backlash during an election year.

"The optics are not politically smart," said one lobbyist who was not authorized to talk to the media. "A handout to the oil industry will likely not play well among white, college-educated suburban moms stuck inside their homes home-schooling their kids."

Speaking before reporters Tuesday evening, Treasury Secretary Steven Mnuchin suggested that energy companies are not the intended recipients of a pot of $17 billion authorized by Congress under the CARES Act for businesses critical to maintaining national security. "Obviously, the energy business is very important to us. This has national security issues, but different," Mnuchin said. "We look forward to looking at what existing capabilities we have and that will be something we may need to go back to Congress and get additional funding for." READ MORE

Excerpt from Politico's Morning Energy: API: LET'S GET A REDO OF THOSE BIOFUEL VOLUMES:The American Petroleum Institute is asking EPA to revise its 2020 blending requirements, the oil producers group told ME. API believes that now that the 10th Circuit has effectively killed the small refiner exemption, the agency should remove the reallocation requirements built into the 2020 rule, a spokesman said. EPA added the requirement last year to blend an extra 770 million gallons of biofuel in light of volumes lost to the mandate from exemptions. The Iowa Renewable Fuels Association, an ethanol producers group, disagrees, calling API's request "rank hypocrisy." READ MORE