RFA Supports EPA Proposal to Deny Small Refinery Exemption Petitions

(Renewable Fuels Association) The Renewable Fuels Association today expressed strong support for the Environmental Protection Agency’s proposal to deny 65 pending small refinery exemption (SRE) petitions, noting that such an action would “restore confidence” in the Renewable Fuel Standard program. EPA’s proposal also would ensure that, moving forward, the SRE program complies with the Tenth Circuit Court’s 2020 decision in Renewable Fuels Association v. EPA.

“EPA’s proposed decision is consistent with the statute and with EPA’s repeated determinations that small refineries pass through the cost of RFS compliance to the wholesale prices of their products and therefore do not face disproportionate economic hardship,” wrote RFA President and CEO Geoff Cooper in comments submitted to the agency. “When finalized, the proposed approach will restore confidence in the RFS program, which in turn will stimulate the increased investment in renewable fuel production that Congress sought to encourage.”

RFA also encourages EPA to deny 31 SREs granted by the previous administration for compliance year 2018. Those exemptions were inappropriately issued in 2019 and were recently remanded to EPA by the D.C. Circuit following a legal challenge led by RFA.

Cooper noted that the congressional goals of enhanced energy security and greenhouse gas emissions reduction have been undermined over the past several years due to the massive increase in SREs: “America’s biofuel producers and farmers have been forced to pay the price—the uncertainty and market instability caused by the surge of exemptions have left them unable to fully benefit from a program intended to increase demand for their products.”

As the lead petitioner in the RFA v. EPA case in the Tenth Circuit, the respondent in the HollyFrontier Cheyenne Refining LLC v. RFA case in the Supreme Court, and a leading petitioner challenging EPA’s 2018 SREs, RFA has been at the forefront of the legal debates surrounding the RFS program’s SRE provisions. “RFA is pleased to see our hard-fought legal battles on SREs are paying off at long last,” Cooper said. “As a direct result of the Tenth Circuit decision, EPA is moving to finally shut the floodgates on the previous administration’s wave of SREs.”

In a related development, RFA on Friday submitted comments to the EPA on the agency’s proposed renewable volume obligations for 2020-2022, which were announced at the same time as the SRE proposal. While RFA is “strongly supportive of the proposed volumes for 2022 for all categories of renewable fuel,” it noted that ethanol producers are “very troubled by EPA’s questionable proposed use of its ‘reset’ authority to reopen the 2020 RVO.” READ MORE

Excerpt from Ethanol Producer Magazine: The American Coalition for Ethanol is also speaking out in support of EPA’s SRE proposal in comments submitted to the agency. “ACE strongly supports EPA’s proposed decision to deny all pending SRE petitions by finding the petitioning refineries do not face disproportionate economic hardship (DEH) caused by compliance with their RFS obligations,” wrote Brian Jennings, CEO of ACE.

ACE’s comments provide background on the litigation that compels EPA to deny the pending SREs, including precedent established by the Tenth Circuit Court in HollyFrontier v. Renewable Fuels Association, which ACE was a petitioner on, and subsequent decision by the Supreme Court in HollyFrontier Cheyenne Refining, LLC v. RFA. EPA’s proposed denial of all pending SRE petitions complies with the Tenth Circuit Court ruling in that: 1) The cause of refinery “hardship” must be the RFS, rather than general economic factors; and 2) EPA’s determination that RFS compliance costs are essentially a pass through that are not ultimately born by refiners prevents RIN prices from being used to justify waivers.

ACE is also encouraged EPA proposed to evaluate future SRE petitions based on these two restraints.

Clean Fuels Alliance America also supports the EPA’s SRE proposal. “Clean Fuels supports EPA’s proposal to deny 65 pending small-refinery exemption petitions and requests that EPA also deny the 36 small-refinery exemptions—31 of which were originally granted—for 2018,” wrote Kurt Kovarik, vice president of federal affairs at Clean Fuels. The 36 additional petitions pending before the agency are those remanded by order of the U.S. Court of Appeals for the D.C. Circuit in response to EPA’s motion in Sinclair Wyoming Refinery and consolidated cases.

Clean Fuels estimates that the 2018 exemptions reduced demand for biodiesel and renewable diesel by 190 million gallons. Overall, the exemptions that EPA granted beginning in 2017 impacted 550 million gallons of biomass-based diesel, resulting in 5.2 million metric tons of additional greenhouse gas emissions. “If EPA were to grant the pending 2019 small refinery exemptions, we estimate that biodiesel and renewable diesel will experience a future market loss of approximately 200 million gallons, resulting in 1.9 million MT of GHG emissions in the atmosphere that could have otherwise been avoided,” Kovarik continued.

“EPA’s denial of pending small refinery exemptions is not just appropriate, but required,” Kovarik added. “Clean Fuels and its members appreciate the administration’s commitment to getting the RFS back on track. We urge EPA to finalize the volumes quickly, account for small refinery exemptions fairly, and grow the market for biofuels through a timely rule for 2023 and beyond.” READ MORE