U.S. Energy Department Recommends Granting Partial Retroactive Waivers to Refiners: Sources

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August 05, 2020

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by Stephanie Kelly (Reuters) The U.S. Department of Energy has recommended that some of the oil refiners that applied for retroactive exemptions from the nation’s biofuel blending law be granted partial relief, two sources familiar with the matter said on Tuesday.

The move could help bring those refining companies into compliance with a court ruling earlier this year that requires waivers granted since 2010 to take the form of an extension - the latest twist in a long-running battle between the refining and biofuel industries over the program.

At present there are 58 pending requests from refiners for waivers covering the years 2011 through 2018, according to government data. The sources said the DOE recommended to the U.S. Environmental Protection Agency, which has final say on the waivers, that “a number” of those requests be partially granted. The sources, who requested anonymity in order to speak candidly, could not immediately provide further details. READ MORE

Ethanol Blog: Sens. Grassley, Ernst Ask DOE Nominee for Transparency on Biofuels Waivers (DTN Progressive Farmer)

WELCOME TO THE RFS FRAY: (Politico's Morning Energy)

Ethanol update: Renewable fuel industry awaits EPA decisions (AgriNews)

Energy Department Recommends Granting Partial Retroactive Waivers (Hoosier Ag Today/NAFB News Service)

Ethanol Awaits Fate on Waivers, Aid: RFA's Cooper: EPA Decision to Issue Waivers Would Equate to 'Locking in Blend Wall' (DTN Progressive Farmer)

Department of Energy recommends granting biofuel waivers (RFD TV; includes VIDEO)

Small Refinery Waivers Continue to Challenge Ethanol (Red River Farm Network)

Excerpt from DTN Progressive Farmer: The senators said the petitions "threaten to undercut the RFS and fail to meet the standard" set by the 10th Circuit decision.

"The EPA's decision to send them to DOE for a technical analysis erodes the public's trust in the rule of law and the ability for the EPA and DOE to faithfully implement the Renewable Fuel Standard," they said.

"You stated in your July 2 response that you were reviewing petitions already reviewed by DOE. We are concerned DOE wasted valuable time and resources to score these petitions again. We now understand that all petitions have been sent back to EPA and that this was a demand from oil-state senators for your nomination to be considered. We have concerns this process is not transparent and does not promote accountability in government.

"Given the remaining questions about how and why these petitions were scored, we could not support your nomination when it came before the Senate."

In previous years, they said, confidential business information had been used as a rationale to "avoid public disclosure" of decisions made by DOE and EPA.

"However, this rationale cannot be used to shield Congress from conducting oversight responsibilities and we ask for a more transparent and collaborative process going forward," the senators said.

"While you state that specific company names, number of petitions, and the year of the petition are considered CBI, we would ask that you provide a legal opinion on how providing such basic information could cause damage outweighing the public's right to know about decisions its government is making. Regardless, we ask that you work to provide a confidential setting for our staff to review past year petition analysis along with current year analysis to allow us to conduct our congressional oversight duties."

The senators ask Menezes to provide the public with information on DOE's score of each petition and when the score recommendation was transmitted back to EPA. READ MORE

Excerpt from Politico's Morning Energy: WELCOME TO THE RFS FRAY: The Senate on Tuesday easily confirmed Mark Menezes to be deputy Energy secretary, voting 79-16, with just two Republicans — Iowa Sens. Joni Ernst and Chuck Grassley — opposing the selection, Anthony reports.

Both senators have been vocal in their opposition to a slew of pending, retroactive waiver requests from small oil refineries for exemptions from their biofuel blending requirements, and they expressed concern Tuesday that the Energy Department was reviewing petitions it had already reviewed. "Given the uncertainty with the 'gap year' small refinery waivers, the wasted time and resources to score the waivers again, the lack of transparency in the entire process, and most importantly, the toll this has taken on Iowa's farmers and biofuel producers, we could not in good faith support Mr. Menezes at this time," the pair said in a statement.

Grassley tweeted Tuesday that DOE had finished up its review of the gap waivers, sending them off to EPA. Meanwhile, Reuters reported DOE recommended that EPA grant partial relief to "a number" of the refiners.

Ernst and Grassley also sent a letter to Menezes that the administration has been too willing to grant refiners' requests to shield the information on claims of confidential business information, preventing Congress from conducting oversight of the small refiner exemptions process, Anthony reports. "While you state that specific company names, number of petitions, and the year of the petition are considered CBI, we would ask that you provide a legal opinion on how providing such basic information could cause damage outweighing the public’s right to know about decisions its government is making," the Republican duo wrote.

Check the calendar: EPA has a statutory requirement to respond to applications one way or another within 90 days after the petition is received by the administrator, analysts at ClearView Energy Partners point out in a Tuesday client note. So, if that clock started Tuesday, as Grassley signals, you're looking at a Nov. 2 deadline — the day before Election Day. READ MORE

Excerpt from AgriNews: One of the big unresolved issues is what the EPA is going to do with these small refinery exemptions. It has been six months since the 10th Circuit Court struck down three of those exemptions that EPA illegally granted and set a precedent that should significantly limit or constrain EPA’s ability to give these exemptions to refiners moving forward.

So, rather than taking that decision and adopting it nationally and just moving ahead, EPA is kind of twiddling its thumbs and still hasn’t told anybody what it intends to do with these exemption requests and with this court decision. All they’ve said is the refiners may appeal this to the Supreme Court and so sort of need to wait until the Supreme Court decides whether they want to hear this case or not.

The chances of the Supreme Court showing any interest in reviewing this case are slim to zero, yet that’s the excuse that EPA is using. So, we have 52 new gap year exemption requests where refiners are looking for exemptions for past years going all the way back to 2011 and the scheme there is to get these exemptions as a way of circumventing the 10th Circuit Court decision so they can remain eligible to get more waivers moving forward.

So, we’re looking at another 80 SRE exemption petitions that are sitting at EPA or soon to be at EPA that haven’t been decided. That’s one big unresolved issue that is creating enormous uncertainty in the marketplace.

The ethanol industry also awaits EPA to announce the Renewable Volume Obligations under the RFS for 2021. The ruling for 2020 was made on July 5, 2019, and appears to be put on indefinite hold by EPA for next year. READ MORE

Excerpt from DTN Progressive Farmer: A report from Hoosier Ag Today, citing unnamed sources, said the DOE had recommended EPA approve some of the pending 58 retroactive waiver requests to the Renewable Fuel Standard. The EPA still has a total of 86 pending requests for small-refinery exemptions, including a total of 28 for 2019 and 2020.

Cooper said the agency already has missed the 90-day deadline to issue decisions on the requests. The deadline was triggered when EPA received the requests.

"We haven't heard what the DOE recommends," he said. "It would be absolutely insane for DOE to recommend any of those hardship waivers. If there was no hardship in 2012, how can they claim that now? There's no transparency in this process."

When contacted by DTN, EPA spokesperson Molly Block said, "EPA has received initial feedback from the Department of Energy on certain petitions for small-refinery exemptions for past compliance years under the Renewable Fuel Standards Program. Our staff is reviewing."

Cooper said SREs have "eroded" the RFS from 15 billion gallons to 13.7 billion or 13.8 billion in each of the past several years.

"If the EPA continues to hand out these exemptions illegally, they're locking in the E10 blend wall," Cooper said. "It really removes the incentive to expand into higher blends. We've got an industry capable of producing 17 billion gallons or more. We should use that capacity."

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The U.S. Court of Appeals for the 10th Circuit in Denver ruled in January that the EPA mishandled the SRE program when it came to issuing three refining company waivers.

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It was expected the agency would apply the ruling nationally after the court said the three companies involved had not previously received waivers and didn't qualify.

"It's the statute itself that established DOE's role in the process," Cooper said. "EPA has really set up a situation that allows for finger pointing between agencies." READ MORE