U.S. EPA Denies 36 Refinery Biofuel Waivers; Gives Most of Them Some Relief

April 08, 2022

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by Stephanie Kelly (Reuters) The U.S. Environmental Protection Agency has denied 36 petitions from oil refiners seeking exemptions to the nation's biofuel blending laws for the 2018 compliance year, but will provide 31 of those refineries with another avenue to seek relief, the agency announced on Thursday.

The action will align the EPA with a 2020 court decision that narrowed the criteria for what facilities should be eligible for exemptions from the blending quotas. Former President Donald Trump's EPA had granted more than 30 so-called Small Refinery Exemptions (SREs) for the 2018 year, triggering a successful court challenge from the biofuel industry.

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The agency added that the alternative relief EPA plans to grant to 31 of the refineries will allow the facilities to meet their 2018 obligations without purchasing credits to show compliance with the law. That decision was made because of "extenuating circumstances," including the fact the plants had initially been granted waivers, it said.

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To receive relief using the alternative approach, refiners must resubmit compliance reports for 2018 and report their actual fuel production for that year, among other data.

The EPA said they're taking this approach in part because the amount of renewable fuel used in 2018 will be unchanged regardless of any actions by refiners now.

The Renewable Fuels Association trade group called the news on Thursday a "hollow victory" for the biofuels industry.

"EPA admits that those exemptions never should have been granted in the first place, but now is sweeping them under the rug and letting the refiners who got these exemptions off the hook," said RFA President Geoff Cooper.

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After reviewing materials including more than a decade of RFS market data, the EPA said it concluded that none of the 36 petitions demonstrated hardship caused by compliance with the RFS program.

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The EPA is still considering petitions from other refineries for compliance years in the 2016-2021 range, the agency said. The EPA had accumulated a backlog of more than 60 SRE requests for those years, according to the agency's website. READ MORE

EPA Yanks 31 Refinery Biofuel Waivers But Skips Credit Requirement (Bloomberg)

EPA Denies 36 RFS Exemptions From 2018 -- In Pulling Small-Refinery Exemptions From RFS, EPA Offers Refiners a Compliance Reprieve (DTN Progressive Farmer)

EPA Moves to Deny 36 Small Refinery Exemptions, Extends Olive Branch (AgWeb)

EPA Retroactively Denies Legacy RFS Waivers, Making More Denials Likely (Inside EPA)

EPA rejects 36 biofuel mandate waiver requests, offers alternative relief for 31 facilities (Agri-Pulse)

On court remand, US EPA denies 36 RFS exemptions for small refineries (S&P Global)

EPA Denies Waivers But Still Gives Refiners a Break (Energy.AgWired.com)

EPA denies 36 SREs, does not remedy demand destruction (Ethanol Producer Magazine)

EPA reverses Trump-era SRE decisions (Argus Media)

Biofuel & Ag Leaders Respond to EPA Decision to Reverse Refinery Exemptions, Decry Lack of Real Market Impact (Renewable Fuels Association)

EPA denies requests for biofuel blending exemptions (The Hill)

EPA rejects biofuel blending waivers for small refineries: In denying the exemptions, EPA said it was meeting a directive from the 10th U.S. Circuit Court of Appeals that economic hardship exemptions can only be issued if the hardship is tied to the RFS, not other factors. (E&E News)

Labor union urges Biden to issue RFS refiner waivers (Inside EPA)

Excerpt from DTN Progressive Farmer: Five refiners were dropped because two were declared ineligible and three others withdrew their initial petitions.

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EPA had argued the agency needed to pull the 36 SREs to stay consistent with the Tenth Circuit Court of Appeals ruling on SREs. The Tenth Circuit had concluded that SREs may only be granted when a small refinery's hardship is caused by compliance with the RFS program. The Tenth Circuit decision from 2020 required EPA to create a new interpretation of how to decide on SREs.

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Petroleum groups had complained that revoking the SREs roughly 2 1/2 years after they were granted raises concerns about RINs and price volatility.

"These refineries have a vested property interest in their approved SREs, which EPA cannot take away without due process of law," the American Fuel & Petrochemical Manufacturers (AFPM) wrote to EPA in February. AFPM stated the refineries have made "innumerable business decisions affecting their finances that could be upended by a sudden, new obligation to purchase and retire RINs, such as decisions regarding loans, capital expenditures, turnaround and maintenance, and other decisions committing financial and other resources based on the assumption they had a valid SRE from 2018."

EPA had released a proposal back in December to reject all pending SRE requests from refiners.

EPA still has 69 pending petitions from refiners for SREs going back as far as the 2016 compliance year, though the bulk of them -- 64 of the petitions -- involve 2019, 2020 and 2021 compliance years.

EPA's denial of petitions: https://www.epa.gov/…

EPA's decision on alternate RFS compliance for certain small refineries: https://www.epa.gov/renewable-fuel-standard-program/april-2022-alternative-rfs-compliance-demonstration-approach READ MORE

Excerpt from Agri-Pulse: "In the SRE denial, we find that all refineries face the same costs to acquire RINs regardless of whether the RINs are created through the act of blending renewable fuels or are purchased on the open market,” EPA said. "This happens because the market price for these fuels increases to reflect the cost of the RIN, much as it would increase in response to higher crude prices.”

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In a statement, several biofuel groups - Growth Energy, Renewable Fuels Association, National Corn Growers Association, Clean Fuels Alliance America, American Coalition for Ethanol, and National Farmers Union - welcomed the SRE withdrawal but expressed frustration about the alternative compliance.

“While today’s decision is an important step in reversing past abuse of refinery exemptions, the decision fails to remedy the economic harms the improperly granted 2018 SREs have already caused," the groups said. "EPA’s move to hold refiners accountable to the law is a welcome step toward getting the RFS back on track that, when applied to pending and future SRE petitions, would improve certainty in the marketplace, and lead to more blending of American-made biofuels. However, EPA’s readiness to excuse individual refineries from their obligations to comply with 2018 blending requirements comes at the expense of our biofuels producers, farmers, and American consumers.”

EPA still has 69 pending SRE requests for the 2016-2021 RFS compliance years. READ MORE