Waiver Wire: Why Is the Biofuels Industry up in Arms about Oil Refinery Waivers?

by Jim Lane (Biofuels Digest) ... But they’re part of the Washington dialogue this month, waivers and easy outs, since reports surfaced in media that the US Environmental Protection Agency granted a Renewable Fuel Standard hardship waiver for CVR Energy’s Wynnewood, Oklahoma oil refinery. One of many such waivers granted, though the exact number is secretive.

The blending that is generally required under terms of the US Energy and Security Act to increase domestic supplies of energy. create domestic jobs and reduce domestic CO2 emissions — yet EISA also made provision for hardship waivers for smaller refineries and gave EPA the authority to determine who gets those waivers.

In part, the controversy hinges on the definition of what makes a small refiner a small refiner — the other part hinges on what constitutes hardship. If a giant industry refiner is making huge profits — can it qualify one of its smaller refineries for a hardship waiver? The Obama Administration said, emphatically and repeatedly, “no”, but the Trump Administration under EPA Administrator Scott Pruitt has changed that policy to a “yes”.

In part, the language of EISA is the problem. The original legislation focused on the size of a specific refinery — hardship waivers can be considered for any refinery making less than 75,000 barrels of fuel per day — and was silent on the overall ownership and profitability of the parent. It creates the potential of a loophole where giant refining portfolios could be constructed out of smaller refineries exempted from RFS compliance and any costs or limits on petroleum share of market that come with compliance.

Not so, according to the University of Illinois, which found that the conditions that caused high conventional biofuel (D6) RIN prices are changing rapidly and that “…it is not out of the realm of possibility for D6 RINs prices to fall back their pre-2013 level of just a few cents without making any changes to the RFS.”

Meanwhile, the National Biodiesel Board submitted a Freedom of Information Act Request aimed at shedding light on small refiner exemptions requested and issued under the Renewable Fuel Standard.

• Any records submitted to EPA in conjunction with a petition for a small refinery exemption pursuant to 42 U.S.C. § 7545(o)(9)(B) for compliance with the 2015, 2016, 2017, and 2018 obligations under the Renewable Fuel Standard.

• Any records summarizing information regarding petitions for a small refinery exemption under 42 U.S.C. § 7545(o)(9)(B) for 2015, 2016, 2017, and 2018, including but not limited to:

Now, the Advanced Biofuels Association (ABFA) has submitted a petition for review to sue the U.S. Environmental Protection Agency Administrator Scott Pruitt challenging EPA’s process for granting exemptions from compliance under the Renewable Fuels Standard (RFS) to small refineries.

“We have seen reports that the number of small refinery exemptions recently granted for compliance years 2016 and 2017 have doubled compared to previous years,” said Michael McAdams, president of ABFA. “ABFA members are concerned that Administrator Pruitt is granting these exemptions in an arbitrary and capricious manner to undisclosed parties behind closed doors with no accountability for its decision-making process.” ABFA submitted the Petition with the U.S. Court of Appeals for the D.C. Circuit given its national implications for the RFS program and its members.

The Hardship Standard
Congress did not establish a specific standard for hardship.

And just to make things even more fuzzy, changes appeared in Consolidated Appropriations Act for Fiscal Year 2016 instructing the Department of Energy to recommend to EPA that it grant a 50 percent waiver to small refineries with a high cost compliance relative to industry average orsignificant impairment of the refinery operations viability. Note that the two step standard has become an either/or.

Now, what exactly constitutes confidential business information. Confidential business documents relating to a petition or lawsuit, the fact that a petition or suit exists, or an agency’s standard or rationale for granting a waiver?

Senators Barasso and Moore Capito also weighed in on this one this letter on March 5, 2018 reaffirming their support on the waivers. And then, this one to EPA and DOE on April 24 to keep the issuance of the small refiner waivers confidential.

Historically, EPA and DOE have protected the confidential business information – which includes the identities – of small refineries petitioning for hardship relief. Disclosing this information would give entities selling refined products in the same market as a small refinery a competitive advantage over that refinery. Disclosing this information would also give entities selling RINs to a small refinery an opportunity to extract a higher price from that refinery. This information can even move the entire secondary RINs market, which is measured in billions of dollars.

But a bipartisan group of 13 US Senators disagreed with Barasso and Moore Capito.

U.S. Senators Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) led a bipartisan group of 13 senators in urging Environmental Protection Agency (EPA) Administrator Scott Pruitt to cease issuing so-called “hardship” waivers exempting obligated parties from the Renewable Fuel Standard (RFS). The senators also requested that the Agency provide topline information about the waivers already issued, disclose whether or not the agency redistributed the waived volume obligations among the non-exempted obligated parties and outline the agency’s plan to make the waiver process more transparent.

According to recent reports, the EPA has already issued 25 “disproportionate hardship” waivers to large, multi-billion-dollar refining companies reporting billions of dollars of profits since 2016. READ MORE