Washington Insider: Biofuels Mandates Under Pressure

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April 26, 2018

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(DTN The Progressive Farmer) Oil state partisans, including certain refiners, have raged about a credit-trading market within the program that they say causes undue economic pain. The biofuels industry counters that those compliance credits, known as renewable identification numbers, are essential to making the mandate work.

While the battle has heated up in Congress — drawing the attention of Texas Republican senators Ted Cruz, R-Texas, and John Cornyn, R-Texas — the EPA has turned to a little-used provision to give the refiners some relief, the News said.

EPA in recent months has exempted a couple dozen refineries from their biofuel requirements for 2016 and 2017, according to press reports in the News, the Houston Chronicle, Reuters and other media outlets. That's far more exemptions than the EPA has granted in years past.

Among those to receive waivers is Dallas-based HollyFrontier, which saved nearly $58 million last year thanks to exemptions for two refineries in Wyoming and Utah.

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It is not clear just who has received waivers in all cases, the News says. Companies like HollyFrontier, which posted some $900 million in profits last year, disclosed the waivers in SEC filings. But privately held companies don't have to provide that information and EPA hasn't released any company-specific information, “further peeving the biofuels industry.”

Reuters, for instance, had to rely upon unnamed sources to report that San Antonio-based Andeavor, one of the nation’s largest refiners, received exemptions for three of its plants. Those waivers came even as the company posted profits last year of about $1.5 billion.

Even USDA Secretary Sonny Perdue has expressed concern, noting the waivers that he is aware of total at least 1 billion gallons. The waivers, he told lawmakers this week, represent "demand destruction."

At this time, news of the waivers has roiled the biofuel credit market, causing prices to drop, and could have a ripple effect on the political negotiations underway. READ MORE

Ethanol Blog -- EPA Waivers Top 1 Billion Gallons in 2017 (DTN The Progressive Farmer)

Skinny and sweet: U.S. refiner earnings depend on the oil diet (Reuters)

The House Biofuel Caucus sent a letter (Politico's Morning Energy)

Pruitt on Waivers: RIN Transparency Key-- EPA Administrator Tells House Committee Agency Wants to Work with Congress on RFS Reform (DTN The Progressive Farmer)

Ethanol Report on Pruitt and the RFS (Energy.AgWired.com; includes AUDIO)

Pruitt Provides Vague Answers About RFS Exemptions (Energy.AgWired.com; includes AUDIO)

RFS Architects Question EPA Waivers (Energy.AgWired.com)

Pruitt tangles with Democrats, defends RFS policies (Agri-Pulse)

EPA Administrator Pruitt Drilled Over Work, Ethics, RFS (Ag Web)

PRUITT TELLS LAWMAKERS RFS WAIVERS WITHIN THE LAW (Brownfield Ag News)

Ted Cruz ups pressure on Trump to overhaul ethanol mandate (Washington Examiner)

Ethanol Blog-- Sen. Cruz: Not Enough Votes to Pass RFS Reform (DTN The Progressive Farmer)

Pruitt says he's working with Calif. They say he isn't (E&E News)

Excerpt from Politico's Morning Energy: The House Biofuel Caucus sent a letter to Pruitt objecting to Renewable Fuel Standard waivers issued by EPA, demanding Pruitt "immediately cease all waiver activity" and provide lawmakers a "full list" with further details. Read it here. READ MORE

Excerpts from DTN The Progressive Farmer: EPA Administrator Scott Pruitt told members of the House Energy and Commerce Subcommittee Thursday he wants to work with Congress to reform the Renewable Fuel Standard. However, he provided few answers as to why the agency approved a recent rash of small-refinery waivers.

Pruitt told the committee it was important to create transparency in the market for renewable identification numbers, or RINs, so as to reduce fraud and to understand what drives prices. RINs are biofuel credits used for compliance with the RFS. In addition, Pruitt told the committee that EPA continues to work on making E15 available year-round.

Pruitt revealed on Thursday that the agency has received more waiver requests already in 2018 than it did in 2017 and 2016, setting the 2018 number at "more than 30." If all the waivers were granted, it would be the highest number of waivers the agency has issued in a single year.

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Pruitt did not directly address why the number of exemptions have been on the rise, telling the committee transparency in the RIN market is the issue.

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Green (Rep. Gene Green, D-Texas) asked Pruitt if EPA grants waivers to facilities above 75,000 barrels per day. Only those refineries that produce 75,000 barrels per day or less qualify for waivers.

"We look at it on a facility-by-facility basis, and the statute says its 75,000 barrels; it's subjectively determined," Pruitt said.

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Rep. Dave Loebseck, D-Iowa, questioned Pruitt's support for the RFS.

"During the confirmation process, you stated support for the Renewable Fuel Standard," he said. "Over the past several weeks, information was revealed that makes me question that. I've heard from farmers across the country on this who are concerned. I'm extremely disappointed in the action, lack of transparency, and accountability in the process is unacceptable."

Loebseck said the EPA administrator is required to reassign RFS gallons waived to another obligated party.

"It is my understanding the process has happened as required under statute," Pruitt said, without providing details.

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When asked by numerous media outlets, including DTN, and by biofuel groups for details about those waivers, EPA has declined to provide information, stating that to do so would expose proprietary business information.

The agency granted nearly 40 RFS waivers to so-called small refiners since 2016, including about 25 in 2017 alone. Included in last year's total is a request by Andeavor, which posted a $1.5 billion profit last year. Also, the New York Times reported that oil giants Exxon and Chevron have requested waivers for 2018.

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Further, the price of D6, or conventional-ethanol RINs, has fallen by 50% since mid-February from about 70 cents to 35 cents.

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When asked why it was taking so long to move to year-round E15 availability, Pruitt said the agency is trying to "ensure the legal basis" is solid, because there "will be litigation." He said the agency plans to finish the review soon.

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In addition, a number of lawmakers continue to draft legislation to reform the RFS. On Thursday, Pruitt indicated the agency is ready to work with Congress on the law. READ MORE

Excerpt from Energy.AgWired.com: Two former senators who played key roles in developing the Renewable Fuel Standard (RFS) are calling on Congress to investigate the EPA’s recent waivers to major refiners and failure to follow the law.

Byron Dorgan (D-ND) and Jim Talent (R-MO) say EPA Administrator Scott Pruitt’s granting of multiple small refinery hardship waivers skirts the law and threatens to undermine the renewable fuels industry. READ MORE