In Controversial Move, EPA Grants 31 Small Refiner Exemptions for 2018 Compliance Year

Posted on 08/10/2019 8:32 AM

Biofuel proponents criticize the 'buried bad news for rural America' as 'unfathomable and utterly reprehensible'


EPA late Friday granted 31 small refiner exemptions (SREs) under the Renewable Fuel Standard (RFS) for the 2018 compliance year.

 

EPA granted 31 SREs under the RFS for the 2018 compliance year. The agency received 40 requests for the 2018 compliance year and prior to Friday (Aug. 9), data showed two had been withdrawn/declared ineligible. The data now show that 31 have been granted, six denied and three were withdrawn/declared ineligible.

EPA also denied a request for the 2016 compliance year and one for the 2017 compliance year that had previously been showing as pending in the data until the update on Friday.

Details:

  • The 31 requests granted for the 2018 compliance year is down from 35 granted for the 2017 compliance year, above the 19 approved for the 2016 compliance year, seven approved for 2015 and eight each for the 2013 and 2014 compliance years.

Federal law authorizes EPA to exempt small refineries facing a “disproportionate economic hardship” from blending quotas.

The total exemptions issued cover more than 4 billion gallons of biofuels, according to EPA data. The latest announcement exempts an estimated 1.43 billion gallons of renewable fuel, second only to the 1.8 billion gallons exempted in 2017 according to EPA’s SRE dashboard. One corn industry analyst said, “This is like adding 5-6 bu./acre to the crop size on Monday’s USDA report. If Trump was trying to see what it would take to lose his support with producers, this should be a good test.” Iowa Renewable Fuels Association Executive Director Monte Shaw called the EPA’s decision “devastating” and said with this action, “President Trump has destroyed over a billion gallons of biofuel demand and broken his promise to Iowa voters to protect the RFS.”

EPA waviers one

EPA waviers two

The news was criticized by other biofuel supporters. House Ag Committee Chairman Collin Peterson (D-Minn.) in a statement said: “The administration tried to bury bad news for rural America by quietly approving 31 more waivers this Friday afternoon that undermine the Renewable Fuel Standard (RFS) and the market for corn. On Wednesday, I hosted a packed forum at Farmfest with Secretary Perdue where farmers raised this issue again and again. Farmers are on the front lines of the tariff war and this announcement by the EPA will only make things worse.”

Rep. Cheri Bustos (D-Ill.) called the waivers "another blow to the pocketbook for farm communities across the Midwest. Time and again, this administration has gone behind closed doors to rig the system for big oil and undermine the Renewable Fuel Standard."

The Renewable Fuels Association (RFA) also assailed the news, with President and CEO Geoff Cooper saying it comes as “ethanol plants in the Heartland are being mothballed and jobs are being lost. It is unfathomable and utterly reprehensible that the Trump administration would dole out more unwarranted waivers to prosperous petroleum refiners.”

The EPA announcement, Cooper added, “comes as a total shock, as just two months ago President Trump himself heard directly from Iowa farmers and ethanol plant workers about the disastrous economic impacts of these small refinery handouts. In response, he told us he would ‘look into it’ and we believed that would lead to the White House and EPA finally putting an end to these devastating waivers. Instead, the Trump administration chose to double down on the exemptions, greatly exacerbating the economic pain being felt in rural America and further stressing an industry already on life support.”

These exemptions are destroying demand for homegrown energy at a time when family farms are struggling, farm income is plummeting and many ethanol plants have been forced to close their doors or idle production,” said Emily Skor, CEO of the advocacy group Growth Energy.

EPA’s refiner-win-at-all-costs oversight of the RFS is doing real damage to America’s farmers and renewable fuel producers who are already suffering from trade wars and volatile markets,” said American Coalition for Ethanol CEO Brian Jennings.

The National Corn Growers Association (NCGA) issued a statement calling on President Donald Trump to act. "Mr. President, you proudly stand with farmers, but your EPA isn’t following through. You can step up for farmers today by reining in RFS waivers," said NCGA President Lynn Chrisp.

The National Sorghum Producers said it is disappointed in the EPA’s decision “to administer extensions to profitable, undisclosed refiners at the detriment of U.S. ethanol and sorghum producers. The continued expansion of small refinery waivers places additional concerns on ethanol producers already facing significantly reduced margins.” With one-third of the U.S. sorghum crop used to produce fuel ethanol, the group said the announcement “comes as a significant disappointment to sorghum farmers. With U.S. net farm income down almost 50% from the 2013 peak and sorghum farmers’ largest market, China, currently on the sidelines, these demand-destroying waivers could not have come at a worse time. National Sorghum Producers will continue to advocate for realistic, fair policies that fulfill Congressional intent while benefiting sorghum farmers and rural Americans.”

Former Iowa Gov. Tom Vilsack, who served as secretary of agriculture in the Obama administration, said in a statement that the EPA “has again disappointed the Heartland.” “Unfortunately, the EPA has dealt yet another body blow to an industry that improves farm income, reduces our reliance on fossil fuels, cleans up our environment and employs hundreds of thousands of Americans in good paying jobs,” Vilsack said.

The Fueling American Jobs Coalition of refiners and fuel retailers disputed claims that waivers are hurting demand for ethanol. The exemptions “provide flexibility without any diminishment in the demand for ethanol, as demonstrated by impartial data,” the coalition said.

The situation with SREs remains a controversial issue that ethanol backers will continue to press with EPA and USDA. But the expected pushback will not likely have much if any impact. The attention will turn to SREs for the 2019 compliance year with none yet listed as being received by the agency. Based on prior years, it could be well into 2020 before the total number of SREs for the 2019 compliance year will be known.

There will likely be more information on the SREs ahead as EPA indicated in their proposed RFS levels for 2020 biofuels and 2021 biodiesel that they were seeking comment on releasing more information about those receiving SREs — what EPA labeled information that is not confidential business information (CBI). That would include the petitioner’s name, the name and location of the facility for which relief was requested, the general nature of the relief requested, the time period for which relief was requested, and the extent to which the EPA granted or denied the requested relief.

EPA in an emailed statement said it will be exploring how it could “remove regulatory burdens that prevent marketplace entrance and growth” for non petroleum-based fuels, related to flexible fuel vehicles and a gasoline blend containing 85% ethanol. Link for details.

Market impacts. Conventional renewable fuel or D6 2019 Renewable Identification Numbers (RINs) lost 40% of their value late Friday afternoon on reports the EPA was set to make an announcement on 2018 SREs. EPA has not reallocated and is not expected to reallocate the mandate volumes that the small refineries would have been required to meet back into the program, which essentially reduces mandates and lowers biofuel demand.

Bottom line: The courts have clearly given the okay for these exemptions; actually, they criticized EPA in the past for not granting them. Corn and biofuel industry stakeholders have legitimate complaints, but many avoid the clear court statements and legal challenges on this topic. As for President Trump, he will have some explaining to do relative to his instructing both EPA Administration Andrew Wheeler and USDA Secretary Sonny Perdue to look into this topic and solve it. This development will follow Perdue wherever he goes.


 

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