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Biofuel industry upset over RFS waivers given to larger refiners

EPA provides large refiner with "small refiner" RFS waiver and, in turn, limits demand.

The Environmental Protection Agency has exempted several refineries owned by one of the nation’s largest oil refining companies, Andeavor, from compliance with the renewable volume obligations (RVOs) of the 2016 Renewable Fuel Standard (RFS), according to a report in Reuters. The news outraged biofuel supporters, who said it undermines the RFS.

The exemption releases three of Andeavor’s refineries -- two in North Dakota and one in Utah -- from their 2016 RFS obligations.

“If the reporting is accurate, it appears EPA granted a secret waiver that is legally reserved for small refiners to one of the largest oil refining companies in the country,” Sen. Chuck Grassley (R., Iowa) said. “If refineries are being allowed to retroactively get out of the renewable volume obligations the EPA assigned them in November, that fundamentally undermines the Renewable Fuel Standard. It would also amount to a massive government handout to a big corporation that made billions in profits just last year. Giving big corporations like Andeavor a free pass when other companies are required to follow the law of the land isn’t just unfair; it may be illegal.”

According to EPA’s definition of a small refiner economic hardship waiver, it is meant for small refiners producing fewer than 75,000 barrels per day and “may only be granted if EPA determines, based on supporting evidence in the petition, that compliance with Renewable Fuel Standard obligations will impose disproportionate economic hardship on the refinery in the year for which the exemption is requested.”

Biofuel industry groups questioned how Andeavor’s 2017 net profit of $1.5 billion constitutes "disproportionate economic hardship" for a "small" refiner?

Renewable Fuels Assn. (RFA) president and chief executive officer Bob Dinneen said, “It appears the agency has initiated a fire sale on RFS demand. Providing a small refiner waiver to a company like Andeavor is laughable and abandons the commitment of President (Donald) Trump to protect the RFS. This is an outrageous abuse of the statute.”

Kevin Skunes, president of the National Corn Growers Assn., said granting these waivers significantly reduces the number of gallons of fuel blended with ethanol, which hurts rural economies and the nation’s corn farmers. “When refiners aren’t meeting their blending obligations, corn farmers pay the price,” Skunes said.

In November 2017, nearly two years after EPA finalized the 2016 RVOs, the agency disclosed that it had exempted at least 14 small refiners from the 2016 RFS requirements, amounting to at least 515 million renewable identification numbers being removed from the total 2016 obligation and effectively reducing the RVO. “This is clearly intentional demand destruction and a subversive attack on the RFS,” according to RFA.

“Any claims the RFS is negatively impacting the oil industry are absurd, much less the fifth-largest refiner in the country, which posted a profit of nearly $1.5 billion last year. Suffice it to say, we are exploring all our options to return the RFS to what the statute intended and what the President has supported,” Dinneen added.

Biofuel supporters questioned EPA’s transparency on the action.

Dinneen said, “This is yet one more action in a series of disturbing moves made after the final RVOs were issued. These latest actions have been under the cover of darkness, with no transparency whatsoever. To date, EPA has still not disclosed which refiners received exemptions from 2016 or 2017 RFS obligations. No one really knows how far these exemptions go or how many total companies have received these waivers.

American Coalition for Ethanol CEO Brian Jennings added that since EPA refuses to disclose which refiners get these RFS exemptions, it blurs the transparency of the renewable identification number market, providing an advantage to refiners receiving waivers. “With nearly 30 small refiner exemptions pending, it appears EPA’s priority is not to fix the outdated Reid vapor pressure restriction on the year-round use of E15 but, rather, to unravel the RFS for refiners,” Jennings said.

Jennings added that when the Obama Administration unlawfully took the RFS off track, the coalition was forced to sue. “As the U.S. Court of Appeals for the D.C. Circuit ruled in Americans for Clean Energy et al. vs. EPA, the ‘intent of the RFS’s increasing requirements are designed to force the market to create ways to produce and use greater and greater volumes of renewable fuel each year.’ Waiving RFS obligations based on ethanol use thresholds violate the intent of the RFS and invite litigation,” he said.

Growth Energy sent a letter Wednesday to EPA Administrator Scott Pruitt condemning the decision to award a small refinery waiver to one of the largest refiners in the U.S. and demanding a moratorium on waivers being issued by EPA. Growth Energy CEO Emily Skor stated, “We ask that EPA immediately cease issuing waivers and pause any waiver applications being considered until the agency conducts a full, transparent public comment process to help assure all stakeholders that the new expansion of small refinery waivers are consistent with the goals of the RFS."

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