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RFA: EPA’s management of RFS small refinery exemptions troubling

Gromit702_iStock_Thinkstock US Environmental Protection Agency building plaque
In a letter to Administrator Pruitt, Renewable Fuels Assn. says small refiner exemptions threaten to undermine integrity of RFS.

There is a troubling “lack of transparency” in the Environmental Protection Agency’s management of the Renewable Fuel Standard’s (RFS) small refinery exemption provisions, according to a letter sent to EPA Administrator Scott Pruitt by the Renewable Fuels Assn. (RFA). The letter from RFA president and chief executive officer Bob Dinneen warns that “an ill-conceived and unauthorized expansion of this exemption could destabilize the market for renewable fuels and undermine Congress’ goals for the RFS program.”

EPA has the ability to exempt small refineries with throughput of no more than 75,000 barrels of crude oil per day from RFS obligations if they demonstrate that the program would lead to “disproportionate economic hardship.” EPA, in consultation with the U.S. Department of Energy, examines requests for the exemption on a case-by-case basis.

In the past, EPA has generally exercised restraint and judiciousness in issuing exemptions for small refiners, presumably because there is little or no evidence that the RFS itself is causing disproportionate economic hardship. However, recent reports suggest that EPA has received requests for exemptions from dozens of small refiners, and RFA believes the public has a right to better understand EPA’s decision-making process for granting or denying exemption requests.

“Although EPA has indicated that it has evaluated a dozen petitions for exemption for 2016, we are not aware of any instance in which EPA has been willing to disclose any data about the total number of petitions it received and granted for subsequent years, including 2018,” Dinneen wrote.

“EPA recently indicated that a congressional directive to follow the Department of Energy’s recommendations for exemptions ‘could impact how EPA evaluates small refinery hardship petitions and the number and magnitude of exemptions granted.’ It would be disappointing, to say the least, if EPA now began to increase the number and magnitude of exemptions granted a decade after the program began,” Dinneen noted.

“As EPA re-evaluates its position of what constitutes a ‘disproportionate economic hardship’ to a small refinery, we hope that EPA will remain true to its previous determination in the 2017 (RFS) final rule that ‘obligated parties, including small entities, are generally recovering the cost of acquiring the credits ... necessary for compliance with the RFS standards through higher sales prices of the petroleum products they sell,” he continued.

In the interest of transparency and public participation, Dinneen’s letter requested that the agency provide more information on the following:

To provide greater certainty for both renewable fuel producers and obligated parties, the RFA letter suggested that EPA should establish an annual cutoff date for receiving and processing any small refinery exemption requests and ensure that any exempted volumes are proportionally reallocated to the blending obligations for non-exempt refiners. Alternatively, the agency could continue granting hardship exemptions in the year they are received but adjust the total gasoline and diesel percentage standards in the subsequent calendar year to offset the reductions.

“The renewable fuels industry and obligated parties deserve greater clarity on the criteria EPA will apply to small refinery petitions going forward,” Dinneen concluded.

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