WASHINGTON, D.C. — The U.S. Environmental Protection Agency denied the 54 “gap year” small refinery exemption petitions that would have allowed petroleum refiners to forego mandates to blend ethanol into gasoline.
The final rule is for small refinery exemption petitions for past compliance years, the so-called “gap-filling” petitions for the 2011-2018 compliance years.
The federal Renewable Fuel Standard requires that oil refineries blend billions of gallons of biofuels into fuel each year or pay a compliance fee. Small oil refineries can apply for waivers based on financial hardship.
Earlier this year, the U.S. Court of Appeals for the Tenth Circuit struck down three small refinery exemptions that EPA granted oil refineries in 2017 to two small refineries owned by HollyFrontier and one by CVR Energy.
According to the court’s decision, the EPA overstepped its authority to grant the waivers because the refineries had not received exemptions in the previous year. The court said the RFS is worded in such a way that any exemption granted to a small refinery after 2010 must take the form of an “extension.”
In its Sept. 14 ruling, EPA acknowledged that it would be completely inappropriate to grant a waiver to a refinery for a compliance obligation from many years ago, especially when the refinery had already fully complied with the obligation.
EPA also cited the Tenth Circuit Court’s decision from January as an important consideration in rejecting the waiver petitions.
Under the RFS, refiners blend about 15 billion gallons of ethanol into their gasoline annually or buy tradable credits from those that do. Small refiners have also been able to seek exemptions if they can prove financial harm from the RFS requirements.
Beginning in 2016, the EPA began granting more petitions to extend the small refinery exemption. EPA’s website indicates that while the agency granted 23 of 41 exemption petitions from 2013 to 2015 (56% approval rate, two petitions were declared ineligible or withdraw), the agency granted 85 of 94 exemptions from 2016 to 2018 (90% approval rate, five petitions were declared ineligible or withdrawn).
“This decision follows President Trump’s promise to promote domestic biofuel production, support our nation’s farmers and in turn strengthen our energy independence. At the EPA, we are delivering on that promise by following the rule-of-law and ensuring 15 billion gallons are blended into the nation’s fuel supply,” said EPA Administrator Andrew Wheeler.
Supporters
Ethanol and agriculture boosters expressed their support for the EPA ruling.
“Rejecting the petitions is simply the right thing to do, and today’s decision marks a big step forward toward fully restoring integrity to the RFS. This should serve as the final nail in the coffin of these gap-year petitions, and we are eager to put this dark and sordid chapter in the history of the RFS behind us once and for all,” said Renewable Fuels Association president and CEO Geoff Cooper.
“The petitions were never anything more than an absurd and bizarre attempt by the refineries to circumvent the Tenth Circuit Court’s decision. We wholeheartedly agree with EPA’s conclusion that ‘these small refineries did not demonstrate then or now that they experienced a disproportionate economic hardship from compliance with the RFS,’ as such a demonstration would be impossible for these refineries to make.
“We sincerely thank President Trump for stepping in to prevent the oil industry from running roughshod over the RFS and ensuring that blending requirements are not further eroded by unwarranted exemptions. We also extend our heartfelt gratitude to the many members of Congress who led the fight against these illegitimate waivers. We thank them for their dedication to protecting and defending the RFS against baseless attacks.”
Richard Guebert Jr., Illinois Farm Bureau president, also noted his appreciation to the Trump administration and EPA for denying the retroactive biofuel blending waivers.
“Our association fought hard to establish the RFS and strongly opposes the oil industry’s never-ending quest to chip away at its foundation. EPA’s ruling is consistent with a recent federal court of appeals decision, and we hope the agency will continue to resist any future efforts to undermine the law,” Guebert said.
The ruling was also welcome news to the National Corn Growers Association. However, NCGA noted, 14 gap-year waivers remain under required reviewed by the Department of Energy. The EPA also has 31 waivers under consideration for 2019 and 2020 RFS compliance years.
“Asking for waivers for nearly 10 years ago was a new low by the oil industry to undermine the RFS and rewrite history. Denying these petitions was the obvious answer and farmers are pleased to begin to move past this distraction,” said Kevin Ross, National Corn Growers Association president.
“While denial of these past-year waivers is obviously positive news for farmers and biofuel producers, we’re never going to have the certainty we need until the underlying waiver issue is fully resolved.
“Nearly a year ago, the president directed the EPA to follow the letter of the law and keep the RFS whole and, in January, the Tenth Circuit ruled the EPA exceeded its authority in granting waivers. The administration has yet to apply this decision to current waiver requests while corn farmers suffer suppressed markets and ethanol plants continue to have idled capacity.
“The solution is simple; the EPA needs to uphold the law, adhere to the Tenth Circuit decision, and follow through on the president’s commitment to farmers. Corn growers stand ready to work with the administration to uphold the RFS and continue to remove barriers to higher ethanol blends.”
Disagreement
Chet Thompson, American Fuel and Petrochemical Manufacturers president and CEO, did not agree with the EPA ruling, noting that the law says small refineries may petition for economic relief from RFS compliance costs “at any time.”
“The notion that this administration is ‘following the rule of law’ through its latest betrayal of U.S. refinery workers is laughable. We hope the president and administrator Wheeler feel a sense of responsibility when RFS compliance costs become even more untenable for refineries of all sizes. The legacy of this administration’s handling of RFS will be fewer union refining jobs, facility closures, reduced U.S. refining capacity, and increased imports of foreign biodiesel,” Thompson said.
“Telling ethanol interests everything they want to hear in a press release is not going to increase the amount of ethanol that gasoline can absorb or do anything to help farmers and ethanol producers. EPA knows this. And now they need to answer how they plan to correct the 2020 RFS volumes artificially inflated because of small refinery exemptions that will no longer be granted and how they will protect consumers and U.S. energy security by ensuring 2021 standards are achievable.”