December 08, 2022

EPA denies small refinery exemptions

WASHINGTON — The U.S. Environmental Protection Agency recently denied 36 small refinery exemption petitions for the 2018 compliance year.

EPA is still considering petitions from other refineries for compliance years ranging from 2016 to 2021.

The denials applied EPA’s new interpretation of the Clean Air Act SRE provisions, consistent with a U.S. Court of Appeals for the Tenth Circuit holding in Renewable Fuels Association et al. v. EPA.

The Tenth Circuit held that SREs may only be granted when a small refinery’s hardship is caused by compliance with the RFS program.

“The latest decision changes and remedies EPA’s prior approach to SRE decisions, under which EPA found basis to grant hardship exemptions where no hardship from RFS compliance existed,” the EPA stated.

“After reviewing more than a decade of Renewable Fuel Standard market data, public comments on a proposal EPA issued in December 2021, and confidential information submitted by petitioners, EPA concluded that none of the 36 2018 SRE petitions demonstrated hardship caused by compliance with the RFS program.”

Alternate Compliance

Simultaneous with the denial action, EPA is also taking action to provide an alternate compliance approach that allows 31 small refineries to meet their new 2018 compliance obligations without purchasing or redeeming additional RFS credits.

“EPA is granting this compliance flexibility because the agency has determined that there are extenuating circumstances specific to this set of petitions, including the fact that SRE petitions were previously granted,” according to the EPA.

Under EPA’s RFS program, a small refinery may be granted a temporary exemption from its annual Renewable Volume Obligations if it can demonstrate that compliance with the RVOs would cause the refinery to suffer disproportionate economic hardship.

Reaction

Farm and biofuel organizations responded to the EPA decision to reverse 31 SREs that were initially granted in August 2019 and expressed disappointment with EPA’s decision to allow refineries with previously-granted SREs to not have to take additional actions to meet their obligations under the RFS by blending more biofuel or purchasing additional Renewable Identification Numbers.

Biofuel and farm advocates had challenges the exemption in the D.C. Circuit Court of Appeals, forcing the agency to reevaluate its approval for select oil refiners to avoid their obligations under the RFS.

Leaders at Growth Energy, Renewable Fuels Association, National Corn Growers Association, Clean Fuels Alliance America, American Coalition for Ethanol and National Farmers Union released the following statement on the decision from EPA: “While this decision is an important step in reversing past abuse of refinery exemptions, the decision fails to remedy the economic harms the improperly granted 2018 SREs have already caused.

“Low-carbon biofuels are the single best tool to deliver immediate relief at the pump, strengthen U.S. energy security and protect the climate. EPA’s move to hold refiners accountable to the law is a welcome step toward getting the RFS back on track that, when applied to pending and future SRE petitions, would improve certainty in the marketplace and lead to more blending of American-made biofuels.

“However, EPA’s readiness to excuse individual refineries from their obligations to comply with 2018 blending requirements comes at the expense of our biofuels producers, farmers and American consumers.”

Michael McAdams, president of the Advanced Biofuels Association, an organization representing more than 40 global companies at the forefront of efforts to decarbonizes the transportation fleet and provide the low-carbon fuels of the future, supported the EPA ruling.

“Four years ago, the Advanced Biofuels Association filed the first lawsuit challenging the Trump administration’s decision to grant SREs to anyone and everyone as a means to undermine the RFS program and lower the value of the RINs,” McAdams said.

“According to Scott Irwin, the Lawrence J. Norton Chair of Agricultural Marketing at the University of Illinois, the Trump administration’s actions shifted $7 billion from the pockets of biofuels producers to — for the first time — many large refiners.

“We are delighted to see this nightmare finally put to bed by the Biden administration. Given the global circumstances facing the liquid transportation fuels industry today, EPA’s decision thoughtfully considers all stakeholders in both the renewable and refining industries.

“Further, EPA’s denial protects the future of the RFS while ensuring American consumers don’t pay more at the pump as a result of this decision. This decision sends a strong signal of support to our members, concluding a years-long saga of legal abuse and creating regulatory certainty for our industry to make the low carbon fuels of the future.”

Tom Doran

Tom Doran

Field Editor