The Environmental Protection Agency announced the denial of 36 exemption requests from the Renewable Fuel Standard for compliance year 2018 but simultaneously granted compliance relief for 31 refiners, meaning they do not have to comply with their 2018 RFS obligations. The Renewable Fuels Association estimates the biofuels industry lost more than 4 billion gallons of demand due to the previous administration's actions of the Small Refinery Exemption program.
On Dec. 7, 2021, EPA proposed to deny 65 pending small refinery exemption petitions. The latest action considers 36 SRE petitions that were remanded to the agency by the U.S. Court of Appeals for the D.C. Circuit on Dec. 8, 2021. The D.C. Circuit ordered EPA to “issue new decisions” by April 7, 2022.
"EPA has determined that, if it were to require these small refineries to comply with their newly created 2018 obligations under the existing compliance scheme, the impact on the RFS program as a whole, in addition to the impacts on the individual small refineries, would be unacceptable due to the unavailability of sufficient RINs to satisfy these new obligations," EPA says.
Farm and biofuel groups 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 challenged the exemptions 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 Renewable Fuel Standard.
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.
“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,” shares Michael McAdams, president of the Advanced Biofuels Association, which represents more than 40 global companies at the forefront of efforts to decarbonize our transportation fleet and provide the low-carbon fuels of the future.
In August 2019, the Trump administration’s EPA approved an unprecedented 31 SREs for the 2018 RVO compliance year with only a cursory, two-page decision. The coalition consisting of the Renewable Fuels Association, Growth Energy, National Corn Growers Association, Clean Fuels Alliance America, American Coalition for Ethanol and National Farmers Union filed a petition in the D.C. Circuit Court challenging EPA’s decision. The coalition asked the court to stay the 2018 SRE case in November 2019 pending the outcome of related litigation in both the 10th Circuit and D.C. Circuit Courts.
In January 2020, the 10th Circuit ruled in Renewable Fuels Association et al. v. EPA that EPA has no power to ‘extend’ an exemption that had lapsed. The Court also held that EPA lacks the authority to grant an exemption based on hardships not caused by RFS compliance, and also found that it was arbitrary and capricious for EPA to ignore its own prior studies showing that refiners recoup RFS compliance costs.
Iowa Renewable Fuels Association Executive Director Monte Shaw says EPA’s reasons for letting the refiners off the hook range from concerns about the RIN carryover balance to the 2018 compliance deadline having passed.
“However, nowhere in the RFS does Congress stipulate that EPA needs to care about the RIN carryover balance more than expanding the real-world use of biofuels. And if reopening past compliance actions is such a concern, then it is hard to understand why the same EPA is proposing reopening the finalized 2020 RFS rule to lower RFS blend levels. Only in D.C. would the wiggle words in this rule be considered logic,” Shaw adds.
“While today’s 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,” the coalition of farm and biofuel groups note. “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.”
Shaw says, “The silver lining is that EPA has reaffirmed the 10th Circuit Court’s ruling that EPA lacked the authority to grant the exemptions in the first place. This rationale should be immediately applied to the other 60-plus RFS exemption requests that remain pending without delay.”