Impact of COVID-19 on Agriculture

Small Refinery Waiver Plan Leaves Much to be Desired

News / FBNews October 22, 2019

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EPA’s supplemental proposal to the Renewable Fuel Standard fails to fully recognize the administration’s considerable use of small refinery waivers and the negative effect this has on the integrity of the RFS program and the entire renewable fuels industry, according to the American Farm Bureau Federation.

Less than two weeks before EPA issued its proposed supplemental rule, Administrator Andrew Wheeler received a warm response when he assured the biofuels industry the agency would “expand domestic energy production and improve the RFS program.” However, when the agency rolled out its proposed supplemental rule on Oct. 15, the applause abruptly ended.                

Rather than basing the projected volume of gasoline and diesel that would be exempt in 2020 on a three-year rolling average of actual exemptions, as EPA initially hinted, the agency is proposing that this three-year rolling average be based on the relief recommended by the Department of Energy. This is problematic because DOE’s projections for the volume of biofuels that will be exempted are often much lower than the actual exemptions.

“EPA’s plan fails to address the significant harm caused by small refinery waivers, but as this is a regulatory proposal, farmers and others involved in the biofuels industry can work through the public comment period to let EPA know what changes need to be made to solve the small refinery waiver problem,” explained Andrew Walmsley, AFBF director of congressional relations. 

EPA’s excessive use of small refinery waivers undermines the goals that were set by Congress to create a more robust renewable fuels industry and greater energy independence, AFBF has noted several times in comments to EPA on previous RFS-related proposals.

The organization is also very concerned about the impact on already struggling farmers, who are watching the demand for corn grown for ethanol drop as the renewable fuel volume obligations diminish with each exemption granted. Over the past year, as the SREs piled up and more ethanol plants announced they were idling production, USDA has reduced its estimate for corn used in ethanol – dropping it by nearly 275 million bushels from last year.

The next step in this process is for farmers and the many others involved in the production of biofuels to engage with EPA through the public comment process, which is expected to open soon and close at the end of November. Following the public comment period, EPA will issue updated standards for 2020 and 2021 renewable volume obligations. Many in the biofuels and agriculture industries – including corn-state lawmakers – hope the new standards will fully capture the actual use of small refinery waivers and restore the integrity of the RFS program.

This Market Intel article provides in-depth analysis of the effects of small refinery waivers.

Small Refinery Exemptions

The Renewable Fuel Standard includes a provision to temporarily exempt small refineries – refineries with an average crude oil input of less than 75,000 barrels per day – from their renewable fuel volume obligations. Refiners submit a petition for exemption to EPA. The agency may grant the permit only if, using evidence provided in the petition for exemption, it determines that “disproportionate economic hardship” exists for the refinery in that year.

In recent years, the number of SREs has increased dramatically, which is problematic because it means refiners blend fewer gallons of renewable fuels into gasoline.

Between 2013 and 2015, EPA granted no more than eight waivers for any given year. The current administration retroactively approved 19 waivers for 2016, then proceeded to grant 35 waivers in 2017 – exempting a total of 1.82 billion gallons that year, a 957% increase from 2013. In 2018, 31 exemptions – amounting to 1.43 billion gallons of biofuel – were granted. In total, over the prior three years, more than 4 billion gallons of renewable fuel obligations were exempted.

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