EPA RFS notice draws criticism from ag groups
Less than two weeks after the Trump administration’s well-received promise to address the devastating impact small refinery exemption (SRE) waivers were having on renewable fuel demand, the EPA on Oct. 15 released a supplemental notice of proposed rulemaking for the Renewable Fuel Standard program, which received a much less favorable response.
EPA’s initial statement, in which Administrator Andrew Wheeler said farmers could count on the 15-billion-gallon ethanol requirement for 2020 under the RFS statute, was somewhat vague, but still widely interpreted by the biofuel and agriculture industries as a step in the right direction. A week and a half later, many of the same groups that had applauded the administration’s RFS efforts were expressing consternation at the agency’s actual proposed plan.
The consensus among the industry is this plan did not reflect the original announcement to project SREs in future years by using a three-year average of past SRE allocations, and instead proposed weighting SREs by partial exemption recommendations made by Department of Energy scores – ultimately likely to reduce SRE projections and undermine the compromise between the biofuel and crude oil sectors weeks ago. This recent proposal falls short of EPA’s initial announcement by not adequately addressing the harm caused by the SREs, and it is understandable that so many are frustrated by what now appears to be a bait and switch.
The U.S. Renewable Fuel Standard includes a provision to temporarily exempt small refineries from their renewable fuel volume obligations. A small refinery is defined as having an average crude oil input of less than 75,000 barrels per day. 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. Congress provided all small refineries with a temporary exemption from the RFS from 2007 through 2010, and that exemption was later extended by two years in connection with a DOE study on the issue.
The supplemental notice does not change the proposed RFS volumes for 2020 and 2021. Instead, it seeks comment on adjustments to the way annual renewable fuel percentages are calculated. The initial announcement hinted that EPA would project the volume of gasoline and diesel that would be exempt in 2020 due to small refinery exemption based on a three-year rolling average of exemptions. While the three-year average would not totally reallocate the lost gallons, it was a step in the right direction and was supported by the biofuels and agricultural industry stakeholders.
The biofuel and agriculture industries’ attitude changed from one of praise in anticipation of the administration’s expected action to address the harm caused by SREs, to outright dismay less than two weeks later when EPA released its supplemental notice. By proposing to utilize DOE-recommended exemptions instead of actual exemptions in accounting for the billions of gallons of ethanol lost to SREs, this fix does little to restore the demand destruction caused by SREs and further undermines the RFS. Many in the industry feel that this supplemental notice was equivalent to a bait and switch and does not live up to the promises made in the administration’s initial announcement.
The next step in this process is for biofuel and agricultural industry stakeholders to engage with the 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 RVOs – one that many in the biofuels and agriculture industry – including corn-state lawmakers -- hope will revert back to original balanced approach to account for SREs by fully capturing historical SREs granted.
To read AFBF’s full Market Intel report on the EPA’s supplemental notice, visit https://gfb.ag/19RFSsuppnotice.