Small Refinery Waivers: Is EPA Breaking The Law?

"I really fail to understand what evidence they could have possibly provided to EPA, to substantiate a finding of disproportionate economic harm.” ( Farm Journal )

For the past two years the Environmental Protection Agency (EPA) has been issuing small refinery hardship waivers, which allow the awarded refiners to forgo blending ethanol with their fuels. Is EPA breaking the law by issuing such waivers? It depends on who you ask. 

“It’s absolutely outside of the intent of the Renewable Fuel Standard (RFS) and it’s outside of the EPA’s authority to grant these waivers without redistributing those accepted volumes to non-exempt parties,” says Geoff Cooper, CEO of the Renewable Fuels Association. 

Most recently the agency granted 31 hardship waivers. 

“If EPA intends to comply with the law, then yes, I think the agency has no choice other than to redistribute or reallocate the exempted volumes,” Cooper says. “So far, they have refused to do that, and that's why we have taken them to court over these exemptions.”

Senator Chuck Grassley (R-Iowa) says the EPA is not only undermining the Congressional intent in the RFS, but also accuses the agency of granting waivers even when the Department of Energy has not found hardship experienced by the refiner. 

EPA’s Bill Wehrum denies those claims.

“We, in conjunction with the Department of Energy, require a substantial amount of information to be provided by those who ask for the waivers, including very detailed information about the financial condition of these facilities and the companies that run them…whether there is hardship that warrants the issuance of an exemption,” Wehrum says. “So, I’ll just say, based on how you asked the question, we just categorically deny the assertion that we’re granting waivers to facilities that are not deserving.”

Except, Cooper says, refineries aren’t currently facing difficult economic conditions. “There is plenty of proof that the refiners aren’t experiencing hardship,” he says. 

For years, oil refiners have pointed to Renewable Identification Number (RIN) costs as proof of economic hardship. In the past, RINs have been nearly $1, however since the spring of 2018 they have been below 20¢. 

“So, if the measure of economic harm is RIN prices, then they have no argument, because we've had historically low RIN prices for almost two years now,” Cooper says. “So, I really fail to understand what evidence they could have possibly provided to EPA, to substantiate a finding of disproportionate economic harm.”

Cooper went as far as to call the hardship waiver consideration process a “sham.”

“It's a strong statement that this process is a sham, but I don't know how else to describe it,” he says. “The refining sector is doing just fine. The farm sector is hurting, and the ethanol industry is printing negative margin, bleeding red. Yet, these companies, these refiners are given a bailout or excuse from their legal obligations to blend.”

Transparency Disputes

When Andrew Wheeler took over the helm of the EPA as Administrator, he promised to provide an “abundance” of transparency around the hardship waiver approval process. The agency launched a new website that includes a dashboard specifically for waiver information. Still, Cooper says, there’s a cloak of secrecy around the process. 

“We don’t know anything about who those six refiners are or why their petitions were denied,” he says, referring to the six denied requests announced in early August. “We don't know anything about the 31 refineries that were granted exemptions. This process is no more transparent today than it was under Administrator Pruitt.” 

According to Pro Farmer’s Jim Wiesemeyer, Grassley wants RFS waiver information from Security and Exchange Commission (SEC) filings, which he says will highlight the extent to which major oil companies are benefitting from the biofuel usage waivers provided to small refineries. 

“We can’t let [oil companies] hide behind proprietary information,” Grassley told reporters Tuesday. “If they are getting help from the government, the government needs to know the basis for their help and the public needs to know.” 

Confidentiality provisions currently preclude EPA from disclosing specific information on individual small refinery exemptions granted.

RIN Resolution

The ethanol industry doesn’t want the EPA to completely do away with RIN waivers for economic hardship, Cooper says, they just want the EPA to honor the RFS.

“We have a law that has been enforced since 2007, and it put these very specific blending obligations in place,” he says. “As long as that law is on the books, EPA needs to enforce it. Does the law allow small refinery exemptions? Yes, it does. But it also says if you're going to exempt 31 small refiners, you need to take that lost volume and redistribute it to non-exempt refiners.”

So far EPA has refused to reallocate lost volume and therefore Cooper says, they're violating the law.

“The solution to us looks like following the law of making sure that that 15 billion gallons figure is implemented,” he says. 

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