EPA denies 36 RFS small refinery exemptions, grants compliance relief to 31 refiners

The U.S. EPA announced April 7 the denial of 36 small refinery exemption (SRE) requests from the Renewable Fuel Standard for compliance year 2018.

“Today, EPA is taking action to respond to an order from the U.S. Court of Appeals for the D.C. Circuit, which remanded 36 2018 SRE decisions taken under the RFS program and ordered EPA to issue new decisions by April 7, 2022,” the agency stated. “To meet this obligation, EPA is denying the 36 remanded SRE petitions for the 2018 compliance year.”

Despite the 36 SRE denials, EPA is granting compliance relief for 31 refiners, meaning they do not have to comply with their 2018 RFS obligations.

“Concurrent with today’s 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,” the agency stated. “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.”

Reactions from industry were mixed.

“EPA’s actions fail to acknowledge and repair the demand destruction over multiple years that the biodiesel and renewable diesel industry experienced,” said Kurt Kovarik, vice president of federal affairs for Clean Fuels Alliance America. “While on one hand EPA reiterates and reinforces its determination that the RFS does not cause hardship to refiners, on the other it continues to provide refiners unwarranted relief.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said, “The silver lining is that EPA has reaffirmed the Tenth 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. Yet we must also be honest that today’s action by EPA grants 31 RFS exemptions in all but name. The unjustified use of RFS exemptions by the Trump EPA was called ‘selling out our farmers’ by President Biden during the campaign, but now that demand destruction is allowed to stand. The bottom line is that today 31 refiners were released from their 2018 RFS obligations the same as had the exemptions been upheld. The 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.”

The American Soybean Association stated that, while the announcement is positive on its face, “EPA is allowing an alternative option for the 31 refineries impacted to meet their new 2018 compliance obligation without any further need to procure or redeem additional compliance credits. Those 31 SREs represent roughly 1.3 billion gallons of biofuels, demonstrating that SRE volumes can quickly add up and risk undermining the integrity of the RFS—and why EPA continuing to deny waivers is important to the biofuels industry.”

ASA President Brad Doyle added, “We appreciate EPA denying these waivers from 2018. While we wish the SRE petitions were resolved sooner, we are very glad EPA is working to remove the backlog of pending waiver requests and is requiring refineries to comply with more stringent hardship and economic impact reporting requirements.”

Michael McAdams, president of the Advanced Biofuels Association, said, “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. 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. Today, 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.”

EPA is still considering dozens of SRE requests from other refineries for compliance years ranging from 2016-’21.

For more information on the 36 denials, click here. For more information on the alternative compliance option for 31 refiners, click here.