US EPA rules on 175 pending RFS small-refinery exemption petitions

U.S. EPA announced Aug. 22 its decisions on 175 individual small-refinery exemption (SRE) petitions from 38 refineries seeking an exemption from their Renewable Fuel Standard obligations for the 2016-’24 compliance years.

In consultation with U.S. DOE, EPA said it reviewed all the information submitted by each individual refinery in support of its petition.

After “careful consideration of all statutory factors” and the information submitted by the refineries, EPA said it is granting full (100 percent) exemptions to 63 petitions, granting partial (50 percent) exemptions to 77 petitions, denying 28 petitions and determining seven petitions to be ineligible.

Source: U.S. EPA

The agency said its final actions on the pending SRE petitions “are based on the legal and factual analysis presented herein, after consulting with DOE, and considering the DOE small-refinery study and ‘other economic factors.’”

EPA describes its evaluation, decision-making process and how it will implement SRE decisions when an exemption is granted in the 28-page document.

In addition, the document articulates the status of 34 SRE petitions from 31 refineries for the 2016-’18 compliance years.

The agency explained that it is reaffirming the policy it set in the first Trump administration through the 2020 renewable volume obligation (RVO) rulemaking, granting a 50 percent partial-relief exemption when a small refinery has demonstrated that it faces partial hardship.

Under DOE’s 2011 small-refinery study, small refineries would have been denied any relief despite demonstrating partial hardship.

“With today’s action, EPA is getting the SRE program back on track with an approach that recognizes some small refineries are impacted more significantly than others and that EPA’s relief should reflect those differences,” the agency stated.

EPA is also reaffirming a policy to return renewable identification number (RIN) credits, previously retired for compliance when a small refinery receives an exemption for a prior compliance year.

Under the RFS program, RINs have a two-year window for use, covering the compliance year in which they were generated and the following compliance year.

“Therefore, while 2022 and earlier vintage RINs are not eligible for use to meet the open 2024 compliance obligations or future obligations, these vintage RINs can be used to demonstrate compliance for prior compliance years consistent with their two-year window,” EPA stated. “Ultimately, this means that the 2022 and earlier vintage RINs will not impact the number of RINs available to meet 2024 and future compliance obligations and are not expected to impact demand for biofuels.”

EPA noted that these decisions are final agency actions.

Lastly, EPA said it will submit a draft supplemental proposed rule to the Office of Management and Budget on the proposed reallocations of the 2023 and later compliance year exempted volumes.

The agency said it does not plan to propose reallocation of any of the exempted volumes for any SREs from 2016-’22 “in light of the limitation on their potential use.”

EPA also said it will be providing updated information on how the agency intends to project SREs for 2026 and 2027 in the context of establishing percentage standards for those years.

“The proposed adjustments will help ensure that refineries blend the intended volumes of renewable fuel into the nation’s fuel supply in 2026 and 2027 after accounting for the SREs granted for 2023 and 2024 in today’s actions and projected SREs granted for 2025-’27 in Set 2,” the agency said. “The supplemental proposal will seek to balance the goals of the RFS in supporting the production and use of renewable fuels while taking into account economic impacts, following the law, and ensuring opportunity for stakeholder comment.”

Industry reaction

Clean Fuels Alliance America expressed wariness of EPA’s award to refiners of more than 1.4 billion RINs from compliance years 2023 and 2024 to be used for the delayed compliance deadline for 2024.

“EPA indicated it will propose a supplemental rule in the coming month to consider reallocating the associated RIN gallons and address the impact on the recently proposed 2026-’27 RFS volumes,” Clean Fuels stated. “Clean Fuels looks forward to working with EPA to quickly finalize this proposal, which will delay the finalization of the 2026 and 2027 rule.”

Kurt Kovarik, Clean Fuels’ vice president of federal affairs, said, “EPA’s course correction on RFS small-refinery exemptions creates fresh uncertainty for America’s farmers and biodiesel, renewable diesel and SAF producers. We look forward to working with the agency to ensure today’s decision does not unwind the strong signal of support issued in June through robust RFS volumes meant to drive growth and recognize investment in domestic fuels and American agriculture.”

Clean Fuels noted that, in the recently proposed RFS volumes for 2026 and 2027 and draft regulatory-impact analysis, EPA reiterated that its analyses consistently show “all obligated parties—including small refiners—fully recover the costs of RFS compliance” through fuel sales.

Kovarik added, “EPA’s announcement conflicts with its consistent finding that small refiners are not facing disproportionate economic hardships from RFS compliance. Refunding retired RINs has the potential to undercut current markets for domestic biodiesel, renewable diesel and SAF as well as for American oilseed crops and other feedstocks. This announcement comes just as farmers begin planning to harvest the year’s soybean crop, which is expected to achieve a record-setting yield. We urge EPA to ensure that small-refinery exemptions do not undermine the market for farmers and clean-fuel producers.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said EPA’s Aug. 22 action is a “big step forward” in getting SRE uncertainty out of the market.

“While we can quibble with the justification of the SREs granted, the EPA was spot-on in reissuing the same retired RFS credits back to the refiners who received an exemption,” he said. “This is consistent with past actions when the shoe was on the other foot and is in line with the overall goals of the RFS. One absolutely vital question remains—how or if the SREs from 2023 to 2025 will be reallocated. That is a 2-billion-gallon uncertainty hanging over the market and the pending RFS blending rule for 2026 and 2027.” 

Shaw said “full and complete reallocation of the 2023 and newer SREs” is vital.

“In the end, that will determine whether the EPA upholds President Trump’s commitment to the RFS and to American farmers,” Shaw said. “If true reallocation does not occur, then EPA is effectively reducing the already low RFS blending levels for 2025. IRFA was heartened by EPA’s announcement today that it will propose reallocating the exempted volumes. We now anxiously await EPA’s reallocation proposal, at which time we will be commenting in the strongest possible terms that reallocation of every SRE gallon must occur, and we will implore the EPA to end the SRE uncertainty before finalizing the 2026-’27 RFS rule.” 

To avoid SREs effectively lowering the blend level established by EPA, the law calls on EPA to estimate the amount of SREs likely to be granted and to factor this into the RFS blending level formula each year—a process referred to as “reallocation.”

According to IRFA, reallocation essentially upholds the RFS blending level while shifting any exempted obligation from those parties to the obligated parties that did not receive exemptions. 

“IRFA has loudly applauded the Trump administration and the EPA for the proposing record-high RFS blend levels for 2026 and 2027,” Shaw said. “We would hate to see these volumes rendered meaningless due to billions of gallons of unreallocated SREs. So while we greatly appreciate that the Trump administration has signaled they will reallocate 2023 and newer refinery waivers, we must examine those details. At the end of the day, the penalty for the failure of the previous RFS rules under the prior administration to include SRE forecasts should not be paid solely by renewable fuels producers. The integrity of the RFS depends on it.”

Michael McAdams, president of the Advanced Biofuels Association, said, “We are grateful to see EPA take action addressing the extensive backlog of SREs. The Advanced Biofuels Association is also pleased that the agency plans to prepare a supplemental proposed rule for the reallocation of the exempted volumes for those years where compliance is yet to be demonstrated as well as how to account for exemptions in future years.”

McAdams noted that exemptions have a significant impact on the value of RINs.

“When RIN values drop, the entire advanced biofuels market is destabilized and put at risk, significantly impacting consumers downstream,” he said. “The Advanced Biofuels Association looks forward to reviewing the proposed rule for reallocation and forecasting adjustments that can strengthen the market for all parties.”

Growth Energy CEO Emily Skor said, “With more than 140 granted refinery exemptions, today’s [SRE] decision alone does not give farmers and biofuel producers the certainty they need. It is imperative that EPA reallocates each and every exempt gallon in a forthcoming rule to mitigate the potentially devastating impact on biofuel demand. We appreciate EPA’s commitment to issue a rule that ensures promised homegrown biofuel gallons reach the marketplace and upholds the administration’s commitment to American energy dominance.”

The Renewable Fuels Association said although it continues to question whether these SREs are truly justified, the organization noted that EPA’s approach for implementing these exemptions “appears reasonable” and “should not disrupt the marketplace or reduce actual renewable fuel consumption.”

RFA President and CEO Geoff Cooper said, “While RFA continues to doubt that the small refineries receiving exemptions today truly experienced ‘disproportionate economic hardship’ due to the RFS, we are pleased to see EPA taking an approach to implementation of these exemptions that is minimally disruptive to the marketplace and affirms the agency’s intent to reallocate renewable fuel volumes lost to SREs. We appreciate that EPA is focused on an approach that maintains stability in the marketplace and ensures finalized annual volumes under the RFS are maintained. The exemptions granted today should have little or no effect on current and future levels of renewable fuel production and use. It is critical, however, that the renewable fuel blending volumes associated with SREs for 2023 and 2024 are fully reallocated.”

Cooper added that in the days ahead, RFA will further analyze EPA’s new approach and rationale for determining disproportionate economic hardship.

“According to EPA’s previous analysis, all refiners—both small and large—recoup their RIN costs when they sell gasoline and diesel,” he said. “Thus, there is no credible evidence that small refiners are disproportionately affected by RFS compliance, or that the financial impact of RFS compliance rises to a level anywhere close to ‘economic hardship.’ In any case, SREs were always intended to be a temporary measure and a bridge to compliance—not a permanent handout. Small refiners have now had two full decades to adapt their operations to comply with the RFS.”