EPA Needs to Reallocate Gallons from RFS Waivers

FROM THE OCTOBER ISSUE: Incoming RFA President and CEO Geoff Cooper addresses the small refiner exemptions issued by the U.S. EPA last year, and how they affect the ethanol market.
By Geoff Cooper | September 06, 2018

The U.S. EPA remains committed to meeting the statutory deadline for finalizing the 2019 Renewable Fuel Standard renewable volume obligations (RVOs) by Nov. 30. While that’s good news, we hope the final rule accounts for the significant damage the small refiner exemptions have caused to the ethanol industry and farmers across the country. Otherwise, the annual requirement for conventional renewable fuels like ethanol will be rendered meaningless and will stand in opposition of President Donald Trump’s support of a strong RFS.

In late June, EPA proposed a total renewable fuel volume of 19.88 billion gallons, of which 4.88 billion are advanced biofuel, including 381 million gallons of cellulosic biofuel. That leaves, on paper, a 15 billion-gallon requirement for conventional renewable fuels like corn ethanol.

But issuing small refiner exemptions after the RVO rule is finalized—which EPA did for the 2016 and 2017 RVO rules and what the agency could do for the 2018 rule—essentially reduces the actual required blending volumes to levels below those specified in the final rule. We explained that in comments to the agency on the 2019 RVO proposal. “Thus, we do not consider the volumes that appear in the proposed rule to be authentic, meaning the preamble’s analyses of the impacts of the 2019 proposed volumes are flawed and indefensible,” RFA wrote to EPA in comments on the proposal.

Specifically, EPA has acknowledged granting 49 retroactive exemptions from the RFS program to small refineries in 2016 and 2017 without adjusting the applicable percentage obligation to shift those volume obligations to nonexempt obligated parties. “The agency’s clandestine use of small refinery exemptions and its refusal to account for them reveals that its proposed RVOs for 2019 are neither reliable nor trustworthy. However EPA justifies its reduction of cellulosic and advanced volumes, EPA’s ostrich-like approach to retroactive small refinery exemptions all but ensures—in direct contravention of the statute—that the required volumes for 2019 will not be met,” RFA wrote.

The small refiner waivers have collectively resulted in a significant decline in demand for biofuels and have cost U.S. corn growers, ethanol producers and ethanol blenders more than $5 billion in economic losses, according to recent RFA calculations. These waivers are not only creating demand destruction, but are in direct conflict with the assurances of Trump. While campaigning for president, he said EPA should ensure that biofuel blend levels match the statutory level set by Congress, and has since repeatedly stressed his support for a strong RFS.

Additionally, during an Aug. 1 hearing by the Senate Environment and Public Works Committee, EPA Acting Administrator Andrew Wheeler said he does believe the RFS should be implemented in a manner consistent with the original intent of Congress. Clearly, lowering the conventional ethanol RVO below the statutory level through illegal waivers is not consistent with Congressional intent.

What can be done? We are asking EPA to “ensure that the RVOs are administered in a manner that is consistent with the statutory purpose of the program” by accounting for the small refiner waivers prospectively, RFA noted in its comments to EPA. In fact, EPA acknowledged it has the authority and obligation to do so. “In a draft of the proposed rule that was submitted to the White House Office of Management and Budget for interagency review, EPA properly included projections of exempted volumes of gasoline and diesel from small refineries. The effect of including these exemptions in the RVO calculation is to increase the RVO percentage for remaining obligated parties, ensuring that the statutorily specified volumes of renewable fuel are in fact blended with gasoline and diesel. However, the administrative record shows that just days before the proposed rule was made public, EPA inexplicably deleted the provisions that would have effectively reallocated the projected small refiner exemptions,” RFA noted.

The RFA will continue to work with EPA to ensure the final 2019 RFS RVO reflects the statutory intent of the rule. Consumers will only see the full economic, energy-security and environmental benefits of the RFS when it is implemented as Congress intended.

Author: Geoff Cooper
Incoming President and CEO
Renewable Fuels Association