Queen for (75,000 Barrels or Less) a Day

FROM THE JULY ISSUE: Small refinery exemptions are helping the oil industry, hurting ethanol.
By Ron Lamberty | June 17, 2019

When Ronald Reagan ran for president 40 years ago, he often told the story of a woman the Chicago Tribune dubbed the “Welfare Queen,” to illustrate government waste and abuse. The woman drove new Cadillacs, wore furs and jewelry, and used multiple identities and dead veteran husbands to collect food stamps, Social Security, welfare and veterans’ benefits supposedly in excess of $150,000 a year. She was caught, convicted and went to prison in the ’70s over an $8,000 theft, and gained “legend” status by disappearing after serving her sentence.

Today, getting caught obtaining food stamps, welfare or other government benefits by providing misinformation about income, job status, or people living in a household, would require repayment of excess benefits along with potentially large fines. Depending on the amount involved, a person could get kicked off all government benefits programs for 10 years and serve up to five years in prison.

With that in mind, imagine the U.S. Department of Agriculture granting Supplemental Nutrition Assistance Program (the program formerly known as food stamps) benefits to people barely qualified under a single program eligibility requirement. Think about the government then ignoring reports those people—who said they couldn’t afford food for their family—were boxing up meals at a local food pantry and selling those meals along with groceries purchased with their new SNAP cards. Then, picture the fraudsters bragging about how much cash the scam brought in, while picking up their buddies’ dinner tab at a fancy restaurant.
Can you imagine government officials dropping by the dinner and saying, “Good for you! Don’t forget to apply again next year!?” Me neither.

Now, change the agency to the U.S. EPA, the program to small refinery exemptions (SREs) from the Renewable Fuel Standard, and the applicant to any owner of a refinery processing a meager 3 million gallons of oil a day (1.15 billion gallons per year) or less—even if the owner is one of the largest, richest companies in the world. Think about these SRE holders buying the ethanol they swore they couldn’t afford (after ethanol and renewable identification number prices crash when EPA admits granting the waivers) and selling the attached “buy ethanol, get free RINs” credits for cash—or holding them to avoid compliance in upcoming years. Picture lavish annual meetings and slick corporate reports detailing tens of millions of dollars in profits added to “disadvantaged” refinery bottom lines because EPA bought the sad stories.

It’s not hard to imagine, because it already happened. EPA even granted retroactive waivers to companies that said they couldn’t comply, but already did. If you’re like me, you can see Sen. Ted Cruz, R-Texas, EPA and oil companies high-fiving each other over windfall refiner profits paid for by gutting ethanol margins, while President Donald Trump distracts ethanol supporters by finally producing the shiny E15  waiver he’s been promising since he was candidate Trump.

EPA now parrots small refiners’ lawyers who claim the court review saying EPA can’t use “viability” as the sole test of hardship, actually means EPA must grant exemptions to small refiners showing any cost to comply—regardless of proportion. EPA apparently ignores refiner cost savings and production gains from producing lower-octane blendstock for ethanol blending, and higher margins refiners make, ostensibly to pay for RINs. In the real world, using ethanol lowers costs, but EPA has chosen to believe seasoned oil industry misinformation experts.

Maybe we should, too. EPA claims timing didn’t allow past reallocation, but two years of blanket SREs and a court ruling say they’re inevitable, right? Maybe EPA can crown its “Oilfare Queens” right up front this time and reallocate their gallons, as required by law.

Author: Ron Lamberty
Senior Vice President
American Coalition for Ethanol