Iowa biofuel, ag groups explain outrage over EPA’s SRE deal

By Erin Voegele | October 16, 2019

Representatives of the Iowa agriculture and biofuels industries held a press briefing Oct. 16 to explain their outrage over the U.S. EPA’s Oct. 15 release of its small refinery exemption (SRE) relief rule, explaining the rule did not accurately represent the deal the White House and the EPA briefed them on earlier this month.  

The U.S. EPA issued a supplemental notice of proposed rulemaking Oct. 15 seeking comments on how it should project the volume of small refinery exemptions (SREs) in annual Renewable Fuel Standard rulemakings to set annual renewable volume obligations (RVOs). The rulemaking, which fell far short of biofuel industry expectations, also demonstrated EPA’s failure to follow U.S. Department of Energy recommendations regarding the approval of past SREs.

Release of the supplemental notice of proposed rulemaking followed an Oct. 4 announcement by the EPA in which it announced a deal had been reached related to the biofuel relief package promised by President Trump earlier this year. The EPA released few details publically on what the deal would include. The agency’s announcement, however, largely drew praise from biofuel producers, the ag community and elected officials representing Midwestern states.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, explained why those groups that initially praised the deal earlier this month slammed the proposed rule that was released yesterday. He said that ag and biofuel groups were briefed on the deal by the White House and EPA on Oct. 3. “In that briefing we were told specifically how we would return the integrity of the RFS…using a three-year rolling average of past actual refinery exemptions,” Shaw said.

“Hearing that mechanism was the absolute key that we had to hear to get behind that deal and to issue the very positive statement that we issued on Oct. 4 because it was real numbers with real accountability,” Shaw continued. “Unfortunately, the EPA reneged on that deal with the proposal they unveiled yesterday.”

In the supplemental proposed rulemaking, the EPA proposes to use a three-year rolling average of U.S. Department of Energy SRE recommendations, rather than actual exemptions. Unlike data on actual waived SRE volumes, DOE recommendations are not publically available and have largely been disregarded by the EPA in recent years during its process to evaluate and approve or deny SRE applications.

Data released by the EPA as part of the rulemaking seems to indicate that if the EPA would have followed DOE’s recommendations in past years—including its recommendations to grant partial exemptions—the volumes waived through SREs approved over the past three years would have been much lower than actually realized. The data shows the EPA followed DOE recommendations for compliance year 2015, providing a total exemption of 290 million RINs. There was, however, a significant mismatch between DOE recommendations and EPA approvals for compliance years 2016-2018.

For compliance year 2016, the EPA said the DOE recommended the approval of SREs equating to 440 million RINs. In actuality, the EPA approved SREs accounting for approximately 790 million RINs. Similarly, the DOE’s compliance year 2017 recommendation reached 1.02 billion RINs, far lower than the estimated 1.82 billion RINs finalized by the EPA. For compliance year 2018, for which several SRE applications are still pending, the DOE has to date recommended the EPA approve SREs accounting for 840 RIN million RINs, far lower than the 1.43 billion RINs worth of SREs already approved by the agency.

According to Shaw, the supplemental proposed rule contains at least two specific instances in which the EPA says it intends to follow DOE’s SRE recommendations in the future, but also reserves the right to disregard those recommendations if the agency feels there are other circumstances that need to be considered.

Shaw said proposal lacks certainty and transparency. As a result, it will not ensure that actual RFS blending obligations will be met. “The EPA proposal that was announced yesterday will not restart a single one of [the idle biofuel] plants because it does not tell the market that there is any certainty in what is going to happen moving forward,” Shaw said. “Instead we are told to trust the EPA.”