Ethanol, Ag Urge Trump Biofuels Action

Ag, Ethanol Groups: Trump Rejection of Gap-Year RFS Waivers Just Beginning

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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number of biofuels promises on the table. (DTN White House photo by Nick Scalise)

OMAHA (DTN) -- EPA's decision last week to reject 54 so-called gap-year small-refinery exemptions to the Renewable Fuel Standard may have been a big victory for biofuels and agriculture producers.

Yet, leaders of biofuels and ag groups said during a press call on Wednesday the Trump administration has a long way to go to right the RFS ship.

EPA indicated it would reject another 14 gap-year exemption requests still with the U.S. Department of Energy for review.

Brian Jennings, chief executive officer of the American Coalition for Ethanol, said EPA action was needed but the administration still continues to fall short.

"I would say the unfortunate reality is that the Environmental Protection Agency has so badly mismanaged the RFS over the last three and a half years," he said.

"You think about it, so many ethanol promises, promises to do right by this industry have collected dust that I think too many folks misinterpreted last week's decision to reject some of these gap-year waivers is a significant turning point. It was not. It was a step in the right direction. But these gap-year waivers should never have been given credibility. They were really nothing more than an outrageous attempt by refiners, really a last-gasp attempt by refiners hoping to avoid the consequences of our victory in the 10th Circuit."

The U.S. Court of Appeals for the 10th Circuit in Denver ruled against EPA on Jan. 24, 2020, in a small-refinery exemptions case, essentially leaving the agency with little choice but to apply the decision nationally.

Three small refiners in the case have appealed to the Supreme Court, which usually accepts just 1% of about 9,000 cases annually. Several similar lawsuits are still pending.

Though the administration's denial of the 54 gap-year waivers was touted as a way for President Donald Trump to move a key election-year issue off of the table, the ethanol and ag groups said the administration hasn't lived up to a number of ethanol promises.

Kevin Ross, president of the National Corn Growers Association and a southwest Iowa farmer, said the EPA's denial of the exemptions was important.

"It was also really the only obvious answer," he said.

"We would consider it a new low by the oil industry to undermine the RFS, rewrite history with these gap-year petitions they were really just completely, completely off base in general. And so, I think the bigger concern for farmers is the real uncertainty that the waivers of these '19 and '20 compliance years that are still under consideration."

According to the EPA's RFS dashboard, the agency has 33 pending requests for exemptions for 2019 and 2020.

WHITE HOUSE MEETING

On Sept. 12, 2019, Trump convened a meeting at the White House to develop a plan to bolster the RFS. Joining the meeting were six Republican senators from Iowa, Nebraska and South Dakota, along with Vice President Mike Pence, economic advisor Larry Kudlow, budget guru Mick Mulvaney, U.S. Secretary of Agriculture Sonny Perdue and EPA Administrator Andrew Wheeler.

"By all accounts everyone left that meeting with the understanding that an agreement had been reached, to put the RFS back on track and to stabilize biofuel and agricultural markets," said Geoff Cooper, president and chief executive officer of the Renewable Fuels Association.

A memorandum from USDA and EPA was released on Oct. 4, 2019, memorializing a five-point RFS agreement.

"And unfortunately, one year later very little progress has been made towards the implementation of that five-point plan," Cooper said. "In fact, only one of the five promised actions from that Oct. 4 announcement has been accomplished to date."

That was the announcement of the Higher Blends Infrastructure Incentive Program, or HPIP.

The five-point plan included accounting for 31 small-refinery exemptions granted in 2019, in the next renewable volume obligations in the RFS. It also included initiating a rulemaking process to streamline E15 labeling and remove other market barriers.

The agencies also vowed to improve transparency in the market for renewable identification numbers, or RINs.

USDA indicated it would "seek opportunities through the budget process" to consider infrastructure projects to expand the availability of higher biofuel blends, as well as continue to address ethanol and biodiesel trade issues.

Cooper said the administration should reject remaining gap-year small-refinery exemption requests pending with the DOE, "immediately adopt" the 10th Circuit decision nationwide and apply it to 33 pending exemption requests for 2019 and 2020, as well as release a new RVO rule for 2021. The proposed rule should have been released in June 2020.

The new RVO, Cooper said, should include 500 million gallons of RFS volumes remanded in a 2017 court decision.

"And then finally EPA should ensure that the small-refinery exemption program is transparent, which is something that has been utterly lacking from the process," he said.

Matthew Morrison, outside counsel for the Renewable Fuels Association and partner at Pillsbury Winthrop Shaw Pittman LLP, said EPA really has no choice but to apply the 10th Circuit decision nationally.

"The decision is now the law of the 10th Circuit," he said, "and the capacity of small refineries in the 10th Circuit comprises about 31% of the small-refinery capacity in the United States.

"So, if EPA were to limit the decision to just the 10th Circuit you have an uneven playing field, which is contrary to EPA policies. Secondly, it is past precedent for the agency adopting circuit-court decisions."

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley