Ethanol Blog

The governors of five states have asked the EPA to waive Renewable Fuels Standard volume obligations citing the current COVID-19 national emergency, in a letter sent to the agency on Wednesday.

Governors Greg Abbott of Texas; Gary Herbert, Utah; Oklahoma's Kevin Stitt; Mark Gordon of Wyoming; and Louisiana's John Bel Edwards, said refiners in their states face financial burden as a result of oil-market disruptions caused by economic shutdowns around the world.

"Under this waiver provision for severe economic hardship, the U.S. Environmental Protection Agency must assess the condition of the refining sector as it finds it under current circumstances," the letter said.

"It must then determine whether the implementation of the current RVO, including costs associated with the recent tripling in the price of renewable identification numbers, present a clear threat to the industry under such circumstances; and then, upon determining whether harm inflicted on a sector as vital as refining and allied aspects of the refining supply chain, constitute an appropriate basis for granting a waiver under the cited provision."

Previous economic studies -- including EPA's own analysis -- have shown refiners pass RFS compliance costs onto consumers at the pump.

The governors said the macroeconomic effects of COVID-19 have suppressed international demand for refined products such as motor fuels and diesel.

The International Energy Agency recently cut its 2020 growth forecast for global oil demand, leading to the first quarterly contraction in more than a decade.

The governors said the IEA also revised down its outlook for global refinery runs.

"As the world economy responds to measures adopted to contain COVID-19, demand for refined products for air transportation, global delivery of goods, and petrochemicals decline -- and any rebound of necessity will occur only after containment restores predictable economic growth," the governors said.

"In the interim, the U.S. refining sector will face real and substantial difficulty. Not only is EPA bound to act on this waiver request, it must do so immediately if it is to avoid the precise severe economic harm this waiver provision is designed to address. The current RVO made assumptions regarding the ability of the U.S. refining sector to blend renewable fuels that simply no longer obtain. As our country comes to grips with this national emergency, continuing to implement the current RVO imposes an added obligation that would 'severely' harm the sector, and consequently harm the economy of the states and the nation."

The governors said EPA has "failed to grant waivers at the request of governors" for lack of documentation.

"However, current extraordinary circumstances represent a material change in condition since the last time EPA entertained such requests," the governors said.

"To be clear, CAA does not require that the waiver we request be limited to situations in which the harm associated with RFS compliance is the only source of stress on the economy. Currently, significant harm to the energy economy is expected to result from depressed demand for transportation fuel. But the 2020 RFS compliance obligations, in their current form, risk transforming the current severe economic harm to existential harm for some of the refineries in our states.

"We urge an expeditious answer to this request as sweeping economic impacts to industrial employment, consumer interests, and all aspects of the economy will be compounded by any delay."

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

Follow me on Twitter @toddneeleyDTN

(TN)

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