Pruitt on Waivers: RIN Transparency Key

OMAHA (DTN) -- EPA Administrator Scott Pruitt told members of the House Energy and Commerce Subcommittee Thursday he wants to work with Congress to reform the Renewable Fuel Standard. However, he provided few answers as to why the agency approved a recent rash of small-refinery waivers.

Pruitt told the committee it was important to create transparency in the market for renewable identification numbers, or RINs, so as to reduce fraud and to understand what drives prices. RINs are biofuel credits used for compliance with the RFS. In addition, Pruitt told the committee that EPA continues to work on making E15 available year-round.

Pruitt revealed on Thursday that the agency has received more waiver requests already in 2018 than it did in 2017 and 2016, setting the 2018 number at "more than 30." If all the waivers were granted, it would be the highest number of waivers the agency has issued in a single year.

Rep. David McKinley, R-W.V., asked Pruitt what Pruitt could do to help small refiners who "can't handle RINs" costs. Small-refinery companies have cited high RIN costs as a reason for requested waivers.

Pruitt did not directly address why the number of exemptions have been on the rise, telling the committee transparency in the RIN market is the issue.

"Congress have been very helpful in providing a waiver," he said, pointing to a need to provide transparency in the RIN trading platform. "The RIN trading platform is causing concern. It is our hope we can chart a path forward. What's really driving this in many respects is RINs prices; escalating RINs prices and volatility in the market."

Rep. Gene Green, D-Texas, said he is concerned about EPA's unwillingness to provide additional details on small-refinery waivers.

"The EPA is a federal government agency and secrecy is not something I think EPA ought to be worried about," Green said.

Pruitt said, "What's really driving this in many respects is just the RIN prices, dropping to 40 cents and up to 85 cents, and the rest. You just see a lot of pressure on those small refineries in particular. It's just escalating RIN prices and instability in the market."

Green asked Pruitt if EPA grants waivers to facilities above 75,000 barrels per day. Only those refineries that produce 75,000 barrels per day or less qualify for waivers.

"We look at it on a facility-by-facility basis, and the statute says its 75,000 barrels; it's subjectively determined," Pruitt said.

RFS SUPPORT QUESTIONED

Rep. Dave Loebseck, D-Iowa, questioned Pruitt's support for the RFS.

"During the confirmation process, you stated support for the Renewable Fuel Standard," he said. "Over the past several weeks, information was revealed that makes me question that. I've heard from farmers across the country on this who are concerned. I'm extremely disappointed in the action, lack of transparency, and accountability in the process is unacceptable."

Loebseck said the EPA administrator is required to reassign RFS gallons waived to another obligated party.

"It is my understanding the process has happened as required under statute," Pruitt said, without providing details.

The EPA has drawn fire for a seeming lack of transparency on waivers dating back to 2016, including declining to provide details about the companies receiving waivers and the amount of biofuel blending excluded. When asked by numerous media outlets, including DTN, and by biofuel groups for details about those waivers, EPA has declined to provide information, stating that to do so would expose proprietary business information.

The agency granted nearly 40 RFS waivers to so-called small refiners since 2016, including about 25 in 2017 alone. Included in last year's total is a request by Andeavor, which posted a $1.5 billion profit last year. Also, the New York Times reported that oil giants Exxon and Chevron have requested waivers for 2018.

Waivers granted to small refineries in 2016 and 2017 may have prevented about 1.6 billion gallons of biofuels from entering the fuel supply, according to a review of EPA data performed by the Renewable Fuels Association.

Further, the price of D6, or conventional-ethanol RINs, has fallen by 50% since mid-February from about 70 cents to 35 cents.

E15 PROCESS

When asked why it was taking so long to move to year-round E15 availability, Pruitt said the agency is trying to "ensure the legal basis" is solid, because there "will be litigation." He said the agency plans to finish the review soon.

"I'm here to tell you farmers are very disappointed by this," Loebseck said. "I think this program, the waiver program, is in need of oversight. We need to make sure these waivers are not abused."

In recent weeks, President Donald Trump said publicly he supports agency action to allow year-round sales of E15.

"It is a legal determination, it is not a policy determination," Pruitt said about E15.

In addition, a number of lawmakers continue to draft legislation to reform the RFS. On Thursday, Pruitt indicated the agency is ready to work with Congress on the law.

"I really believe Congress' role in this is terribly important," he said. "We need Congress and our regulatory response together."

Rep. John Shimkus, R-Ill., said he agreed that RFS reform should come from Congress.

"I take this seriously," he said. "I believe no matter the real intentions of the law, the best way to settle this is by statue."

Other members of Congress, including Sen. Charles Grassley, R-Iowa, have said the RFS is not in need of reform.

Democrats on the House committee spent much of Thursday's hearing pressing Pruitt on travel and other expenditures that have raised ethics questions about his management of the agency. Pruitt also testified before the House Interior, Environment and Related Agencies Appropriations Subcommittee on Thursday afternoon.

"The administration has brought secrecy and scandal to EPA," Rep. Frank Pallone, D-N.J., said. "Clearly, you do not believe in EPA's mission. In December you promised to be transparent. I think every indication we have is you should resign."

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

Follow him on Twitter @toddneeleyDTN

(AG)

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