EPA Refiner Rules Challenged

OMAHA (DTN) -- The ethanol industry and supporters in agriculture filed a formal petition on Monday with the Environmental Protection Agency (EPA) to change its regulations to account for lost gallons of renewable fuels because of EPA's small refinery exemptions.

The battle between biofuel supporters and EPA has gone on for months as the agency continues granting an "unprecedented number of retroactive small refinery exemptions," as biofuel groups noted in their news release.

The petition was filed after several ethanol and farm groups filed a lawsuit last week challenging three of the small-refinery exemptions. The lawsuit, filed in the Tenth Circuit Court of Appeals, argues those exemptions were made "under unusually clandestine proceedings" for refineries in Oklahoma, Wyoming and Utah.

EPA has been granting exemptions for prior-year Renewable Fuels Standard (RFS) obligations for these refineries, but EPA has no rules or means to "true up" the RFS obligations for these retroactive exemptions. Therefore, the volume of gallons exempted ends up lost.

The petition was filed by the Renewable Fuels Association, American Coalition for Ethanol, The Biotechnology Innovation Organization, Growth Energy, the National Biodiesel Board, National Corn Growers Association and National Farmers Union.

"EPA Administrator Scott Pruitt has had a fire sale on small refiner exemptions for anyone with a stamp and an envelope, making a mockery of the President's commitment to a 15-billion-gallon RFS for conventional biofuel. This must end. We take no pleasure in having to litigate to protect the integrity of the RFS, but it appears we have no other recourse," said Bob Dinneen, chief executive officer of the Renewable Fuels Association.

The coalition notes in the petition that EPA has granted more than two dozen refinery exemptions in recent months, "most of them seemingly retroactively." The exemptions, according to news reports, is about three times the amount granted in prior years. The result has been to drive down the Renewable Identification Number (RIN) blender credits, which is "helping the oil industry reduce compliance costs."

At the same time, some significantly large and profitable petroleum companies have applied for, and been granted, exemptions by EPA for their smaller refineries.

The full extent of EPA's exemptions is also unknown, as EPA has not publicly disclosed how many exemptions it has granted. EPA has not responded to Freedom of Information requests, including one by DTN/The Progressive Farmer, nor has EPA responded to inquiries from Congress about the number of exemptions and volume of biofuels displaced.

"These lost volumes are having a negative effect on the nation's corn growers at a time when net farm income is projected to hit its lowest point in 12 years," said Kevin Skunes, president of the National Corn Growers Association and a North Dakota farmer. "When EPA waives these volumes, that translates into lost demand opportunities for corn growers, who expect that EPA should implement and enforce the RFS as intended by Congress."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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