Ethanol Blog

The head of the nation's largest ethanol interest group has asked EPA Acting Administrator Andrew Wheeler to account for biofuel gallons waived from the Renewable Fuel Standard in recent years, as part of an expected upcoming multi-year reset of the RFS.

The agency is reportedly on track to release a proposed rule in the spring, to reset RFS blending obligations for 2020-2022, as well as biomass-based diesel blending obligations for 2021-2022.

In a letter to Wheeler on Tuesday, Renewable Fuels Association President and Chief Executive Officer Geoff Cooper said that reset should account for a large volume of biofuels waived from the RFS.

The EPA proposal is expected to include reduced volumes of cellulosic ethanol and advanced biofuels based on lower-than-expected production capacity.

Cooper writes the reset also should include upward adjustments to future blending obligations for conventional renewable fuels.

That is needed, Cooper said, to account for 500 million gallons of renewable fuel "improperly waived from the 2016 standards" as required by the D.C. Circuit Court of Appeals' remand in Americans for Clean Energy v. EPA. Cooper said in the letter the EPA may already have a plan to incorporate the 500 million gallons improperly waived in Americans for Clean Energy v. EPA. The D.C. Circuit court ordered the remand more than 18 months ago.

In addition, RFA calls for the approximate 232 million Renewable Identification Numbers written off for Philadelphia Energy Solutions Refining and Marketing, LLC, as part of a bankruptcy settlement, as well as the 2.25 billion RINs waived in 48 small refinery exemptions granted in 2016 and 2017.

"As a result of these waivers or exemptions from required volumes, many ethanol plants have recently idled, shut down, or announced layoffs," Cooper said in the letter. "These compliance exemptions also have hurt demand and prices for American farmers. At a time when trade disputes are dampening export market opportunities, the EPA-induced disruption in domestic ethanol and corn demand is devastating."

Cooper said the waived gallons should be part of EPA's calculus, based on a provision of federal law that requires adjusted volumes to be "based on a review of the implementation of the program during (previous) calendar years" as well as six enumerated factors.

"Due to the waived or exempted volumes listed above, the RFS as implemented has not achieved the applicable volume requirements that EPA set in its annual rules," the letter said. "Furthermore, EPA has a "statutory mandate to ensure that those (volume) requirements are met."

On the Philadelphia Energy Solutions Refining and Marketing, LLC, bankruptcy, Cooper said the company was allowed to "evade compliance with a substantial portion -- approximately 360 million gallons -- of its 2016-18 renewable volume obligations. Although the company owed 467 million RINs for the 2016 and 2017 compliance periods, in addition to about 97 million RINs for the roughly three-month compliance period between Jan. 1, 2018, and the effective date of the settlement agreement."

The company was required to retire 138 million RINs for its 2016-17 compliance and 64.6 million RINs toward post-bankruptcy RVO. "Treating PESRM's RIN obligations as just another monetary claim that could be discharged for pennies on the dollar rather than as a regulatory obligation that must be complied with, EPA effectively waived the majority of those remaining volume obligations," the letter said.

On the small refinery exemptions, Cooper said "the practical result of these exemptions has been a flood of RIN credits onto the market, a dramatic collapse in RIN prices, reduced ethanol blending activity in 2018, and historically low ethanol prices."

Previously, EPA has adjusted applicable percentage standards upward to account for small refinery exemptions. However, Cooper said in the letter that "EPA now claims it intends to do so only when the small refinery exemptions are granted prior to the date that the standards are promulgated. This policy decision doesn't relieve EPA of its obligation to ensure the statutory volumes are met, however, even if that adjustment is made in subsequent annual rules.

"EPA should compensate for the lost volumes due to small refinery exemptions as part of the reset rule, particularly as the Reset Rule will establish volume requirements for more than one year. A multi-year rule would allow EPA to spread out restored exempted volumes over more than one year."

Read the letter here: https://ethanolrfa.org/…

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

Follow me on Twitter @toddneeleyDTN

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