The American Petroleum Institute asked the EPA to reconsider the 2020 volume obligations in the Renewable Fuel Standard after a federal court ruled the agency mishandled small-refinery exemptions.
The ethanol and refining industries are waiting for the agency to decide whether it will apply nationally a ruling from the U.S. Court of Appeals for the 10th Circuit in Denver, that the agency inappropriately approved many SREs without merit.
In an April 6 petition letter to EPA Administrator Andrew Wheeler, API attorney Maryam Hatcher said the court's ruling means the agency has to redo 2020 volumes.
"EPA's 2020 RFS rule altered the agency's long-standing approach to accounting for small-refinery exemptions," the petition said.
In October 2019, EPA issued a supplemental notice and proposed to account for expected waivers in future RFS volume rules.
"According to the new definitions, which were finalized in the 2020 RFS rule, the standards now take into account the volumes of gasoline and diesel that are 'projected to be exempt' during the upcoming compliance year, even if such exemptions had not been granted as of the date of the final annual RFS rule, effectively shifting RFS obligations from exempt small refineries to other obligated parties," the petition said.
"EPA also announced changes to the way in which it would evaluate small-refinery-exemption requests. EPA estimated that, under its new approach, it would grant small-refinery exemptions totaling 7.26 billion gallons of gasoline and diesel volumes for 2020. EPA's new approach to accounting for small-refinery exemptions significantly increased the renewable volume obligations for other, non-exempt obligated parties from 10.92% total renewable fuel in the original proposal to 11.56%.
"EPA's change in course effectively 'reallocated' the renewable-fuel obligations associated with the projected small-refinery-exempt volumes to non-exempt obligated parties."
Geoff Cooper, president and chief executive officer of the Renewable Fuels Association, said in a statement to DTN the court's decision shouldn't be a reason to complete an RFS rewrite.
"API's petition is half right and half wrong. We agree with API that EPA should immediately implement the 10th Circuit Court's 'game-changing' decision nationwide, and that doing so would 'drastically reduce' the number of small refinery exemptions issued by EPA," he said.
"But API is wrong to suggest that implementation of the 10th Circuit decision necessitates a rewrite of the 2020 RVO. Due to illegally granted exemptions, the renewable fuels industry was robbed out of more than 4 billion gallons of RFS requirements from 2016-2018."
Cooper said EPA should "immediately adopt the 10th Circuit decision nationwide and leave the 2020 RVO as is."
That would result, he said, in the renewable fuels industry "recapturing a very small piece of the 2014-2018 blending obligations that were unceremoniously and illegally pilfered away."
The petition said the 10th Circuit decision "demolishes the foundations of EPA's projections."
The court ruled three refiners who were subject of the Renewable Fuels Association lawsuit, were not eligible for waivers in 2017 and 2018 because they had not previously received them.
"Per RFA's holding, the number of small-refinery exemptions should be drastically reduced," the petition said.
"Although it is not possible based on public data to determine the exact number of small refineries which have continuously maintained their exemptions since the DOE study in 2011, EPA data indicate seven refineries at most, while a Feb. 27, 2020, letter by 13 senators to President Trump indicates only two eligible refineries."
The petition said the court's decision "dramatically narrows" EPA's small-refinery exemption program, and "thus bears directly on EPA's decision in the RFS 2020 rule to reallocate projected small-refinery-exempt volumes to other obligated parties."
API asks the agency to institute a rulemaking to reconsider the reallocation-related portions of the RFS 2020 rule.
"In a revised 2020 rule, EPA should decline to reallocate volumes for small-refinery exemptions not granted as of the date of the final rule," the petition said.
"Alternatively, EPA should significantly reduce the projected small-refinery-exempt volume for 2020 in light of the RFA decision."
Todd Neeley can be reached at email@example.com
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