EPA Waivers Total 2.25 Billion Gallons

Iowa Sen. Grassley Suggests EPA not Following Administrative Procedures Act

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
Connect with Todd:
Though the EPA proposed an increase in biofuels volumes, there continues to be concern about how the agency issues waivers. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- The amount of biofuels gallons lost to small refinery waivers was worse than many had estimated.

The EPA granted waivers to the Renewable Fuel Standard in 2016 and 2017, totaling 2.25 billion gallons of biofuels, according to the agency's latest renewable volume obligations proposal released on Tuesday.

In a recent analysis, the Renewable Fuels Association estimated the total to be around 1.6 billion gallons.

EPA outlined details of the bank for renewable identification numbers, or RINs, in the proposed volumes.

"They include the approximately 1,460 million RINs that were not required to be retired by small refineries that were granted hardship exemptions for 2017 and approximately 790 million RINs that were not required to be retired by small refineries that were granted hardship exemptions for 2016, along with the RINs that Philadelphia Energy Solutions Refining and Marketing, LLC was not required to retire as part of its bankruptcy settlement agreement," the agency said in the proposal.

"While EPA cannot predict how obligated parties will comply in 2018 or the amount of additional small refinery hardship exemptions that may be granted in the future, the 2016 and 2017 exemptions have directly increased the number of carryover RINs that will likely be available for compliance with the 2019 standards. This total volume of carryover RINs is approximately 15% of the total renewable fuel volume requirement that EPA is proposing for 2019, which is less than the 20% maximum limit permitted by the regulations to be carried over for use in complying with the 2019 standards."

Sen. Charles Grassley, R-Iowa, was livid at the news but fell short in calling for EPA Administrator Scott Pruitt to resign.

"That's a gut punch to Midwest farmers, to President Trump and to the rule of law," Grassley said in a statement. "So far, Administrator Pruitt has failed. But he can make it right by reallocating waived obligations in the final rule. Otherwise, Administrator Pruitt should let someone else do the job who won't continue to undermine the president. This would be a common sense step to repairing the damage already done and rebuilding trust between Administrator Pruitt and Midwest farmers."

In addition, Grassley raised the notion the EPA may be breaking the law in how it handles waiver requests.

"As chairman of the Senate Judiciary Committee, I also have concerns that EPA may be ignoring or abusing the Administrative Procedure Act as they continue to grant waivers in secret and refuse to respond to congressional oversight and public information requests regarding the practice," Grassley said. "The public's business ought to be public, and hiding behind bureaucracy and poor excuses isn't going to work."

Grassley continued, "I'd like to work with Administrator Pruitt to help him rebuild trust with Congress and with farmers, but it's going to take concrete steps in the near future, otherwise there's no reason to believe much from EPA."

ADDITIONAL REACTION

The proposed volumes raised reactions from across the country, as Midwest lawmakers and biofuels and agriculture groups largely expressed disappointment.

Nebraska Republican Gov. Pete Ricketts, who is a past chair of the Governors' Biofuels Coalition, praised EPA for increasing the volumes for cellulosic ethanol and other advanced biofuels, but said the waivers continue to hurt business.

"While timely release helps create predictability for producers, the EPA's practice of granting small refinery waivers erodes producer confidence in the market," Ricketts said. "During a recent meeting in Nebraska, Administrator Pruitt talked about reforming the method for reallocating waived gallons."

U.S. Secretary of Agriculture Sonny Perdue said he disagrees with how EPA is handling the waivers issue.

"At USDA, we're going to hold very firmly to the fact that if we have an (renewable volume obligation), it ought to be an honest number, and not one that has a leak out the back door with waivers that are not accounted for," Perdue said during a USDA radio interview on Tuesday.

Kelly Brunkhorst, executive director of the Nebraska Corn Growers Association, who also attended the Pruitt meeting with Nebraska farm groups recently, said the administrator hasn't squared with farmers.

"Administrator Pruitt is losing trust with Nebraska farmers by continually undermining the RFS with his approval of waivers," Brunkhorst said in a statement. "Administer Pruitt has been dishonest in recent meetings with Nebraskans by claiming Department of Energy waiver recommendations aligned with the EPA's actions. Clearly, this isn't the truth."

The Fueling American Jobs Coalition, which is a coalition of oil refiners and others, said in a statement it still has "significant concerns" that the proposal for 15 billion gallons of conventional biofuels along with increases in cellulosic and other advanced biofuels, "threatens to increase RIN costs" for refiners.

The American Petroleum Institute said the EPA was "fair and equitable" in how it handled the small refinery waivers.

"EPA made the right call in not reallocating the waived small refiner exemption volumes, however the agency's latest proposal for 2019 is yet another example -- in fact it's an annual example of a broken government program that needs a comprehensive legislative solution that includes the sunset of the program," API Downstream Group Director Frank Macchiarola said in a statement.

Iowa Corn Growers Association President Mark Recker said his group will "fight to protect the rights of Iowa's farmers and consumers and hold the EPA accountable. Farmers expect the EPA to uphold the RFS as President Trump and Administrator Pruitt promised to do," he said.

"EPA's actions have thoroughly undermined that commitment while providing little transparency regarding how they are administering the small refinery waiver program," Recker said.

National Corn Growers Association President Kevin Skunes said the EPA appears to be looking the other way on farmers' concerns.

"By continuing to allow retroactive exemptions to refineries, EPA will undercut the volumes in this rule, rendering the proposed blending levels meaningless," he said. "Furthermore, the proposed rule states that EPA will not consider comments on how small refinery exemptions are accounted for."

The American Soybean Association President John Heisdorffer said he was encouraged by the proposed increased volumes for biodiesel and other advanced biofuels, but discouraged by the increased number of waivers.

Sen. Joni Ernst, R-Iowa, said farmers deserve "honesty and transparency" from the EPA on the RFS.

On the advanced biofuels front, two industry representatives said the waivers are making investments in those technologies less likely.

"In order to ensure a favorable and supportive investment climate for advanced and cellulosic biofuel producers, EPA must reallocate the gallons from the small refinery waivers already issued and into the future," said Brent Erickson, executive vice president of the Biotechnology Innovation Organization's Industrial and Environmental Section.

Advanced Biofuels Business Council Executive Director Brooke Coleman said until there is "some check on the EPA's abuse of waivers, regulatory uncertainty will continue to threaten investments in advanced biofuels."

Read the proposed rule here: https://www.epa.gov/…

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

Follow me on Twitter @toddneeleyDTN

(ES/SK )

Todd Neeley