RFS Case Continues in DC

Agency Tells Court it Attempts to Account for Exemptions in Final Volumes

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The EPA continues to defend the small refinery waiver program in court documents. (EPA logo)

OMAHA (DTN) -- The EPA argues a formula it uses to set biofuels volume percentages in the Renewable Fuel Standard accounts for gasoline and diesel produced by exempted small refineries, in a nearly 26,000-page brief filed on Thursday as part of an ongoing lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit.

This past summer the National Biodiesel Board (NBB), along with the American Petroleum Institute, Sierra Club and Gulf Restoration Network, sued the agency, challenging its implementation of the RFS on numerous fronts.

The NBB in particular challenged EPA on its issuance of waivers, specific volumes set for 2018, and biomass-based diesel volumes for 2019.

A number of other biofuels and agriculture groups have filed similar lawsuits.

The biodiesel industry estimates it lost about 300 million gallons in demand as a result of waivers issued by EPA in 2016 and 2017. The agency granted 48 out of 56 waivers requested during that span. So far, EPA has received 15 waiver requests in 2018 and has issued zero. The agency had been issuing waivers after finalizing renewable volume obligations on Nov. 30.

A brief filed by the NBB this summer argues EPA should provide an estimate of how many biofuels gallons might be waived under small refinery exemptions, and then set the required percentage volumes higher to account for waivers.

The EPA argued in its court brief that a formula used to calculate percent standards in the RFS also includes estimates of gasoline and diesel "projected to be to be produced by exempt small refineries and small refiners... in any year they are exempt."

The EPA said it results in a higher percentage standard, "thereby requiring the remaining obligated parties (those not granted exemptions) to acquire more RINs (renewable identification numbers). Consequently, all exemptions granted prior to the issuance of the annual rule are accounted for by the formula."

That formula, however, does not account for waivers requested after RFS volumes are finalized on Nov. 30.

"EPA adjudicates small refinery exemption petitions based upon the financial circumstances of the refinery during the calendar year," the EPA brief said. "As a result, EPA may issue exemption decisions for a given compliance year after the annual standards for that year have been promulgated.

"The formula does not account for such after-the-fact exemptions. EPA has also consistently explained that altering the standards after they have been set to account for such exemptions would not be consistent with the statutory requirement that EPA set the standards 'no later than Nov. 30' and that doing so would inappropriately render the standards a moving target."

The 48 exemptions were granted by previous EPA Administrator Scott Pruitt. Acting Administrator Andrew Wheeler has indicated he would take a different approach to granting waivers.

The agency indicated in its brief that it has latitude in how it handles waiver requests.

"Beyond this, the statute is silent on how EPA should treat such exemptions, affording EPA discretion to settle on a reasonable approach," the EPA said.

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

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Todd Neeley