Group Wants EPA Freeze on RFS Waivers

PRUITT Argues Agency Lacks Authority to Grant Waivers Retroactively

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Biofuels petitioners have asked a federal court to prevent the EPA from granting new small refinery waivers to the Renewable Fuel Standard. (DTN file photo by Greg Horstmeier)

OMAHA (DTN) -- A biofuels industry petitioner asked a federal appeals court to stop the EPA from issuing additional small refinery waivers to the Renewable Fuel Standard, according to court documents filed on Tuesday.

The petitioner calling itself Producers of Renewables United for Integrity Truth and Transparency, or PRUITT, asked EPA in July to remove invalid Renewable Identification Numbers, or RINs, from the market and to stop issuing small refinery waivers until the agency changed the regulation. The agency didn't respond and was sued by the group at the end of July.

Now, the U.S. Court of Appeals for the District of Columbia Circuit, has been asked to take action. A biofuels industry source told DTN the group consists of several biodiesel producers.

In court documents filed on Tuesday in the federal appeals court, PRUITT alleged EPA is not legally authorized to issue waivers retroactively.

"Further, EPA has now granted these exemptions even after the compliance deadlines for the volume requirements have passed and has allowed for the reinstatement of retired or expired credits, referred to as Renewable Identification Numbers or RINs, which are used by obligated parties to show compliance with the volume requirements," the group said in court documents.

"But, under EPA's regulations, a previously retired or an expired RIN cannot be used for compliance. Movant requested a prompt response from EPA due to indications that requests for additional exemptions remained pending at EPA, the upcoming compliance deadline for 2018, and the negative impacts EPA's actions have had on the RFS requirements and the biofuels market."

In 2016 and 2017, the EPA granted 48 small refinery waivers to the RFS. So far in 2018, the agency has not approved any of the 15 waiver requests and may receive more following EPA's finalizing of RFS volumes on Nov. 30.

In all, agency waivers reduced biofuel blending requirements for refiners by about 2.25 billion gallons in 2016 and 2017. Biodiesel industry officials estimate producers lost about 300 million gallons from waivers.

Earlier this week, Sen. Charles Grassley, R-Iowa, told agriculture journalists he believes EPA Acting Administrator Andrew Wheeler will be more cautious about considering waivers than was previous administrator Scott Pruitt.

In court documents filed this week, the group PRUITT outlined how the biofuels industry has been harmed by the agency granting waivers.

"The biofuel industry has devoted significant resources toward preparing for the RFS and has made significant investments in reliance on implementing the RFS volumes," the group said.

"The RFS program has been vital to the investment and growth of the advanced biofuel industry. EPA's failure to ensure the RFS volumes through the grant of small refinery exemptions and reinstatement of retired/expired RINs has created uncertainty and volatility in the market the RFS was supposed to support. As a result, EPA's actions have caused irreparable harm to the members of petitioner."

The group said the biofuels industry has had a difficult time quantifying harms that are being felt.

"But petitioner's members have invested in production, infrastructure and distribution of biofuels considering the expected demand from the RFS program," PRUITT said. The RFS volume obligations and RIN availability naturally affects actual biofuel production, as well as plans for future production. More RINs in the market also result in a reduced demand for actual production of biofuels."

In particular, the group told the court about how biodiesel producers have been affected.

"EPA's actions have resulted in a drop in RIN prices," they said. "For example, biodiesel is often sold to discretionary blenders rather than obligated parties. RIN values provide these blenders incentives for blending biodiesel. The artificial drop in RIN prices reduces those incentives, resulting in lost sales and customers."

The group said biodiesel sales contracts often are completed months in advance. So those contracts are affected by the rise and fall in RINs prices.

"Unexpected reductions in RIN prices decreases the value of those contracts and, thereby, the ability to recover operational costs," they said.

"These losses cannot be compensated. If EPA's actions can continue unabated, the economic viability of biofuel producers will be in jeopardy, affecting the producers and their surrounding communities."

There is a number of similar lawsuits filed by other biofuels groups, including the Renewable Fuels Association.

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

Follow him on Twitter @toddneeleyDTN

(SK/ES)

Todd Neeley