Pushing Back on Oil Refiners

Iowa Ethanol Leaders Challenge EPA to Reject New Small-Refinery Exemptions

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Monte Shaw, executive director of the Iowa Renewable Fuels Association (left), listens as Mike Naig, Iowa's secretary of agriculture, challenges the requests by small refiners to be exempt from the Renewable Fuel Standard. (DTN photo by Chris Clayton)

COUNCIL BLUFFS, Iowa (DTN) -- The Trump administration shouldn't grant more than three dozen small-refiner exemptions to the Renewable Fuel Standard at a time when farmers are already feeling the impacts of low commodity prices due to lost trade, the head of the Iowa Renewable Fuels Association said Wednesday.

Speaking at the Southwest Iowa Renewable Energy ethanol plant, Monte Shaw, executive director of the IRFA, and Iowa Secretary of Agriculture Mike Naig called on the Environmental Protection Agency to reject 39 requests by refiners to be exempt from the blending requirements of the 2018 obligated blend volumes. The requests come after former EPA Administrator Scott Pruitt granted more than 50 such waivers for 2016 and 2017 that affected as many as 2.5 billion gallons in biofuel volume.

Shaw listed several reasons why EPA should outright reject the small-refinery exemptions (SREs). The biggest reason, Shaw said, is the low price for Renewable Identification Numbers (RINs), the blending credits attached to every gallon of biofuels. A year ago, RINs were trading at 60-plus cents per gallon. Now the D6 RIN price is closer to 10 cents per gallon. Shaw said there have been reports of RINs now trading at 8 cents per gallon.

"If you can justify granting small-refinery exemptions under today's circumstances, where you can buy a RIN for 8 cents, then what EPA would really be saying is it's always going to grant small-refinery exemptions," Shaw said. "Then, the hope of a 15-billion-gallon RFS is dead. That is not what Congress intended, nor is that what President [Donald] Trump promised."

The 39 exemptions, if all approved, would affect roughly 1 billion gallons in ethanol demand. "This happens at a time when our farmers in rural America can least afford it," Naig said.

While acknowledging EPA has authority to grant the exemptions, Naig said EPA also has the authority to grant exemptions in a way that doesn't harm the biofuels industry as well.

"I think [EPA] Administrator [Andrew] Wheeler inherited quite a mess when it comes to this issue," Naig said. "I think it's an opportunity to do the right thing here." He added, "So, we could call on EPA and on Wheeler to do the right thing."

Naig also said any exemptions should require reallocating those obligated ethanol gallons to other refiners.

Shaw said the ethanol industry's requests to stop the SREs and get final approval of year-round E15 ethanol blends are reasonable requests that have gotten repeated support from President Donald Trump.

Sen. Charles Grassley, R-Iowa, sent a letter to Energy Secretary Rick Perry last week, alerting him to 39 applications sent to the EPA by companies seeking the small-refinery exemption in the Renewable Fuel Standard. Grassley's letter raised questions to Perry about the Department of Energy's scoring for small refiners that EPA uses to grant approval.

A recent court case showed EPA approved prior-year exemptions under former administrator Scott Pruitt even though the Energy Department viability scores showed there was no economic reason the refiners needed those exemptions. Pruitt and EPA previously had asserted that all exemptions were based on the Energy Department's analysis. Grassley's letter asked the Energy Department for some clarity.

Shaw talked Wednesday about Grassley's letter. Shaw called on Congress to determine whether Pruitt misled Congress about the way EPA uses the Department of Justice recommendations.

Naig deflected a question about whether RFS small-refinery exemptions would hurt President Trump's support with farmers, given the challenges farmers have faced with trade. Naig said he believed trade deals would get done and the White House would make the right decisions on the RFS.

"At a time when we are facing enough challenge, we don't need anymore," Shaw said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton