Groups Sue EPA on Small-Refinery Waiver

Interagency Reviewers Pointed Out Discrepancies in Biofuels Deal, Proposal

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Office of Management and Budget reviewers told EPA officials the latest biofuels proposal doesn't match the White House agreement. (DTN file photo)

OMAHA (DTN) -- Biofuels and agriculture groups have filed a legal challenge against EPA's approval of 31 additional small-refinery exemptions in August.

Groups filed a court petition on Wednesday in the U.S. Court of Appeals for the District of Columbia.

The Renewable Fuels Association, American Coalition for Ethanol, Growth Energy, National Biodiesel Board, National Corn Growers Association and National Farmers Union, argue in their petition the EPA's action detailed in a two-page memorandum not published in the Federal Register constituted a final action subject to legal challenge.

"The 2018 SRE (small refinery exemption) decision was signed Aug. 9, 2019, but it was not published in the Federal Register; in fact, its existence remained a secret until Sept. 19, 2019, when EPA attached it as an exhibit to a filing in the U.S. Court of Appeals for the 10th Circuit," the groups state in the petition for review.

The EPA granted 85 small-refinery exemptions between 2016 and 2018, totaling more than 4 billion ethanol-equivalent gallons of what the biofuels and agriculture industries contend is lost demand.

Those groups reportedly brokered a deal with the White House earlier this month to account for biofuels gallons exempted from the Renewable Fuel Standard in future years. The details of that agreement outlined by biofuels and agriculture sources that were part of a briefing call with the administration prior to the announced deal and a proposed remedy from EPA remain at odds. Industry groups contend EPA did not follow the agreement, while the agency stands by the proposal as consistent with the agreement.

Even as biofuels and agriculture groups continue to cry foul on the EPA proposal, President Donald Trump is on board with the agency, https://www.dtnpf.com/….

In a news release announcing the latest legal challenge, the biofuels and agriculture groups contend EPA provided few details in its rationale for granting the 31 exemptions on Aug. 9.

"Unlike previous years, EPA's entire decision document was only two pages long, the coalition noted in their petition," the news release said. "In these short two pages, EPA purported to resolve 36 pending petitions for disproportionate economic hardship exemptions -- a decision that exempted small refineries from having to blend almost 1.5 billion gallons of renewable fuel. The brief document does not reveal any details and contains only the most bare-bones reasoning for EPA's decision."

EPA providing the following comment in response to the lawsuit, "EPA continues to implement the Renewable Fuel Standard program in accordance with the Clean Air Act, taking into consideration additional direction from Congress, recommendations from Department of Energy, and relevant court decisions. Many aspects of the decisions for exempting individual refineries are based on confidential business information. Publicly available information can be found at our website."

OMB REVIEWERS CALL OUT EPA PROPOSAL

The timeline over the past three weeks has been filled with different groups, including White House officials, disputing EPA's latest biofuels plan and its likely outcomes. The proposed rule does not include language regarding a three-year rolling average that was initially detailed. EPA's plan also would account for only about half of the annual volume of biofuel gallons EPA has waived.

The Trump administration initially announced a biofuels deal on Oct. 4 that would include accounting for small-refinery exemptions based on a three-year rolling average of about 4 billion gallons waived between 2016 and 2018, or about 1.35 billion gallons annually.

The actual EPA proposal released Oct. 15 showed the agency would account for a much smaller volume of 770 million gallons based on a U.S. Department of Energy analysis.

Agriculture and biofuels group held a press call on Oct. 16, following the release of EPA's proposal. On that call, the groups said they had joined a briefing telephone call with administration officials on Oct. 3. During that call they said the administration outlined plans to use a three-year rolling average of volumes lost.

EPA spokesman Michael Abboud provided the following comment to DTN on Tuesday disputing comments made by farm and biofuel leaders. "That is not accurate. EPA has consistently stated that it will seek comment on how to and at what levels it projects small refinery relief in the 2020 compliance year, these ranges are informed by the last three compliance years and the statutory discretion provided to EPA by Congress."

In documents posted to regulations.gov by EPA on Monday, email exchanges between the agency and the White House Office of Management and Budget, however, show OMB interagency reviewers did not agree with the EPA proposal as it relates to the White House deal.

Danielle Y. Jones, senior policy adviser for international regulatory cooperation at the OMB wrote in an Oct. 9 email to EPA officials: "We do not agree with the inclusion of the alternative as drafted. We believe there is no rationale for using older data and the alternative is inconsistent with the WH decision last week to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation's fuel supply beginning in 2020."

Jones wrote the OMB recommended EPA request comments on an alternative proposal based on actual small refinery exemptions issued to refiners from 2016-18. "This alternative is consistent with the decision to ensure more than 15 billion gallons of conventional ethanol. It is also grounded with actual historic data and gives greater consideration and weight to past practices," Jones wrote to EPA.

Following up on Oct. 10, Jones also emailed EPA officials more interagency review comments that further questioned EPA's strategy. "EPA justifies using a counter-factual level of granted waivers as a basis for the future projection in 2020, but does not deal with the much bigger question about the changes in policy that justify deviating from a strict three-year average. Future policymakers, faced with other challenges, have the discretion to again change the policy for granting waivers (without public notice or comment). That would be an unacceptable outcome for small refiners, who would be subject to a higher RVO because of past waivers while being denied waiver in the current year."

In response to DTN's request for comment EPA said, "The Oct. 15 proposed supplemental rule is the proposed text from our announced agreement with the White House and USDA on Oct. 4."

The House Committee on Energy and Commerce has scheduled an Oct. 29 hearing on the small-refinery exemptions program.

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

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Todd Neeley