COVID-19 Cited in Waiver Request

OMAHA (DTN) -- Though governors in five oil-producing states asked the EPA for a refiner waiver from Renewable Fuel Standard volumes on Wednesday night, officials with three ethanol industry groups say the request has no merit.

In a letter sent to EPA Administrator Andrew Wheeler, Greg Abbott of Texas; Gary Herbert, Utah; Oklahoma's Kevin Stitt; Mark Gordon of Wyoming; and Louisiana's John Bel Edwards, said refiners in their states face a financial burden from oil-market disruptions caused by COVID-19 economic shutdowns.

Geoff Cooper, president and chief executive officer of the Renewable Fuels Association, said the agency has rejected similar requests and should do so now.

"Apparently toilet paper isn't the only thing in short supply in oil states these days," he said in a statement.

"Clearly, these governors are experiencing an acute shortage of facts and reality too. It's clear they know absolutely nothing about how the Renewable Fuel Standard actually works. They outrageously claim that a waiver is needed because of 'depressed demand for transportation fuel.' But because EPA translates the RFS into a percentage each year, the renewable fuel blending requirements already adjust in tandem with changes in gasoline and diesel consumption."

Cooper said if COVID-19 led to a 15% drop in gasoline and diesel demand, for example, the renewable fuel blending requirements drop by the same amount.

"The EPA has no authority to grant relief when the RFS itself is not the cause of the 'severe economic harm,' a fact that has been reconfirmed by EPA multiple times in the past when it denied similar nonsensical waiver requests," he said.

"The governors themselves acknowledge the problems facing refiners today are driven by COVID-19 and cratering oil prices, not the RFS."

An EPA spokesperson told DTN, "The agency is watching the situation closely, and reviewing the governors' letter."

The same factors have hit the ethanol industry hard in recent weeks, as nearly half of all production has been idled because of falling gasoline demand and oversupply.

Brian Jennings, chief executive officer of the American Coalition for Ethanol, said the oil industry is not alone in its struggles.

"We remind the administration that oil refiners are not the only ones suffering from the economic fallout of the current situation," he said in a statement.

"Ethanol producers, and the farmers supplying them corn, are suffering a proportional economic disaster. EPA should in fact do the opposite of the governors' request and issue an interim rule to increase the RVO for 2020 to the percentage necessary to ensure that the full 20.09 billion gallons required by law are used."

In an April 3 letter to Wheeler, ACE asked the agency to conduct a rulemaking to expand RFS volumes for 2020, https://ethanol.org/….

Growth Energy Chief Executive Officer Emily Skor said granting an RFS waiver would compound an already difficult economic situation in rural America.

"This is an offensive attempt by refiners to steal markets from struggling biofuel producers and farmers," she said in a statement.

"Any move to unravel the RFS now would dim any hopes of economic recovery in rural America, where so many in the U.S. biofuel industry have been impacted by furloughs and plant closures, and millions of farmers are struggling to stay afloat. We've seen the courts reject this kind of abuse before. Even oil companies admit that biofuel credits don't impose a real cost on refiners."

In February 2019, the American Petroleum Institute released a white paper, https://www.dtnpf.com/…, that concluded reforms to the Renewable Identification Numbers, or RINs, market were not needed.

"Moreover, EPA's and others' studies have repeatedly found that RIN purchasers -- even small and independent refineries -- are generally able to recover their RIN costs in the price of the gasoline they sell," the API white paper said.

"Accordingly, EPA has explained that there is no economic harm to RIN purchasers, even if RIN prices are high, because those costs are recouped in the gasoline blend stock and diesel. For these reasons, EPA should be extremely cautious before embarking upon radical changes to the long-standing RIN market. EPA has found that obligated parties, including merchant refiners and small refineries, 'are charging more for domestic gasoline and diesel to ensure that they recoup the costs associated' with RFS compliance, and so on average there is no negative economic impact on RIN purchasers."

Obligated parties to the RFS, including refiners and others, are allowed to buy RINs or blend biofuels to comply with the law.

In the letter on Wednesday, the governors said EPA has "failed to grant waivers at the request of governors" for lack of documentation.

"However, current extraordinary circumstances represent a material change in condition since the last time EPA entertained such requests," the governors said.

"To be clear, CAA does not require that the waiver we request be limited to situations in which the harm associated with RFS compliance is the only source of stress on the economy. Currently, significant harm to the energy economy is expected to result from depressed demand for transportation fuel."

Read more here about the governors' request: https://www.dtnpf.com/…

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

Follow him on Twitter @toddneeleyDTN

(CZ/BAS)

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