Docs Show EPA Ignored OMB on Waivers

OMAHA (DTN) -- Interagency reviewers showed EPA how to account for biofuel gallons lost to small-refinery waivers, but the EPA ignored the suggestions, interagency review documents show.

Documents posted to www.regulations.gov on the 2020 Renewable Fuel Standard volumes show reviewers of the rule suggested EPA reallocate waived volumes of biofuels in the 2020 proposal.

In addition, the reviewers provided a possible method for restoring 500 million gallons of blending obligations that were erroneously waived in 2016. The U.S. Court of Appeals for the District of Columbia Circuit ordered the 2016 gallons to be accounted for in future rulemaking, but the agency declined to do so in its latest volumes proposal.

President Donald Trump's EPA has waived about 4.03 billion gallons of biofuels since 2016, as a result of granting 85 small-refinery waivers.

"EPA put a zero in for projected volume of gasoline for exempt small refineries and projected volume of diesel for exempt small refineries, ensuring your projected totals are not met and all actual outcomes or resulting biofuel requirements are biased to one side, lower," an OMB reviewer said in interagency comments.

"This bias appears in outcomes for every requirement, including your cellulosic-volume requirement which the court directed to you to have a 'neutral' estimate. You also draw a conclusion about the ability to achieve certain volumes with respect to the blend wall, while simultaneously ensuring that your calculated total is not the actual requirement, thus your requirement relative to the blend wall is wrong."

EPA provided the following statement to DTN in response: "These comments are not internal White House documents but transparent documents from months ago. This claim represents a misunderstanding of the routine interagency review process. EPA receives public comments on its proposals from a variety of sources and receives comments from our federal partners. EPA then responds to those comments and addresses them consistent with our legal authorities in finalizing a rulemaking. EPA, along with USDA and the Department of Energy, will continue to implement the Renewable Fuel Standard program in accordance with the Clean Air Act, taking into consideration additional direction from Congress, and relevant court decisions."

OMB reviewers offered a possible solution for accounting for waived gallons in order to make sure the overall total RFS volumes were met.

That included providing a projection of about 12.5 billion exempted gasoline and diesel gallons in the RFS formula -- or close to the actual average exempted volume of 12.8 billion gallons of gasoline and diesel during the 2016-2018 period.

In addition, OMB reviewers suggested EPA should adjust renewable volume obligation percentages to incorporate projected gasoline and diesel exempted through small-refinery waivers.

EPA responded, "The approach taken in this proposal is consistent with the approach first laid out in 2011 and followed since, and we have not proposed to revisit it. Whether to revisit this issue is a matter already under review at agency leadership levels and we anticipate discussing it further while this action is under review."

Reviewers were critical of EPA's decision not to abide by the court decision saying, "You reject the ACE court remand because you conclude there is no 'room' to incorporate it, knowing that the stated RVO will not be achieved because of the issuance, and lack of incorporation of, small-refinery waivers."

EPA's responded, "This issue and our response to the ACE remand are the subject of ongoing discussions."

Renewable Fuels Association President and CEO Geoff Cooper said in a news release on Monday that the interagency comments show reviewers were aware of repeated concerns made known by agriculture and biofuel interests and tried to do something about it.

"The revelations in these documents will only exacerbate the outrage and anger in farm country over EPA's abuse of the small-refinery waiver provision," he said. "The documents clearly show that EPA knowingly ignored strong recommendations from within the administration to redistribute blending volumes that were exempted via small-refinery waivers. EPA also disregarded recommendations to address a court order to restore 500 million gallons of lost blending obligations from 2016."

Reviewers suggested the agency could remand the 500 million gallons in increments. That would include increasing the overall RFS volumes by 75 million gallons in 2020, 175 million in 2021 and 250 million in 2022.

Cooper said the agency could change course in its newly proposed renewable volume obligations currently pending before the EPA.

"The solution to the small-refinery waiver problem was right in front of EPA's face the whole time, yet they chose to snatch defeat from the jaws of victory," he said.

"The only way to begin calming the anxiety and aggravation in rural America is for EPA to immediately announce that it will resolve these issues in the upcoming 2020 RVO final rule. EPA must adopt the prospective reallocation approach recommended during the interagency review process in the 2020 rule, as well as include the 500-million-gallon remand. Anything short of that will be viewed by farmers and biofuel producers as another sellout to the oil industry and another kick in the teeth to the hardworking families in the Heartland."

Read more of interagency review documents here: https://www.regulations.gov/…

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

Follow him on Twitter @toddneeleyDTN

(AG)

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