Ethanol Blog

LINCOLN, Neb. (DTN) -- U.S. biofuels groups made it clear on Wednesday that only 100% biofuels gallons reallocation of small-refinery exemptions to the Renewable Fuel Standard would be acceptable, in public comments given during a virtual hearing hosted by the U.S. Environmental Protection Agency.

Two weeks ago, the EPA released a proposal that includes reallocating up to 100% of gallons exempted from 2023 to 2025. The proposal also asks for comment on alternatives from zero gallons to 50% or even 75% of gallons reallocated. So, full reallocation would include about 2.18 billion gallons total.

The EPA announced in August it had granted full exemptions on 63 petitions, partial exemptions on 77 petitions and denied 28 petitions on SRE requests covering 2016 to 2024.

In addition, EPA is proposing to add a new SRE reallocation volume term in the percentage standard equations for 2026 and 2027, to account for exemptions granted for the 2023-2025 compliance years.

RFA CALLS FOR INDEPENDENT SRE EVALUATIONS

Geoff Cooper, CEO of the Renewable Fuels Association, told the agency his group "strongly disagree" with EPA's new approach to determining 'disproportionate economic hardship' and believe that the agency is improperly expanding the scope of relief available to small refineries by "overreading" a legal ruling from the U.S. Court of Appeals for the District of Columbia Circuit in Sinclair Wyoming Refining Company LLC v EPA. The court ruled that the agency's decision to deny exemption requests to the RFS was contrary to law and arbitrary and capricious.

Cooper said the EPA has a duty to "independently evaluate" petitions and assess whether a small refiner has experienced disproportionate economic hardship.

"EPA should not be deferring to the DOE's long-outdated 2011 study and scoring matrix," Cooper said.

Although the Government Accountability Office in 2022 said the U.S. Department of Energy study was "critically flawed" and EPA agreed, "Nowhere in its August 2025 SRE decision document did EPA address these flaws or its past criticism of the study and scoring matrix," Cooper told the agency.

If the EPA does not decide to change the way it evaluates whether small refineries suffer economic hardship, Cooper said the agency "must reallocate 100% of those exempted volumes."

Cooper said his group supports EPA's proposal to "fully reallocate" exempt volumes for 2026 and 2027.

"As this administration recognized in 2020, reallocation is the only way for the agency to meet its statutory obligation to ensure that the required volumes are achieved," he said.

"Partial reallocation cannot satisfy this duty. For the same reason, EPA must reallocate 100% of the exempted volumes for 2023, 2024 and 2025. Anything less would permit obligated parties to avoid their share of the statutory mandate, shifting the burden unfairly onto renewable fuel producers."

Cooper said the RFS volumes originally proposed could not be achieved without full reallocation.

GROWTH ENERGY QUESTIONS EXEMPTIONS

Growth Energy CEO Emily Skor told the agency her group believes the agency is granting more small-refinery exemptions than what was intended by the law.

"As the RFS celebrates two decades of success, refiners have had ample time to make investments in renewable fuels and higher ethanol blends," she said.

"We continue to believe that these small-refinery exemptions should only be granted sparingly and in very limited circumstances. In August, we saw EPA take a thoughtful and reasonable approach to the more than 200 pending SREs weighing on the RFS program. After clearing out the older SREs, those for 2022 and earlier, and not bloating the RIN (renewable identification numbers) bank, the agency has in this supplemental proposal appropriately focused on the pool of exempted gallons for 2023 through 2025."

Skor said Growth Energy supports EPA's proposal to reallocate gallons to fully account for them so that biofuel demand is not lost.

"The bottom line -- if the agency follows through on the proposal, and if it properly accounts for the refinery exemptions it has granted and will grant moving forward, EPA can and will protect biofuel production and demand for U.S. farm commodities, in line with the goals of the RFS," she said.

"Given the looming crisis in the ag economy, the agency's approach promises to serve as an economic lifeline to American farmers. Beyond this proposal, we continue to urge EPA to pursue all the other avenues at its disposal to ensure the success of American biofuels and American agriculture. The agency should clear the backlog of pathway approvals for renewable fuel. It should work with Congress to support permanent year-round E15 and finalize its proposal to simplify E15 infrastructure and labeling requirements. But most importantly, the agency must move quickly to finalize the RVO proposal -- our industry cannot wait any longer."

ACE CONCERNED ABOUT RINS SUPPLY

Brian Jennings, CEO of the American Coalition for Ethanol, said the Trump administration's decision to grant SREs in August for 2023 and 2024 increased the supply of renewable identification numbers.

"Furthermore, as EPA has cautioned, if the volumes of renewable fuel represented by the SREs are not reallocated, obligated parties could use the oversupply of low-priced RINs to satisfy the 2026 and 2027 renewable volume obligations instead of buying and blending physical gallons of ethanol and other renewable fuel," Jennings said.

"This type of demand destruction undermines the integrity of the RFS. Unfortunately, demand destruction occurred in 2018 and 2019 when SREs and low RIN prices discouraged refiners from blending ethanol above E10 and artificially restrained sales of E15, E30, and E85."

Jennings said that ACE believes EPA is bound by the statute to finalize full and complete reallocation for 2026 and 2027.

"In other words, the agency must reallocate 100% of the 2023 through 2025 exempted RVOs -- an estimated 2.18 billion gallons -- to the final Set 2 rule," he said.

"The 100% full-reallocation approach is the only way to ensure blending obligations will remain whole for 2026 and 2027. Going forward, we applaud EPA for indicating it will prospectively account for and reallocate SREs as it undertakes RVO rulemakings beyond 2027."

IRFA WANTS FULL REALLOCATION

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said 100% reallocation of the 2023 to 2025 exemptions is the appropriate action.

"The law requires EPA's prime directive to be ensuring RFS blending levels are met," Shaw said.

"Only full reallocation will maintain the integrity to the RFS and deliver meaningful benefits to rural America. IRFA strongly believes EPA should finalize its proposal to reallocate 100% of the exemptions over 2026-2027. We are concerned by reports that a 50% reallocation scheme is gaining steam. If EPA ultimately determines that 100% reallocation over 2026-2027 is not possible, the agency should not undermine the RFS with 50% reallocation. Instead, as an alternative, the EPA should reallocate 100% of the 2023-2025 exemptions over four years. This approach would have the same market impact in the short term as 50% reallocation but would still provide lasting support for American farmers and the biofuels industry."

Read more on DTN:

"EPA Proposes RFS Reallocation Options," https://www.dtnpf.com/…

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

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