Ethanol Blog

LINCOLN, Neb. (DTN) -- A group of four state attorneys general raised concerns with U.S. Environmental Protection Agency Administrator Lee Zeldin that the agency is about to grant small-refinery exemptions to the Renewable Fuel Standard at a time when refining companies are turning large profits.

In a letter to Zeldin on Monday, the attorneys general from Iowa, Nebraska, South Dakota and Missouri said they are concerned the agency is not following the proper steps when considering petitions.

DTN reported Tuesday that the EPA is expected to decide on pending SREs for 2025 in the next week, and that exemptions issued could exceed 1.8 billion gallons of biofuels.

"By way of background, following EPA's August 2025 announcement of 140 SREs, I, along with the attorneys general from Nebraska and South Dakota, sent you a letter on Oct. 29, 2025, outlining sincere concerns regarding the circumstances under which those SREs were sought," Iowa Attorney General Brenna Bird wrote in the letter signed by the four states.

"In that letter, we underscored how some refiners reduce production to qualify for a SRE instead of maximizing capacity and the gamesmanship used to satisfy the 'economic hardship' element."

Ahead of the pending decisions, the letter said the U.S. refining sector is seeing some of the "highest refining margins in modern history."

"The entire world is facing a shortage of refined products," the letter said. "And as a result, all refineries are reporting record profitability -- it is likely almost none are economically disadvantaged or experiencing the kind of economic hardship required to qualify for a SRE. The refineries want to have their cake and eat it, too."

The attorneys general said the economic benefit of the SRE is "staggering" and is "worth more than the returns the refineries receiving them" are making. The AGs said the companies should be held accountable.

"If that sounds outlandish, it makes sense to ask them," the letter said.

"The refineries are boasting about it themselves. For example, Delek, in a recent earnings announcement, shared that approximately 30% to 46% of the publicly traded stock value generated due to SREs. That translates to roughly $1.9 billion to $3.8 billion in wealth transfer from American drivers to a single company. Other refiners have reported similar engorgements."

The AGs said the EPA already has recognized that the cost of the RFS was "substantially embedded" in the refining margin and "should not be causing distress" to small refineries.

"Even more stunning, it is a wonder that EPA would encourage the type of gamesmanship that artificially limits the supply of much-needed refined products and increases prices on Iowans and other consumers nationwide," the letter said.

"Small refiners are unlikely to be suffering the economic distress they need to be claiming to justify an exception under the statute. Even more stunning, it is a wonder that EPA would encourage the type of gamesmanship that limits the supply of refined products and increases prices on drivers and truckers across the Midwest and rest of the country."

The AGs said the agency runs a risk of "behaving arbitrarily or contrary to statute" if it continues to award SREs to companies that are making record profits.

"Awarding SREs undermines the RFS, creates incentives for certain refiners to restrain production at a time when the country needs every refinery running at full rates, and increases the costs of fuel for consumers and hurts farmers," the letter said.

RESPONSE TO EPA'S SRE PLANS

In March, the EPA forecasted less than one billion gallons would be exempted for 2025. This week it was reported by Bloomberg Intelligence that the agency may have plans to exempt over 1.8 billion gallons.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said in a statement on Tuesday that the recent return of biodiesel production in Iowa as a result of 2025 RFS blending levels could be in jeopardy if the volume of exemptions becomes reality.

"To reverse course now by granting massive levels of unjustified refinery exemptions would be bad policy, bad economics and bad for farmers," Shaw said.

"We are hoping this is just another false rumor floated in the media to roil the markets so some credit trader can try to make a buck. But if there is substance behind the rumors, it is not too late to change course and to commit to a robust RFS."

Shaw said that since the EPA finalized the RFS blending levels for 2026-2027 in March, there has been a "strong resurgence" of biodiesel production in Iowa and around the country.

"In Iowa, we had biodiesel plants that were shuttered or running at very reduced rates," he said.

"Today they are producing at full capacity, buying soybean oil from our farmers, and hiring back workers that had been let go. It would be reckless and almost unimaginable to pull the rug out from under this success story at the request of a handful of oil refiners that are certainly not suffering from economic hardship during this time of high oil and fuel prices."

Read more on DTN:

"Biofuels, Ag Fear RFS Exemption Surge," https://www.dtnpf.com/…

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

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