EPA Waiving Biofuel Quotas Spurs Rebuke From Ethanol Supporters

(Bloomberg) -- The Environmental Protection Agency has given more than two dozen small refiners permission to ignore the nation’s renewable fuel mandate, angering competitors as well as farm-state lawmakers who say the exceptions undermine the program.

Roughly 30 refineries are seeking waivers from the Renewable Fuel Standard for the 2017 compliance year, and so far at least 25 have won them, according to two people familiar with the process.

Allowing refineries to escape annual blending quotas "fundamentally undermines" the mandate requiring refiners and fuel importers to mix ethanol and other biofuels into gasoline and diesel, said Senator Chuck Grassley, a Republican from Iowa and fierce defender of the U.S. renewable fuel requirement.

“It appears EPA granted a secret waiver that is legally reserved for small refiners to one of the largest oil refining companies in the country," Grassley said in an emailed statement.

The waivers are being issued under a program Congress established in the Renewable Fuel Standard law that allows small refineries to be granted temporary exemptions if they can prove complying with the quotas would cause them to suffer hardship.

‘Established Process’

“The criteria used to grant waivers has not changed since previous administrations," EPA spokesperson Liz Bowman said by email. "EPA follows a long-standing, established process where the agency uses a DOE analysis to inform decisions about refiner exemptions."

The American Petroleum Institute, which has members including Royal Dutch Shell Plc, BP Plc, and other large oil companies, has warned against refinery-specific exemptions, arguing they create uncertainty and distort a "level playing field."

To qualify for a waiver, such small refineries must have processed no more than 75,000 barrels per day of crude in 2006.

Until 2010, 59 eligible refiners received the exemptions automatically each year. Later, the EPA began vetting applications individually, guided by Energy Department recommendations.

Secretive Program

Now, 38 refineries are eligible under the program -- and roughly 30 of them formally asked for relief from the 2017 biofuel quotas, one person said. The people asked to speak anonymously so they could candidly discuss the biofuel waiver program Congress designed to be secretive, with company-specific information shielded from public view.

The agency is still working through applications, so more than 25 refineries ultimately may win the valuable exemptions for the 2017 compliance year. The agency is granting those requests more liberally, following a federal court ruling last year that rejected the EPA’s previous, stricter approach.

Among the 2017 waiver recipients: some of Andeavor’s 10 refineries, according to a person familiar with the approval, and Calumet Specialty Products Partners LP, which said in an April 2 filing that the EPA had granted its refineries hardship exemptions for 2017 and 2016.

Andeavor

Exxon Mobil Corp. also may be eligible to receive a waiver for its 61,500 barrel-a-day facility in Billings, Montana. Company spokeswoman Sarah Nordin couldn’t immediately be reached by email or phone for comment.

The EPA granted exemption for 14 refineries for the 2016 compliance year. In addition to Calumet and Delek, HollyFrontier Corp., said in regulatory filings that waivers it received last year helped it pare $57.8 million in compliance costs.

When the EPA grants exemptions after setting annual biofuel quotas, it doesn’t redistribute the requirements to other refiners -- so each waiver effectively lowers the overall amount of renewable fuel required nationwide.

Emily Skor, head of the Growth Energy coalition of renewable fuel advocates, said the exemption rush "is not tenable," and are "wholly inconsistent" with the Trump administration’s pledge to uphold the biofuel mandate. "It’s gravely concerning."

--With assistance from Ari Natter Ryan Beene Barbara Powell and Simon Casey

To contact the reporters on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net, Mario Parker in Chicago at mparker22@bloomberg.net, Laura Blewitt in Houston at lblewitt@bloomberg.net.

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net.

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