The Renewable Fuels Association (RFA) is looking for disclosure as to what qualifies small refineries for exemptions from the Renewable Fuel Standard (RFS). The Environmental Protection Agency (EPA) indicated it may expand upon those exemptions. In a letter to EPA Administrator Scott Pruitt, the RFA asked for greater certainty for both renewable fuel producers and obligated parties.
“This lack of transparency is particularly disconcerting given that an ill-conceived and unauthorized expansion of this exemption could destabilize the market for renewable fuels and undermine Congress’s goals for the RFS program,” RFA president and CEO Bob Dineen wrote. “I would also like to express our concern with the market destabilizing impacts of EPA’s failure to require non-exempt obligated parties to make up the volume of fuel that the exempt small refiners would have otherwise provided in a given year.”
The EPA can exempt refineries with crude oil throughput of no more than 75,000 barrels of crude per day, an authority the agency was given from the outset of the RFS in 2005. The provision was meant to spare the refineries “disproportionate hardship.” Determinations to grant exemptions are case-by-case and the criteria for that decision-making process has not been disclosed.
“In the past, EPA has generally exercised restraint and judiciousness in issuing exemptions for small refiners, presumably because there is little or no evidence that the RFS itself is causing disproportionate economic hardship,” the RFA stated in a press release.
After the Tenth Circuit Court’s decision in Sinclair Wyoming Refining Co. v. EPA this past fall, the agency is expected to receive an influx of requests for the exemption. But Dineen reminded Pruitt that the exemptions were originally intended to be temporary as the market acclimated to RFS.
“It would be disappointing, to say the least, if EPA now began to increase the number and magnitude of exemptions granted, a decade after the program began,” Dineen wrote. “As the American Petroleum Institute echoed in its recent comments, ‘refiners have had ample time to adjust their businesses to operate under the burden of the RFS.’”
To provide greater certainty for both renewable fuel producers and obligated parties, the RFA suggested EPA should establish an annual cut-off date for receiving and processing any small refinery exemption requests, and ensure that any exempted volumes are proportionally reallocated to the blending obligations for non-exempt refiners. Alternatively, the agency to continue granting hardship exemptions in the year they are received, but adjust the total gasoline and diesel percentage standards in the subsequent calendar year to offset the reductions.