The Environmental Protection Agency is denying three dozen small refineries relief from the requirements of the nation’s biofuel mandate, but is providing other ways for most of the facilities to comply with their 2018 obligations under the Renewable Fuel Standard.

The news comes as the agency seeks to respond and adapt to court rulings that have added new factors in the process to determine whether or not an entity is eligible for a small refinery exemption under the Renewable Fuel Standard. The 36 denials issued Thursday stemmed from a court decision that remanded the applications back to the agency.

The Supreme Court has also considered SRE policy in the last year, when the high court overturned a 10th Circuit test for determining which facilities could have their RFS obligation waived.

The 36 denials, EPA said, “apply EPA’s new interpretation of the Clean Air Act SRE provisions.”

“Today’s decision changes and remedies EPA’s prior approach to SRE decisions, under which EPA found basis to grant hardship exemptions where no hardship from RFS compliance existed,” the agency said. “After reviewing more than a decade of RFS market data, public comments on a proposal EPA issued in December 2021, and confidential information submitted by petitioners, EPA concluded that none of the 36 2018 SRE petitions demonstrated hardship caused by compliance with the RFS program.”

Facilities have traditionally sought an SRE when concerned that complying with the RFS – which mandates the amount of biofuels that need to be blended into the nation’s fuel supply – would cause economic harm to their businesses.

The Clean Air Act – which includes the language that created the RFS – includes a provision to allow facilities that produce less than 75,000 barrels of oil per day to seek relief from supplying the necessary Renewable Identification Numbers back to the EPA to demonstrate RFS compliance. RINs can be submitted through a facility’s own blending or through the purchase of another company’s excess credits.

"In the SRE denial, we find that all refineries face the same costs to acquire RINs regardless of whether the RINs are created through the act of blending renewable fuels or are purchased on the open market,” EPA said. "This happens because the market price for these fuels increases to reflect the cost of the RIN, much as it would increase in response to higher crude prices.”

Geoff Moody, vice president of government relations for the American Fuel and Petrochemical Manufacturers, criticized the move in a statement. 

“EPA’s blanket denial of relief for small refineries is a political decision that contradicts Congress’s design for the RFS," he said. "We are deeply disappointed in this and in the precedent it sets for small refineries experiencing hardship and the communities and regions that rely on these facilities for energy security.”

Also on Thursday, EPA said a subset of 31 of the denied petitions could be eligible for a separate form of relief. That group of petitions will be provided an alternate approach “that allows the 31 small refineries to meet their new 2018 compliance obligations without purchasing or redeeming additional RFS credits.”

“Regardless of the compliance demonstrations the 31 small refineries now make, the amount of renewable fuel used in 2018 will remain unchanged, as that year is in the past and no additional renewable fuel can be produced or used in that year,” EPA said in documentation rolling out the alternative. “Accordingly, if EPA were to require these 31 small refineries to acquire and retire RINs now, there would be no impact on renewable fuel production or demand in the 2018 compliance year”

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The agency said it “has determined that there are extenuating circumstances specific to this set of petitions, including the fact that SRE petitions were previously granted.”

Instead, those 31 facilities will now be required to “resubmit their annual compliance reports for 2018 and report their actual gasoline and diesel fuel production, actual annual (Renewable Volume Obligations), and zero RIN deficit carryforward into the following compliance year.”

In a statement, several biofuel groups - Growth Energy, Renewable Fuels Association, National Corn Growers Association, Clean Fuels Alliance America, American Coalition for Ethanol, and National Farmers Union - welcomed the SRE withdrawal but expressed frustration about the alternative compliance. 

“While today’s decision is an important step in reversing past abuse of refinery exemptions, the decision fails to remedy the economic harms the improperly granted 2018 SREs have already caused," the groups said. "EPA’s move to hold refiners accountable to the law is a welcome step toward getting the RFS back on track that, when applied to pending and future SRE petitions, would improve certainty in the marketplace, and lead to more blending of American-made biofuels. However, EPA’s readiness to excuse individual refineries from their obligations to comply with 2018 blending requirements comes at the expense of our biofuels producers, farmers, and American consumers.”

EPA still has 69 pending SRE requests for the 2016-2021 RFS compliance years.

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