The Environmental Protection Agency acted Friday on a backlog of 175 requests for small refinery exemptions from biofuel usage mandates, granting full or partial waivers on all but 35 petitions.
The agency granted full exemptions to 63 petitions and partial waivers to 77 others. Some 28 petitions were denied; seven were deemed ineligible.
“With today’s action, EPA is getting the SRE program back on track with an approach that recognizes some small refineries are impacted more significantly than others and that EPA’s relief should reflect those differences,” EPA said in a press release.
The agency said it was reaffirming a policy developed in the first Trump administration to grant 50% exemptions to a small refinery that “has demonstrated that it faces partial hardship.”
The agency also is reaffirming a policy to return Renewable Fuel Standard compliance credits that were previously retired when a refinery received an exemption. Because the credits, or renewable identification numbers (RINs), have a two-year window for use, RINs for 2022 or earlier “will not impact the number of RINs available to meet 2024 and future compliance obligations and are not expected to impact demand for biofuels,” the agency says.
The agency plans to propose a supplemental rule for reallocating exempted credits.
The decision on reallocating credits "takes off the table a major potential bearish factor regarding the future direction of the RFS. That assumes the return of worthless expired RINs holds up in court. I suspect the court filings will happen soon," said University of Illinois economist Scott Irwin in a post on X.
Altogether, the agency exempted 5.34 billion RINs, all but 1.39 billion of which were for 2022 and earlier years, according to the executive summary of the decision.
Brian Jennings, CEO of the American Coalition for Ethanol, welcomed the agency's decision to reallocate 2023 and later RINs.
"EPA's new approach is any small refinery exemption we grant for the 2023 compliance year and later, we're going to reallocate. And you have to look at that and say, 'That's a win.' You have to look at that and say, 'That's exactly how we intended for this RFS SRE provision to be adopted,'" Jennings said in an interview on the sidelines of ACE's annual meeting in Sioux Falls, South Dakota.
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He acknowledged there could be additional litigation over the SRE decision.
"Maybe the thing we have going for us is that any litigation on this front, based on the Supreme Court ruling earlier this year, has to go through the D.C. Circuit, and that's a better venue for these cases," Jennings said.
The Supreme Court ruled in June that the D.C. Circuit was the proper venue for legal challenges to EPA’s SRE decisions, removing the issue from regional circuit courts that have sometimes ruled against the biofuel industry.
The American Fuel and Petrochemical Manufacturers blasted EPA’s plan to reallocate waived credits since 2023.
“Piling on more than a billion gallons in additional, reallocated mandates will do nothing other than increase imports, harm U.S. energy dominance and cost consumers. This is akin to your neighbor getting a tax break and the IRS showing up at your doorstep with the bill. It is simply wrong,” AFPM President and CEO Chet Thompson said in a statement.
Clean Fuels Alliance America, which represents producers of biomass-based diesel, expressed concern about the uncertainty around EPA’s reallocation plan, noting it would delay finalization of renewable volume obligations for 2026 and 2027.
“EPA’s course correction on RFS small refinery exemptions creates fresh uncertainty for America’s farmers and biodiesel, renewable diesel, and SAF producers. We look forward to working with the agency to ensure today’s decision does not unwind the strong signal of support issued in June through robust RFS volumes meant to drive growth and recognize investment in domestic fuels and American agriculture,” Clean Fuels Vice President of Federal Affairs Kurt Kovarik said in a press release.
Noah Wicks contributed to this report.
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