EPA’s second attempt to fix Renewable Fuel Standard loophole draws criticism

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Photo by Darrell Hoemann/Midwest Center for Investigative Reporting

The Environmental Protection Agency has granted ethanol blending exemptions to nearly four times as many oil refineries this year as in 2015.

Critics of new proposed rules regulating how oil and gas refineries blend biofuels say the federal government’s generous exemptions to large refineries have contributed to the idling of at least 28 ethanol and biodiesel plants in the last 14 months.

Of the 200 ethanol plants in the U.S., 178 are in the Midwest, and account for 93 percent of all ethanol production in the U.S., according to the U.S. Energy Information Administration.

Thirty-one oil refineries received waivers in 2018, while 35 were granted exemptions in 2017. That’s up from 19 waivers in 2016 and just eight in 2013, according to data from the Environmental Protection Agency.

Refineries that produce more than 75,000 barrels a day are required to blend biofuels into fuel as a part of the Energy Policy Act of 2005, but smaller refineries can apply for exemptions.

The EPA has proposed new rules twice since July 2019 to set how much ethanol, biodiesel and other biofuels should be blended into gasoline and diesel fuel.

Yet the moves have failed to satisfy farmers and ethanol advocates, who say the EPA's exemptions have contributed to the shuttering or idling of 19 ethanol plants and 9 biodiesel facilities since September 2018, according to the Renewable Fuels Association. The group points to the EPA’s lax approval of refinery exemptions as a contributor to the plants' economic hardships.

The EPA proposed new rules on Oct. 15, in an attempt to clarify the minimum amount of biofuel required.

Or, more specifically, the EPA has proposed changes to a July 29 proposal, that will take effect in 2020.

On October 4, the Trump administration promised 15 billion gallons of ethanol would be blended into fuel in 2020, and efforts would be made to makeup for approximately 1.34 billion gallons that were not blended due to small refinery exemptions in 2017 and 2018, according to the American Coalition for Ethanol. But the Oct. 15 announcement only accounts for 770 million gallons of previously unblended biofuel, the coalition said in a statement.

This comes after farmers, ethanol producers and several Midwestern state representatives expressed frustration over practices that benefited big oil refineries while hurting biofuel producers.

The fight stems from the agency’s allowance of large oil refineries to use exemptions meant for small, independent oil companies to bypass ethanol blending rules.

Industry groups, farm-state senators and farmers expected more biofuel gallons in the new proposal, based on previous talks with Trump administration officials.

“As we began to look at the proposal, we saw pretty quickly that it doesn’t do what we all expected it would do. It doesn’t seem to be consistent with the agreements that were made between the White House and farm-state senators,” said Geoff Cooper, president of the Renewable Fuels Association. “That commitment was made by President Trump several months ago, it was further discussed in meetings with farm-state senators in September, and October 4 we had a big announcement from EPA and USDA.”

When the agency released its first proposed rule change in July, many farmers were angry, claiming the President had sold out a loyal constituency for the benefit of big oil companies.

“Today’s agricultural community is facing a great number of challenges: a prolonged downturn in the farm economy, the erosion of international export markets due to escalating trade tensions, climate change-related weather extremes, and declining populations and job opportunities in rural areas,” said Roger Johnson, president of the National Farmers Union. “It is disappointing that time and time again, EPA has chosen to undermine the policy’s purpose and integrity. This proposal is just the latest example of that.”

In an Oct. 4 statement, EPA administrator Andrew Wheeler praised the President for helping the agriculture community.

“President Trump’s leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our Nation’s farmers and providing greater energy security,” said Wheeler.

But in the same statement, the EPA touted all the measures the Trump administration has done for the entire energy sector, implying what’s good for the oil and gas industry is also good for biofuel producers.

“The Trump Administration has enacted tax and regulatory policies that have helped make American energy dominant,” the statement said, “and will continue to enact pro-growth energy policies to expand American energy dominance.”

The statement lists accomplishments such as removing the U.S. from the Paris Climate Accord and opening the Arctic National Wildlife Refuge for development by oil and gas companies, but nothing that specifically helps the biofuels industry.

Two RFS rule change proposals in three months

This newest proposal by the EPA touts support from Midwestern governors, congressmen and the president’s own cabinet members, but corn growers and ethanol industry groups say it doesn’t go far enough to fix the damage already done.

“The proposed rule fails to provide the assurance needed that EPA’s practices for granting waivers will change going forward. Farmers have long been skeptical of the EPA’s administration of the RFS,” said Kevin Ross, president of the National Corn Growers Association. “This proposal doesn’t provide farmers confidence in EPA’s ability to follow through and make this right.”

The proposed rule change includes confusing language around the biggest issue frustrating farmers - the billions of gallons of ethanol that didn’t get blended into fuel in 2017 and 2018 because of the drastic increase in small refinery exemptions.

“If this is confusing, I would suggest that’s EPA’s goal. The Agency hopes farmers and biofuel producers will overlook the fact EPA is not planning to ensure 15 billion gallons,” said the American Coalition for Ethanol (ACE) in a statement. 

ACE said by allowing refineries owned by companies such as Chevron, Exxon Mobil, Phillips 66, Sinclair and Marathon to opt out of blending renewable fuels into their gas, they’ve allowed big oil companies to remove billions of gallons of ethanol and biodiesel from gas pumps across the country.

More than 30 billion gallons of biofuel have been exempted in 2017 and 2018 alone, according to EPA data.

There are 59 refineries that qualify as “small refineries” under the EPAs rules, according to a 2019 report by the American Fuel & Petrochemical Manufacturers. These refineries produce less than 75,000 barrels per day. In 2018, 42 refineries petitioned for exemptions. One major complaint by the ethanol and biodiesel industry is that the EPA won’t release the names of refineries receiving exemptions.

While major oil refineries are receiving cost-saving exemptions, ethanol plants are shutting down. An analysis by the Renewable Fuels Association showed that idling one ethanol plant in Fairmont, Minnesota resulted in a potential lost income for farmers of more than $8.4 million. Corn prices in the area weakened by as much as $.20 cents per bushel after the plant stopped taking grain.

Map: Ethanol plants vs. Small refineries

There are approximately 200 ethanol plants in the U.S., most in the Midwest. they collectively produce a little more than 1.1 million barrels of ethanol a day. By contrast, the 59 smallest gas refineries in the country produce 1.9 million barrels a day.