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EPA grants 25 small refiner exemptions to fuel mandates

04 Apr 2018 14:56 (+01:00 GMT)
EPA grants 25 small refiner exemptions to fuel mandates

Houston, 4 April (Argus) — The Environmental Protection Agency (EPA) has so far granted 25 small US refiners exemptions from federal fuel blending mandates for 2017, dragging down the market for compliance credits and infuriating biofuels groups.

EPA did not comment on the associated number of renewable identification numbers (RINs) associated with small refinery exemptions to the Renewable Fuel Standard (RFS). The number of approved waivers — more than double the previous year and all but four of the applications received for 2017 — surged after Congress and federal courts told the agency last year it had overstepped its authority by limiting the number of waivers.

"It appears the agency has initiated a fire sale on RFS demand," Renewable Fuels Association chief executive Bob Dinneen said.

RFS requires refiners, importers and other companies to each year ensure minimum volumes of renewables blend into the fuel they add to the US transportation supply. Companies acquire RINs needed to prove compliance by blending approved renewable and conventional fuels. Obligated parties that lack infrastructure for that activity purchase RINs from blenders.

Congress created a hardship waiver for refineries with less than 75,000 b/d of capacity. Facilities must convince the Department of Energy and EPA that compliance creates an economic hardship. The waivers apply to individual facilities, rather than an overall company.

EPA does not adjust a year's minimum volume after waiving a small facility's obligation. Such waivers instead effectively reduce obligations for all obligated parties and increase the supply of available RINs, cutting costs.

The agency has historically granted few waivers, though given little detail on who received the benefits or how decisions were reached. Because the waivers hinge on economic hardships, they are treated as confidential business information. A 2011 list of candidate refineries prepared by the Department of Energy was also redacted.

Congress considered the agency too restrictive in past grants. Instructions attached to the agency's appropriations bill for 2017 directed EPA to stop considering profitability as a factor in economic hardship.

"This is inconsistent with congressional intent because the statute does not contemplate that a small refinery would only be able to obtain an exemption by showing that the RFS program threatens its viability," the bill read.

And a federal court last year found that EPA had overstepped its authority in rejecting applications from certain small refiners in a case brought by Wyoming facilities otherwise eligible for the exemptions.

"The EPA's decision takes the statutory language too far," chief judge Timothy Tymkovich wrote.

EPA documents last year said at least 12 refineries received exemptions under the program, with 515mn associated RINs.

RINs associated with ethanol blending tumbled by 9pc to 40¢/RIN yesterday on reports that US independent refiner Andeavor received exemptions for three facilities. Andeavor neither confirmed nor denied receiving exemptions.

US Senator Chuck Grassley (R-Iowa) called the exemptions "a secret waiver" in a statement this morning that questioned whether EPA was following the law.

"Giving big corporations like Andeavor a free pass when other companies are required to follow the law of the land is not just unfair, it may be illegal," Grassley said in a statement.