News
26/08/03
US Senate farm bill targets E15, SRE reform
Houston, 3 August (Argus) — The US Senate is pondering a farm bill that would
expand small refinery exemptions from Renewable Fuel Standard (RFS) blending
obligations and allow year-round sales of ethanol fuel blends up to 15pc (E15).
The bill, also known as Farm Bill 2.0 and introduced by Senator John Boozman
(R-Arkansas) on 31 July, provides a new avenue for advancing provisions from the
stalled HR 1346 bill , with some changes. HR 1346 made little progress in the US
Senate after passing the US House of Representatives in May , as some lawmakers
balked at supporting year-round E15 sales without negotiating broad changes to
the RFS, sources familiar with the discussions said. Like HR 1346, the proposed
bill would allow year-round sales of fuel blends up to E15, which are currently
restricted during the summer to limit ground-level ozone. The US Environmental
Protection Agency (EPA) has increasingly issued and extended summertime E15
waivers from Clean Air Act regulations in recent years. Both bills would direct
the EPA to conduct a rulemaking to modify fuel dispenser labeling and
underground storage tank requirements for compatibility with E15 within 18
months of enactment. The biggest difference between the two bills concerns
exemptions for small refiners from annual biofuel blending mandates under the
RFS. The RFS requires refiners to blend various types of biofuels each year or
buy credits, known as renewable identification numbers (RINs), from others that
do so to cover their obligations. Refining facilities with a nameplate capacity
of no more than 75,000 b/d can request an annual exemption from the EPA if they
can show that compliance would cause disproportionate economic hardship. These
are referred to as small refinery exemptions (SRE). The EPA decides whether to
grant full, partial or no relief. Under the new proposal from the Senate, the
EPA would reduce the compliance obligations of any qualifying small refinery by
the lesser of two amounts: Its highest actual annual production volume from
2023-25, or its production volume for the calendar year in which the agency
applies the reduction. For the former volume, the facility must have petitioned
for an extension of its SRE by June 2026 for any of its 2023-25 obligations. If
a refinery's actual annual production volume exceeds its highest volume from the
2023-25 period, only the additional amount is subject to RFS obligations. If a
refinery no longer qualifies as a small refinery in 2028 or any year after, the
EPA cannot grant a waiver from its RFS blending obligations in any subsequent
year. The EPA would need to reallocate any RFS obligations exempted from small
refineries under these proposed requirements, minus an amount equal to the
energy content of 500mn USG of conventional biofuels, based on its estimate of
annual exempted fuel when determining program compliance obligations. The agency
would start in 2028 then compare its estimate with the actual amount of exempted
fuel, with any required adjustment reflected in the next year of obligations.
The EPA would also return RINs retired as part of 2016-18 obligations to small
refiners that meet certain eligibility requirements, similar to HR 1346.
However, HR 1346, in contrast, would have tightened the definition of a small
refiner to apply only to companies or entities that did not exceed 75,000 b/d
across all facilities in 2025. The EPA would reduce by 75pc RFS obligations for
qualifying small refineries starting in 2028, if they did not in 2026 or any
other year exceed the 75,000 b/d threshold. The House version of the bill
prohibits the EPA from reallocating any exempted volumes onto other RFS
participants. The addition of E15 and SRE language is a departure from the
initial discussion draft of Farm Bill 2.0 released in June, which contained
nothing about either provision. Lawmakers were reluctant to add E15 and SRE
provisions into the bill as of last month, citing already narrow support, with
Democratic committee members' approval resting on ongoing Supplemental Nutrition
Assistance Program (SNAP) negotiations and the medical absence of senator Mitch
McConnell (R-Kentucky), sources familiar with discussions around the bill told
Argus . It is unclear what changed sentiment, but the committee's Democratic
members have not indicated that the newest version of the bill achieves the SNAP
changes required for their support to move it out of committee. The current farm
bill expires on 30 September. Ethanol-focused industry groups Growth Energy and
the Renewable Fuels Association said they plan to continue engaging on the bill.
While the American Petroleum Institute (API) had put its support behind the
"common sense" House version of SRE amendments, it is now urging Congress to
reject the Senate language. "The proposal included in the Senate farm bill fails
to deliver that balanced approach, replacing it with flawed provisions that
weaken America's fuel supply instead of providing the long-term certainty
consumers, farmers, biofuel producers and refiners need," API told Argus . The
Senate Agriculture, Nutrition and Forestry Committee will hold a markup for the
bill on 6 August. The Senate will leave for recess on 7 August, while the House
is already on recess until 31 August, meaning significant progress will likely
not happen until September. By Denise Cathey Send comments and request more
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