Biofuels industry asks court to block EPA waivers

Opponents of federal fuel blending mandate waivers today asked a US court to block the Environmental Protection Agency from issuing more of the waivers, ratcheting up a running battle over the volumes of renewables in the US transportation fuel supply.

The Advanced Biofuels Association cited redacted materials from another lawsuit against the agency to urge a judge to block EPA from exempting small refineries from 2018 Renewable Fuel Standard (RFS) requirements. The association argued in that lawsuit that the agency under former administrator Scott Pruitt illegally and arbitrarily increased the number of exemptions to record levels — effectively waiving 9.4pc of total US blending requirements for 2017.

The cuts have weighed especially heavy on biodiesel blending. Fuel blenders continue to use ethanol, a cheap octane source that makes up roughly 10pc of gasoline blends sold nationwide. But biodiesel blending faces tougher blending economics and less stable demand.

Credits associated with biodiesel blending have for years filled a gap between the total volume of ethanol that retailers can blend — about 14.5bn USG — and an implied mandate for both conventional ethanol and biodiesel of 15bn USG. Slashing the mandates have helped to depress demand for physical biodiesel blending, producers and blenders have said.

EPA said in early April that the agency was waiting for Department of Energy (DOE) recommendations on a record 40 applications to waiver requirements for 2018.

The association argued in March that redacted documents released to the group as part of the lawsuit showed that the EPA in 2017 disregarded DOE guidance to determine which refineries it would exempt from the requirements. The agency also included debt liabilities assumed by parent companies, ignored profits from selling credits no longer needed under the program and gave outsized weight to diesel production to tilt the program toward more waivers.

The documents remain under seal to protect confidential business information. EPA said its approval process followed the law and said in March that the characterization "is based on the filings of a single party and should be interpreted accordingly."

RFS requires refiners, importers and other companies to each year ensure minimum volumes of renewables blend into the gasoline and diesel they add to the US transportation supply. Congress included a waiver of these requirements for refineries processing less than 75,000 b/d that could demonstrate a hardship caused by the program to EPA and DOE.

These exemptions surged under President Donald Trump's administration, to a record 35 waivers for 2017. Because these waivers do not transfer blending obligations to larger companies, the exemptions effectively reduced blending requirements for the year by 17.1bn USG of gasoline and diesel.