US biofuel waiver denials may be 'flawed': Report

President Joe Biden's administration may have relied on a "flawed assumption" as the basis to deny requests from dozens of small refineries for a waiver from biofuel blending mandates, a federal watchdog report said today.

The new report, from the US Government Accountability Office (GAO), focuses on the Biden administration's decision to reject requests from more than 30 small refineries for exemptions from annual biofuel blending requirements under the Renewable Fuel Standard.

The US Environmental Protection Agency (EPA) earlier this year said it denied the waivers because the small refineries — which process up to 75,000 b/d — failed to show they had a "disproportionate" hardship from the biofuel program. EPA said credits called RINs used to comply with the program trade the same price regardless of the size of the buyer, and those costs are then passed through to purchasers.

But the EPA's analysis on the price of RINs might be incorrect, the report said. The GAO said its own analysis found a subset of the small refineries paid 2.4-2.9pc more for renewable fuel D6 RINs than a subset of large refineries, although the price spread fell to 0.5-1.5pc for biomass-based diesel D4 RINs. EPA should reassess its analysis, or else it "risks inappropriately denying valid exemption petitions," the report said.

EPA said it disagreed with the GAO, which it said reached the "wrong conclusion" using the same data the agency had reviewed. EPA said its analysis was backed by an "extensive, transparent notice and comment process and input from experts from across the industry."

The GAO report is likely to be cited in pending litigation by small refiners challenging the EPA's blanket denial of dozens of waivers. Republican lawmakers from states with small refineries say the report shows the waiver denials were "arbitrary" and should be reversed.

"It is high time that the administration reverse course, grant relief to small refineries and clean up its gross mismanagement of this program," US Senate Energy and Natural Resources Committee chairman John Barrasso (R-Wyoming) said.

Biofuel industry groups defended the agency's analysis. The GAO's analysis is "shoddy" and even then only suggests that many small refiners are paying just 0.5pc more for regulatory compliance than large refineries, Renewable Fuels Association president Geoff Cooper said.

"All refiners — large or small, merchant or integrated — face the same compliance obligations and they all pass their RIN costs on to fuel blenders at the terminal," Cooper said.

By Chris Knight