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US ethanol industry challenges biofuel blending waivers in federal court

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US ethanol industry challenges biofuel blending waivers in federal court

A coalition of U.S. ethanol industry groups announced May 29 that it had filed suit in federal court challenging "hardship" waivers that the U.S. Environmental Protection Agency has granted certain U.S. refiners from complying with biofuel blending mandates, arguing that the regulator overstepped its authority by granting relief to profitable companies.

The suit, filed May 29 by The Renewable Fuels Association, National Corn Growers Association, American Coalition for Ethanol and the National Farmers Union in the U.S. Court of Appeals for the 10th circuit, targets waivers granted to HollyFrontier Corp.'s 52,000 barrel-per-day Cheyenne and 45,000 bbl/d Woods Cross refineries and CVR Energy Inc. subsidiary CVR Refining LP's 74,500 bbl/d Wynnewood refinery.

The Renewable Fuel Standard program, administered by the EPA, requires U.S. refiners to blend an increasing volume of biofuels such as ethanol into the transportation fuels they produce each year, escalating to 36 billion gallons by 2022.

The EPA sets annual renewable volume obligations each year based on overall volume requirements and projections of domestic gasoline and diesel production.

Those companies that cannot meet the blending requirements must purchase credits, known as renewable identification numbers in order to meet their blending obligations.

Under the program, refineries with a capacity of less than 75,000 barrels per day can seek "hardship" waivers from the EPA. Under the leadership of Scott Pruitt, the agency has been more liberal in granting these exemptions and has reportedly approved at least 25.

"The petitioners are not challenging the EPA's underlying authority to exempt certain small refineries; rather they are challenging three granted exemptions as abuses of EPA's authority." the Renewable Fuels Association said in a statement. "EPA should be forced to explain why an otherwise profitable refinery faces disproportionate hardship from compliance with the RFS."

During first-quarter earnings calls, U.S. refiners outlined more than $550 million in benefits to their businesses stemming from the Trump administration's light approach to enforcing biofuel blending mandates.

While the EPA does not publicly disclose any information about hardship waivers, refining executives argue secrecy is necessary in order to protect market participants.

"The request for or granting a waiver is something we consider very confidential," CVR Energy President, CEO and Director David Lamp said during an April 26 call with investors. "CVR Energy has had a long history of keeping RFS compliance strategy confidential, mainly because we are net buyers. We are in the market every day, and we just don't want people to know what we're doing."

Renewable Fuels Association President and CEO Bob Dinneen argued that the EPA is relying on confidentiality to act "in contravention of the statute and its own regulations" and "methodically destroying the demand for renewable fuels."

"With the little information we've been able to piece together through secondary sources, it's clear that EPA has been extending these exemptions to refineries that don't qualify for them," Dinneen said.

The EPA, the refining industry group the American Fuel and Petrochemical Manufacturers, HollyFrontier and CVR Energy did not respond to requests for comment.