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EPA to account for a fraction of past waivers in setting biofuel blending quotas

The U.S. Environmental Protection Agency on Oct. 15 released details of a proposal to account for waivers granted to small refineries when setting biofuel blending targets under the Renewable Fuel Standard that underwhelmed ethanol advocates and perturbed the petroleum industry.

The Renewable Fuel Standard allows the EPA to grant hardship waivers to refineries that process less than 75,000 barrels per day of crude oil. In a supplemental notice of proposed rulemaking issued on Oct. 15, the EPA proposed to change the definition of exempted gasoline and diesel volumes to reflect a three-year average of the relief recommended by the U.S. Department of Energy, rather than an estimate of gasoline and diesel volumes to be produced by refineries that have already been granted waivers for the compliance year. The proposal would effectively reallocate those estimated exempted volumes to refineries that are not granted hardship waivers in a given compliance year.

From 2016 to 2018, the relief recommended by the DOE would have resulted in a reduction of 770 million biofuel blending credits, known as RINs, per year for the upcoming compliance year, the EPA said. But data on the EPA's website show the agency has been far more liberal in granting waivers over the last three compliance years, with the average volume exempted over the last three years nearly 75% higher than what the DOE recommended.

Both biofuel and petroleum interests are unhappy with the proposal.

"While the granting of widespread Small Refinery Exemptions should not be occurring in the first place, there is simply no logic in forcing complying refineries to bear the burden of decisions outside of their control," American Petroleum Institute vice president of downstream and industry operations Frank Macchiarola said Oct. 15.

American Fuel and Petrochemical Manufacturers President and CEO Chet Thompson called the proposal "a painful affront to the manufacturing workers the president promised to support," adding the trade war with China is "the real source of what currently ails the biofuel and agriculture industries."

Iowa Biodiesel Board Executive Director Grant Kimberley called the proposal a "dramatic departure from the agreement struck with the President" and called for exempted volumes to reflect actuals from the previous three years.

"It is baffling to us that the proposal sets the three-year average of exempted volume using the very same DOE recommendations that EPA blatantly ignored over and over," Renewable Fuels Association President and CEO Geoff Cooper said. "We are concerned that the volume of actual exemptions granted in 2020 could very well exceed the amount of projected exemptions from DOE, putting us right back into the quagmire where the 15-billion-gallon requirement is eroded and undermined."

In the 2016 compliance year, the EPA granted 19 out of 20 petitions for relief for a total volume of 790 million RINs. In the 2017 compliance year, the agency granted 35 out of 37 waiver requests for a total volume of 1.82 billion RINs. In the 2018 compliance year, the EPA granted 31 out of 42 waiver requests for a total volume of 1.43 billion RINs.

The EPA will hold a public hearing on the proposal at 9:00 a.m. ET on Oct. 30 in Ypsilanti, Mich., outside of Ann Arbor. Public comments on the proposal are due Nov. 29.