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Senators seek biofuel-blending compliance relief for US oil refineries

Highlights

Urge EPA to waive or reduce 2020 RFS volumes

Argue high compliance costs jeopardizing US refining capacity

Effort to change 2020 standard criticized as fool's errand

As the Environmental Protection Agency gears up to announce how much renewable fuel must be mixed with gasoline and diesel in 2021 and 2022, 17 oil-state senators are calling on the agency to ease perceived compliance burdens on the US oil refining sector by waiving 2020 blending obligations and setting lower requirements for the following years.

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Congress, through the Renewable Fuel Standard program, set biofuel blending targets that increase each year and tasked the EPA with reviewing those targets and annually initiating rulemaking to set renewable volume obligations (RVO) in line with market conditions.

The last RVO to be finalized was for 2020. It set the total renewable fuel volume at 20.09 billion gallons. Advanced biofuel was set for 5.09 billion gallons, including 590 million gallons of cellulosic biofuel. The 2020 biodiesel amount was set at 2.43 billion gallons.

Reports have floated that the EPA was close to sending the overdue RVO for 2021 as well as proposed volumes for 2022 to the White House for pre-publication review, a key step before the agency can formally propose the biofuel blending requirements and launch the comment and hearing process that leads to setting the final annual volumes.

GOP letter

An Aug. 23 letter from 17 GOP senators to EPA Administrator Michael Regan asks the agency to not only "set the 2021 and 2022 RVOs at levels that comport with reality," but to also "waive or significantly reduce the [RVO] for compliance year 2020."

Senators Pat Toomey of Pennsylvania, Shelley Moore Capito of West Virginia, John Barrasso of Wyoming, John Cornyn of Texas and others asserted that prices for compliance credits, called RINs, have "soared" and were contributing to "skyrocketing" gasoline prices.

S&P Global Platts assessed current-year D6 RINs at $1.3550/RIN Aug. 24, up from $1.2825/RIN Aug. 23. Though higher on the day, the credits fell sharply after spending much of August in the mid-$1.60s/RIN after media reports of potentially lower RVOs.

RIN prices peaked at all-time highs in early June, reaching $1.9775/RIN June 8. High biofuel feedstock prices bolstered RIN values since August 2020. RIN market participants have seen soybean oil and corn futures climbing to multiyear highs as bullish for RINs.

"We are calling on EPA to take concrete steps to stabilize the RFS compliance system by setting the 2021 and 2022 RVOs below the blend wall," the senators said, referring to the 10% ethanol and 90% gasoline fuel blend most widely accepted and available from retailers across the country.

In the letter, they contend that a purported shortage of RINs, historically high RIN prices and the dive in fuel demand brought on by the pandemic have threatened the economic viability of US refineries and sent domestic refinery capacity to its lowest level since 2015 with the shuttering or repurposing of seven refineries in the last year.

"If the RIN bank is depleted, there would be no RINs available for obligated parties to purchase, leaving US refiners little choice but to cut fuel production, increase fuel exports or face non-compliance with the RFS," they said in their plea for the EPA to help avert additional financial hardship on consumers and protect the continued viability of remaining US refineries.

Other views

Farm-state lawmakers and the biofuel industry have challenged those assertions.

Republican Senator Chuck Grassley of Iowa, for instance, expressed disappointment in hearing that the administration may lower the biofuel blending requirements for this year.

"If the reports are true, then once again, the EPA is giving a gift to Big Oil and is playing games with the Renewable Fuel Standard law," Grassley said in a statement Aug. 20.

Renewable Fuels Association President and CEO Geoff Cooper said the oil-state senators' letter to EPA simply rehashed "tired arguments that have been disproven time and time again," and that "Regan and the White House will see right through this charade."

Thus far, the White House has been silent on biofuel policy issues pending before the EPA, including the court remand of a Trump-era rule that eliminated a summertime ban on higher ethanol blends in gasoline and a Supreme Court decision that affirmed the agency's authority to exempt small refineries from annual blending requirements.

Request called ridiculous

Cooper, in an email Aug. 24, called the request for a waiver of the 2020 RFS standards a fool's errand.

"EPA has repeatedly stated that it does not have the authority to go back in time and change RFS volumes that have already been finalized," he said.

"And the Biden administration knows that reducing the 2021 and 2022 RFS volumes would derail the president's agenda related to clean energy, climate and domestic manufacturing jobs," Cooper continued. "It would also mark a big step backward on the path to net-zero GHG emissions by 2050."

RFA has asked the EPA to preserve the 2020 RVO and adopt strong RVOs for 2021 and 2022, including the statutory allotment of 15 billion gallons of conventional renewable fuel annually.

"Waiving biofuel volumes would continue our dangerous dependence on fossil fuels," Chris Bliley, senior vice president of regulatory affairs for the biofuel trade group Growth Energy, added in an interview Aug. 24. "The RFS, which encourages the use of cleaner fuels, has been the law for over a decade, and the easiest way to comply is to blend more biofuels."