Ethanol partners call on EPA and the White House to right wrongs with the Renewable Fuel Standards

On Sept.14, the ethanol industry celebrated a welcome, albeit predictable, victory when the Environmental Protection Agency denied 54 small refinery exemption petitions and committed to rejecting at least 14 more pending petitions.

According to Geoff Cooper, president and CEO of the Renewable Fuels Association, these were the so-called retroactive gap-year petitions that had been filed by small refiners who were attempting to circumvent the 10th circuit court decision by going back in time and claiming that they had a hardship years ago and should have had an exemption from their compliance obligations as far back as 2011.

“Really the whole purpose of them trying to secure these gap-year exemptions was so that they would be able to claim that they now meet the conditions of the 10th circuit decision and should remain eligible for more waivers going forward,” Cooper said. “Fortunately the Trump administration recognized the irrationality of those petitions and rejected them outright. I want to underscore just how big of a deal that really is. The 68 petitions that are being denied represent roughly 2.8 billion gallons of renewable fuel blending requirements for past years and rejecting those petitions means that those blending requirements will be persevered.”

The 10th circuit court decision came out in January 2020 from a unanimous three-judge panel. According to Matthew Morrison, partner at Pillsbury Winthrop Shaw Pittman LLP, the court said that the Clean Air Act allows EPA to only extend existing exemptions and it does not allow the agency to create new exemptions after the refineries already demonstrated they can achieve compliance. The court found that the Clean Air Act required that any disproportionate hardship justifying an exemption had to be the result of compliance with the Renewable Fuels Standard program itself. The court also determined that the EPA abused its discretion by failing to address the extent to which three refineries were able to recoup their compliance costs by charging higher prices for the fuels they sold.

Three groups joined the RFA in challenging EPA in the 10th circuit court: the National Corn Growers Association, the National Farmers Union and the American Coalition for Ethanol. They aggressively took on EPA’s abuse of the small refinery exemption program and Cooper believes they secured one of the most important court decisions in the history of the RFS.

“I would say the unfortunate reality is the EPA has badly mismanaged the RFS over the last three and a half years,” said Brian Jennings, CEO of the American Coalition for Ethanol. “So many promises to do right by the ethanol industry have collected dust. But I think too many folks misinterpreted the decision to reject some of these gap year waivers as a significant turning point. It was not. It was a step in the right direction, but these gap year waivers should never have been given credibility. They were really nothing more than an outrageous attempt by refiners hoping to avoid the consequences of our victory in the 10th circuit.”

More work to be done

Although partners in the ethanol industry are pleased with the recent petition decisions, they want to remind EPA and the Trump administration that there is a lot of work that remains to be done.

“It was one year ago that President Trump convened a meeting Sept. 12, 2019, to develop a plan to revive the RFS and restore market certainty for farmers and biofuel producers,” Cooper said. “In this meeting, he established a five-point plan moving forward. Unfortunately, one year later very little progress has been made.”

According to Cooper, only one of the five promised actions has been accomplished to date, which is the U.S. Department of Agriculture’s Higher Blends Infrastructure Incentive Program. While he applauded the gap-year denials, Cooper said there were a number of actions the Trump administration needed to take to finish the job.

First off, Cooper said they must ensure all the president’s commitments from last September’s five-point plan are upheld. Next, they must reject the 17 gap year petitions that have not come back from Department of Energy yet. Furthermore, EPA should immediately adopt the 10th circuit decision nationwide and apply it to all 33 pending exemption requests for 2019 and 2020. Next, EPA should propose the 2021 Renewable Volume Obligation proposal and include the statutory volumes for conventional renewable fuels and increase requirements for cellulosic and advanced biofuels. It also needs to be consistent with the 10th circuit court decision. EPA should also include the required 500 million gallon remanded volume that was ordered by the D.C. circuit court in a 2017 decision in the Americans for Clean Energy case. Finally, EPA should ensure that the Small Refinery Exemption program is transparent, and that basic information is provided to the public around these decisions.

Kevin Ross, president of the National Corn Growers Association, said the bigger concern for farmers is the real uncertainty of the 2019 and 2020 compliance years that are still under consideration.

“Farmers are not going to have that certainty that they need going into harvest and this administration won’t be able to live up to their promises until these waiver issues are dismissed,” Ross said. “Some transparency in addressing these waivers would go a long way toward injecting some confidence into the rural ag economy, especially going into harvest this year. We think it’s a really simple solution and the EPA needs to uphold the law and observe the 10th circuit decision.”

2020 has been tough on most industries and ethanol has been no exception, however, a show of good faith from EPA and a willingness to follow through on promises from the White House would go a long way in mending broken bridges.

“The small refinery exemption issue has seen us lose well over 4 billion gallons of renewable fuels over the years, which is a huge number and really unacceptable,” said Anne Steckel, senior biofuels advisor, National Farmers Union. “Like many industries, ethanol was affected by COVID-19 and demand was down and so demand was down for corn as well. Coupled with trade policies, this has been a really hard year for farmers so we’re calling on the Trump administration to keep their pledge to support farmers and uphold the RFS and apply this 10th circuit decision nationwide.”

Lacey Newlin can be reached at 620-227-1871 or [email protected].