EPA Yanks 31 Refinery Biofuel Waivers But Skips Credit Requirement

(Bloomberg) -- The Biden administration on Thursday rescinded 31 refineries’ previously granted waivers from 2018 biofuel-blending requirements -- but said it will not require the facilities to buy compliance credits to fulfill the quotas. 

The Environmental Protection Agency’s move was designed to stave off disruptions in a tight market for those compliance credits, something that could drive up already high gasoline prices. 

The approach underscores the continued legal and political pitfalls surrounding the 17-year-old Renewable Fuel Standard program that compels refineries to mix alternatives such as corn-based ethanol into gasoline and diesel. Joe Biden promised to promote ethanol and other biofuels when campaigning for president, but once in the White House he’s faced the same dilemma predecessors did in balancing competing demands from oil refiners and agricultural interests. 

At issue is the EPA’s 2019 decision to grant 31 refineries exemptions from 2018 biofuel blending quotas while denying the relief to five others. After renewable fuel supporters challenged the move, the U.S. Court of Appeals for the District of Columbia Circuit in December gave the EPA 120 days to issue new decisions. 

With its action Thursday, the EPA said the 31 previously granted exemptions were wrongly authorized because any economic hardship suffered by the facilities was not directly caused by the RFS program itself.

The EPA said in a notice it was providing the 31 previously exempted refineries an “alternate compliance approach” so they can fulfill 2018 requirements without buying or redeeming biofuel compliance credits known as renewable identification numbers, or RINs. Under the EPA’s plan, the affected refineries can fulfill their obligations by resubmitting annual compliance reports for 2018. 

“EPA is granting this compliance flexibility because the agency has determined that there are extenuating circumstances specific to this set of petitions,” the agency said. 

Biofuel advocates took a dim view of the decision, which they said effectively absolved refiners of the need to acquire some 1.4 billion RINs. 

Geoff Cooper, chief executive of the Renewable Fuels Association, called the EPA’s decision “a hollow victory for the biofuels industry.”

“EPA admits that those exemptions never should have been granted in the first place, but now is sweeping them under the rug and letting the refiners who got these exemptions off the hook,” Cooper said in an emailed statement. “The so-called alternative compliance approach issued by EPA is really a no-compliance approach.”

Refining advocates had warned the Biden administration that forcing refineries to acquire RINs to satisfy previously waived quotas could spur excessive demand for available credits and potentially higher gasoline costs, undermining White House efforts to lower prices at the pump. 

The EPA appeared sympathetic to those concerns. “Limited available RINs makes it impracticable for these 31 small refineries to meet their 2018 obligations under the existing compliance scheme,” the EPA said. By contrast, the agency said, a drawdown of 1.4 billion credits would seriously jeopardize the ability of refiners to satisfy future quotas and could result in “serious harmful impacts” to the entire program. 

The denials could provide legal support for a separate EPA proposal to reject more than 60 other refinery requests for waivers from quotas spanning 2016 to 2021, the agency said. The agency said the new rejections were consistent with a 2020 decision by the 10th Circuit U.S. Court of Appeals that previous exemptions had been improperly granted because refineries’ economic hardship wasn’t tied to the RFS. 

The Biden administration is set to finalize blending quotas for 2020, 2021 and 2022 by June 3. 

(Updates with biofuel industry comment and details on alternative compliance from sixth paragraph)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.