RFS Program Under Attack

The ABFA, and other groups, including the Renewable Fuels Association, have filed suit contesting the recently granted small refinery exemptions under the renewable fuel standard.
By Michael McAdams | July 11, 2018

Let’s not mince words: U.S. EPA Administrator Scott Pruitt is no friend to the biofuels industry. His recent actions granting so-called “small refineries” unprecedented numbers of RFS program compliance exemptions not only goes well beyond what EPA has previously considered, but also runs counter to congressional intent.

Based on what has been reported in the press, we suspect that EPA has granted up to 30 exemptions for small refineries in compliance years 2016 and ’17—three times what we have seen previously. Effectively, this will allow EPA to issue these 30 small refineries massive volumes of 2018 RINs to be used to demonstrate compliance in the current year, thus lowering demand in the RIN markets that would otherwise drive increased production.

Congress intended for the RFS to increase the amount of renewable fuel used in the U.S. as more supply became available. Yet, in its own presentation to the OMB on May 15, EPA took credit for an additional 1.2 billion carryover RINs created as a result of these small refinery exemptions, and the relief afforded to Philadelphia Energy Solutions after the company declared bankruptcy. Effectively, this would reduce the demand for renewable fuel by flooding the market with RINs that do not reflect current production and available supply, while allowing EPA to still grow the annual RVO and meet statutory mandates. Of course, none of this has been publically confirmed by EPA, not even the 1.2 billion number used in internal documents. The Advanced Biofuel Association, along with scores of others, continues to await results from its document production request to EPA under the Freedom of Information Act.

It is clear Pruitt will take unprecedented steps to undercut the RFS program and create massive uncertainty in the markets. Despite having testified during his confirmation hearing and writing five letters to various senators claiming that he would support the RFS program, Pruitt is gutting the RVO mandates with no transparency or accountability for his actions. Moreover, he continues to impede the introduction of new gallons to available supply by delaying pathway approvals and stalemating the regulatory reform package known as the “REGS Rule,” which would have eased some challenges specific to cellulosic fuels. Again, all behind closed doors.

Clearly, these actions comprise a concerted effort to drive down the value of RINs. And since the news regarding the small refinery exemptions first broke, the value of the D6 RIN has fallen over 50 percent—exactly the outcome sought by Pruitt, and the small refineries receiving these new exemptions. We’ve even heard he is personally directing his staff to take action on the small refinery exemptions in ways that benefit the refineries owned by the likes of Carl Icahn, to the tune of tens of millions of dollars. In our judgment, the law does not give Pruitt the ability to grant this unprecedented volume of exemptions, undercutting the intent of Congress in this manner. The ABFA, and other groups, including the Renewable Fuels Association, have now filed suit contesting the recently granted small refinery exemptions. The litigation will begin over these coming summer months. For the sake of the RFS program, this is a fight we must win.

Stay tuned, and don’t believe for a second that Pruitt has your back when it comes to the RFS. At best, especially given the 13 different investigations he is currently under, we should mark him down as doubtful.

Author: Michael McAdams
President, Advanced Biofuels Association