Naig, Shaw say pending SREs would hurt farmers, damage RFS

By Erin Voegele | April 17, 2019

Iowa Secretary of Agriculture Mike Naig and Iowa Renewable Fuels Association Executive Director Monte Shaw held a press conference April 17 to discuss the 39 small refinery exemptions (SREs) currently pending for compliance year 2018 under the Renewable Fuel Standard.

“We believe it is time for EPA to address this threat to the Renewable Fuel Standard, “Naig said. “Over the past two years, EPA has granted waivers that have accounted for 2.6 billion gallons of ethanol, equaling nearly 1 billion bushels of corn.”

Naig said the impacts from these SREs are occurring during a time when farmers in rural America can least afford it. He cited the USDA’s 2017 ag census that was released last week showing that on-farm income in Iowa was down 24 percent between 2012 and 2017.

“I think Administrator [Andrew] Wheeler has inherited quite a mess when it comes to this issue,” Naig said, but stressed it’s not too late for him to “do the right thing” on SREs.

While Naig noted that the EPA does have the authority to grant SREs, he said the agency should do so in a way that complies with legal standards and doesn’t harm the biofuels industry. “If we move to a prospective [SRE] approach, that would allow these waived gallons to be reassigned in some way,” he said.

Shaw delivered a speech reviewing the background and facts associated with the RFS and SREs. “When we talk about defending the RFS and getting year-round E15, we are not asking for anything more than what is in the law itself, and what [President] Trump has promised to voters,” he said.

Former EPA Administrator Scott Pruitt tried to paint a picture that EPA is forced to grant SREs, Shaw said, noting he cited court cases and report language attached to appropriations bills. Wheeler has also cited court cases in his comments related to SREs.

Shaw referenced comments made by Wheeler at a recent congressional hearing in which he said the EPA has been sued over SREs three times and lost all three times. According to Shaw, those comments are misleading. He said the EPA has been sued over SREs more than three times. He said the vast majority of SRE denials either weren’t challenged in court, while many that were challenged were held up by the courts.

Shaw also noted that the EPA tends to mischaracterize the three court cases it does cite with regard to SREs. The courts did not rule that the EPA must provide a SRE to anyone who applies. Rather, the court said the threshold for disproportionate economic hardship had been set too high.

During his discussion, Shaw noted that Pruitt had testified several times before congress that the EPA had simply followed recommendations made by the U.S. Department of Energy when approving SRE applications. “I myself have personally talked to a former senior—and I mean senior—level appointed who worked for DOE Secretary [Rick] Perry when Pruitt was at the EPA,” Shaw said. “This former senior staffer said DOE folks would watch Pruitt testify that he was just doing what the DOE recommended, and they would just shake their heads in disbelief because they knew that it wasn’t true.”

While Wheeler has testified the EPA has followed DOE advice in all but one instance, Shaw cited a letter Sen. Chuck Grassley, R-Iowa, sent to Perry last week. Data included in that letter seems to indicate the EPA approved SRE applications even when no evidence of disproportionate economic harm was revealed by DOE analysis.

Shaw called on congress to get to the bottom of the questions asked by Grassley in his letter, and determine if the EPA has truly been following DOE guidance when approving SRE applications.

Shaw said the 39 SRE applications pending for 2018 represent “enough gallons to rip the heard out of the RFS.”

If congress wanted to exempt all small refineries from the RFS, it could have done so, Shaw said, noting the program actually did include a blanket exemption for those refineries during its first two years. “Congress clearly envisioned a time when small refinery exemptions were not justified,” he said.

Shaw also noted that if the EPA can justify granting SREs under today’s circumstances, when RINs are priced at only 8 cents, then they agency would actually be saying its “always going to grant small refinery exemptions and the hope of ever having a true 15 billion gallon RFS is dead.”

“That’s not what congress intended, nor is it what President Trump has promised,” Shaw said.