DOE confirms EPA ignored recommendations on SRE applications

The U.S. Department of Energy has confirmed at least one instance in which the U.S. EPA approved a small refinery exemption (SRE) application despite DOE analysis that determined the refinery faced no disproportionate economic hardship due to compliance with its Renewable Fuel Standard obligations.

The DOE made the statement in a July 19 letter to Sen. Chuck Grassley, R-Iowa. Grassley sent a letter to Energy Secretary Rick Perry in April asking for clarity on the DOE’s review process concerning SRE applications. Under statute, the DOE reviews SRE applications and provides recommendations to the EPA.

Perry responded to Grassley’s request in the July 19 letter.

“As required by statute, DOE provides EPA with its analysis of each of the petitions,” Perry wrote. “DOE fairly and consistently evaluates all petitions, and has not changed how the analysis is applied or scored from the previous administration.”

In the letter, Perry explains that the DOE analyzes the SRE petitions and assigns them scores based solely on factors developed in the 2011 Small Refiners Exemption Study and the 2014 addendum. The DOE then provides EPA with the result of that analysis.

“As required by law, the results of DOE’s analysis are intended to identify whether compliance by a small refinery imposes a ‘disproportionate economic hardship,” Perry wrote. “Although DOE provides the results of the analysis finding for EPA to consider, EPA has exclusive authority to decide whether to grant a petition by a small refinery for an exemption from EPA’s [RFS] requirements. In making its determination on individual petitions, EPA also is required to consider ‘other economic factors’ that are not part of DOE’s scoring of the factors developed in the 2011 study.”

According to Perry, DOE’s analysis is based on a scoring matrix that consists of two indices. He said a zero is indicated if a refinery scores below the specified threshold for both indices, while a 50 percent exemption is indicated if a refinery scores above the specified threshold for only one index and a 100 percent exemption is indicated if a refinery scores above the threshold for both indices.

“EPA does not formally share with DOE its decisions on individual petitions, and DOE does not rack EPA’s determinations with respect to individual petitions,” Perry wrote. “I would suggest that EPA is the best source of information regarding its decisions on small refinery exemptions and the number of times in which EPA’s decisions on exemptions may have differed with DOE’s guidance.”

“That said, to DOE’s knowledge, EPA has never granted a 50 percent exemption,” Perry continued. “EPA has both granted and denied exemptions in the past for which the results of DOE’s analysis indicate that a 50 percent exemption may be appropriate.”

Based on data posted the EPA website, Perry said “DOE is aware of one instance in which DOE’s analysis indicated that EPA consider no exemption, but the result was an EPA decision to grant an exemption to the petitioner.”

Within the letter, Perry also confirmed that the EPA has completed its analysis of all 37 SRE petitions for compliance year 2018 it has received to date. While the EPA website shows the agency has received 40 such SRE petitions so far for compliance year 2018, Perry indicated only 37 of those petitions have been sent to DOE by EPA. The DOE sent EPA its findings for those 37 petitions on April 26, according to the letter.

“This confirms what we’ve suspected and has been reported by news media,” Grassley said in a statement released July 23. “President Trump delivered on E15, but EPA has been undermining the president’s commitment to Iowa, the Midwest and rural America. I hope the White House puts an end to these handouts to Big Oil that hurt American farmers.”

The Renewable Fuels Association released a statement July 24 stressing Perry’s letter shows EPA ignored DOE recommendations on SRE applications. “The admissions of the DOE letter flatly contradict previous statements from EPA officials who claimed their hands were tied by DOE recommendations on small refiner exemptions,” said Geoff Cooper, president and CEO of the RFA. “EPA has claimed it must follow DOE’s guidance on whether to grant or deny exemptions, but this letter clearly shows EPA ignored the recommendations and analysis provided by DOE. The demand destruction that has resulted from these exemptions has been real and significant. Ethanol producers and the corn farmers who supply our industry are facing some of the worst market conditions in a generation, and these small refinery bailouts are largely to blame for that. We urge President Trump and Administrator Wheeler to restore some integrity and judiciousness to the small refiner exemption program, and ensure that any exempted renewable fuel blending requirements are redistributed to non-exempt refiners.”

Cooper said the letter also corroborates information recently uncovered through a Freedom of Information Act request filed by RFA, in which a former EPA official warned former Administrator Scott Pruitt that granting certain exemptions “would be a clear violation of Mr. Pruitt’s oath of office.” Other information uncovered in the FOIA request shows the White House knew exemptions were being granted without any demonstration of “true economic hardship.” 

A full copy of Perry’s letter can be downloaded from Grassley’s website.