Biofuels groups send letter to EPA opposing API’s RFS petition

The Renewable Fuels Association, American Coalition for Ethanol, National Corn Growers Association and National Farmers Union sent a letter to U.S. EPA Administrator Andrew Wheeler on May 1 opposing the American Petroleum Institute’s April 6 petition that requests the agency reconsider the 2020 Renewable Fuel Standard final rule.

The petition requests that EPA reconsider the rule’s treatment of small refinery exemptions (SREs) in light of the Tenth Circuit Court’s Jan. 24 ruling that struck down three SREs approved by the agency. API argues that reconsideration of the rule is mandatory because the court’s decision was issued after EPA published the final 2020 RFS rule and “the decision undermines multiple key aspects of the RFS 2020 rule’s treatment of small-refinery-exempt volumes EPA projected would exist in 2020.”

The petition points out that the EPA changed its approach to SREs in the 2020 rule. Specifically, the agency established a plan to reallocate estimated future waived SRE volumes to other obligated parties. For 2020, the EPA estimated the SRE volume to be 7.26 billion gallons worth of gasoline and diesel. Since the Tenth Circuit Court ruling significantly reduced the number of refineries that would be eligible for SREs, the API want’s the EPA to adjust its estimated SRE volumes that must be reallocated.

The U.S. EPA, however, has not announced plans to comply with the Tenth Circuit Court ruling or to apply it nationally. The agency on March 27 announced it intends to develop an “appropriate implementation and enforcement response” to the Tenth Circuit Court’s small refinery exemption (SRE) ruling “after appeals have been resolved and the court’s mandate has been issued.”

In their letter, the RFA, ACE, NCGA and NFU argue the EPA should not reconsider the 2020 RFS rule unless it first acknowledges the Tenth Circuit’s holding as having national application. “Although API argues that the Tenth Circuit’s decision ‘demolishes the foundations of EPA’s [small refinery] projections,’ there is no basis for revisiting or modifying EPA’s current approach until EPA acknowledges that the central tenets of the Tenth Circuit’s decision are appropriately applied throughout the country,” they wrote.

The biofuel groups say those tenets must include, at a minimum, that small refineries are entitled to an extension of their exemption only if that exemption remained continuously in effect; that any finding of disproportionate economic hardship had to be caused only by compliance with the RFS program; and that EPA will reconcile any proposed findings of disproportionate economic hardship with its longstanding view that the RFS compliance costs are ultimately passed through to end users and ultimately recovered by refineries.

“Even after acknowledging the appropriateness of applying the Tenth Circuit’s decision nationally, however, we do not agree it necessarily follows that the 2020 RFS rule must be reduced,” the biofuel groups wrote. “As noted by the court, EPA’s recent abuse of its small refinery exemption authority has significantly harmed the U.S. ethanol industry. Indeed, nationally, more than 4 billion gallons of 2016-2018 renewable fuel volume requirements were lost due to EPA’s illegally issued small refinery waivers. Applying the Tenth Circuit decision nationally while leaving the 2020 RFS Rule intact would begin to restore a small amount of the renewable fuel volume requirements lost to past small refinery exemptions; still, doing so would come nowhere near fully redressing the demand destruction wrought by the exemptions.”

RFA, ACE, NCGA and NFU stress it is unclear whether API even satisfies the requirements for reconsideration under RFS statute. “Even if API were to satisfy the procedural prerequisites for reconsideration and alter its long-held position on modifying finalized annual volume standards, convening a new notice and comment rulemaking on the 2020 RFS rule would be futile,” the biofuel groups continued. “By the time EPA were to propose a new rule, receive and consider public comment, and finalize an amended rule, the 2020 compliance year will likely have passed.

“We agree with API that the Tenth Circuit decision warrants immediate national application, but since reconsideration of the 2020 RFS rule is neither practical nor legally defensible, we encourage EPA to confirm the wisdom of that conclusion in its upcoming proposal to set annual standards for 2021,” RFA, ACE, NCGA, and NFU continued.

A full copy of the letter can be downloaded from the RFA website.