EPA denies gap year SRE petitions

The U.S. EPA announced Sept. 14 it will deny “gap-year” small refinery exemption (SRE) petitions filed by oil refineries in an effort to circumvent a January 2020 ruling by Tenth Circuit Court of Appeals that determined the agency cannot extend SREs to any small refinery whose earlier, temporary exemptions had lapsed.

The EPA most recently updated its online SRE dashboard on Aug. 20. At that time, gap year SRE petitions accounted for 65 of the 98 total SRE petitions that were pending with the EPA.

“This decision follows President Trump’s promise to promote domestic biofuel production, support our nation’s farmers, and in turn strengthen our energy independence,” said EPA Administrator Andrew Wheeler. “At the EPA, we are delivering on that promise by following the rule-of-law and ensuring 15 billion gallons are blended into the nation’s fuel supply.”

A document addressed to the affected small refineries indicates 17 small refineries in 14 states and seven federal judicial circuits have submitted 68 individual petitions asking EPA to either reconsider exemption denials or grant exemptions for prior years in which the refineries had not sought them. The agency said the majority of the gap year petitions were filed in March, with the balance received by the agency in June, August and September.

At the end of July, the U.S. Department of Energy transmitted its scores for 54 of the gap year petitions to the EPA. “In its recommendations for those [gap year petitions] for which it provided its findings, DOE found that while most of the refineries had demonstrated some degree of structural hardships during the years related to their petitions, none of the small refineries had demonstrated that their viability was affected,” the EPA said in the document. “For these reasons, DOE recommended either no relief or 50 percent relief for each of the small refineries that submitted [gap year petitions.]”

Although SRE petitions can be filed at any time, the EPA said it unclear if the “at any time” language in the Renewable Fuel Standard statute governing SREs allows the EPA to grant the gap year petitions. “The statutory language certainly does not preclude EPA from considering the time that has elapsed between the compliance year and when a small refinery petitions for relief as a factor in determining whether to grant such relief,” the EPA said in the document. “Indeed, it seems unlikely that the Congress contemplated or intended to allow a small refinery to obtain hardship relief through submitting a petition in calendar year 2020 for RFS compliance year 2011, for example. Moreover, it is unclear whether EPA has authority to grant a [gap year petition] when the small refinery which submitted it has already compliance with the RFS obligations for that prior year.”

The EPA said in the document it is denying the gap year SRE petitions, including those in which petitions sought reconsideration of a prior EPA denial, and the petitions for which the DOE recommended zero relief or 50 percent relief.

In the document, the EPA states the “decision is a nationally applicable final agency action.” Any petitions for review off the action must be filed in the Court of Appeals for the District of Columbia Circuit within 60 days from the date the final action is published in the Federal Register.

Several biofuel groups have spoken out in support of the EPA’s announcement.

The American Coalition for Ethanol welcomed the agency’s action on gap year SREs. “We are pleased EPA is heeding the industry’s calls and President’s directive to reject the gap-year petitions,” said Brian Jennings, CEO of Ace. “As EPA notes in the letter they issued today, these refineries did not demonstrate disproportionate economic hardship from compliance with the RFS. Simply put, these retroactive waivers ignored the RFS statute and the Tenth Circuit Court decision, so rejection of the gap-year requests is what the law and court precedent required of EPA.

“The next logical step is for EPA to once and for all nationally apply the precedent set by the Tenth Circuit Court, which likely means denying most of the pending refinery waivers for 2019 and 2020,” he said.

“We also expect more details regarding the President’s E15 tweet on Saturday and plans around EPA’s intentions to ‘update E15 labels to ensure consumers have informed choices at the pump and clarify the ability of existing fuel infrastructure to support expanded E15 use,’” Jennings added.

Growth Energy also welcomed the EPA’s decision. “Today’s action lifts a cloud of uncertainty that has been hanging over America’s farmers and biofuel producers since June,” said Emily Skor, CEO of Growth Energy. “We’re grateful to farm state champions like Senator Ernst, who has led a bipartisan coalition of lawmakers in the House and Senate and governors across the heartland in speaking out against oil-backed efforts to dodge the law, circumvent the courts, and upend markets.

“Growth Energy looks forward to continuing our work with the White House and leaders in Congress to ensure that we restore integrity to our nation’s biofuel targets and that rural communities have the support they need to revitalize growth in the months ahead,” she continued.

The Renewable Fuels Association said it was pleased with the EPA’s move to deny the gap year petitions. “We are pleased to see EPA is officially denying 54 so-called ‘gap-year’ small refinery exemption petitions, and we look forward to EPA similarly denying the remaining 14 petitions once they are received from DOE,” said Geoff Cooper, president and CEO of the RFA. “Rejecting the petitions is simply the right thing to do, and today’s decision marks a big step forward toward fully restoring integrity to the Renewable Fuel Standard. This should serve as the final nail in the coffin of these gap-year petitions, and we are eager to put this dark and sordid chapter in the history of the RFS behind us once and for all.

“The petitions were never anything more than an absurd and bizarre attempt by the refineries to circumvent the Tenth Circuit Court’s decision in the Renewable Fuels Association v. EPA case,” he said. “We wholeheartedly agree with EPA’s conclusion that ‘these small refineries did not demonstrate then or now that they experienced a disproportionate economic hardship from compliance with the RFS,’ as such a demonstration would be impossible for these refineries to make. EPA is correct that these refineries ‘do not warrant an exemption’ and we are pleased to see Administrator Wheeler acknowledge that Congress did not intend to exempt small refineries ‘that already successfully complied with their RFS obligations.’

“We sincerely thank President Trump for stepping in to prevent the oil industry from running roughshod over the RFS and ensuring that blending requirements are not further eroded by unwarranted exemptions,” Cooper added. “We also extend our heartfelt gratitude to the many members of Congress who led the fight against these illegitimate waivers. We thank them for their dedication to protecting and defending the RFS against baseless attacks.”

The National Biodiesel Board also applauded the EPA’s decision to reject the gap year petitions. “On behalf of U.S biodiesel producers across the country, we welcome President Trump’s and Administrator Wheeler’s decision to deny many of the so-called gap-filling exemption petitions,” said Kurt Kovarik, vice president of federal affairs at the NBB. “The decision to deny these absurd petitions filed by refiners simply to skirt their obligations under the law is the right call. I am hopeful EPA will continue to apply this standard to the remaining gap exemptions and to future petitions. We look forward to working with the administration to restore growth in the biodiesel and renewable diesel industry and ensure that RFS volumes for biomass-based diesel are met.

“I would especially like to express the industry’s gratitude to Congressional leaders such as Sens. Joni Ernst (R-IA) and Chuck Grassley (R-IA), as well as to Iowa Governor Kim Reynolds and many others who have effectively made the case for a lawful resolution of these gap exemption petitions.”