EPA grants biofuel credit exemptions for small refineries
NEW YORK, (Reuters) - The Environmental Protection Agency has exempted one of the nation’s largest oil refining companies,
The exemption, which applies to the three smallest of
The decision, which has not been previously reported, raises the question of whether other big oil firms with small refineries - such as ExxonMobil Corp, Chevron Corp and Phillips 66 - also have or could receive waivers, which are granted by the EPA without public disclosure.
Such waivers were designed for refineries producing less than 75 Mbpd that can demonstrate that they suffer a “disproportionate economic hardship” from the costs of RFS compliance.
The EPA exemption, granted about a month ago, could reduce
The exemption releases the firm of its obligation to provide the EPA with biofuels credits proving compliance at the three refineries - two located in North Dakota and one in Utah - for the year 2016, which would have come due this year, the sources said.
As a matter of policy, the agency refuses to release any information on the waivers, or to name their recipients, citing concerns over disclosing private business information. The EPA denied a Freedom of Information Act request from Reuters seeking information on companies receiving the waivers.
ExxonMobil, Chevron and Phillips 66 also own refineries small enough to meet the barrel-per-day standard, as does billionaire investor and Trump ally Carl Icahn - whose efforts last year to overhaul the biofuels program drew scrutiny from federal investigators. Icahn,
The waivers are typically only reported if a publicly-traded firm considers them to be material to their financial or operational performance, in which case they must disclose the information through Securities and Exchange Commission filings.
The RFS has long been a lightning rod of conflict between the corn lobby, which supports the policy as an engine for demand, and refiners who say it costs them a fortune.
The White House has sought to broker a deal between two of its key political constituencies in a series of meetings, but the effort has failed to yield policy changes acceptable to both sides.
Ethanol industry advocates argue exemptions for refiners undermine the intent of the law, originally designed to reduce greenhouse gas emissions, reduce dependence on foreign oil and boost farm economies.
While the EPA’s motives in providing hardship waivers are unclear, the exemptions are one of the tools at the administration’s disposal to ease financial pressure on refiners without undertaking a reform of the RFS policy.
EPA chief Scott Pruitt, appointed by Trump, has repeatedly said the RFS is too costly to oil refiners and should be overhauled. But Trump’s Secretary of Agriculture, Sonny Perdue, told an agriculture conference in February that Trump “stands with corn farmers, biofuels farmers
White House spokeswoman Kelly Love did not respond to a question about whether the administration was expanding the use of the RFS waivers to help refiners. Bowman, of the EPA, also did not comment on the question.
LAWSUIT OVER ‘HARDSHIP’ STANDARD
“The EPA’s interpretation takes the statutory language too far,” wrote Chief Judge Timothy Tymkovich of the 10th Circuit Court of Appeals in Denver. “A ‘hardship’ is something that makes one’s life hard or difficult - not just something that makes continued existence impossible.”
The lawsuit - along with a perception that the Trump administration might be more sympathetic to refiners - has sparked a big increase in applications from refining firms for the exemptions this year. More than 30 refineries have sought the waivers, according to sources familiar with the matter. In a typical year, the EPA would receive about 12 to 15 requests for hardship exemptions and would grant about half of them, a former official familiar with the program told Reuters.
EXEMPTIONS SAVE REFINERS BIG BUCKS
Those credits would be worth about $58 million based on a Reuters calculation of average renewable fuel RIN prices this year. In the past, other companies have said the exemptions they were granted saved them tens of millions of dollars, according to Securities and Exchange Commission filings. Last year, for example, HollyFrontier disclosed a reduction of almost $58 million in its costs of credits for two refineries for 2016.
Such windfalls for oil firms come at the expense of the corn and ethanol industries, said Renewable Fuels Association Executive Vice President Geoff Cooper. Refiners granted exemptions win in two ways: They no longer have to blend biofuels or buy credits to comply with the law, and they can sell any credits they had previously purchased to use for compliance. The waivers, Cooper said in a post on the RFA website, “are destroying demand for ethanol and corn.”
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