U.S. EPA denies 36 refinery biofuel waivers

The U.S. Environmental Protection Agency (EPA) has denied 36 petitions from oil refiners seeking exemptions to the nation's biofuel blending laws for the 2018 compliance year, but will provide 31 of those refineries with another avenue to seek relief, the agency announced.

The action will align the EPA with a 2020 court decision that narrowed the criteria for what facilities should be eligible for exemptions from the blending quotas. Former President Donald Trump's EPA had granted more than 30 so-called Small Refinery Exemptions (SREs) for the 2018 year, triggering a successful court challenge from the biofuel industry.

"The decision to deny these petitions is rooted in EPA's commitment to follow the law and recent court decisions with respect to its legal authority on SRE petitions," EPA spokesperson Nick Conger said.

The agency added that the alternative relief EPA plans to grant to 31 of the refineries will allow the facilities to meet their 2018 obligations without purchasing credits to show compliance with the law. That decision was made because of "extenuating circumstances," including the fact the plants had initially been granted waivers, it said.

"The compliance flexibilities we are providing to select refineries are based on a separate and distinct analysis," EPA's Conger said.

To receive relief using the alternative approach, refiners must resubmit compliance reports for 2018 and report their actual fuel production for that year, among other data.

The EPA said they're taking this approach in part because the amount of renewable fuel used in 2018 will be unchanged regardless of any actions by refiners now.

The Renewable Fuels Association trade group called the news on Thursday a "hollow victory" for the biofuels industry.

"EPA admits that those exemptions never should have been granted in the first place, but now is sweeping them under the rug and letting the refiners who got these exemptions off the hook," said RFA President Geoff Cooper.

Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of renewable fuels into the nation's fuel mix, a policy intended to help farmers, reduce GHG emissions, and cut U.S. petroleum imports.

Small refiners can seek a waiver to the mandates, or an SRE, if they can prove the mandates would financially harm them.

After reviewing materials including more than a decade of RFS market data, the EPA said it concluded that none of the 36 petitions demonstrated hardship caused by compliance with the RFS program.

U.S. renewable fuel credit prices that had risen on Thursday ahead of the announcement fell back toward levels seen on Wednesday. Renewable fuel (D6) credits traded at $1.15 each after the news, down from $1.21 earlier, traders said. The credits traded at $1.155 on Wednesday.

A U.S. appeals court dealing with the SRE issue had given EPA an April 7 deadline to decide on the waivers.

The EPA is still considering petitions from other refineries for compliance years in the 2016-2021 range, the agency said. The EPA had accumulated a backlog of more than 60 SRE requests for those years, according to the agency's website.

SREs have always been a hotly debated topic between the oil refining industry and the ethanol and corn industries.

Biofuel producers and corn growers argue that the waivers undercut demand for their products, while the refining industry refutes that and says the exemptions are needed to keep small fuel producers in business.

(Reporting by Stephanie Kelly; additional reporting by Valerie Volcovici; editing by Paul Simao and David Gregorio)

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