Oil-state governors seek renewable fuel waiver for refiners

Refiners say the economy's swoon makes the requirements too costly. Biofuel backers say their industry is suffering as well

An ethanol biomass refinery plant. (Getty Images)
An ethanol biomass refinery plant. (Getty Images)
Posted April 16, 2020 at 1:33pm

Oil-state governors want the EPA to waive refineries’ obligations to comply with the nation’s biofuels policy, arguing that the coronavirus pandemic is causing the industry economic hardship.

The governors’ request reflects the long-standing tension between oil states and farm states that have benefited the most from the Renewable Fuel Standard, which requires refineries to add plant-based fuels such as corn ethanol and biodiesel from soybeans into the nation’s motor fuels.

The oil industry and its backers in government have resisted the policy from the onset because it eats into their profits. 

And the demands for reduced renewable fuel obligations precede the coronavirus.

The letter sent Wednesday was signed by Republican Govs. Greg Abbott of Texas, Gary Herbert of Utah, Kevin Stitt of Oklahoma and Mark Gordon of Wyoming. Louisiana Gov. John Bel Edwards, a Democrat, also separately requested the exemptions. 

Backlash

Any EPA action to aid the refiners would spark backlash from ardent biofuel allies such as Iowa Republican Sens. Charles E. Grassley and Joni Ernst, and Sen. Tammy Duckworth, D-Ill.

In their demands for waivers, the governors cited the reduced forecast  for global oil demand and the increased prices of Renewable Identification Numbers — tradable credits used to enforce compliance with the RFS. Refiners unable to meet their biofuel obligations can buy the so-called RINs to prove compliance.

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The EPA must determine whether current circumstances “present a clear threat to the industry,” the governors wrote, and then “upon determining whether harm inflicted on a sector as vital as refining and allied aspects of the refining supply chain, constitute an appropriate basis” for granting the exemptions from the requirements, called Renewable Volume Obligations.

“As our country comes to grips with this national emergency, continuing to implement the current RVO imposes an added obligation that would 'severely' harm the sector, and consequently harm the economy of the States and the Nation,” the governors wrote. “Not only is EPA bound to act on this waiver request, it must do so immediately if it is to avoid the precise severe economic harm this waiver provision is designed to address.”

'Law of the land'

EPA spokesperson Andrea Woods said the agency is “reviewing the letter and watching the situation closely.” Any response that’s favorable to refiners will be met with pushback from biofuel advocates.

A spokesman for Grassley said the renewable fuel policy is “the law of the land” and that “any attempt by EPA to rewrite the RFS statute would be illegal.”

Renewable fuel trade groups said the governors’ demands were outrageous and would hurt rural jobs.

“This is an offensive attempt by refiners to steal markets from struggling biofuel producers and farmers,” said Emily Skor, CEO of the biofuels trade group Growth Energy. “Any move to unravel the RFS now would dim any hopes of economic recovery in rural America, where so many in the U.S. biofuel industry have been impacted by furloughs and plant closures, and millions of farmers are struggling to stay afloat.”

The fight over renewable fuel waivers escalated under the Trump administration when the EPA under former Administrator Scott Pruitt significantly increased the number of waivers it granted refiners.

Renewable fuel groups sued the EPA over the exemptions, and a federal court in January ruled that the agency had inappropriately handed out waivers. That decision effectively forces the EPA to reduce the number of waivers it grants. Earlier this month, the court rejected refiners' attempts to challenge its decision, a blow to the industry.

Now the coronavirus pandemic hands the refining industry and oil-state governors a new argument for the waivers. The pandemic has brought the global economy to a near-standstill and lowered demand for motor fuels as workers stay home.

Chet Thompson, president of the American Fuel and Petrochemical Manufacturers trade association, said compliance with the biofuels policy costs refineries more than their employee payrolls.  

“This is an indefensible burden, especially now as COVID-19 has upended the market for gasoline and refined products and the refining industry nationally is running at low enough capacity that facilities are being forced to idle,” Thompson said in a statement. “Refineries are critical national security assets and cannot afford the unachievable RFS on top of COVID-19.”

Geoff Cooper, president of the Renewable Fuels Association, said the EPA has no authority to grant relief when the RFS itself is not the cause of the severe economic harm. In this case the refiners are arguing that the harm is coming from the coronavirus crisis.  

The same factors are hurting the ethanol industry, he said.

 “A general waiver at this point would only serve to close more ethanol plants and kill more jobs across rural America,” Cooper said.