By Ellen Essman, Ohio Law Blog, Agricultural & Resource Law Program at The Ohio State University
If you’ve been keeping up with the ag news lately, chances are you’ve heard a lot about the Renewable Fuel Standard (RFS). As a refresher, the RFS program “requires a certain volume of renewable fuel to replace the quantity of petroleum-based transportation fuel.” Renewable fuels include biofuels made from crops such as corn and soybeans. Lately, you may have heard discussion about a controversial new rule regarding the volumes of biofuels that are required to be mixed with oil. While all that talk has been going on, there has also been a lawsuit against the EPA for RFS exemptions given to certain oil refineries. Congress has been examining the exemptions as well. Having trouble keeping all of this RFS information straight? We’ll help you sort it out.
EPA proposes new RFS rule
The Environmental Protection Agency (EPA) recently released a notice of proposed rulemaking, asking for more public comment on the proposed volumes of biofuels to be required under the RFS program in 2020 and 2021. Agricultural and biofuels groups are not pleased with the proposed blending rules, arguing that the way EPA proposes to calculate biofuel volumes would result in much lower volumes than they were originally promised by President Trump. (The original promise was made in part to make up for waivers the Trump EPA had given to oil refineries.) Conversely, EPA and the Trump administration contend that the proposed rule does meet the previously agreed upon biofuel volumes. A hearing on the proposed rule was held on October 30, where many agriculture and biofuels groups expressed their concerns. The oil industry was also represented at the hearing. Members of the oil industry feel that the cost of mixing in biofuels is too high. It is unlikely any deal was struck at the hearing, but there is still an opportunity to comment on the proposed rule if you wish. Comments are due on Nov. 29, 2019.
Ag and biofuels groups sue the EPA
In the midst of the argument over how the volumes of biodiesel under the RFS will be calculated, another related quarrel has emerged. At the center of this dispute are exemptions EPA has given to “small refineries” in the oil industry. The number of exemptions given has increased drastically under the Trump administration, which in turn has lessened the demand for biofuels made from crops like corn and soybeans. On Oct. 23, 2019, agriculture and biofuel groups filed a petition against the EPA in the U.S. Court of Appeals for the D.C. Circuit. In the petition, the groups ask the court to review a decision made in August 2019 which retroactively exempted over 31 small refineries from meeting their 2018 biofuels requirements. The petitioning groups include Renewable Fuels Association, American Coalition for Ethanol, Growth Energy, National Biodiesel Board, National Corn Growers Association, and National Farmers Union.
How does the small refinery exemption work?
Typically, an oil refinery would have to mix a set volume of renewable fuels, like biofuels, into their gasoline or diesel fuel. The volumes are set annually. Small refineries, which are defined as refineries where “the average aggregate daily crude oil throughput does not exceed 75,000 barrels,” can petition the EPA for an exemption from meeting their renewable fuel obligations. Exemptions are typically given temporarily if the refinery can show they would suffer economic hardship if they were made to blend their fuel with biofuel. A refinery seeking an exemption has to include a number of records showing their economic hardship in their petition, such as tax filings and financial statements.
Why are ag and biofuel groups asking for judicial review?
Why are the groups we mentioned above upset about this particular set of small refinery exemptions? Well, first of all, the groups point to the brevity of the EPA’s decision. (The decision document can be found in the link to the petition, listed above.) The EPA’s decision document uses only two pages to explain their decision on 36 small refinery petitions. Because the decision was so short, the groups feel that EPA did not include the analysis of economic hardship for each refinery that they believe is required by the Clean Air Act and RFS regulations. Essentially, the groups argue that the EPA has not provided enough evidence or explanation for awarding the exemptions.
Underlying all of this is the fact that more small refinery exemptions means lower demand for biofuels. In fact, the ag and biofuel groups claim that due to the 31 exemptions made in August alone, 1.5 billion gallons of renewable fuel were not used. In addition, the 31 exemptions are just a few of many awarded by Trump’s EPA. By all accounts, since Trump took office, there has been a sharp increase in exemptions granted. EPA has data on the number of exemptions available here. The first year the Trump administration made exemptions was 2016.
It seems as though the House Subcommittee on Environment and Climate Change (part of the Committee on Energy and Commerce) is also worried about EPA’s exemptions, or waivers, for small oil refineries. On Oct. 29, 2019, the Subcommittee held an oversight hearing entitled “Protecting the RFS: The Trump Administration’s Abuse of Secret Waivers.” In fact, in their memo about the hearing, the Subcommittee cited some of the same issues in the lawsuit we discussed above; namely the increase in waivers and the consequent effect on biofuel demand. Testimony was heard from both ag/biofuels and oil representatives.
In the hearing, the Subcommittee also considered the proposed “Renewable Fuel Standard Integrity Act of 2019.” The text of the bill is available here. The bill would require small refineries to submit petitions for exemptions from RFS requirements annually by June 1. Additionally, it would require information in the waiver petitions to be available to the American public.
What happens next?
As you can see, we’re playing a waiting game on three separate fronts. For the RFS rule, we’ll have to wait and see what kind of comments are submitted, and whether or not the EPA takes those comments into account when it writes the final rule. As for the lawsuit, all eyes are on the Court of Appeals for the D.C. Circuit. The court could determine that the law does indeed require EPA to include more information and analysis to explain their reasons for exemption. On the other hand, the court could find that EPA’s decision document is sufficient under the law. In Congress, we’ll have to wait and see whether the proposed bill gets out of the Committee on Energy and Commerce and onto the House floor.