US House subcommittee examines small refiner exemption disclosure bill

The US Environmental Protection Agency should disclose the identities, locations, and affected volumes of small refiners seeking hardship exemptions from motor fuel quotas under the Renewable Fuel Standard, three biofuels industry witnesses told a US House Energy and Commerce Subcommittee on Oct. 29. A fourth witness, who represented refiners, warned that this would amount to releasing proprietary information and could make it more difficult for the plants to remain competitive.

Discussion centered around H.R. 3006, which Rep. Collin Peterson (D-Minn.) introduced on May 23. It would establish an annual June 1 small refiner exemption (SRE) application deadline. Section 3 specifies that any information submitted to EPA for an SRE “shall not be deemed to be a trade secret or confidential and shall be subject to public disclosure.” The bill has 14 Democrat and 21 Republican cosponsors.

“The RFS explicitly allows small refineries to petition for hardship waivers ‘at any time.’ This provision, included by Congress in the statute, correctly recognizes that it is impractical to place artificial deadlines on small refineries that may have need to petition for relief for any number of reasons at a later time,” American Fuel & Petrochemical Manufacturers Pres. Chet Thompson told the committee’s Environment subcommittee.

“For instance, a petition in advance of a June deadline will not reflect an unexpected increase in the annual RFS percentage standards, unexpected increases in [Renewable Identification Number] prices, lower than expected margins, a greater demand for diesel compared to gasoline, or any other number of factors that [the US Department of Energy] and EPA take into account,” Thompson said.

‘Secretive and underhanded’

The three other witnesses, however, said EPA’s current method of reviewing SRE applications has placed a cloak of secrecy over the process. “In its ongoing pursuit to undermine the RFS, the oil industry continues to advance the red herring narrative that the ‘cost of compliance’ presents an unbearable economic hardship that threatens the viability of petroleum refineries,” Renewable Fuels Association Pres. Geoff Cooper charged.

“EPA’s secretive and underhanded approach to the SRE provision in recent years has destabilized the RFS, reduced the production and use of clean renewable biofuels, increased GHG emissions and tailpipe pollution, and led to lost jobs and economic opportunity in rural America,” Cooper said.

“Far from protecting small refiners, these waivers are wreaking havoc with small biorefiners throughout the biofuels industry and the affiliated industries and communities that support them,” said Gene Gebolys, founder and president of Boston-based World Energy, which owns and operates five biodiesel plants and a renewable diesel refinery. He testified on behalf of the National Biodiesel Board.

“EPA’s proposal to estimate future [SREs] in the 2020 [Renewable Volume Obligation] formula does not send a strong enough signal to the biofuel industry to help reopen closed plants and get industry employees back to work,” Gebolys said. “There is no guarantee in the proposed rule that EPA won’t continue to grant a flood of exemptions every year.”

Kelly Nieuwenhuis, president of Siouxland Energy Cooperative, a farmer-owned ethanol plant in Sioux Center, Iowa, which produces 60 million gal/year of corn ethanol, said EPA’s Aug. 9 decision to award 31 SREs forced the plant to shut down 6 weeks prior to the hearing.

“Following the most recent round of EPA exemptions, the value of corn fell by 10%, the sharpest drop for any August on record, further depressing farm income. This was coupled with a decrease in ethanol prices of 18-20¢ in the immediate aftermath of EPA’s Aug. 9 decision to exempt 31 refineries,” Nieuwenhuis said. “Economic growth in rural communities has stalled, threatening to freeze capital investments, undercut small businesses, and slash state and local revenues associated with agricultural and investment income.”

More exemptions issued

The number of SREs that EPA has granted rose after Donald Trump became president, the biofuel industry witnesses charged. “The Obama Administration EPA granted 23 SREs and denied 18 petitions over the three compliance years of 2013-15, because these decisions were made after the compliance year passed. Further data included in the most recent EPA proposal on SREs shows that Obama officials followed the DOE’s advice on what SREs to grant,” Nieuwenhuis said.

“Since 2016, the current EPA has expanded the use of [SREs] to grant 85 SRE petitions, and it did not deny a single application for 2016 or 2017. Press reports indicate that EPA ignored DOE’s recommendations to deny a petition in 24 out of 48 applications in 2016-17,” Nieuwenhuis said.

Republicans at the hearing said legislation that would mandate higher octane levels would be a more effective solution in the long run. “I would like members of this committee and subcommittee to take a look at the 21st Century High Octane Fuels Act my colleague Bill Flores (R-Tex.) and I have recently reintroduced,” said Rep. John Shimkus (R-Ill.), the subcommittee’s ranking minority member.

“I think it’s fair to say that some exemptions to RFS requirements are necessary,” said Energy and Commerce Committee Chairman Frank Pallone (D-NJ). “We have a number of small refineries in New Jersey. But EPA is granting these exemptions in secret, without even revealing which facilities are receiving them. Some of the information contained in the [SRE] applications is likely to be confidential and should not be revealed for competitive reasons. But we should be able to find some kind of middle ground.”

Contact Nick Snow at [email protected].