On Thursday, May 31, Reuters reported that the Environmental Protection Agency (EPA) had taken the unprecedented move of granting waivers to oil refineries for prior compliance years. Under a previously little-used authority, EPA had already taken steps to grant small refinery exemptions to approximately two dozen petroleum refiners, relinquishing them of their duty to either blend biofuels or buy compliance credits under the Renewable Fuel Standard (RFS), a core component of the program. But the latest revelation indicates that EPA has gone one step further and granted waivers for previous years’ compliance to at least two oil refiners, adding further complexity to the Pandora’s Box that the EPA has opened.
On Thursday, Reuters reported that both HollyFrontier Corp. and Sinclair Oil were awarded hardship waivers. Regulatory filings from HollyFrontier show that the company alone would net nearly $34 million in savings from the EPA-granted exemption. In 2017, a federal court ruled that the Obama Administration had improperly denied the companies’ request for economic hardship waivers in 2015. Farm and biofuel organizations recently filed suit against the EPA’s use of the hardship waiver in previous months. Now, the retroactive waivers add a fresh twist to the ongoing saga of the small refinery exemption and likely open the administration up to further legal challenges from both the oil refining and biofuel sectors.
The move is also at odds with the President’s numerous pledges to find a “win-win” solution to both the cost of compliance for smaller refineries (which biofuel supporters and several economists state is largely fictional), and the fact that the Renewable Fuel Standard calls for the increasing use of biofuels in the domestic fuel supply. Indeed, the growing list of refinery exemptions from the fuel blending program put the chance of success in brokering some sort of grand compromise on the RFS slim to none.
Previous White House proposals, such as allowing exported gallons to garner Renewable Identification Numbers (RINs) to make up for the growing shortfall in exempted gallons – 1.7 billion at last count – would require Congressional intervention and appear dead on arrival. The White House’s other, more popular, proposal to allow year-round sales of E15 would likely take a year or more to complete, and some have questioned the existing authority of EPA to allow the year-round sale of E15 without statutory changes.
The net effect of the waivers and continued uncertainty has been a tumble in RIN prices (the tradeable compliance mechanism for the RFS), which are now at a five-year low. Conversely, outlets such as the Wall Street Journal have recently reported that many refiners’ shares have doubled or even tripled as the EPA has granted refining companies of all sizes hardship waivers.
Indeed, while the waivers are supposed to help small, economically struggling refiners, the Trump Administration has been awarding them to refiners of all sizes, including refining giants Exxon Mobil Corp. and Chevron Corp. Under the small refinery exemption, any refiner producing under 750,000 barrels per day, even if owned by a larger refiner, could apply for a hardship waiver. Previous administrations have rarely granted hardship waivers.
At its core, the current administration fails to grasp that RIN prices are a core component of the Renewable Fuel Standard. Indeed, the higher the price of a RIN, the more incentive there is to blend biofuels. Without higher RIN prices, economists predict that biofuel blending is unlikely to increase greatly, even if E15 is approved for year-round use.
For more information on this issue, see past EESI articles:
- RFS Roundup: White House’s “Last Meeting” on RFS Raises More Questions than Answers (May 2018)
- Deal or No Deal on RFS Reform (March 2018)
For more information see: