Five governors ask for RFS exemption, RFA says they’re wrong |

Five governors ask for RFS exemption, RFA says they’re wrong

The Hagstrom Report

The governors of five oil-producing states — Texas, Oklahoma, Wyoming, Utah and Louisiana — have asked the Environmental Protection Agency to waive renewable volume obligations (RVO) under the Renewable Fuel Standard due to the impact of the COVID-19 pandemic on the oil industry, DTN/The Progressive Farmer reported.

“Under this waiver provision for severe economic hardship, the U.S. Environmental Protection Agency must assess the condition of the refining sector as it finds it under current circumstances,” the letter said.

“It must then determine whether the implementation of the current RVO, including costs associated with the recent tripling in the price of renewable identification numbers, present a clear threat to the industry under such circumstances; 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 a waiver under the cited provision.”

DTN noted that “Previous economic studies — including EPA’s own analysis — have shown refiners pass RFS compliance costs onto consumers at the pump.” Renewable Fuels Association CEO Geoff Cooper said in a news release April 16.

“Apparently toilet paper isn’t the only thing in short supply in oil states these days — clearly, these governors are experiencing an acute shortage of facts and reality too.”

“It’s clear they know absolutely nothing about how the Renewable Fuel Standard actually works. They outrageously claim that a waiver is needed because of ‘depressed demand for transportation fuel.’ But because EPA translates the RFS into a percentage each year, the renewable fuel blending requirements already adjust in tandem with changes in gasoline and diesel consumption.”

“So, if COVID-19 causes 2020 gasoline and diesel demand to drop 15%, for example, the renewable fuel blending requirements drops by the exact same amount.

“In any event, the EPA has no authority to grant relief when the RFS itself is not the cause of the ‘severe economic harm,’ a fact that has been reconfirmed by EPA multiple times in the past when it denied similar nonsensical waiver requests,” Cooper said.

“The governors themselves acknowledge the problems facing refiners today are driven by COVID-19 and cratering oil prices, not the RFS. These same factors are impacting the ethanol industry as well, and to an even greater extent: Nearly half of the nation’s ethanol production capacity has been idled as a result of falling gasoline demand. A general waiver at this point would only serve to close more ethanol plants and kill more jobs across rural America.

“The bottom line is, this letter comes nowhere close to satisfying the well-defined statutory criteria and requirements established for requesting a waiver. It can’t even be called a petition. EPA should reject it out of hand and return to focusing on efforts that will actually help Americans get through this challenging period. These governors may still be practicing social distancing, but they should not be distancing themselves from the facts as well.”

Growth Energy CEO Emily Skor said, “This is an offensive attempt by refiners to steal markets from struggling biofuel producers and farmers. 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.

“We’ve seen the courts reject this kind of abuse before. Even oil companies admit that biofuel credits don’t impose a real cost on refiners. We see this as a non-starter and call on this administration to focus on restoring — not destroying — rural jobs.”

American Coalition for Ethanol CEO Brian Jennings said, “Not only should EPA dismiss the oil-state governors’ RFS waiver request, the agency should act swiftly to increase blending obligations in 2020 because the economic fallout from COVID-19 is destroying demand for ethanol below statutory levels.

“EPA has no other choice than to reject this most recent ploy to waive the RFS based on precedent from previous waiver appeals in 2008 and 2012 which require EPA to determine that the RFS itself must be proven to be the cause of severe economic harm to justify a waiver, not outside factors such as coronavirus or a drought. The RFS is clearly not the cause of the economic catastrophe brought on by coronavirus and the Saudi-Russian oil price war, and the oil industry should direct its blame elsewhere.

“We remind the administration that oil refiners are not the only ones suffering from the economic fallout of the current situation. Ethanol producers, and the farmers supplying them corn, are suffering a proportional economic disaster. EPA should in fact do the opposite of the governors’ request and issue an interim rule to increase the RVO for 2020 to the percentage necessary to ensure that the full 20.09 billion gallons required by law are used.”

Bloomberg said in a story behind its paywall, “The EPA must consult with the Energy and Agriculture departments and ask for public comment before making a decision.”

“However, the EPA has been reluctant to grant such widespread waiver requests in the past, including in 2012 when a U.S. drought hit the corn harvest, prompting a price surge. Typically, each gallon of gasoline sold in the U.S. is mixed with about 10% ethanol.”

University of Illinois agricultural economist Scott Irwin told Bloomberg it may be difficult to win a general waiver now, since it would be tough to prove that economic harm was not only widespread and broad-based but also caused by the biofuels rule.

Meanwhile, ethanol production hit a new low, the Food & Environment Reporting Network said, citing Energy Information Administration figures. ❖