EPA refinery waivers created demand destruction of at least 1.6 billion gallons of ethanol in 2016-17

In Washington, the EPA’s recent actions in exempting small refineries from their Renewable Fuel Standard blending obligations for 2016 and 2017 have effectively lowered the volumetric obligations by at least 1.6 billion gallons, according to an analysis of the agency’s own monthly compliance data by the Renewable Fuels Association. The Secretary of Agriculture told the Senate agriculture committee that the direct result of the waivers was demand destruction for ethanol. The volume of lost blending obligations for these two years is 10 times the collective volume of lost volume from 2013-2015.

In recent weeks, it’s been widely reported that EPA has exempted as many as 25-30 small refineries from their RFS blending obligations in 2017, and as many as 20 refineries from their 2016 obligations. Despite numerous requests from industry stakeholders, including RFA, and lawmakers for additional information, EPA has not disclosed the exact number of exemptions granted or the volume of required renewable fuel blending that was effectively erased.

However, recently updated data found in EPA’s EMTS database provides some clarity on the volume of gasoline and diesel fuel that was exempted from blending requirements in 2016 and 2017. “The EPA data strongly imply that small refiner exemptions have resulted in effectively lowering the 2017 required volume of renewable fuels by 1.11 billion gallons, or 6%. The data also show that small refiner exemptions also effectively reduced the 2016 RFS requirement by 523 million gallons,” according to the analysis.

Based on EPA’s EMTS database, the actual annual consumption of gasoline and diesel fuel in 2013-2015 was very close to the volume of gasoline and diesel fuel obligated for RFS compliance, as reported by obligated parties. “This means RFS blending obligations applied to virtually every gallon of gasoline and diesel fuel produced and consumed in the United States,” the analysis explained. “However, something clearly changed in 2016 and 2017. The EPA data show large discrepancies between actual gasoline and diesel consumption and the volumes obligated for renewable fuel blending as reported by obligated parties. The difference was 5.2 billion gallons in 2016, virtually doubling to 10.3 billion gallons in 2017. The only reasonable explanation for these large discrepancies between actual gasoline/diesel consumption and the volume of gasoline/diesel obligated for renewable fuel blending is the surge in small refiner exemption approvals,” the analysis found.