EPA Strikes Icy Blow to Ag & Biofuels: 31 waivers hit heart of American farmers and biofuels

August 10, 2019 |

EPA might have a new name in some circles – Exemptions for Petroleum Agency – thanks to the 31 small refinery waivers issued on Friday which has the biofuels and agriculture industries reeling after promises made by President Trump to look into why big oil companies were getting these exemptions intended for small biorefineries and how exactly decisions were being made on the waivers. An icy blow straight to the heart of American farmers and the biofuels industry…making many feel like Anna – angry, hurt, shocked, yet trying to survive and not ready to give up.

First, a look at the numbers:

40 exemption requests received

31 exemptions issued

6 denied

3 withdrawn or ineligible

13,420 Estimated Volumes of Gasoline and Diesel Exempted (million gallons)

1,430 Estimated Volumes of Gasoline and Diesel Exempted (million gallons)

Those are the EPA numbers. But let’s take a look behind those numbers.

First, is it really a surprise given that a week ago Reuters reported that EPA Administrator Andrew Wheeler said that the waivers weren’t impacting ethanol demand in a negative way? That was a hint at what was coming this week…the shocking approval of 31 waivers.

Responses to the EPA announcement include more numbers…that the EPA is threatening to destroy an additional billion gallons of critical biofuel demand – on top of the 2.6 billion gallons already destroyed over the last two years, that the EPA has granted 53 RFS waivers since early 2018, including to big oil companies. So how bad is it?

The reactions

It’s negative nelly. For anyone in the impacted industries, it’s nothing but bad news.

But we at The Digest like to try and look at the bright side and while this was definitely a challenge, the one positive thing about all this it seems to get everyone on the biofuels and agriculture industries on the same side and working together to face a common enemy. If nothing else, it is pushing people to fight even harder for biofuels and American farmers. From lawsuits and petitions, organizations are coming together to try and balance things out more fairly. So who is to blame? What can be done?

Here’s a recap of some of the reactions so far with their own answers to those questions:

The Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw placed the blame directly on President Trump saying he broke his RFS promise to Iowa voters, even referring to fecal matter:

“The Trump Administration’s approval of 31 refinery exemptions from the Renewable Fuel Standard is just devasting news for our industry,” Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw. “With this action, President Trump has destroyed over a billion gallons of biofuel demand and broken his promise to Iowa voters to protect the RFS. The vast majority of these exemptions are not justified under the law. Since this news began to leak this afternoon, RFS credit prices have freefallen to nearly zero, destroying much of the incentive to blend an incremental gallon of ethanol.”

“Adding insult to injury, right now the EPA is estimating zero exemptions for next year,” said Shaw. “Based on the actions of the Trump EPA to date, estimating zero exemptions can best be described as something I stepped in at the Iowa State Fair. EPA Administrator Wheeler should come to the Fair this week, look Iowans in the eye, and say that his honest ‘best estimate’ is zero. He knows better and biofuels producers and farmers deserve better. Coming on top of the loss of the massive China market, U.S. biofuels producers are now facing a one-two gut punch from the Trump Administration.”

Other than a resolution of the China trade situation, the only hope for a near-term boost for biofuels producers would be for EPA to follow the law and account for the estimated number of refinery exemptions when finalizing the pending 2020 RFS blending level rule. This would allow the EPA to reallocate the exempted gallons and end the demand destruction.

Brian Jennings, CEO of the American Coalition for Ethanol (ACE) said:

“EPA’s refiner-win-at-all-costs oversight of the RFS is doing real damage to America’s farmers and renewable fuel producers who are already suffering from trade wars and volatile markets. The RFS is supposed to ensure the use of ethanol and biodiesel increases from one year to the next, but 85 Small Refinery Exemptions later and over 3 billion waived gallons represents an enormous step backwards.

“The Agency’s actions on the 2018 waiver requests reinforces our decision to join with others to challenge EPA’s handling of certain Small Refinery Exemptions in Court and petition for EPA to account for lost volumes of renewable fuel resulting from the unprecedented number of retroactive waivers granted by the Agency that we recently asked the court to move forward on due to no response from EPA.”

National Biodiesel Board (NBB)’s Kurt Kovarik, Vice President of Federal Affairs, said that the impact from the exemptions “likely will put biodiesel producers out of business” and also places blame on President Trump that:

“Less than two months after vowing to always protect and defend American farmers, President Trump is bowing to oil industry pressure and allowing his EPA to dismantle the Renewable Fuel Standard program, force U.S. biodiesel producers out of business, and undermine the farm economy. EPA and administration personnel are well aware that the ongoing spree of big oil exemptions destroy demand for biodiesel and render the RFS program meaningless.”

The NBB statement references University of Illinois economist Scott Irwin, and said “virtually all of the demand destruction from small refinery waivers is falling on the biodiesel industry. As EPA continues to hand them out to every refiner that asks, the damage to the U.S. biodiesel and renewable diesel industry could reach $7.7 billion or 2.54 billion gallons.”

“A small refinery processing 75,000 barrels of oil per day can produce nearly 1 billion gallons of gasoline and diesel per year. The refinery’s annual RFS obligation would create demand for nearly 20 million gallons of biodiesel or renewable diesel, which are the most widely available advanced biofuels. Dozens of biodiesel producers across the United States produce less than 20 million gallons each year.”

Kovarik continued, “Biodiesel producers are already shutting down facilities and laying off workers, due to loss of demand. The ongoing demand destruction will undercut the industry’s investments and choke off markets for surplus agricultural oils, adding to the economic hardship that farmers are facing. The Trump administration’s action represents a fundamental betrayal of previous promises to farmers and the agricultural economy.”

Emily Skor, CEO of Growth Energy said in a statement strongly titled, “Trump EPA Shatters Rural Hopes with 31 New Refinery Exemptions:”

“The EPA has proven beyond any doubt that it doesn’t care about following the law, American jobs, or even the president’s promises. Now farmers and biofuel producers are paying the price. These exemptions are destroying demand for homegrown energy at a time when family farms are struggling, farm income is plummeting and many ethanol plants have been forced to close their doors or idle production. The impact on rural communities cannot be overstated. President Trump must move quickly if there is any hope of repairing the damage. If he won’t hold the EPA accountable, then he’s failing to uphold the commitment he’s made to rural America.”

Geoff Cooper, President and CEO of the Renewable Fuels Association (RFA) said:

“At a time when ethanol plants in the Heartland are being mothballed and jobs are being lost, it is unfathomable and utterly reprehensible that the Trump Administration would dole out more unwarranted waivers to prosperous petroleum refiners. Today’s announcement comes as a total shock, as just two months ago President Trump himself heard directly from Iowa farmers and ethanol plant workers about the disastrous economic impacts of these small refinery handouts. In response, he told us he would ‘look into it’ and we believed that would lead to the White House and EPA finally putting an end to these devastating waivers. Instead, the Trump administration chose to double down on the exemptions, greatly exacerbating the economic pain being felt in rural America and further stressing an industry already on life support.”

“There is absolutely no evidence whatsoever that small refineries are suffering ‘disproportionate economic harm’ due to the RFS, meaning the entire EPA decision-making process is a sham. Making matters worse, the process remains cloaked in secrecy and bias, and there is mounting evidence that the administration is continuing to grant full exemptions against the recommendations of the Department of Energy—and even against the advice of some EPA officials.”

“Ethanol demand has fallen and prices have plummeted to their lowest values in more than a decade,” Cooper said. “When operating, the 13 plants that recently shut down bought nearly 300 million bushels of corn and supported more than 2,400 jobs in rural communities from Iowa and Minnesota to Mississippi and Virginia. Who will tell those workers and their families that the demands of Big Oil are more important to this administration than the livelihood of rural America?

“Neil Armstrong spoke of his setting foot on the moon as one small step for man and a giant leap for mankind. EPA, by allowing year-round sales of E15 at the end of May, gave the ethanol industry one small step forward. But now, with EPA’s decision to grant these small refinery exemptions, we have one giant leap – backwards.”

Brooke Coleman, Executive Director of the Advanced Biofuels Business Council said:

“It’s amazing that the White House could take a long, hard look at the damage this EPA is doing to rural America and decide to double down. The Bureau of Economic Analysis reports that farm income is down 49 percent since the end of 2018. Biofuel plants across the farm belt are closing their doors. There is simply no legal or economic justification for more handouts to oil giants like Exxon and Chevron — especially when those exemptions come at the expense of families facing the worst rural downturn in modern memory.”

Lynn Chrisp, President of the National Corn Growers Association (NCGA) said:

“Waivers reduce demand for ethanol, lower the value of our crop and undermine the President’s support for America’s farmers. Waivers benefit big oil at the expense of corn farmers who, between losing export markets abroad and ethanol markets at home, are losing patience. Mr. President, you proudly stand with farmers, but your EPA isn’t following through. You can step up for farmers today by reining in RFS waivers. Farmers expect the RFS to be kept whole by accounting for waived gallons and bringing more transparency to EPA’s secret process.”

Bottom Line

Earlier this summer, The Digest reported on the year-round E15 ruling and how most in the biofuels and ag industries were jumping for joy like Olaf dreaming about summertime. But we even ended the story with “The big question is what comes next? What will happen with the small refinery waivers? With RINs?”

Well, now that waiver question has been answered and the industry is feeling a little less like Olaf and a little more like Anna after getting a shocking bolt of ice into the hearts of American farmers and biofuel producers. But like Anna, ag and biofuels industries are not giving up and are fighting even harder than ever for survival.

Print Friendly, PDF & Email

Tags: , , ,

Category: Top Stories

Thank you for visting the Digest.