The public comment period of U.S. EPA’s supplemental notice of proposed rulemaking that addresses the agency’s plan to reallocate future Renewable Fuel Standard volumes lost to small refinery exemptions (SREs) closed Nov. 29. More than 11,700 comments were filed on the proposal, according to data posted to the www.Regulations.gov website.

The supplemental notice of proposed rulemaking, issued on Oct. 15, has been slammed by supporters of the biofuels industry. The White House originally briefed biofuel industry representatives on a deal that would use a three-year rolling average of actual SRE waived volumes to predict future waived volumes. The EPA’s rulemaking, however, proposes to use a three-year rolling average of U.S. Department of Energy SRE recommendations rather than actual waived volumes to project future SREs. Unlike data on actual waived SRE volumes, DOE recommendations are not publically available and have largely been disregarded by the EPA in recent years during its process to evaluate and approve or deny SRE applications.

Comments filed by representatives of the biofuels industry called on the EPA to honor congressional intent and President Trump’s commitment to the RFS.

The Renewable Fuels Association urged the EPA to follow the law and noted that the Clean Air Act requires the agency to ensure that the RFS volumes specified by Congress are fully enforced. “The congressional intent is indisputable and unambiguous, and the law is clear,” said Geoff Cooper, president and CEO of the RFA. “Unfortunately, the EPA has forsaken the law in recent years by failing to ensure the congressionally directed renewable fuel volume requirements are enforced. EPA issued 85 retroactive small refinery exemptions for the 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.04 billion gallons.”

While EPA’s supplemental proposal takes a step in the right direction, the RFA said it doesn’t go far enough in ensuring that the congressional RFS volumes are fully enforced. “If past is prologue, EPA’s proposal could result in the 15-billion-gallon requirement sliding backward to a requirement for just 14.4 billion gallons in 2020,” the RFA said in its comments. 

RFA said the agency can get the RFS back on track and uphold President Trump’s commitment to farmers by fully redistributing renewable fuel blending requirements that are waived due to SREs.

“We strongly urge EPA to ensure the law is upheld and the president’s commitment is honored,” the comments state. “This can only be achieved if EPA finalizes an approach that uses the three-year average of actual exempted volumes—not the three-year average of the Department of Energy’s recommendations—as the basis for projecting exemptions in 2020 and beyond.”

The comments also underscore the devastating impacts of SREs on the renewable fuels industry. “It is an undeniable fact that the surge in SREs has caused demand loss and economic hardship for U.S. ethanol producers,” Cooper wrote. “At least 20 ethanol plants have been temporarily idled or permanently closed since early 2018 when EPA began to massively expand the volume of SREs.”

Adopting a redistribution methodology based on the three-year average of actual exemptions would help "stop the bleeding” and get ethanol producers back on their feet after one of the worst years in the industry’s history, Cooper said.

Growth Energy called on the EPA to uphold Trump’s commitment to farmers and biofuel workers by fixing the flawed supplemental notice of proposed rulemaking. In its written comments, Growth Energy urged regulators to fully account for biofuel demand lost to SREs.

“Unfortunately, the current proposal fails to provide the certainty and stability that America’s farmers and biofuel producers need to rebuild after years of demand destruction,” said Emily Skor, CEO of Growth Energy. “It offers a solution based on outdated and inaccurate estimates, potentially keeping billions of gallons of biofuels off the market. The president has committed to upholding the integrity of the RFS, and communities across the heartland are counting on EPA to keep that promise by accurately accounting for lost gallons.”

In its comments to EPA, Growth Energy calls on regulators to account for a rolling average of actual exempted volumes from the three most recently completed compliance years, and provides detailed instructions on how EPA should execute these directives. This includes ensuring EPA’s projections rely on the agency’s actual history of adjudicating SRE applications, using the most recent data available when setting volume requirements, issuing partial SRE relief where appropriate, and disclosing additional data and analysis regarding SRE decisions to provide needed public insight into EPA’s decision-making process.

The American Coalition for Ethanol urged the EPA to get the RFS back on track. ACE CEO Brian Jennings detailed three areas in which the proposal falls short in ACE’s written comments, including the proposed rule (1) does nothing to reallocate the 85 Small Refinery Exemptions (SREs) from 2016 through 2018 which eroded more than 4 billion gallons from statutory levels, (2) represents a missed opportunity to restore 500 million gallons unlawfully waived from the 2016 compliance year, and (3) betrays the deal on how to ensure at least 15 billion gallons in the RFS for 2020 and beyond.

ACE’s comments underscore that this proposal does not reflect the original deal, and rather, “in a classic bait and switch, EPA’s proposal brazenly attempts to paper over the fact that actual waived SRE volumes from 2016 through 2018 were double what the Agency is proposing to reallocate for 2020.”

This is another example of EPA’s double-standard with the RFS. “…when it came to helping refineries escape RFS obligations, EPA rejected Department of Energy (DoE) recommendations to exercise restraint, but now that EPA must restore volume to the RFS, the Agency is suddenly embracing DoE recommendations because the result will keep a lid on refinery blending obligations going forward.”

The written comments reinforce this point by referencing direct quotes from interagency review documents posted on regulations.gov which reveal email exchanges between Trump administration officials about the deal reached with the President. An October 11 interagency reviewer commented to EPA that “the alternative is inconsistent with the WH decision last week to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020…”

In addition to ACE’s specific comments about the 2020 volume and accounting for future waivers, Jennings’ remarks highlight the radical changes made to the EPA’s handling of SREs with explicit evidence that the Trump administration acknowledges this departure from the norm. The comments also provide data on how the issuance of numerous retroactive SREs impacts the RIN marketplace, and mentions ACE and its allies’ court challenges to the mismanagement of the SRE provision. The comments conclude by urging EPA to finalize a rule that reallocates the actual average volume waived from 2016 through 2018 and ensures at least 15 billion gallons for the 2020 compliance year.

The National Biodiesel Board urged EPA to properly account for SREs, address the remand of the 2016 standards and increase the 2021 biomass-based diesel volume.

NBB said it welcomes EPA's proposal to estimate 2020 and future SREs in the formula for setting renewable volume obligations (RVOs). In its comments, NBB calls it a positive and necessary step to ensure that future small refinery exemptions do not continue to destroy demand for biomass-based diesel. However, NBB points out that EPA's proposal falls short in several ways.

Kurt Kovarik, vice president for federal affairs at the NBB, states, "On Oct. 4, President Trump, the EPA and USDA jointly pledged to account for small refinery exemptions in the RFS annual rule and ensure that the biomass-based diesel volume is met. On Oct. 15, however, EPA proposed action that would significantly underestimate future exemptions and fall short of ensuring that RVOs are met."

NBB encourages EPA to use the best possible estimate of future small refinery exemptions—specifically, a three-year average of the gallons EPA actually exempted. "Unfortunately, the proposal uses an average of past exemptions recommended by the Department of Energy (DOE) rather than an average of actual volumes waived," NBB writes. "Because EPA has ignored DOE's recommendations in each of the past three years, that methodology would only account for about half of the annual impact of recent small refinery exemptions."

NBB also points out that EPA does not propose to do anything about SREs before 2020. "Over 4 billion gallons of demand for biofuels has been lost due to retroactive small refinery exemptions for compliance years 2015 through 2018. This impact has been particularly significant for biomass-based diesel producers because biomass-based diesel RINs can be used to satisfy multiple obligations under the RFS," NBB writes. "Despite having the means to do so, EPA has not proposed to do anything in the Supplemental Notice to address this massive loss of renewable fuel demand."

In its written comments, NBB reiterates its requests that EPA raise the 2021 biomass-based diesel volumes and the 2020 RVOs to include the 500 million gallons the D.C. Circuit Court recognized (in ACE v EPA) were improperly waived in 2016. "Increasing the RVO by 500 million gallons would not only be achievable by BBD and other renewable fuels, it would assist in reviving production, reopening production facilities, and saving jobs," NBB writes. "The BBD industry can still achieve higher volumes if EPA properly accounts for small refinery exemptions and increases the renewable volume obligations and account for the ACE gallons."

More information, including full copies of written public comments, is available on www.Regulations.gov under Docket ID No. EPA-HQ-OAR-2019-0136.