Reuters

November 28, 2018

By Jarrett Renshaw, Humeyra Pamuk

The Trump Administration has temporarily frozen a program meant to exempt small oil refineries in financial distress from the U.S. biofuels law, as it reviews the scoring system to evaluate applications, according to two sources familiar with the matter.

The review means changes are likely to the program, which has become a lightning rod of controversy between the rival oil and corn industries since the Environmental Protection Agency vastly increased the number of waivers for last year.

Under the U.S. Renewable Fuel Standard, oil refiners must increasingly blend biofuels like corn-based ethanol into their fuel each year or purchase blending credits from those that do. The regulation was passed in 2005 to help farmers and cut fuel imports.

But small oil refineries can be exempted from the standard if they prove that compliance would cause disproportionate hardship. The EPA granted 29 such waivers for the 2017 compliance year, up from 14 in 2015 and 20 in 2016.

The biofuels industry and lawmakers representing farm states want the program halted, saying the expansion hurt farmers by eroding demand for ethanol. But refiners consider the program a lifeline to small facilities and have won lawsuits accusing the EPA of being too stingy with waivers.

The two sources, who requested anonymity to discuss the matter, said over the past week that the Trump administration was delaying consideration of any new waivers while the Department of Energy reviews its scoring system for applications. The department evaluates waiver requests and provides recommendations to the EPA.

That has placed on hold seven applications for the 2017 compliance year, and 15 applications for the 2018. Typically, the EPA waits until the latter half of the year to begin reviewing applications because applicants need to demonstrate financial hardship using hard figures for their facilities.

An EPA official confirmed the review. “I think what DOE needs to do is tighten up their approach and we need to do the same,” said the official, who asked not to be named. “I honestly don’t know where they’ll end up and whether they’re going to make any changes at all.”

Whatever the outcome, it could have a dramatic impact on the multibillion-dollar credit trading market, which has been hard-hit by the waiver expansion.

“This is a promising and long overdue development that shows Acting Administrator (Andrew) Wheeler cares about righting the ship at EPA after the prior administrator’s mismanagement and poor leadership. There’s no good reason multibillion-dollar oil refineries making record profits should receive so-called ‘hardship’ waivers exempting them from following the law,” U.S. Republican Senator Chuck Grassley, of Iowa, said in a statement on Wednesday.

Credits, called Renewable Identification Numbers or RINs, have plummeted in value from over $1 to 10 cents this week as reports emerged of the number of EPA waivers granted last year. Some of those went to facilities owned by big, profitable companies like Chevron Corp and Andeavor, which recently merged with Marathon Petroleum Corp, Reuters has reported.

That cut in credit prices has saved hundreds of millions of dollars in compliance costs for merchant refiners that lack enough biofuel blending facilities, like Valero Energy Corp, PBF Energy Inc and Carl Icahn’s CVR Energy Inc.

The issue has placed President Donald Trump in a tough spot between two key constituencies, trying to support the agriculture industry slammed by the impact of his trade war with China while also keeping costs down for the oil industry.

Biofuel supporters contended the expansion of the waiver program was politically driven by former EPA Administrator Scott Pruitt, an Oklahoman considered an oil industry ally. Pruitt resigned in July in a flurry of ethical scandals, and has been replaced by Andrew Wheeler, a former coal lobbyist.

“Under the last EPA chief, the waiver program became a cookie jar open to every well-connected refinery owner, and we’re seeing the results across rural America with biofuel plants closing their doors or idling production,” said Brooke Coleman, head of the Advanced Biofuels Business Council.

The EPA has blamed the program’s expansion on recent federal court rulings, triggered by challenges filed by small refining companies Holly Frontier and Sinclair, which said the agency was using too strict of a test to determine disproportionate hardship.

All hardship applications are first handled by the Energy Department, which determines whether compliance would lead to disproportionate impact, or threaten a refinery’s viability. The final decision on applications rests with the EPA.

Read the original article: Exclusive: EPA Refinery Biofuel Waiver Program on Hold Pending Review - Sources

Reuters

November 20, 2018

By Chris Prentice, Jarrett Renshaw

The U.S. Environmental Protection Agency granted oil major Chevron Corp a 2017 hardship waiver from U.S. biofuel laws for its Utah refinery earlier this year, according to a source familiar with the company’s operations.

Chevron, which reported a net income of $9.2 billion in 2017, becomes the largest known company to be awarded a hardship waiver from the Renewable Fuel Standard (RFS), which requires refiners to blend biofuels like ethanol into their fuel pool or buy compliance credits from competitors that do.

The waivers, which have grown significantly under the Trump administration, have angered corn-belt farmers who say it hurts demand for ethanol and other biofuels.

“When an oil company whose net profits surpass the total value of the Iowa corn crop claims it is experiencing ‘hardship,’ you know we’ve reached a new level of absurdity,” said Geoff Cooper, CEO of the Renewable Fuels Association.

California-based Chevron declined to confirm whether it received a small refinery hardship waiver, but did say that seeking them can level the playing field.

“EPA has acknowledged that it has granted several small refinery exemptions from the RFS. Any Chevron refinery not exempted from the RFS would be at a disadvantage in the highly competitive markets where we operate,” the company said in an emailed statement.

The EPA did not immediately respond to requests for comment.

Refineries with a capacity less than 75,000 barrels-per-day can receive waivers from the RFS if they prove compliance would cause them disproportionate hardship. Chevron’s Salt Lake City, Utah, plant is 54,000 barrels-per-day.

The EPA, under President Donald Trump, expanded the waiver program, awarding 29 exemptions for the 2017 calendar year, up from 19 in 2016 and just seven in 2015, EPA data shows.

The EPA has attributed the program’s expansion to a lawsuit brought by two oil refiners who challenged the EPA’s denial of their waiver request. A federal judge ruled the EPA was using too narrow of a test to evaluate applications.

Biofuel backers say the expansion was politically driven by former EPA administrator Scott Pruitt, who sought ways to lower compliance costs for refiners. The Chevron approval was granted under Pruitt, the source said.

The surge in hardship waivers has pummeled the price for compliance credits some refiners must buy.

Reuters previously reported that Chevron, along with Exxon Mobil Corp, sought a hardship waiver from U.S. biofuel laws.

Exxon Mobil’s application status was unclear.

Read the original article: Exclusive: Chevron Granted Waiver from U.S. Biofuel Laws at Utah Plant - Source

West Central Tribune

November 17, 2018

By Tom Cherveny

Renewable Fuels Association

November 20, 2018

Press Release

There has been a media blitz lately by the oil industry saying that ethanol demand has been unaffected by the Environmental Protection Agency’s (EPA) rampant grants of Renewable Fuel Standard (RFS) exemptions to small refineries.  Recently, even some in the agriculture community have bought into these claims.  Don’t be fooled.

Under former EPA Administrator Scott Pruitt, 19 small refinery exemptions were granted retroactively for the 2016 compliance year, and 29 were doled out for 2017, compared to seven or eight in each of the three previous years.  The EPA reinstated RFS credits known as renewable identification numbers (RINs) to these refiners, which they can use for compliance rather than blending physical biofuels.

As shown in a new analysis by the RFA, these large-scale exemptions have impacted both components of ethanol demand: quantity and price.

The impact on quantity is reflected in the ethanol “blend rate,” the average inclusion level of ethanol in the nation’s gasoline supply.  The blend rate exceeded 10% in all but three months in 2017, and it hit a record 10.8% in January 2018.  However, it slumped starting in February 2018, as exempted refiners were flush with reinstated RINs, and as rumors and press reports regarding the exemptions made their way into the market.  The blend rate fell to 9.8% in February, ticked down to 9.7% in March and receded further 9.5% in April.  Between February and June, the blend rate exceeded 10% in only one month.

Additionally, as alluded to above, small refinery exemptions have impacted ethanol prices along with ethanol consumption.  The RFA conducted a basic regression analysis to determine the effect on prices.  The results showed that ethanol prices were 8 cents/gallon lower than they otherwise would have been in February, and that the impact grew to 34 cents/gallon by June and stayed at that level throughout the summer.

Every gallon produced and sold by the U.S. ethanol industry has been priced lower than would have been the case in the absence of the exemptions.  There were 9.4 billion gallons of ethanol produced between February and August (the latest month for which comprehensive supply/demand data are available).  By multiplying production by the price impact in each month, it can be determined that the industry’s revenues were reduced by $2.3 billion during that time period.

Moreover, the impact on the ethanol industry continues.  Largely as a result of the exemptions, the EPA has estimated that RIN inventories at the end of 2018, which will be available to meet 2019 RFS obligations, will swell to 3.06 billion.  This is an increase of 840 million RINs (nearly 40%) from the agency’s estimate of inventories carried over into 2018.  To the extent that refineries have “kept their powder dry” by using ethanol and other biofuels in recent months, they will be able to use their RIN inventories for compliance when expedient in the future.

In summary, small refinery exemptions have had a marked effect on ethanol consumption and a massive impact on industry revenues.  Don’t be fooled by commentary and social-media posts that fail to show the full picture.

Read the original release: Demand Destruction from Small Refinery Exemptions is Clear and Continuing

Minneapolis, Nov 20 – Seventeen students from Little Falls High School visited the Central Minnesota Renewables (CMR) plant yesterday afternoon to learn more about Minnesota’s bio-based chemical industry.

During the tour, the students, from grades 9 to 12, learned about the various processes of acetone and butanol production at CMR, which is produced from Minnesota-grown corn.

“We appreciate Little Falls High School bringing their students to our plant to learn about bio-based chemicals and the many benefits they provide. Tours such as these are an opportunity for students to engage with our employees and learn about the one of kind in the world production process that is located in their home town,” said Jonathan Olmscheid, VP of Finance at CMR.

The tour was organized by the Minnesota Bio-Fuels Association (MN Biofuels), a non-profit trade organization that represents the ethanol and renewable chemical industries in Minnesota. CMR is a member of MN Biofuels.

The students, which were from the high school’s Agriscience class, toured the facility’s administrative office, energy center, fermentation, distillation, laboratory operations, control room, protein and fiber storage, incoming grain handling and storage and chemical loadout areas.

“Yesterday’s visit from Little Falls concludes our school tours for 2018. Tours at CMR showcase how a domestic feedstock is converted into a clean chemical that reduces harmful VOC emissions and supports the surrounding economy,” said Tim Rudnicki, executive director at MN Biofuels.

CMR was previously an ethanol plant that was repurposed to produce renewable chemicals from corn in 2016. It uses 5.2 million bushels of corn annually.

CMR’s bio-based chemicals are used as solvents and additives in consumers products such as Kingsford GreenFlame charcoal lighter fluid, Beauty Secrets acetone nail polish remover, paints, adhesives and coatings.

Beth Berlin, agriculture instructor at Little Falls High School, accompanied her students during yesterday’s tour. Prior to the tour, she said that her students had studied corn and its use in biofuels.

“My students saw first-hand the uses of locally-grown corn, and viewed the process of making bio-based chemicals. I'm excited to have students see what is going on in their own backyards,” Berlin said

Benson, Nov 16 – Twenty students from Belgrade-Brooten-Elrosa (BBE) High School toured Chippewa Valley Ethanol Company (CVEC) in Benson this morning to learn about ethanol production.

“School tours allow students a first-hand look at the ethanol production process and its role of advancing our local economy in addition to promoting our energy independence and improving our air quality,” said Chad Friese, CEO of CVEC.

The students, from grades 11 to 12, were from BBE High School’s Dairy & Livestock Production, Ag Business Management and Small Gas Engines classes.

During the tour, they learned about the several different components of ethanol production such as incoming grain grading, grain handling, fermentation, grain storage, dried distiller grain production and storage, ethanol storage and shipment.

CVEC, which produces 50 million gallons of ethanol annually, is an ethanol production cooperative that commenced operations in 1996 and currently has 50 employees. The tour was organized by the Minnesota Bio-Fuels Association (MN Biofuels). CVEC is a member of MN Biofuels.

“Our annual grant program enables schools to tour their local ethanol plant and learn more about Minnesota-produced renewable fuels,” said Tim Rudnicki, executive director at MN Biofuels.

BBE High School’s agriculture instructor, Gary Rodgers, said that his students had learned about oxygenated fuels and ethanol prior to today’s tour during their small engines training program.

“My students learned how the process works and saw that ethanol is providing good jobs, creating more demand for locally grown corn and reducing pollution in engines burning it. 

“They now have a better understanding of the importance of ethanol blended fuels and are more willing to try ethanol blended fuels and start using it on an ongoing basis,” he said.

Reuters

November 13, 2018

by Humeyra Pamuk

The U.S. Environmental Protection Agency (EPA) may issue fewer biofuel waivers to small refineries under Acting Administrator Andrew Wheeler than it did under its previous leadership, Republican Senator Chuck Grassley of Iowa said on Tuesday.

“I sense that Wheeler has a feeling that (former Administrator Scott Pruitt) was very liberal on his issuing of waivers,” Grassley told a conference call.

Asked if he thought such an attitude change could lead to fewer waivers, Grassley, one of the most powerful voices for U.S. agriculture interests, said: “Yes.”

The small refinery waiver program is among the most controversial issues dividing the U.S. corn industry and Big Oil. Under the U.S. Renewable Fuel Standard (RFS), refiners are required to blend increasing amounts of biofuels like corn-based ethanol into the nation’s fuel supply each year to help expand the market for farm products.

But small refineries can apply for waivers if they demonstrate that complying would cause them hardship.

Under Pruitt, the number of waivers granted to small refiners soared, angering the biofuels industry which argued the program was being used to benefit energy companies while undermining demand for corn-based fuel.

Wheeler took over the EPA in July after Pruitt resigned in a flurry of ethical controversies.

While Wheeler has said little about his approach to the small refinery waiver program, he has said he would like to introduce reforms to the RFS that can please both the energy and agriculture industries.

At Trump’s direction, the EPA is currently working on a proposal to expand sales of higher ethanol gasoline blends year round, a move meant to help corn growers stung by soft domestic demand and a loss of export markets from trade disputes.

Read the original article: Iowa Senator Says Expect Fewer Biofuel Waivers From Wheeler's EPA

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