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October 16, 2019

Biofuel Quarrel Continues Despite Trump Attempt as Peacemaker

A dispute between two of President Trump’s key constituencies entered a new phase on October 15, when the Environmental Protection Agency (EPA) issued a supplemental notice of proposed rulemaking to establish renewable fuel volumes for 2020 and 2021. The corn belt has been pressing the Trump Administration to do more to aid farm communities impacted by ongoing global trade disputes and a spate of difficult weather. Meanwhile, domestic fuel manufacturers have been urging improved management of the Renewable Fuel Standard program (RFS), including the use of Small Refinery Exemptions (SREs) that allow qualifying facilities to petition for relief from volume designations. This supplemental rulemaking is an attempt at a truce that Administration officials spent weeks developing while corn and refining interests publicly fought over the impacts of increasing volumes and the number of exemptions.

The notice does not change the proposed volumes for 2020 and 2021. Instead, it proposes and seeks comment on adjustments to the way that annual renewable fuel percentages are calculated. Annual renewable fuel percentage standards are used to calculate the number of gallons each obligated party is required to blend into their fuel or to otherwise obtain renewable identification numbers (RINs) to demonstrate compliance.

Specifically, the EPA is seeking comment on projecting the volume of gasoline and diesel that will be exempt in 2020 due to small refinery exemptions based on a three-year average of the relief recommended by the Department of Energy (DOE), including where DOE had recommended partial exemptions. EPA intends to grant partial exemptions in appropriate circumstances when adjudicating 2020 exemption petitions. The EPA proposes to use this value to adjust the way renewable fuel percentages are calculated. The proposed adjustments would help ensure that the industry blends the final volumes of renewable fuel into the nation’s fuel supply and that, in practice, the required volumes are not effectively reduced by future hardship exemptions for small refineries. Consistent with the statute, the supplemental notice seeks to balance the RFS’s goal of maximizing the use of renewables while still providing relief to small refineries that demonstrate the need.

The proposal is the Administration’s most recent attempt at a compromise between oil and agricultural constituencies. However, the immediate reactions indicate that the parties do not see the proposal as a solution, as both biofuel advocates and refining interests wasted no time in expressing their displeasure with the notice.

EPA will hold a public hearing Oct. 30, 2019 and conduct a 30-day comment period to combine this into the finalization of rulemaking to set the overall volumes for 2020 and 2021. EPA projects the rulemaking will be completed this year, but the strong negative response from the biofuel and refining industries suggests this rulemaking will continue to be challenging. EPA will have to issue one more proposed rule on renewable volume obligations prior to the 2020 election -- and how they balance these interests will be worth watching closely.

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