Oil refiners are attempting to evade an adverse appellate court ruling by asking the EPA for retroactive exemptions from the ethanol mandate, said biofuel trade groups on Thursday. Refiners have filed 52 petitions for exemptions stretching as far back as 2011, potentially creating a chain of annual waivers that would allow them to seek exemptions now.
The U.S. 10th Circuit Court of Appeals ruled on Jan. 24 that the EPA could not exempt a small-volume refinery from compliance with the Renewable Fuel Standard (RFS) unless it already had an exemption. Farm and biofuel groups have called repeatedly for the EPA to implement the ruling, which would effectively end the exemptions, and to reject “gap year” petitions covering past years.
On Thursday, the EPA posted the 52 petitions for small-refinery exemptions on its website, igniting complaints by biofuel backers. The Renewable Fuels Association called the petitions “another new scam” and “a cynical scheme to circumvent” the appellate court. Growth Energy said they were “a blatant attempt … to rewrite years of history, just to bypass the 10th Circuit Court and push more biofuels out of the marketplace.”
Not so, said refiners. “The law is clear that small refineries can apply for RFS hardship relief at any time,” said the American Fuel and Petrochemical Manufacturers, an industry trade group. The AFPM said refiners were trying “to correct the record” with the EPA, contending that the agency had been overly strict in the past and had discouraged refiners from seeking exemptions.
Ethanol groups say the exemptions reduce the demand for biofuels. Under the RFS, refiners are required to mix ethanol into gasoline. If they fail to meet their target for biofuel use, they can buy so-called credits to bring themselves into compliance. The petroleum industry says the fuel market is saturated with ethanol at present and that ethanol credits can be unduly expensive. Under the RFS, small-volume refineries can ask for a hardship waiver from meeting the standard.
Both gasoline and ethanol consumption plunged during March and April as stay-at-home orders reduced fuel demand. The economic slowdown that accompanied the pandemic is expected to suppress fuel usage for months into the future, possibly intensifying the struggle between gasoline and ethanol for market share.
The coronavirus shock to the fuel industry is likely to spark a shakeout among ethanol producers that will drive out “weaker players” through consolidation or plant closures, said analyst Kenneth Zuckerberg of CoBank, an agricultural lender. Ethanol consumption, which has run at nearly 16 billion gallons annually since 2017, will fall to 13.4 billion gallons this year, then recover to 14.7 billion gallons in 2021, he said. Still, the industry, with a production capacity of 17 billion gallons a year, is overbuilt, he said.
“By 2025, we expect the U.S. ethanol industry to undergo a three-stage transformation that will result in fewer, better capitalized players with revenue diversity beyond fuel ethanol,” wrote Zuckerberg, CoBank’s lead economist for grain and farm supply. “That diversity will include production of higher-margin co-products, such as high-protein distillers’ grains for animal feed, carbon dioxide for refrigeration, beverage-grade alcohol, and other industrial products, including those used for personal hygiene — for example, hand sanitizing.”
Retrenchment would hit oil refiners, too, reported Bloomberg on May 30. It quoted Spencer Welch, a vice president at IHS Markit, as saying, “The COVID-19 situation has accelerated the rationalization process that was always coming. It will hit Europe hardest and first. But it will also hit North America, particularly the East Coast.” Refineries in Europe and the United States are overmatched by larger, newer, and more efficient refineries in the Middle East and Asia, said the news service.
The CoBank report, “Readjustment today, rationalization tomorrow,” is available here.
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June 19, 2020 at 08:02PM
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In new fuel clash, oil refiners ask for 52 retroactive ethanol exemptions - Successful Farming
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