U.S. Environmental Protection Agency (EPA) is acting on the backlog of 175 Small Refinery Exemption (SRE) petitions from 38 small refineries for 2016 – 2024 compliance years. In consultation with the U.S. Department of Energy (DOE), EPA reviewed and considered information submitted by each petitioning small refinery. EPA then evaluated each SRE petition consistent with the Clean Air Act and case law. After carefully reviewing all information, EPA is granting full exemptions to 63 petitions, granting partial exemptions to 77 petitions, denying 28 petitions, and determining 7 petitions to be ineligible.
EPA is reaffirming the policy it set in the first Trump Administration through the 2020 Renewable Volume Obligation Rulemaking, granting partial relief (a 50 percent exemption) where a small refinery has demonstrated that it faces partial hardship. Under DOE’s 2011 Small Refinery Study, small refineries would have been denied any relief despite demonstrating partial hardship. With today’s action, EPA is getting the SRE program back on track with an approach that recognizes some small refineries are impacted more significantly than others and that EPA’s relief should reflect those differences. Concurrent with this decision, EPA will update the Renewable Fuel Standard (RFS) Small Refinery Exemption website to reflect action on the 175 petitions.
At the same time, EPA is reaffirming a policy to return RFS compliance credits, known as Renewable Identification Numbers (RINs), previously retired for compliance when a small refinery receives an exemption for a prior compliance year. Under the RFS program, RINs have a two-year window for use, covering the compliance year in which they were generated and the following compliance year. Therefore, while 2022 and earlier vintage RINs are not eligible for use to meet the open 2024 compliance obligations or future obligations, these vintage RINs can be used to demonstrate compliance for prior compliance years consistent with their two-year window. Ultimately, this means that the 2022 and earlier vintage RINs will not impact the number of RINs available to meet 2024 and future compliance obligations and are not expected to impact demand for biofuels.
Finally, in the near future, EPA will submit a draft supplemental proposed rule to the Office of Management and Budget (OMB) on the proposed reallocations of the 2023 and later compliance year exempted volumes. EPA does not plan to propose reallocation of any of the exempted volumes for any SREs from 2016 – 2022 in light of the limitation on their potential use. EPA will also be providing updated information on how the agency intends to project SREs for 2026 and 2027 in the context of establishing percentage standards for those years. The proposed adjustments will help ensure that refineries blend the intended volumes of renewable fuel into the nation’s fuel supply in 2026 and 2027 after accounting for the SREs granted for 2023 and 2024 in today’s actions and projected SREs granted for 2025 – 2027 in Set 2. The supplemental proposal will seek to balance the goals of the RFS in supporting the production and use of renewable fuels while taking into account economic impacts, following the law, and ensuring opportunity for stakeholder comment.
Devin Mogler, President and CEO, National Oilseed Processors Association (NOPA):
“The EPA inherited a messy situation and we appreciate the agency’s commitment to ending the years-long SRE litigation and restoring stability to the RFS. NOPA is confident the agency understands that strong RVOs will have profoundly positive impacts on U.S. farmers and rural America. We urge the EPA to build on this progress and quickly finalize the RVOs in a way that delivers these positive impacts, by finalizing a re-allocation policy that fully accounts for gallons lost due to SREs in 2023-2025 and any projected SREs for future years, expanding volumes for the biomass-based diesel category to at least 5.25 billion gallons and ensuring domestic feedstocks and fuels are prioritized. These measures are essential to ensuring the program strengthens domestic markets and keeps investment and jobs in rural America.”
Emily Skor, CEO, Growth Energy:
“With more than 140 granted refinery exemptions, today’s decision alone does not give farmers and biofuel producers the certainty they need. It is imperative that EPA reallocates each and every exempt gallon in a forthcoming rule to mitigate the potentially devastating impact on biofuel demand. We appreciate EPA’s commitment to issue a rule that ensures promised homegrown biofuel gallons reach the marketplace and upholds the administration’s commitment to American energy dominance.”
Geoff Cooper, President and CEO, Renewable Fuels Association:
“While RFA continues to doubt that the small refineries receiving exemptions today truly experienced ‘disproportionate economic hardship’ due to the RFS, we are pleased to see EPA taking an approach to implementation of these exemptions that is minimally disruptive to the marketplace and affirms the agency’s intent to reallocate renewable fuel volumes lost to SREs. We appreciate that EPA is focused on an approach that maintains stability in the marketplace and ensures finalized annual volumes under the RFS are maintained. The exemptions granted today should have little or no effect on current and future levels of renewable fuel production and use. It is critical, however, that the renewable fuel blending volumes associated with SREs for 2023 and 2024 are fully reallocated. In the days ahead, RFA will be further analyzing EPA’s new approach and rationale for determining disproportionate economic hardship. According to EPA’s previous analysis, all refiners—both small and large—recoup their RIN costs when they sell gasoline and diesel. Thus, there is no credible evidence that small refiners are disproportionately affected by RFS compliance, or that the financial impact of RFS compliance rises to a level anywhere close to ‘economic hardship.’ In any case, SREs were always intended to be a temporary measure and a bridge to compliance—not a permanent handout. Small refiners have now had two full decades to adapt their operations to comply with the RFS.”
Kurt Kovarik, Vice President of Federal Affairs, Clean Fuels Alliance America:
“EPA’s course correction on RFS small refinery exemptions creates fresh uncertainty for America’s farmers and biodiesel, renewable diesel, and SAF producers. We look forward to working with the agency to ensure today’s decision does not unwind the strong signal of support issued in June through robust RFS volumes meant to drive growth and recognize investment in domestic fuels and American agriculture. … EPA’s announcement conflicts with its consistent finding that small refiners are not facing disproportionate economic hardships from RFS compliance. Refunding retired RINs has the potential to undercut current markets for domestic biodiesel, renewable diesel, and SAF as well as for American oilseed crops and other feedstocks. This announcement comes just as farmers begin planning to harvest the year’s soybean crop, which is expected to achieve a record-setting yield. We urge EPA to ensure that small refinery exemptions do not undermine the market for farmers and clean fuel producers.”
