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U.S. small refiners make surge of biofuel waiver requests

More than two dozen small U.S. refineries are seeking waivers from the nation’s biofuels law, an unusually high number that reflects growing oil industry resistance to the program, according to sources familiar with the matter.

Prices of the most popular renewable fuel credits dropped to 61 cents in early trading on Thursday following the Reuters report, a near eight-month low and down from 64 cents on Wednesday, traders said.

The requests to the U.S. Environmental Protection Agency add pressure to the Trump administration to help an industry that claims the U.S. Renewable Fuel Standard (RFS) costs it billions of dollars a year by requiring refiners to blend increasing volumes of biofuels like ethanol into gasoline and diesel.

While the White House and EPA have expressed concern for refiners and are mediating talks between representatives of the industry and the ethanol lobby, they have largely sided with corn-growing states with large Republican majorities.

Sources familiar with the matter said the EPA was currently reviewing 27 waiver applications from small refineries, covering multiple years. They said more refiners had applied this year than usual, emboldened by the Trump administration’s anti-regulatory stance as well as recent court rulings that broadened the EPA’s criteria for granting waivers.

The EPA has the authority to grant exemptions from the program to refineries with a capacity under 75,000 barrels per day if the company can demonstrate financial hardship, but the agency has been reluctant to do so in the past. In the four years ended in 2016, the EPA granted a total of 29 small-refiner exemptions – fewer than eight a year on average, according to data provided to Reuters by the EPA in response to a Freedom of Information Act request.

The Renewable Fuels Association (RFA) said they are concerned about the EPA relaxing the standards in a way that violates the program’s goals of boosting use of renewable fuels, according to a letter seen by Reuters. “RFA is concerned that virtually any refiner with crude throughput of less than 75,000 barrels of crude per day could be granted the small refiner exemption – roughly 10 percent of all domestic refining capacity,” the letter said. The EPA must remain “discerning” in its review process and ensure that non-exempt obligated parties make up for any lost volumes of renewable fuels that the exempt small refiners would have otherwise provided, the letter states.

A U.S. appeals court concluded last August in a case filed by Sinclair Refining against the EPA that the agency was being too strict in granting waivers only to companies that can prove the RFS would drive them out of business.

There are 53 refineries in the United States with capacity less than 75,0000 barrels per day, and their owners include some of the nation’s largest oil companies, including Chevron and Andeavor (formerly Tesoro).

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