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The Renewable Fuel Standard Waiver Program: A Good Idea or Not?

Once again, the Renewable Fuel Standard (RFS) is popping up in headlines—this time

because of a little known waiver available to small refiners: a waiver that—no pun

intended—is certainly making “waves.”

Barely a quarter in to this calendar year, there has been a significant increase in the

number of refiners seeking waivers from the volume obligations set forth by the RFS.

This waiver is available to small refiners—those with a refinery capacity of less than

75,000 gallons per day—if they can demonstrate that compliance would create undue

financial hardship. Fair or not, the Trump Administration is also “making waves” by

issuing these waivers despite the fact that the power to grant exemption has been

available to the EPA for years. More refiners are requesting the waiver and more

refiners are being approved—25 so far this year—which more than doubles the number

issued in calendar year 2017.

This waiver upswing is an indication of how well the industry is taking to the ever-

increasing volume requirements under the RFS. Increasing resistance by refiners to the

burden of renewable fuels has created, however, tension with the corn and ethanol

lobby who decry the waivers as an undermining of the RFS entirely. The waivers for the

2016 Renewable Volume Obligations effectively reduced the volume requirements by

1.2 billion gallons—from 15 billion to 13.8 billion. Meanwhile, the refiners are putting

pressure on the EPA, maintaining that the requirements are costing them billions upon

billions of dollars which, for some refineries, has created financial hardships.

San Antonio based refinery, Andeavor, for instance, has already been granted three

waivers to ten of its smallest refineries. Andeavor is one of the nation’s largest

refineries with net profits totaling 1.5 billion dollars last year alone. These waivers,

however, were not for the whole of Andeavor, but only for its three smallest refineries –

all of which have a capacity under the 70,000-barrel- a-day limit. Still, those in

opposition have painted it as a gross misuse of the waiver option.

One group in opposition is the Renewable Fuels Association. Its President and CEO,

Bob Dinneen, has called the waiver an “outrageous abuse of the statute” which

obviously speaks to his very ardent disapproval. Further, Kevin Skunes, President of

the National Corn Growers Association, has stated that the EPA needs to consider the

impact on rural communities and corn farmers as well—not exactly a glowing

endorsement either.

It is no secret that the petroleum industry is fighting against the ever-increasing

demands of the RFS—preferring instead to cater to the demands of its customers. The

RFS is an interference in the exchange between producers and consumers. Corn

farmers seemingly want refiners to be forced to buy their product while refiners just want

their customers to be free to buy what they want. Free enterprise, anyone? And with

the EPA caught in the crosshairs of the debate, it seems they are leaning more

pointedly in the direction of favoring the refiners.

It remains to be seen how many refiners will be granted waivers. Requirements for

coming years are already being lowered and more waivers are being granted. All that

to be said, it seems that it is not too farfetched to say that we may be witnessing the

demise of the Renewable Fuels Standard altogether. Time will tell. Stay tuned…

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