Policy Issues

The Environmental Protection Agency (EPA) reduces RFS obligations by granting retroactive exemptions to oil refiners. These exemptions reduce refiners' prior-year RFS obligations by hundreds of millions of gallons; refiners then sell or carry forward the returned RINs, destroying demand for biofuels in the present year.

In the 2020 RFS rule finalized in December 2019, EPA recognized its duty to ensure the RFS volumes it sets each year are not reduced through these exemptions. EPA estimated 2020 exemptions will be lower than in 2016, 2017 and 2018 -- roughly 57 percent of the average for those years.

In January 2020, the U.S. Court of Appeals for the 10th Circuit ruled that EPA "opened a gaping and ever-widening hole" in the RFS program by abusing these exemptions. The court ruled that EPA's authority is limited to extending existing exemptions only in cases where the RFS is the direct cause of hardship. In response, refiners are now asking EPA to widen the loophole further and are petitioning for exemptions going back to the very start of the program. 

NBB is monitoring EPA as it considers small refinery exemption petitions. If EPA fails to limit retroactive exemptions going forward, it will continue to reduce RFS volumes below the standards it set and destroy demand for biodiesel and renewable diesel.

NBB continues to work with its members to advocate to EPA and Trump administration officials that past RFS volumes for biodiesel and renewable diesel are made whole. NBB also asks Members of Congress to exercise oversight and ensure EPA follows the law in granting small refinery exemptions.

As our members communicate with Members of Congress, EPA and other Washington policy makers, the media, and the public, NBB works with them to amplify these points:

  • If EPA continues to hand out small refinery exemptions at the same rate as in 2016-2018, it will reduce biodiesel demand by 2.54 billion gallons and cause a $7.7 billion loss for the industry, according to University of Illinois economist Scott Irwin.
  • Just one small refinery exemption can eliminate demand for an entire biodiesel facility. A “small” oil refinery can produce up to 3 million gallons of fuel per day. It’s annual RFS obligation for biodiesel is only 20 million gallons, which is more than some small biodiesel plants produce in a year.
  • EPA began freely handing out small refinery exemptions before receiving the Congressional directives and Court decisions they currently cite as justification.
  • EPA has ignored Department of Energy recommendations regarding whether small refinery exemptions are merited.

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