Exclusive: EPA granted full biofuel waivers to refineries despite Energy Department advice - memo

(Reuters) - The U.S. Environmental Protection Agency granted some refineries full waivers from biofuels regulation for the 2018 compliance year, even though the Department of Energy had recommended partial exemptions, according to an EPA memo seen by Reuters.

FILE PHOTO: The U.S. Environmental Protection Agency (EPA) sign is seen on the podium at EPA headquarters in Washington, U.S., July 11, 2018. REUTERS/Ting Shen

The decision upset the powerful U.S. corn lobby, already angry at the Trump administration’s move in August to grant 31 full exemptions to refineries, freeing them from an at-times costly obligation to use biofuels such as corn-based ethanol.

Democratic presidential candidates also seized on the administration’s use of waivers on Tuesday, calling them a giveaway to the oil industry that hurts farmers already struggling from the effects of the U.S. trade war with China.

The issue shows how President Donald Trump has struggled to simultaneously please the corn and oil industries, key political constituencies leading into next year’s presidential election that have routinely clashed over future biofuels policy.

The Aug. 9 memo showed the EPA granted “full exemptions for those 2018 small refinery petitions where DOE recommended 50% relief.”

The memo, signed by Anne Idsal, EPA’s acting assistant administrator for the Office of Air and Radiation, did not specify how many refineries were involved.

Trump’s EPA has disregarded DOE advice on waivers in the past, Reuters has reported, marking a break from the Obama administration’s EPA, which had often either adopted energy department recommendations or, when it did not, ruled against exempting oil refiners.

An EPA official did not immediately comment.

Agency officials and oil industry representatives have defended the EPA’s expanded use of waivers under the Trump administration, saying they protect refining jobs and there is no evidence they have any impact on ethanol demand.

“Small refinery exemptions are a critical lifeline for small refineries across the U.S.,” said a spokesman for the American Fuel and Petrochemical Manufacturers refining group.

But biofuel industry representatives called the memo evidence the agency is biased in favor of the oil industry.

“Granting favors to refiners that aren’t really facing an economic hardship is just one of the multiple problems with EPA’s handling of small refinery exemptions,” said Kurt Kovarik, vice president of federal affairs for the National Biodiesel Board, on the sidelines of an industry event.

“The memo clearly shows that EPA continues to disregard the recommendations of DOE,” Geoff Cooper, head of the Renewable Fuels Association industry group, said in an email.

In a clear sign the issue has become a potential political vulnerability for Trump, White House hopeful Democratic Senator Cory Booker seized on the news of the memo, calling the administration’s use of the waiver program an “abuse of power.”

He added, “Time and time again, this president and his administration have used their power to prop up their political allies, like oil companies, at the expense of hardworking American farmers, and now, they’re doing it against the advice of their own Department of Energy.”

Mayor Pete Buttigieg also mentioned small refinery waivers on Tuesday during a campaign stop in Iowa, calling them “big giveaways to oil,” drawing applause from his crowd.

The U.S. Renewable Fuel Standard requires oil refineries to blend biofuels, such as corn-based ethanol, into their fuel or purchase credits from those that do.

The law is intended to help farmers and cut U.S. dependence on foreign oil but refiners say it costs them a fortune.

The RFS, however, allows the EPA to grant waivers from the regulation to small refining facilities of 75,000 barrels per day or less, if they can prove that compliance would cause them disproportionate economic hardship.

This process sees the DOE assess applications and provide recommendations to the EPA, which then makes a final decision.

While the EPA publishes the number of waiver applicants and recipients each year, it keeps their identities secret, arguing the information is business-sensitive.

Since Trump took office, the EPA has vastly expanded its use of the exemptions, providing waivers to small facilities owned by billionaire investor Carl Icahn and oil majors, such as Exxon Mobil Corp and Chevron Corp, Reuters has reported.

Under pressure over the most recent round of 31 waivers, Trump last month promised a “giant package” to farmers to boost the market for ethanol. That plan has yet to be released.

(This story corrects the spelling of senator’s name in paragraph 14)

Reporting by Jarrett Renshaw in Philadelphia and Stephanie Kelly in New York; Writing by Richard ValdmanisEditing by Marguerita Choy, Matthew Lewis and Cynthia Osterman