EPA chief defends biofuel waivers in meeting with farm senators: sources

WASHINGTON (Reuters) - The head of the U.S. Environmental Protection Agency defended his agency’s expanded use of waivers exempting refineries from the country’s biofuel law during a closed-door meeting with farm state senators last week, arguing the program has had no negative impact on ethanol demand, according to four sources with knowledge of the meeting.

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EPA Administrator Andrew Wheeler’s comments are a sign he may resist an overhaul of the so-called Small Refinery Exemption program, which President Donald Trump last month ordered members of his Cabinet to review based on complaints from the corn lobby. The EPA and the U.S. Department of Agriculture are preparing to hold a cabinet-level meeting on the issue as soon as this week, two of the same sources said.

Under the U.S. Renewable Fuel Standard, refineries must blend corn-based ethanol into their gasoline or buy credits from those that do – a policy meant to help farmers and cut U.S. petroleum imports. But small facilities can secure exemptions from the program if they can prove to the EPA that complying would cause them financial hardship.

Since Trump took office, the EPA has more than quadrupled the number of waivers it has granted to refineries, saving the oil industry hundreds of millions of dollars, but enraging farmers who claim the move threatens demand for one of their staple products. Refiners dismiss the argument, saying ethanol demand has not been impacted.

Wheeler echoed the refining industry’s point of view in his meeting last Wednesday with the senators from corn-producing states, which included powerful Republican Chuck Grassley from Iowa, according to the four sources, who asked not to be named.

“We understand Wheeler has made a case that ethanol industry was not hurt by the small refinery waivers,” said one of the sources, an industry official with knowledge of the meeting. Another source said Wheeler attributed the reason behind weak ethanol demand as falling gasoline consumption, not the waiver program.

The EPA said in a statement emailed to Reuters that it “continues to implement the Renewable Fuel Standard program in accordance with the Clean Air Act, taking into consideration additional direction from Congress, recommendations from Department of Energy, and relevant court decisions.”

It did not comment on the meeting.

Renewable fuel (D6) credits for 2019 traded as low as 20 cents each on Tuesday, losing four cents from the previous session following this Reuters report on the meeting, traders said.

The waiver program has been a source of contention between the rivaling corn and oil industries for years now, but the tug of war between the groups has intensified in recent months, underscoring the rising political importance of the RFS policy.

Industry sources told Reuters in recent weeks that decisions on some 40 outstanding waiver applications, covering the 2018 compliance year, were nearly finalized before Trump intervened and demanded the review. Since then, the USDA and EPA have been in talks on how to redesign the waiver program but so far, no definitive solution has emerged.

During a visit to a refinery in Pennsylvania on Tuesday, Wheeler said the agency was still processing them and was hoping to make decisions within the next few weeks, or at most a month.

Some refiners say they filed their applications far earlier than April, and say the EPA is already late.

Past waivers have gone to small refineries owned by giants like Exxon Mobil and Chevron Corp, along with a facility owned by billionaire investor Carl Icahn, according to a report by Reuters. That has raised accusations from the corn lobby that the EPA is misusing the program meant to protect the smallest fuel facilities from going bust.

Additional reporting by Stephanie Kelly in New York; editing by Richard Valdmanis and Marguerita Choy