EPA takes action on Small Refinery Exemption petitions

The U.S. Environmental Protection Agency (EPA) has acted on the backlog of 175 Small Refinery Exemption (SRE) petitions from 38 small refineries for the 2016-2024 compliance years, having reviewed the information submitted in consultation with the U.S. Department of Energy (DOE).

As a result, the agency has granted full exemptions to 63 petitions and partial exemptions to 77 petitions, denied 28 petitions and determined seven petitions to be ineligible.

The actions follow a June EPA announcement that it would propose Renewable Fuel Standard (RFS) volume requirements for 2026 and 2027.

The EPA says it is reaffirming the policy it set in the first Trump administration through the 2020 Renewable Volume Obligation Rulemaking, granting partial relief (a 50 percent exemption) where a small refinery has demonstrated that it faces partial hardship.

Under DOE’s 2011 Small Refinery Study, small refineries would have been denied any relief despite demonstrating partial hardship. With today’s action, EPA says it “is getting the SRE program back on track with an approach that recognizes some small refineries are impacted more significantly than others and that EPA’s relief should reflect those differences.”

The agency will update the RFS Small Refinery Exemption website to reflect its action on the 175 petitions.

The EPA also says it is reaffirming a policy to return RFS compliance credits, known as Renewable Identification Numbers (RINs), previously retired for compliance when a small refinery receives an exemption for a prior compliance year.

In a news release about the action, the EPA explains that RINs have a two-year window for use under the RFS, covering the compliance year in which they were generated and the following compliance year.

“Therefore, while 2022 and earlier vintage RINs are not eligible for use to meet the open 2024 compliance obligations or future obligations, these vintage RINs can be used to demonstrate compliance for prior compliance years consistent with their two-year window," the EPA says. "Ultimately, this means that the 2022 and earlier vintage RINs will not impact the number of RINs available to meet 2024 and future compliance obligations and are not expected to impact demand for biofuels."

The agency says it will submit a draft supplemental proposed rule to the Office of Management and Budget (OMB) on the proposed reallocations of the 2023 and later compliance year exempted volumes. EPA does not plan to propose reallocation of any of the exempted volumes for any SREs from 2016-2022 in light of the limitation on their potential use and that it will provide updated information on how the agency intends to project SREs for 2026 and 2027 in the context of establishing percentage standards for those years.

The proposed adjustments will help ensure refineries blend the intended volumes of renewable fuel into the nation’s fuel supply in 2026 and 2027 after accounting for the SREs granted for 2023 and 2024 in today’s actions and projected SREs granted for 2025-2027, the EPA says.

“The supplemental proposal will seek to balance the goals of the RFS in supporting the production and use of renewable fuels while taking into account economic impacts, following the law and ensuring opportunity for stakeholder comment," the agency adds.

Washington-based American Biogas Council (ABC) Executive Director Patrick Serfass praised the timing of the EPA’s actions on the RFS regarding SREs and the renewable volume obligations (RVOs).

“Issuing SREs now, before the RVOs are finalized, allows the EPA to balance both levers in the RFS to make sure they work together harmoniously and promote the healthy function of the RINs market," Serfass says. "The RVOs set demand for the RINs market, and SREs decrease demand. Announcing the SREs now gives the EPA the opportunity to follow the recommendation from the American Biogas Council and other renewable fuel producers to increase RVOs, which would increase demand and balance out the impact of issuing SREs."

“Without an increase in RVOs, RIN credit prices could crash, creating a harmful economic ripple effect across rural America. The EPA can make this all work together to protect farmers and rural communities, who depend on a strong, stable RFS program.”