President Donald Trump followed through on his promise to break down regulatory barriers at the Environmental Protection Agency and allow year-round E15 sales. Iowa’s farmers and ethanol producers are grateful.
But the E15 rule will not make up for the damage that EPA is doing with its small refinery exemptions — particularly not for small biodiesel producers.
Over the past year, the biodiesel and renewable diesel industry has lost demand for hundreds of millions of gallons of product through the RFS loophole EPA created. EPA has always granted RFS exemptions to a handful of small refineries every year since 2013. But in 2017, EPA began handing out these exemptions to some of the biggest, most profitable oil companies in the world. It doesn’t seem possible that every oil company in the United States could be facing a hardship from blending biofuels, when fuel sales are climbing, and oil prices are strong.
For 2017, EPA granted RFS exemptions to 35 oil refineries. The total volume of gasoline and diesel produced by that group of oil refineries was more than 17 billion gallons. That’s an enormous amount of fuel compared to biofuel producers. EPA set the 2017 RFS volume for all U.S. biofuel producers — ethanol, biodiesel and all other types — only at 19.1 billion gallons. And that volume was eventually cut to 17.2 billion gallons through the exemptions.
EPA is protecting as much market space for oil refiners — excluding them from competition — as it is for biofuel producers. That’s turning the RFS program upside down.
According to University of Illinois economist Scott Irwin, if EPA continues to grant the exemptions to everyone who asks — the way it has been granting them — the demand destruction could reach 2.45 billion gallons over the next few years, with a $7.7 billion economic loss for the biodiesel and renewable diesel industry.
Biodiesel producers are tiny compared to so-called small oil refineries. Take CVR Energy, owned by wealthy investor Carl Icahn, as an example. CVR reportedly received an exemption for its Wynnewood, Oklahoma, refinery, which refines 74,500 barrels of oil each and every day. A mid-sized biodiesel producer would refine less than an equivalent amount of vegetable oil in an entire month.
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A single exemption for a small oil refinery can put a biodiesel producer out of business. The math is simple enough. Since each barrel of oil yields a little more than 31 gallons of gasoline and diesel, a refinery the size of CVR’s produces more than 2.3 million gallons of fuel a day and over 860 million gallons each year. The advanced biofuel RFS obligation for such a refinery this year would include close to 21 million gallons of biomass-based diesel. And there are dozens of small biodiesel producers across the country who produce less than that.
If a small biodiesel producer gets put out of business, it will impact more people than just the 20 or 30 plant workers. Twenty million gallons of biodiesel production supports more than 600 jobs across the economy — from farmers to truck drivers. Biodiesel producers are often the primary drivers of local economies.
According to recent news reports, the president is aware that his EPA is turning the RFS program on its head through small refinery exemptions. He gave direction to EPA on the E15 rule and ensured it got done quickly. America’s biodiesel producers need him to take decisive action on the RFS exemptions.
• Tom Brooks is general manager of Western Dubuque Biodiesel, a 30-million gallon per year facility in Farley whose investors include area soybean growers.