When drivers go to refill their gas tanks in the U.S., chances are a bit of corn ethanol or soybean biodiesel is mixed in with the gasoline.
That’s because the federal government requires refineries to blend a certain amount of plant-derived fuel into gasoline, under a program called the Renewable Fuel Standard.
But according to some Wyoming petroleum refineries, the requirements can be tough to meet. And a recent federal court ruling could make meeting the set blending levels even harder.
If a petroleum refinery can’t meet the set standard through blending biofuel or other approved renewable fuels into its gasoline supply, it must turn to the market to purchase credits. It’s a mandate that many smaller refineries have called economically prohibitive.
To lessen the financial burden on smaller operations, in the past the Environmental Protection Agency has extended hardship relief or waivers to some refineries unable to meet the requirements. But that relief was placed in jeopardy after a panel of judges in the 10th U.S. Circuit Court of Appeals ruled the agency was overextending relief in January. Several refineries converting crude into fuel in Wyoming apply for these annual exemptions from renewable fuel standards. Depending on how the federal court ruling is applied, it could effectively invalidate exemptions from renewable energy standards for small refineries going forward.
Wyoming’s governor, along with governors in five other states, has called on the federal agency to waive the standard or extend economic relief opportunities to struggling refineries. Now, these leaders of oil-producing states have a new, unlikely ally: a conservation group.
The National Wildlife Federation recently called on federal officials to waive the renewable fuel standard requirements, on the basis the mandate accelerates harm to the environment and the climate.
Growing corn or soybeans for biofuel wreaks havoc on land, water, air and wildlife, the group argued in a May 29 letter addressed to EPA Administrator Andrew Wheeler.
According to the environmental advocates, the expansion of irrigated cropland — fueled by the uptick in ethanol demand for fuel — has decimated native prairies and degraded habitats for wildlife like prairie chickens, waterfowl and monarch butterflies. The land conversion has also contributed high levels of climate-warming carbon to the atmosphere, the group said.
“Increasing mandated blending levels increases the potential for further land conversion, presenting a marked threat to the battle against global climate change, with its consequent catastrophic effects on human health and the environment,” the National Wildlife Federation wrote in its letter.
The group joined governors in Wyoming, Louisiana, Oklahoma, Pennsylvania, Texas and Utah in advocating for a waiver.
“The 2020 (Renewable Fuel Standard) compliance obligations, in their current form, risk transforming the current severe economic harm to existential harm for some of the refineries in our states,” stated the April 15 letter, signed by Gordon and other governors.
The federal court ruling delivered earlier this year has placed small oil refineries, including those in Wyoming, in a financial pinch that has only been exacerbated by the COVID-19 pandemic, the governors stated.
Wyoming-based Sinclair Oil Corp. has also lobbied against the renewable fuel standards, saying the cost burden of purchasing credits to fulfill renewable fuel obligations threatens the viability of smaller refineries.
“From a perspective entirely different than that of an energy producer, (the National Wildlife Federation) reaches the same conclusion: The renewable fuel standard program is a total failure,” Adam Suess, vice president of government relations for Sinclair Oil Corp., told the Star-Tribune.
How the Renewable Fuel Standard program works
In 2005, Congress created the Renewable Fuel Standard in an effort to lower greenhouse gas emissions. The program requires companies refining or importing crude oil to incorporate certain types of biofuel, such as corn ethanol, into transportation fuel supply. But groups like the National Wildlife Federation say the program is not functioning as lawmakers intended.
The EPA, which is responsible for overseeing the program, sets a renewable volume obligation for refineries to meet each year. To comply, oil refineries can blend biofuel or other approved plant-derived fuel sources into their gasoline and diesel fuel.
But often that’s not enough to meet the program’s requirements. So in addition to blending gasoline with other fuels, refineries also turn to the open market to purchase credits, known as “renewable identification numbers,” to meet these standards.
When establishing the mandate, some lawmakers anticipated smaller operations would likely be hit harder than larger ones by the requirements. Small refineries, such as Sinclair Oil Corp. or HollyFrontier Corporation in Wyoming, can therefore apply for exemptions from the program. Under the Clean Air Act, parties must demonstrate that meeting the biofuel standards would cause disproportionate economic harm.
The statute considers a company processing an average of less than 70,000 barrels per day to be a small refinery.
Compared to larger refining companies, Sinclair Oil Corp. contends with resource and capital constraints, according to Suess. The company has applied for federal relief from the renewable energy standards several times — but its application for relief last year remains on the line with the recent ruling.
Since the court decision, the cost of some renewable identification numbers, or credits, has increased threefold. The steep price for compliance could cripple smaller refineries, lawmakers and industry leaders who oppose the ruling said.
What about farmers?
But critics of the renewable fuel standard waivers or exemptions say the relief already granted to smaller refineries hurts ethanol producers and farmers. Biofuel standards have helped increase demand for corn and soybeans. Approximately 40 percent of corn farmed in the U.S. goes toward making corn ethanol for fuel.
Others, like the American Petroleum Institute, have supported the 10th Circuit ruling, saying the relief caused “regulatory uncertainty” for some refineries. The group tends to represent larger oil companies, which cannot obtain small refinery exemptions.
But it’s not just corn and big oil coming out in support of the program. The Western Values Project, a watchdog organization protecting public lands, has been a critic of oil-producing states’ requests to waive the renewable fuel standard.
“This is another desperate Hail Mary by oily politicians to bail out big oil corporations, and these campaign donations prove it,” Jayson O’Neill, director of the group, said in a statement. “(President Donald) Trump’s EPA shouldn’t hand out favors to corporate special interests and campaign donors at the expense of our environment and the American farmers who are already reeling from the effects of the coronavirus pandemic and ongoing trade wars.”
The EPA declined to file an appeal after the federal court ruling in January. Meanwhile, the agency continues to deliberate how it will interpret the court ruling.
“EPA continues to deliberate and engage with stakeholders over the broad-ranging implications of COVID-19 for the implementation of the (Renewable Fuel Standard) program,” an EPA representative told Reuters last Monday.
Follow the latest on Wyoming’s energy industry @camillereports
The business news you need
With a weekly newsletter looking back at local history.