Rep. Axne Calls for Investigation Into EPA's Expansion of Biofuel Waivers

August 21, 2019
Press Release
Axne calls for increased transparency in biofuel waiver process following unprecedented use of small refinery exemptions for large or unqualified refineries

COUNCIL BLUFFS, IA – Today, U.S. Rep. Cindy Axne (IA-03), a member of the House Agriculture Committee, called for a federal investigation into the Environmental Protection Agency’s (EPA) expansion of refinery exemptions from blending requirements under the Renewable Fuel Standard (RFS). In a letter sent today to Charles J. Sheehan, Acting Inspector General (IG) of the EPA, Rep. Axne requested that the IG conduct an investigation into the highly questionable decision-making and misuse of the EPA’s “small refinery exemption” (SRE) authority to benefit large or unqualified companies that may be exerting an undue amount of influence over the regulatory process.

 “I have serious concerns that the EPA continues to ignore the boundaries of its authority under the law in its administration of this waiver authority. Relying on the veil of secrecy provided by claims of confidential business information conceals the EPA’s highly questionable decision-making and misuse of its authority to benefit a small group of companies that may be exerting an undue amount of influence over the regulatory process,” wrote Congresswoman Axne.

Under the RFS, the EPA is able to grant waivers to small refineries who experience disproportionate economic hardship. The EPA recently announced an additional 31 exemptions for the 2018 RFS, bringing the total waivers issued in the last three years to 85 – a drastic expansion from the 10 that were granted between the years 2008-2016. Exemptions have been granted to some of the world’s largest and most profitable oil companies, including Andeavor, Chevron, Exxon, and Carl Ichan’s CVR.

“Through the unprecedented use of small refinery exemptions, the EPA has waived more than 4 billion gallons of requirements for renewable fuel blending at the expense of Iowa farmers and rural communities,” wrote Axne.

Rep. Axne announced that she was calling for the investigation at a bipartisan press conference at Southwest Iowa Renewable Energy. In addition to Rep. Axne, Mike Jerke, CEO and President of Southwest Iowa Renewable Energy; Tom Shipley, Republican State Senator; Jeff Jorgenson, Board Member of the Iowa Soybean Association; and Delayne D. Johnson, CEO of Quad County Corn Processors, spoke on how the these biofuel exemptions are hurting Iowa farmers and rural communities.

In May, Rep. Axne led a group of 35 Republicans and Democrats on a letter requesting the Administration's EPA to stop issuing Small Refinery Exemptions for large or unqualified refiners under the RFS program. In a letter sent to EPA Administrator Andrew Wheeler, the Members highlighted that the expansion of biofuel waivers hurts farmers who rely on demand for corn-based ethanol and other biofuels and has increased our dependence on foreign oil.

Rep. Axne, Congressman Dave Loebsack, Congresswoman Abby Finkenauer, and other members of the House Biofuels Caucus introduced bipartisan legislation that would force the Trump administration to reallocate each gallon of biofuel demand taken from America’s farmers.

In April, Rep. Axne wrote legislation to make the second generation biofuel producer tax credit permanent in order to support Iowa farmers, create jobs across the state and reduce dependence on foreign oil. This legislation will incentivize investment in the development of advanced biofuel production by renewing a $1.01 per gallon tax credit for producers which expired at the end of 2017.

The full text of the letter is available here and below.

 

August 21, 2019

 

Charles J. Sheehan

Acting Inspector General

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue, N.W.

Washington, DC 20460

 

 

Dear Acting Inspector General Sheehan:

 

I am writing to express my grave concern that the Environmental Protection Agency (EPA) is violating Congressional intent to increase blending of renewable fuels and lower greenhouse gas emissions. Through the unprecedented use of small refinery exemptions (SREs), the EPA has waived more than 4 billion gallons of requirements for renewable fuel blending at the expense of Iowa farmers and rural communities.

On August 9, 2019, the EPA issued an additional thirty-one small refinery exemptions for the 2018 Renewable Fuel Standard (RFS) compliance year, reportedly at the direction of the President of the United States[1], bringing the total number of waivers issued in the last three years to 85 – a drastic expansion. These waivers convey significant financial gain, valued at hundreds of millions of dollars, to corporations whose identity is concealed from the public.

These waivers cut demand for biofuels, hurt farmers, raise the price of gas, and increase greenhouse gas emissions. 2018 was the first year ever that ethanol consumption fell, even with historically low prices. Biodiesel losses exceed $2 billion per year and are estimated at $7.7 billion over 3 years. All of this comes at a time when farm income is down by 49 percent since the end of 2018, according to the Bureau of Economic Analysis.[2] These small refinery waivers are enriching oil refiners on the backs of farmers and the rural economy.  

I have serious concerns that the EPA continues to ignore the boundaries of its authority under the law in its administration of this waiver authority. Relying on the veil of secrecy provided by claims of confidential business information conceals the EPA’s highly questionable decision-making and misuse of its authority to benefit a small group of companies that may be exerting an undue amount of influence over the regulatory process.

I request an immediate investigation into the small refinery waivers granted in 2016, 2017 and 2018 to include which refiners received waivers in each year, the financial value of the waivers received by each company, any contact by refineries seeking waivers with the EPA or the White House, the consistency of the EPA’s decisions with statutory requirements and regulations, the EPA’s decision-making process, and the presence of conflict of interest for any of the EPA staff or Administration officials involved in the SRE process.

I am also asking your office to determine what reasoning the EPA had for each waiver from 2016 to 2018, including if there was any statutory or legal rule to support it. As you know, from 2008 until 2016, less than 10 waivers were granted compared to the 85 waivers granted over the last three years. I request that OIG work to determine if there were refineries who were denied a waiver within that 8-year period but received a waiver under this Administration.

In conducting your investigation, I request that you focus at a minimum on the following areas of concern:

1)     The EPA has stated that they were required to shift its approach on small refinery waivers in 2017 after the United States Court of Appeals, Tenth Circuit decision that was issued in Sinclair Wyoming Ref. Co vs. the U.S. Envtl. Prot. Agency.  Documents in this case revealed that the EPA had already changed its policy before May 4, 2017. These court released documents show that the EPA wrote to a refining company that “we [the EPA] are changing our approach” to the waiver program by allowing exemptions to refineries even if their operations “are not significantly impaired” by compliance”. Carl Icahn, a majority shareholder of CVR Energy, served as a special advisor to the President through August 2017. It was reported in April 2018 that CVR Energy received a small refinery exemption from the EPA.[3]

2)     Under the RFS, the EPA is able to grant small refinery hardship waivers to refineries producing less than 75,000 barrels per day who are experiencing disproportionate economic hardship. In determining economic hardship, the EPA is required to consult with the Department of Energy (DOE) to evaluate a refiner’s hardship before granting a waiver. The EPA ignored advice from the DOE, which could not identify any financial justification for many of these exemptions. In July 2019, Secretary of Energy Rick Perry confirmed[4] that the EPA has issued at least one small refinery waiver against the DOE’s recommendations, and reports[5] indicate that the EPA granted full waivers rather than the partial waivers recommended by DOE.

3)     On April 12, 2019, the EPA released a Federal Register notice[6] with a proposed rule that would release the names of the refineries that receive SREs to the public. On April 30, it was reported[7] that the White House intervened at the request of refiners interested in protecting their identities, and the EPA stopped the rule. The names of refiners receiving waivers have still not been released by the EPA, though media reports indicate that profitable companies like Chevron, ExxonMobil, Holly Frontier, and others received waivers.

4)     The EPA has only issued SREs retroactively, after the RFS compliance year has ended. Issuing waivers prospectively would allow waived gallons to be redistributed through the rest of the program, consistent with the intent of the law. Interagency review of the 2019 Renewable Volume Obligation (RVO) confirmed that EPA is able to issue SREs prospectively in a reasonable and straightforward manner. When asked by Congress in April 2019 if the EPA could shift to a prospective SRE approach, EPA Administrator Wheeler acknowledged that the answer is yes.[8]

5)     The EPA’s regulations[9] require that the RVO, which sets blending targets for each year, incorporate the number of gallons expected to be waived under the small refinery exemption authority. Yet, the EPA has never included anything other than a zero in this formula when it establishes annual RVO.

The EPA’s misuse of the small refinery hardship waiver authority must end. Rural economies and farmers cannot withstand more of the same. I look forward to the results of your investigation and request a copy of your investigation be sent to me upon completion.

Sincerely,

 

Cindy Axne

Member of Congress