The Environmental Protection Agency (EPA) overturned 31 small refinery exemptions SREs that were granted by the Trump Administration in August 2019. The effect of those 31 exemptions was to reduce the 2018 Renewable Fuel Standard (RFS) requirements by 1.43 billion gallons while increasing the supply of Renewable Identification Numbers (RINs), causing the prices for credits to drop significantly.
EPA's decision was grounded in a January 2020 court case that required the EPA to assess whether the economic harm claimed by a small refinery is caused directly by RFS compliance, and whether the small refinery lacks the ability to pass through its RFS compliance costs to wholesale customers.
Drawing in large measure on the arguments that NATSO has long articulated in various RFS policy debates, EPA found that the harm claimed by the refiners was not primarily caused by RFS compliance obligations and that all of the refiners pass along their compliance costs through higher prices for refined products. Thus, EPA found no justification for granting any of the exemptions.
EPA is not requiring the refineries in question to make up for the lost 1.43 billion gallons by acquiring and retiring additional RINs. Leading up to EPA's decision, RIN prices ran a bit higher on rumors that EPA may in fact require refiners to buy RINs to make up for the inappropriately granted exemptions. This turned out not to be true (and prices accordingly retreated). Instead, EPA is allowing these refiners to use a so-called “alternative compliance demonstration” that simply obligates them to resubmit 2018 compliance reports and show a RIN shortfall, which EPA will forgive.
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