GAO Found EPA’s Denial Of Small Refiners’ Waivers To Be Arbitrary

The Government Accountability Office (GAO) found that Environmental Protection Agency’s (EPA) decision to deny small oil refiners’ exemptions from the Renewable Fuel Standard (RFS) was arbitrary.

In June, EPA denied 69 small refinery exemption petitions from the RFS mandate. The denial of the wavers forces small refiners to blend their products with biofuels or purchase renewable fuel credits that are costly, increasing energy costs for U.S. consumers. [emphasis, links added]

The Government Accountability Office’s report determined that EPA’s decision was based on potentially invalid assumptions and applied arbitrarily.

While EPA believes that small refineries do not experience “disproportionate economic hardship” due to the RFS, assuming that all parties pay and receive one price for the tradeable credits used to demonstrate compliance with the RFS, GAO found that the EPA’s data show that this assumption is incorrect.

EPA’s statistics show that from 2013 to 2021, small refiners were paying more to comply with RFS when compared to larger companies as they were spending an increased amount of money to buy renewable fuel credits that the EPA requires them to obtain.

GAO also stated that the EPA had also not attempted to work out whether its assumptions about RFS compliance costs were correct. This is especially noteworthy because of the large number of small refiners who have closed recently, reducing U.S. refining capacity.

GAO also found that “EPA has routinely missed the 90-day statutory deadline for issuing exemption decisions and does not have procedures to ensure that it meets these deadlines.

“In five of the nine years GAO analyzed, EPA took more than 200 days to issue a decision for more than half of the petitions submitted.

“These late decisions diminish the benefit of exemptions, create market uncertainty, discourage investment, and undermine the design of the RFS more broadly.”

Small refineries produce 17 billion gallons of gasoline, diesel, and other fuels each year by processing oil, and generally lack the capability to blend biofuels, forcing them to buy credits.

With the United States already having lost one million barrels a day of refinery processing capacity due to reduced demand from COVID lockdowns, onerous regulation, and large subsidies for converting to biofuel production, placing more regulatory demands on U.S. small refiners is paramount to adding massive hardships to their operations. …snip…

GAO Recommendations

GAO made seven recommendations including that EPA reassess its conclusion that all small refineries recover their RFS compliance costs in the price of the gasoline and diesel they sell, DOE and EPA develop documented policies and procedures for making small refinery exemption decisions, and EPA develops procedures to ensure that it meets deadlines.

Conclusion

The United States has lost one million barrels per day of refining capacity and is dependent on the remaining refinery capacity to supply the gasoline, diesel, and heating oil demand of U.S. consumers.

In this time of higher energy prices, denying small refiners waivers that they have received in the past is hurting not only these refiners but Americans, who have to pay the higher cost of petroleum products due to the mandatory credit purchases.

GAO’s findings suggest that EPA is wielding its regulatory power in a completely arbitrary manner and calls into question not only EPA’s administration of the RFS program but its decision-making processes agency-wide.

Put simply, EPA appears to be handing down decisions that have massive implications for the nation’s energy supply and prices based on unfounded assumptions including those relating to environmental effects, which calls into question whether they are working for the American people that fund the agency.

Read full post at Institute for Energy Research