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Exclusive: Small refiners hit EPA with surge of biofuel waiver requests: sources

[January 25, 2018] By Jarrett Renshaw

NEW YORK (Reuters) - More than two dozen small U.S. refineries are seeking waivers from the nation's biofuels law, an unusually high number that reflects growing oil industry resistance to the program, according to sources familiar with the matter.

The requests, made to the U.S. Environmental Protection Agency, add pressure on the administration of President Donald Trump to help an industry that claims the U.S. Renewable Fuel Standard (RFS) costs it billions of dollars a year by requiring refiners to blend increasing volumes of biofuels like corn-based ethanol into the nation's gasoline and diesel.

Philadelphia Energy Solutions, the largest U.S. East Coast refiner, filed for bankruptcy on Monday and blamed its financial distress on the program.

While the White House and EPA chief Scott Pruitt have expressed concern for refiners and are mediating talks between representatives of the industry and the ethanol lobby, they have so far largely sided with corn-growing states with large Republican majorities.

The sources familiar with the matter said the EPA was currently reviewing 27 waiver applications from small refineries, covering multiple years. They said more refiners had applied this year than usual, emboldened by the Trump administration's anti-regulatory stance as well as recent court rulings that broadened the EPA's criteria for granting waivers.

The EPA has the authority to grant exemptions from the program to refineries with a capacity under 75,000 barrels per day if the company can demonstrate financial hardship, but the agency has been reluctant to do so in the past.

In the four years ended in 2016, the EPA granted a total of 29 small-refiner exemptions - fewer than eight a year on average, according to data provided to Reuters by the EPA in response to a Freedom of Information Act request.

A U.S. appeals court concluded last August, in a case filed by Sinclair Refining against the EPA, that the agency was being too strict in granting waivers only to companies that can prove the RFS would drive them out of business.

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The Philadelphia Energy Solutions oil refinery owned by The Carlyle Group is seen at sunset in front of the Philadelphia skyline March 24, 2014. REUTERS/David M. Parrott/File Photo

There are 53 refineries in the United States with capacity less than 75,0000 bpd, and their owners include some of the nation's largest oil companies, including Chevron Corp <CVX.N> and Andeavor (formerly Tesoro) <ANDV.N>.

Waiver requests and decisions are considered private business matters by the EPA and not typically disclosed. An official at the agency who asked not to be named said the EPA was reviewing waiver applications on a case-by-case basis but did not provide details on numbers.

An EPA spokesman declined to comment.

If all or most of the current applications were granted by the EPA, it could drive down prices for blending credits, called RINs, which must be earned or purchased by refiners to prove they are complying with the RFS program.

That is because exempted refiners could sell any credits they have on hand, instead of using them for compliance. Aggressive use of the EPA's exemption authority could also reduce the total amount of ethanol that the nation's refiners must blend, and have a more dramatic impact on RIN prices.

Since 2013, RIN prices have swung violently, from 16 cents to nearly $1.50. More recently, RIN prices have fallen to the low 60 cent range, in part because of unusual selling of credits, sparking speculation that exemptions will be, or already have been, granted, two credit brokers said.

(Reporting By Jarrett Renshaw; Editing by Richard Valdmanis and Steve Orlofsky)

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