Exclusive: Trump's EPA ignored Energy
Department calls to limit biofuel waivers
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[June 26, 2018]
By Jarrett Renshaw and Chris Prentice
NEW YORK (Reuters) - The Trump
administration's Environmental Protection Agency has consistently
ignored recommendations from the Department of Energy to reject or limit
waivers to oil refiners seeking exemptions from nation's biofuels law,
according to five sources familiar with the matter.
The U.S. Renewable Fuel Standard requires the firms to cover costs of
blending corn-based ethanol into gasoline. But the EPA, after consulting
with the energy department, can exempt small refineries in cases where
compliance presents a "disproportionate economic hardship."
The waivers can save refiners tens or even hundreds of millions of
dollars a year.
Under EPA chief Scott Pruitt, an appointee of President Donald Trump,
the agency has issued more than two dozen such exemptions in recent
months - about triple the usual number granted under past
administrations.
During that time, EPA has consistently granted full waivers in cases
where the energy department recommended only partial exemptions, and, at
least once, granted a full approval when the energy department advised
an outright rejection, according to two sources familiar with the
decisions.

That approach marks a sharp break from Obama administration's EPA, which
had often either adopted energy department recommendations or, when it
didn't, ruled against exempting oil refiners, the sources said.
The shift between the Democratic and Republican administrations shows
how political ideologies and constituencies can steer bureaucratic
interpretation of a law that never changed - with major impacts on
industry.
The waivers save refineries money by freeing them from their obligation
to blend ethanol into their gasoline or to purchase compliance credits
from those who do. The broad use of waivers lately has angered the
powerful corn lobby, which argues they threaten corn demand.
The Renewable Fuels Association, which represents U.S. ethanol makers,
last month estimated that the waivers have reduced the amount of ethanol
refiners are required to blend by 1.6 billion gallons. The law currently
requires refiners to blend 15 billion gallons of the biofuel per year.
The surge in waivers has sent the price of biofuels compliance credits
to five-year lows, saving refiners such as Valero Energy Corp and PBF
Energy hundreds of millions of dollars.
Until now, it was not known if the EPA gave the waivers on the basis of
the energy department recommendations or despite them. The EPA has
denied public records requests seeking information on the waivers, which
it considers proprietary company information.
Biofuel groups have asked the U.S. Court of Appeals for the 10th Circuit
in Washington to review legality of the waivers - arguing the EPA is
"methodically destroying the demand for renewable fuels" - and to force
the EPA to disclose them.
EPA spokeswoman Molly Block declined to comment on the pending
litigation or on whether the agency has approved waivers that the energy
department recommended rejecting.

"From the beginning of this administration, we have worked closely with
our partners at DOE on this issue," she said in a written statement.
DOE spokeswoman Shaylyn Hynes did not respond to requests for comment.
'FINANCIAL HARDSHIP'
During a recent Midwest tour, Pruitt told Nebraska farmers that the EPA
works "in alliance with the Department of Energy" to grant the waivers,
saying there was just one example of disagreement. EPA spokespeople have
repeatedly said the agency's criteria for granting waivers have not
changed.
The sources with knowledge of the two agencies' interactions disputed
the assertion that the EPA and DOE are acting as partners in these
decisions. They declined to provide a specific number of cases in which
the EPA has gone against energy department recommendations or to name
most of the companies involved, but did provide two examples of what
they said has become regular practice.
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President Donald Trump (L) listens to EPA Administrator Scott Pruitt
after announcing his decision that the United States will withdraw
from the Paris Climate Agreement, in the Rose Garden of the White
House in Washington, U.S., June 1, 2017. REUTERS/Kevin Lamarque

In one case, the EPA provided a full waiver to a refiner after the
energy department had recommended rejecting the exemption, two
sources told Reuters.
In another, the EPA granted full waivers to refineries owned by
Andeavor - a large U.S. refining company which reported $1.4 billion
in net income last year - after the energy department had
recommended a 50-percent exemption, according to two other sources
familiar with the company's approval. The waivers for Andeavor were
first reported by Reuters in April.
The company said in a May earnings statement that the waivers,
provided to its smallest refineries, saved it about $100 million in
compliance costs.
Scott LaBelle, an Andeavor spokesman, declined to comment beyond the
company's previous statements.
Obama's administration was accused of being too stingy with the
waivers. Last year, an appellate judge said Obama’s EPA had used too
narrow a definition of "financial hardship" when it denied Sinclair
Oil waivers for its Wyoming refineries for 2014 and 2015. But
appellate judges in two other similar cases upheld the EPA's denials
and its methods.
Neither the rulings nor the change in presidential administrations
changed the way energy department analysts scored applications,
according to the sources.
Energy department analysts score applications on a two-part test
that considers whether compliance would lead to disproportionate
impact or threaten a refinery's viability. Qualifying under either
leads to a partial exemption; qualifying under both leads to a full
exemption.
'WORKAROUND' TO HELP REFINERS
The EPA's relaxed standard for the waivers is the latest
illustration of the agency's leadership seeking to deliver relief to
refiners from the law, which was signed under Republican President
George W. Bush to help farmers, reduce petroleum imports and improve
air quality.

Pruitt has repeatedly recommended overhauling the law to reduce
strain on refiners and advocated for changes during months of failed
negotiations between oil and corn representatives mediated by
President Donald Trump.
Republican Senator Joni Ernst from Iowa, the top ethanol-producing
state, said Pruitt's handling of the waivers appeared to be based on
a political goal of helping the oil industry - a charge the EPA has
denied.
"This is definitely a workaround that they have figured out. That's
why we are demanding transparency," Ernst said in an interview,
referring to requests her and other lawmakers for the EPA to
disclose information on the waivers.
The current administration has attempted to lower compliance costs
for some refiners since billionaire investor and refinery-owner Carl
Icahn first raised concerns to Trump during his campaign, and then
again after Trump named Icahn as a "special advisor" on industry
regulation after his election.
Icahn resigned from his advisory post in August under pressure from
lawmakers who said his dual role as investor and advisor posed
ethical concerns. Icahn's CVR Energy was among the refining
companies that received a waiver from EPA, Reuters reported earlier
this year.
(Editing by Richard Valdmanis and Brian Thevenot)
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