The Environmental Protection Agency held a virtual hearing Wednesday to get feedback on its recent supplemental proposed rule regarding small refinery exemptions and the reallocation of affected volumes under the Renewable Fuel Standard and the biofuels industry was unanimous in its call for 100 percent reallocation of all exempted renewable fuel blending volumes.

Just two weeks ago, EPA co-proposed “additional volumes representing complete (100 percent) reallocation and 50 percent reallocation for SREs granted in full or in part for 2023 and 2024, as well as those projected to be granted for 2025, as part of the ongoing RFS rulemaking.”

In testimony to the EPA, the Renewable Fuels Association strongly disagreed with EPA’s decision to grant 140 small refinery exemptions (SREs) based on a new approach to determining “disproportionate economic hardship (DEH).”

“If EPA is going to resume granting SREs under its flawed notion of DEH, it must reallocate 100 percent of those exempted volumes,” RFA President and CEO Geoff Cooper said. “Without reallocating 100 percent of the exempted volumes, the volumes originally proposed cannot be achieved and any final volumes will be illusory.”

Cooper also objected to EPA’s reliance on the Department of Energy’s outdated small refinery study and “scoring matrix” in the SRE process. “EPA has a duty to independently evaluate petitions and assess whether a small refiner has experienced DEH,” he said. “EPA should not be deferring to the DOE’s long-outdated 2011 study and scoring matrix. In 2022, the Government Accountability Office faulted the DOE study as ‘critically flawed,’ and EPA itself asserted that the study fails to provide useful information.”

American Coalition for Ethanol (ACE) CEO Brian Jennings emphasized in his testimony that without full reallocation, obligated parties could use the oversupply of low-priced renewable identification numbers (RINs) to satisfy the 2026 and 2027 obligations without buying or blending physical gallons of ethanol and other renewable fuels.

“This type of demand destruction undermines the integrity of the RFS,” Jennings said, adding that demand destruction occurred in 2018 and 2019 when SREs and low RIN prices discouraged refiners from blending ethanol above E10 and artificially restrained sales of E15, E30, and E85.

Jennings commended EPA for working to reallocate volumes that should have been legally blended and stated ACE’s view that the Agency is bound by statute to finalize full and complete reallocation for 2026 and 2027. “In other words, the Agency must reallocate 100% of the 2023 through 2025 exempted RVOs – an estimated 2.18 billion gallons – to the final Set 2 rule,” Jennings said.