GAO says EPA was ‘wrong’ in its ruling against small refineries

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A Government Accountability Office investigation requested in 2020 by Sens. Jim Inhofe and James Lankford and others led to a damning report this week in which the GAO concluded the EPA had no basis to deny small refineries relief from ethanol mandates.

The request was made as the Wynnewood Refinery and others across the U.S. challenged a Denver federal court of appeals ruling which eventually landed before the U.S Supreme Court.  The refineries had made hardship relief petitions under the RFS aspect of the required ethanol production.

Earlier this year, the Environmental Protection Agency (EPA) denied 61 petitions from small refineries for relief under the RFS for the 2019, 2020, and 2021 compliance years. EPA rejected these petitions, claiming that the RFS compliance costs (RINs) for small refineries are equal to the RFS compliance costs for larger refineries. The GAO report shows that EPA had no basis to claim that small and large refineries bear the same costs when complying with the RFS.

The GAO report prompted a quick reaction from Sen. John Barrasso (R-WY) who is the ranking member of the Senate Energy and Natural Resources Committee. Sen. Lankford is also member of the committee.

“EPA’s ethanol mandate has been crushing America’s small refineries for years. That’s especially true in my home state of Wyoming, where small refineries play a critical role in supplying families and businesses the energy they need,” said Barrasso.

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“Today’s report shows that the Biden administration has arbitrarily denied small refineries relief from this mandate. It is high time that the administration reverse course, grant relief to small refineries, and clean up its gross mismanagement of this program. Senator Capito and I will fight to ensure this happens,” added the Wyoming senator.

Another ranking member, Sen. Shelley Moore Capito (R-WV) joined in the response.

“Today’s report provides more evidence that the Biden administration’s war on American energy continues to stifle growth and inflict harm on workers and employers across the country,” said Capito.

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“Small refineries, including those in West Virginia, often can’t comply with burdensome RFS regulations, yet their exemption requests have been met with delayed decisions and blanket denials based on flawed metrics. It’s encouraging to see the GAO report recommend the EPA reassess its procedures, improve its decision-making, and, importantly, stop penalizing small refineries. Along with Senator Barrasso, I look forward to leading efforts to ensure these recommendations are implemented properly and America’s small refineries are protected.”

In the report, GAO recommends, among other things, that EPA reassess its conclusion that small refineries pass their RFS compliance costs onto purchasers.

GAO states: “EPA’s conclusion that RIN costs are being passed through to purchasers relies on a potentially faulty assumption that all parties pay and receive one price for RINs, something that our analysis brings into question. Without reassessing its conclusion on RIN pass-through, including by fully examining and documenting RIN market performance and RIN pass-through in all relevant fuel markets, EPA will continue to make decisions on exemption petitions without quality information and, therefore, risks inappropriately denying valid exemption petitions.”

Source: Barrasso press release