The U.S. Environmental Protection Agency has finalized biofuel blending volumes at 20.94 billion gallons in 2023, 21.54 billion gallons in 2024 and 22.33 billion gallons in 2025. That compares with the initial proposal announced in December of 20.82 billion in 2023, 21.87 billion in 2024, and 22.68 billion in 2025.

But the finalized volumes include just 15 billion gallons of conventional biofuels like corn-based ethanol in all three years, plus a 250 million-gallon supplemental amount for 2023. That represents a decline from the initial proposal, which included 15 billion gallons of conventional biofuels in 2023 and 15.25 billion gallons in both 2024 and 2025.

The plan also has modest increases to biomass-based diesel volumes compared with the proposal, despite a major lobbying push from groups that produce biodiesel, renewable diesel and sustainable aviation fuel to boost volumes higher.

The announcement drew strong rebukes from ethanol and biodiesel advocates.

“The industry responded to signals from the Biden administration and Congress aiming to rapidly decarbonize U.S. fuel markets, particularly aviation, marine, and heavy-duty transport, and make clean fuels available to more consumers,” said Kurt Kovarik, vice-president of federal affairs with Clean Fuels, a biodiesel group. “The volumes EPA finalized today are not high enough to support those goals.”

Iowa Secretary of Agriculture Mike Naig said the finalized mandates fail to fully support benefits that biofuels can provide to farmers and consumers.

The Renewable Fuels Association called the reductions in ethanol mandates “inexplicable” and “unwarranted.”

The final rule marks a new phase in the U.S. Renewable Fuel Standard program, which is more than a decade old and frequently pits the powerful oil and biofuel industries against each other. Under the RFS, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do.

Ethanol producers and corn farmers like the mandates because they provide a market for their products, while the oil industry finds the requirements too pricey.

While Congress set out specific goals for the program through 2022, the law expands the EPA’s authority for 2023 and beyond to change the way the RFS is administered.

The EPA said the finalized rule would reduce reliance on foreign sources of oil by between 130,000 to 140,000 barrels per day over 2023-2025.

U.S. renewable fuel credit prices dropped eight per cent following the news, trading at $1.34 each from as much as $1.46 each the day prior, traders said (all figures US$). Biomass-based credits dropped to $1.38 each from $1.48 each the previous day.

The futures market fell sharply Wednesday in reaction to the lower-than-expected biofuel mandates, with most Chicago Board of Trade soyoil contracts locked down their daily four cent/lb. trading limit. The soyoil market had rallied to its highest in nearly 3-1/2 months last week.

Other provisions

The EPA also set out a series of regulatory changes in the final rule, in an effort to strengthen the agency’s implementation of the RFS program.

The agency will modify provisions for biogas-derived renewable fuels to ensure that biogas is produced from renewable biomass and used as a transportation fuel, as well as to allow for the use of biogas as a biointermediate.

Absent from the rule, however, was a much-anticipated pathway for electric vehicle manufacturers to generate lucrative credits under the RFS, though it was included in the original proposal in December. Reuters previously reported that the administration was planning to abandon the scheme over worries about lawsuits.

The plan would have given EV automakers, such as Tesla, credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or landfills.

The EPA said on Wednesday it will continue to assess stakeholder comments it received on the EV scheme, and it will work on potential paths forward for it.

The American Fuel and Petrochemical Manufacturers said it was pleased to see the EPA abandon the EV program, saying the RFS is a liquid fuels program that should not include electric vehicles.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw; additional reporting by Mark Weinraub.

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The move could provide immediate relief to oil refiners that have to comply with the blending requirements. It also is likely to drag the Biden administration further into a clash between oil refiners and the biofuels industry over the requirements.

Under the U.S. Renewable Fuel Standard program, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradeable credits, known as RINs, from those that do.

Farmers and biofuel producers argue that reducing mandates harms demand for their products, though refiners reject that claim and say the costs of the program puts blue-collar refinery jobs at risk.

The EPA confirmed Thursday it had sent the biofuel blending proposal to the White House’s Office of Management and Budget (OMB).

“The proposal aims to get the (Renewable Fuel Standard) program back on track while addressing challenges stemming from decisions made under the prior administration,” an EPA spokesperson said in a statement.

The agency was also expected to recommend to the White House reducing mandates for 2021, while boosting mandates for 2022 above the previous two years, Reuters reported last week, citing sources.

The agency did not provide details on the proposal or confirm Reuters’ reporting.

Lowering mandates retroactively for 2020 could benefit in particular merchant refiners such as PBF Energy and Delta Air Lines’ Monroe Energy, which slowed or halted purchases of renewable fuel credits this year as they lobbied the Biden administration for regulatory relief.

Those refiners and others had amassed earlier this year a more than US$1 billion shortfall in the credits they need to comply with the mandates, an apparent bet that the Biden administration would let them off the hook or that the credit prices would fall.

The deadline for refiners to prove compliance with the 2020 requirements was extended in April to Jan. 31, 2022. Reducing the mandates would help refiners who have outstanding obligations for that compliance year.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw.

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The outbreak has touched off a massive global decline in demand for motor fuels and forced companies to reduce staffing levels to slow infection rates.

Typically U.S. fuel dealers are required to stop selling winter-grade gasoline on May 1 as summer anti-smog standards come into play. But marketers will now be allowed to sell the fuel until at least May 20, and possibly beyond.

“The reason we have to do this is because people are driving fewer miles and the winter blends are stockpiled in all the tanks,” EPA chief Andrew Wheeler told Reuters in an interview. “There’s no place to put the summer blend.”

The EPA, he said, will also extend the deadline for small oil refineries to prove their compliance with the Renewable Fuel Standard (RFS), the law that requires refineries to blend billions of gallons of biofuels like ethanol into their fuel or buy credits from those that do.

Refiners are typically required to prove their compliance by March 31, but facilities with less than 75,000 barrels of daily processing capacity will be given extensions.

Wheeler said the decision was related to ongoing litigation over the agency’s Small Refinery Exemption Program, which can free some small plants from obligations under the RFS. A federal court ruled in January that the EPA had been too free with the waivers, and while the agency did not challenge the ruling, some refineries have.

Wheeler said it would be unfair to force small refineries to comply with the RFS before that case is over.

“We’re extending the compliance assistance to all the smaller refineries,” he said.

In the meantime, the agency will not revisit or rescind any of the exemptions it has given to small refineries in the past.

“Investigating and initiating enforcement actions against small refineries that were previously subject to an exemption is a low priority for the agency,” the EPA said in a press release outlining the moves.

The American Fuel and Petrochemical Manufacturers cheered the EPA’s decision to allow for sales of winter-grade gasoline past the cutoff.

“Refineries are already transitioning to producing summer grade gasoline, but with the unprecedented decline in gasoline consumption, there is simply not enough consumer demand to draw down existing inventory by the summer RVP deadline,” said Derrick Morgan, AFPM’s senior vice-president of federal and regulatory affairs.

— Stephanie Kelly reports on the U.S. energy sector for Reuters from New York.

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The decision could undermine President Donald Trump’s support among farmers, an important constituency in the November 2020 election. Some U.S. farmers have already been hurt by the United States’ prolonged trade war with China.

“The administration is moving forward to finalize the 2020 RVO (renewable volume obligations) in line with the agreement that the President made this fall,” White House spokesman Judd Deere said.

Deere confirmed he was talking about a proposal unveiled by the U.S. Environmental Protection Agency in October, which was intended to compensate the biofuel industry for the administration’s expanded use of refinery waivers, but which the industry has largely panned as insufficient.

Under the U.S. Renewable Fuel Standard, oil refiners are required to blend some 15 billion gallons of corn-based ethanol into their gasoline every year, but small facilities can be exempted if compliance would hurt them financially.

The Trump administration’s EPA has roughly quadrupled the number of the so-called Small Refinery Exemptions, something corn farmers and biofuel producers say has deeply undercut demand for ethanol.

The oil industry says the waivers are needed to preserve blue-collar refining jobs and disagrees with the claim that the waivers destroy demand.

The EPA plan, devised after weeks of negotiations with both the oil and biofuel industries to resolve the issue, would raise the biofuels volumes that some refineries must blend in 2020 based on U.S. Energy Department recommendations for volumes that should be exempted.

Biofuel interests wanted the regulation to be based on volumes that have actually been waived, since the EPA has routinely waived more blending volumes than the DOE has recommended.

On Tuesday, more than 1,700 farmers and biofuel advocates sent a letter to Trump, criticizing EPA’s proposal and asking him to directly intervene in the debate.

By then, the decision had already been reached. White House economic adviser Larry Kudlow told the Iowa Corn Growers Association during a meeting in Washington on Tuesday that the administration was sticking with the EPA’s proposal, two sources familiar with the matter said.

The plan is expected to be finalized by Friday, one source said. The final rule for 2020 blending requirements is already past its end-November deadline.

“EPA has reviewed all comments received during the comment period from the public and we plan to finalize the rule this winter,” EPA spokesman Michael Abboud said.

Support across key Midwestern states helped propel Trump to the presidency in 2016, a trend he is hoping to replicate in next year’s election.

But some farmers have threatened to withdraw support because of his administration’s handling of biofuel policy.

The biofuels news, however, comes amid progress in the United States’ trade war with China, a dispute that has been especially damaging to U.S. farmers.

It also comes as Congress readies a vote on the nation’s new trade pact with Mexico and Canada, an agreement also expected to boost farmers’ fortunes.

Renewable fuel (D6) credits for 2019 traded at 12.75 U.S. cents each on Wednesday, down from 13.25 in the previous session, traders said.

— Reporting for Reuters by Stephanie Kelly in New York and Jarrett Renshaw in Philadelphia.

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The plan would require an unspecified increase in the amount of ethanol that oil refiners must add to their fuel in 2020, and would also aim to remove further barriers to the sale of higher ethanol blends of gasoline like E15, the Environmental Protection Agency (EPA) said in a statement.

“President Trump’s leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our nation’s farmers and providing greater energy security,” EPA administrator Andrew Wheeler said.

The deal is widely seen as an attempt by President Donald Trump to mend fences with the powerful corn lobby, which was outraged by the EPA’s decision in August to exempt 31 oil refineries from their obligations under the RFS. This freed the refineries from the requirement to blend biofuels or buy credits from those who do.

Biofuel companies, farmers and Midwest lawmakers complained that the waivers undercut demand for corn, which is already slumping due to the U.S. trade war with China. Oil refiners say the waivers protect blue-collar jobs and have no real impact on ethanol use.

Senators from Iowa, the nation’s biggest ethanol producing state, welcomed the move.

“The President heard that message and has acted on it” Republican Senator Joni Ernst said in a statement. “Our message was clear: uphold the RFS —15 billion means 15 billion,” Ernst, who was instrumental in putting together the deal, said.

The rules, which will be finalized after a period of public comment, would “ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020,” the EPA said, without giving an exact number. Any changes to blending volume mandates for 2020 under the U.S. biofuel law, the Renewable Fuel Standard (RFS), must be finalized by Nov. 30.

Before Friday’s proposal, the EPA had called for the refining industry to add 20.04 billion gallons of biofuels, including 15 billion gallons of ethanol, into their fuel in 2020. The Trump administration had also already provided a boost to E15 earlier this year, by lifting an Obama-era ban on its sale during summer months.

While the move was largely welcome by biofuel groups, some industry players said they were concerned that the EPA declined to provide an exact figure for the 2020 blending quotas. A brief EPA call with reporters offered little insight, with an agency official saying only that the mandates will be based on a calculation of waived volumes over the previous three years.

Tim Gannon, a farmer from Iowa and a former official with the U.S. Department of Agriculture, was skeptical.

“It is very much in question whether this gets done by 2020,” he said. “Every time the President makes a promise on the RFS, his EPA administrator manages to roll it back for Big Oil… The question now is will this time be any different?”

Oil industry upset

Oil companies have consistently resisted measures to expand the biofuels market, which they view as a competitor. Refiners have vehemently complained that the requirements under the RFS cost them a fortune. Their weeks-long efforts to include oil-friendly measures in the final deal announced Friday failed.

“We are deeply concerned about the administration’s decision to, once again, play politics with our fuel system by increasing an already onerous biofuel mandate, placing greater strain on the U.S. manufacturers he promised to protect and threatening higher costs for consumers,” the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers industry groups said in a joint statement.

Trump waded into the issue early in his presidency after representatives of the refining industry complained about the high costs of compliance, seeking to tap into his administration’s support for rolling back regulation.

Trump’s EPA had since vastly expanded its use of the provision allowing small refining facilities to seek waivers if they can prove compliance would cause them disproportionate financial hardship.

Reuters has reported that small facilities owned by oil majors such as Exxon Mobil and Chevron Corp. have been among the facilities securing recent exemptions.

U.S. biofuel credits traded at 27 cents each on Friday following the announcement, up from 23.50 cents each on Thursday, traders said. However, the credits came off highs as the market sought clarity on the plan’s details.

— Reporting for Reuters by Humeyra Pamuk and Stephanie Kelly; writing by Richard Valdmanis.

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Clashes between farmers and the oil industry over biofuel policy have posed a challenge for Trump, who is counting on the support of both constituencies in next year’s presidential election.

U.S. farmers and ethanol producers have ramped up pressure on Trump over the past few weeks to quickly take steps to boost ethanol demand. The oil industry has struck back, saying such moves would increase costs for refiners and could cost manufacturing jobs.

“The Farmers are going to be so happy when they see what we are doing for Ethanol, not even including the E-15, year around, which is already done,” Trump said on Twitter. “It will be a giant package, get ready! At the same time I was able to save the small refineries from certain closing. Great for all!”

Trump did not offer details on what the “giant package” would contain. The E15 mentioned by Trump is a higher-ethanol blend of gasoline.

The U.S. Renewable Fuel Standard requires refiners to blend biofuels like ethanol into their fuel, but allows the U.S. Environmental Protection Agency to grant waivers to financially troubled small facilities.

The EPA announced this month a decision to grant 31 such waivers to refineries, a level the corn lobby called excessive, saying it would undermine biofuel demand.

Corn growers and ethanol producers met this week in Nebraska, with both groups voicing dissatisfaction with the Trump administration, in the first major gathering of industry leaders since the waiver announcement. They urged a policy proposal that would redistribute waived volumes from the exemptions going forward.

If implemented by the administration, the move would help reinvigorate wavering support from some in the sector for Trump, they said.

“What the association wants going forward is to put teeth back into the RFS,” said Kathy Bergren, director of public policy and renewable fuels for the National Corn Growers Association.

Kerry Knuth, chief executive of Knuth Farms in Mead, Nebraska, said he has at times been frustrated by the president and his administration’s actions. Knuth supported Trump in the 2016 election.

“There’s nothing we can do is the worst thing,” said Knuth, whose farm grows corn, soybeans and wheat. “Nobody even cares about us out here. It’s all about big industry.”

Trump last week directed Agriculture Secretary Sonny Perdue, EPA chief Andrew Wheeler and White House advisers to come up with a solution that would boost biofuel demand in the wake of the EPA waiver decision. Among the proposals was to ramp up biofuel blending quotas slightly, but there has been disagreement over when to apply the increase, sources said.

Perdue said on Wednesday he also proposed strengthening U.S. infrastructure to allow more widespread use of E15. The Trump administration in June lifted a summertime ban on E15 use that had been imposed by the administration of Democratic former President Barack Obama to combat smog.

‘Misguided’

The oil industry, which dislikes the biofuel mandates because they cut into its market share, has said it would oppose any efforts to further bolster ethanol.

On Thursday, Chet Thompson, CEO of American Fuel and Petrochemical Manufacturers, the largest U.S. oil refining association, said any reallocation and raising of biofuel blending quotas would be “bad policy and unlawful.”

Thompson warned in a conference call that this would “raise the cost of compliance for refiners and raise the cost of fuel for consumers.” He dismissed farmers’ argument that waivers hurt biofuel demand, citing data from the U.S. Energy Information Administration showing ethanol consumption for the first five months of 2019 at its highest since at least 2010. The mandate was put in place in 2005.

“We hope to be able to convince the president to change tack … He is being misinformed, he is being misguided by some of his closest advisers,” he said, adding that if persuasion fails, the industry will not refrain from court action.

On Wednesday, the chief executives of three major refiners — Valero Energy, Marathon Oil and Flint Hills Resources — wrote a letter to Trump, saying waivers did not cause a reduction in ethanol demand and they were also not the reason the biofuels industry was in dire straits.

“We urge you to prevent other changes to the RFS that would threaten the viability of our Nation’s refineries,” they said.

— Reporting for Reuters by David Alexander and Humeyra Pamuk in Washington and Stephanie Kelly in South Sioux City, Nebraska; writing by Richard Valdmanis.

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The powerful senator, who represents the largest ethanol-producing state in the country, told Iowa Public Television that low biofuel credit prices negated refiners’ complaints that they are suffering financial hardship and deserve waivers from complying with laws to encourage more biofuel use.

“They screwed us…when they issued 31 waivers,” Grassley told the broadcaster. “Compared to less than 10 waivers during all the Obama years…What’s really bad isn’t a waiver, it’s that it’s been granted to people who aren’t in hardship,” he said.

He added that he would take up the issue with President Donald Trump.

Reuters earlier reported that it was Trump who gave the green light to EPA Administrator Andrew Wheeler to go ahead with the waiver decisions, a move that infuriated corn growers while pleasing the refining industry.

Sources told Reuters that Trump wanted the issue off his desk and gave Wheeler the go-ahead to announce the 31 exemptions out of 40 applications.

“The president has heard from all sides and in the end he has had enough of it,” one source familiar with knowledge of the matter said.

On Friday, EPA’s website showed two more petitions have been submitted, bringing the total number of applications to 42. EPA had approved 31 of them while denying six.

U.S. corn and oil industries are at loggerheads over EPA’s implementation of the Renewable Fuel Standard, a more than a decade-old federal policy that requires refineries to blend corn-based ethanol into their gasoline or buy credits from those that do.

But small facilities can secure exemptions from the program if they can prove to the EPA that complying would cause them financial hardship.

Since Trump took office, the EPA has more than quadrupled the number of waivers it has granted to refineries, including some operated by giants Exxon Mobil and Chevron Corp., saving the oil industry hundreds of millions of dollars, but enraging farmers who say the exemptions threaten demand for one of their staple products.

Refiners dismiss the argument, saying ethanol demand has not been affected.

Iowa is a swing state that Trump carried in the 2016 presidential election and is potentially crucial for his re-election efforts next year. Farmers in the state have also chafed under Trump’s trade war with China that has sapped demand for agriculture products.

Trump had ordered the revamp of the waiver program in June, after hearing from angry farmers during a trip to Iowa but nearly two months of inter-agency negotiations failed to change the outcome in corn growers’ favour.

— Humeyra Pamuk is a Reuters correspondent covering U.S. energy policy from Washington, D.C.

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The request, made by Perkins Coie in a letter to the EPA dated Monday, adds to mounting pressure from representatives of the refining industry for the Trump administration to box the USDA out of the controversial waiver program.

The letter follows Agriculture Secretary Sonny Perdue publicly expressing opposition to the way the program has been run in recent years.

The program can exempt small refiners in financial turmoil from their responsibility to blend ethanol into gasoline under the Renewable Fuel Standard. Waivers can save them tens of millions of dollars but are broadly opposed by the corn industry, which argues they undercut biofuel demand.

Since President Donald Trump took office, the EPA has roughly tripled the number of waivers it has granted to small refiners, drawing anger from the corn lobby and putting Trump in the middle of a battle between two powerful constituencies important to his re-election campaign.

In the letter to EPA administrator Andrew Wheeler, Perkins Coie said the applications contained confidential business information (CBI) that should not be shared with USDA.

“The USDA seeks the small refineries’ CBI in order to assert influence over EPA’s final decisions and thereby reduce the number of small refinery petitions granted by EPA. This interference is improper as a matter of law,” it said.

The letter added that refiners feared USDA would share the confidential information in the applications with players in the agriculture community, which could undermine the refineries’ ability to compete.

“We would view any release of CBI to USDA as an indication that USDA was given improper influence over the decision-making process for small refinery hardship relief,” the letter said.

Last week, Republican senators representing oil states wrote to Trump asking him to keep Perdue away from any decision-making process over the petitions. Louisiana Senator John Kennedy also wrote to Perdue saying he will block confirmation of agency nominations until Perdue “stops interfering.”

Perdue has often sided publicly with farmers on the issue of biofuel waivers and told farmers at an event in Iowa recently that he had spoken to Trump about it and was helping to devise a fix.

Trump has also ordered a review of the small refinery waiver program after hearing criticism from farmers during a recent tour of farm country.

— Reporting for Reuters by Humeyra Pamuk in Washington, D.C.

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The proposal to broaden sales of the so-called E15 rule marks the latest flashpoint in an ongoing battle between the corn and oil industries — two crucial constituencies for President Donald Trump — over U.S. biofuels policy.

Corn farmers support any move by Washington that would expand their sales into the multibillion-gallon biofuel market, but oil companies dislike the competition and refiners say adding ethanol to their fuel costs them a fortune.

“Consistent with President Trump’s direction, EPA is working to propose and finalize these changes by the summer driving season,” said EPA Administrator Andrew Wheeler in a press release. “We will be holding a public hearing at the end of this month to gather important feedback.”

E15 gasoline contains 15 per cent ethanol, versus the 10 per cent in most U.S. gasoline.

A summertime ban on E15 had been imposed years ago over concerns that it contributes to smog in hot weather, though recent studies have shown its impact on air quality may not be significantly different from that of E10.

The biofuel industry welcomed the proposal.

“This is one big step forward, a key milestone that we all have circled on the calendar. There is still a long way to go and not a lot of time to get there,” Geoff Cooper, head of the Renewable Fuels Association, said in a phone interview.

The American Petroleum Institute, the largest oil trade group, called on the administration to scrap what it called an “anti-consumer policy,” noting for example that some U.S vehicles could lose their warranties if they use E15.

It called the proposal “contrary to the law.”

The rule also includes measures to limit speculation in the multibillion-dollar biofuel credit market, a concession to merchant refiners such as Valero Energy and PBF Energy, which oppose higher ethanol use and have repeatedly complained about the costs of complying with U.S. biofuels policy.

Under the U.S. Renewable Fuels Standard (RFS), oil refiners are required to blend increasing volumes of biofuels like ethanol into their diesel and gasoline each year, or purchase the credits, called RINs, from those that do.

The agency plans to hold a public hearing on the proposed rule on March 29.

Unintended consequences

While some refiners like the proposed reforms, they face stiff opposition from oil majors such as Exxon Mobil and Chevron. These companies generate more credits than needed for compliance, allowing them to profit by selling extra credits when prices rise.

Reuters last week reported the details of the proposal aimed at limiting parties from hoarding credits to sell at higher prices.

The measures would prohibit parties such as banks not involved in the fuel supply chain from buying ethanol-based RINs, known as D6s, the most widely traded credit, according to the published rule proposal.

The rule would also shift the program from annual to quarterly compliance, forcing parties to turn credits in to the EPA instead of holding on to them.

Companies with large stockpiles of credits above their compliance requirements would be forced to notify the EPA in certain situations, and their names would be published on the agency’s website, according to the proposal.

The EPA is also seeking to limit the duration a non-obligated party can hold RINs, and increase the compliance frequency of the program.

“It is now incumbent for the Administration to finalize a rule with the right market reforms that limit speculation and manipulation without creating any unintended consequences for RFS obligated parties,” Fueling American Jobs Coalition, a pro-merchant refinery group, said in a statement.

Oil majors are expected to align themselves with truck stop operators and other fuel retailers which are routine sellers of the credits and oppose the proposed limits.

— Reporting for Reuters by Humeyra Pamuk in Washington, D.C. and Jarrett Renshaw in Trenton, N.J.

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The new documents, part of a lawsuit that began last year, could provide the most complete explanation to date of how the Environmental Protection Agency vastly expanded the number of small refinery hardship biofuel waivers under former administrator Scott Pruitt, including by granting exemptions to oil majors Exxon Mobil and Chevron.

The expansion of the waiver program saved the oil industry hundreds of millions of dollars but angered farmers in the nation’s heartland, who said it crushed the credit prices that are an integral part of the ethanol industry.

According to the documents, filed by the Advanced Biofuels Association (ABFA), the EPA in 2017 stopped considering whether compliance with the Renewable Fuel Standard (RFS) would prevent a refinery from making money and being competitive.

Instead, the agency considered primarily whether compliance would cause a “disproportionate” impact on the facility, an easier hurdle to clear.

Under the RFS, refiners must mix biofuels like ethanol with their gasoline and diesel, but smaller refineries can be exempted if they can prove that complying would cause them measurable financial harm.

ABFA, which represents 35 companies responsible for 4.4 billion gallons of renewable fuel production around the globe, is asking a federal judge to rule whether the EPA’s expansion of the waiver program was legal, which they argue depresses demand for their biofuel.

The Department of Energy traditionally scored the hardship applications on a two-prong matrix that considered whether the RFS posed a disproportionate hardship, and whether the plant could remain viable if required to comply.

Prior to May 2017, a refinery would have to pass both tests to get an exemption, ABFA alleged, citing EPA correspondence with a refiner it said it had obtained.

“In prior decisions, EPA considered that a small refinery could not show disproportionate economic hardship without showing an effect on ‘viability,’ but we are changing our approach,” the EPA wrote in 2017 to an unnamed refiner, according to an excerpt included in the court filing.

The EPA went on to say that “RFS obligations may impose a disproportionate economic hardship when it is disproportionately difficult for a refinery to comply with its RFS obligations — even if the refinery’s operations are not significantly impaired.”

The EPA turned over documents related to 48 applications for waivers to the ABFA as part of the legal discovery process. In 24 cases, the Energy Department gave the applicant a viability score of zero, meaning the RFS would have no impact on the refinery’s ability to stay competitive and profitable, but the EPA still granted the waiver, ABFA alleged in the court documents.

The EPA also routinely ignored the department’s recommendations to grant partial exemptions and instead granted full exemptions, ABFA alleged in court documents.

An EPA official said the agency had no comment.

The trade group has asked a federal court in Washington to rule on the legality of the expansion of the hardship waivers under Pruitt. The scoring system has faced judicial scrutiny in the past, with judges in different circuits siding with and against the agency.

In an often cited case, the 10th U.S. Circuit Court of Appeals in Denver ruled in 2017 that the EPA had in the past used too strict a definition of viability that required the applicant to prove complying with the RFS would cause the plant to shut or the company to file for bankruptcy.

While the EPA did not announce the changes publicly, the agency clearly sent the message to refiners, ABFA said. Oil majors such as Chevron and Exxon Mobil, who did not apply for waivers in the past, were granted exemptions at their smaller refineries, Reuters previously reported.

Billionaire Carl Icahn, a one-time Trump adviser who helped Pruitt land the job at the EPA, was also granted exemptions at his smaller refineries owned by CVR Energy after previously been denied them by the Obama administration.

In all, the number of exemptions granted went from seven in 2015 to at least 29 in 2017, EPA data shows.

The EPA is set to decide on 37 additional pending applications for 2018 by the end of the month, a move that will be closely watched by the corn and oil industries.

— Jarrett Renshaw reports on the U.S. energy sector for Reuters from New York.

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