Houston — US ethanol producer Green Plains Wednesday attributed a slide in the ethanol blending rate with gasoline to the Environmental Protection Agency's recent practice of granting small refinery exemptions.
"The lower value is attributable to the overreach of the EPA on small refinery exemptions," CEO Todd Becker said during the company's second-quarter earnings call.
"The issue will be litigated as the 10th Circuit Court of Appeals agreed to hear the ethanol groups' lawsuit on granting of exemptions," Becker added. "The EPA administrator granted small refineries exemptions to companies that we believe should not have gotten them. It has really taken the market out of balance this year."
The EPA under former administrator Scott Pruitt issued small refinery exemptions at a much higher rate than under the Obama administration.
If a refinery processes under 75,000 b/d of crude and experiences a financial hardship from blending biofuels, it can apply for an exemption from federal biofuel blending mandates. Several recent court cases, starting last September, yielded opinions that the EPA had erred in not issuing enough exemptions.
Acting EPA administrator Andrew Wheeler has said he is likely to continue the practice of issuing the exemptions at a higher rate than what was the norm under the Obama administration.
Those waivers effectively lower the volume of biofuels that obligated parties are required to add to transportation fuel.
Biofuels industry groups are pushing for the waived volumes to be reallocated while oil interests have pushed for the volumes to remain waived.
If the volumes are added to the blending requirements for large refineries, it would support RIN prices. However, the future of the program is opaque as the current administration balances agriculture and oil interests.
The four-week rolling average of the ethanol blending rate, calculated by dividing the refiner and blender ethanol input by gasoline demand, fell to 9.64% in the week ended July 27, from 9.65% the previous week, according to Energy Information Administration data released Wednesday.
Ethanol proponents have said the current premium gasoline carries over ethanol should support blending of the biofuel.
But ethanol industry groups and producers like Green Plains have said the waivers are keeping blenders from feeling any pressure to blend ethanol at a higher rate.
"It's disappointing from our perspective, it is driving the reason why we aren't blending a full 10% right now," Becker said.
"There aren't a lot of hardships anymore, and RIN prices have come down to 20 cents, so at this point we don't see how the EPA could issue many small refiner exemptions going forward or how they could have issued them in the past," he added. "We continue to fight every day to get those reversed or reallocated, but moving forward we don't think it's going to be as much of an impact as RIN prices are hovering at 20 cents."
