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Small Refiner Exemptions: It’s Time to Name Names

May 23, 2019


Despite the mounting public outcry for greater transparency (including this letter sent today by Sen. Tammy Duckworth), the Environmental Protection Agency (EPA) still refuses to disclose the names of the oil refiners seeking and receiving small refinery exemptions (SREs) from their Renewable Fuel Standard (RFS) blending obligations. It seems unfathomable that the agency tasked with protecting the environment is instead excusing wealthy fossil energy companies from their Clean Air Act requirements, then shielding them from public scrutiny. But that’s exactly what’s happening. Indeed, the only information available to the public regarding the identity of “small” refiners receiving SREs has come through dogged investigative reporting and a few voluntary disclosures in quarterly financial filings. EPA seemed to realize it was on shaky ground when it proposed to publicly reveal certain information related to SREs back in 2016. But that proposal was shelved as the new Administration settled into the White House. It appeared the SRE public disclosure proposal was being revived in early April, but it has not yet been officially published and may never see the light of day (in fact the EPA page where a draft was posted now says “Not Found”). According to Reuters, the plan was put on ice again after “blowback from the White House and parts of the oil industry.” So, as EPA prepares to decide more than three dozen new SRE requests, the public remains in the dark about who is receiving exemptions and why. But if EPA won’t name names, we will. According to data from the Energy Information Administration (EIA), there are 48 refineries in the lower 48 states and Hawaii that fall under the “small refinery” threshold of 75,000 barrels per day (Alaska refineries are already exempt). Thus, while we don’t know precisely which 40 small refineries petitioned for 2018 SREs and which eight did not, we know that the vast majority of “small refineries” did in fact request exemptions. The full list of refineries with 75,000 bpd of capacity or less is shown below (excluding Alaska).

It’s worth noting that refining giants like Chevron, CVR, ExxonMobil, HollyFrontier, Marathon, Phillips 66, and Valero all appear on this list—these are hardly the “small” mom-and-pop refining operations that Congress had in mind when it created a temporary RFS exemption for small refiners. In fact, the combined net revenue of the companies owning these 48 small refineries is estimated at more than $75 billion in 2018—that’s more than total net U.S. farm income. And now a new study from Colorado State University shows that refiners receiving SREs are experiencing disproportionate economic windfalls—not disproportionate economic hardship as they are claiming. Small refiners exempted from the RFS are able to reap inflated margins by charging prices for gasoline and diesel that still incorporate the costs of RFS compliance. The analysis finds that since RIN costs are fully passed through to wholesale gasoline prices, exempt refiners benefit from slightly higher wholesale prices for their refined products but escape the offsetting RIN cost that non-exempt refiners face. According to the study, “…small, exempt refineries that do not comply with RFS blending requirements, and therefore do not pay the RIN costs but receive higher output prices, may receive substantial benefits from the policy.” It’s no wonder the companies seeking and receiving SREs don’t want anyone to know who they are. But Congressional champions for rural America, like House Ag Committee Chairman Collin Peterson (D-MN), and Rep. Dusty Johnson (R-SD), have had enough of the administration’s SRE shenanigans. Peterson and Johnson introduced a bill today that would enhance transparency by ensuring that key information surrounding SREs is publicly disclosed. The bill would also require refineries seeking an exemption from the RFS to submit petitions in a timely manner so that any waivers granted would be prospectively reallocated to non-exempt obligated parties. RFA strongly supports the bill and we hope it portends an end to the SRE nightmare.