“ABFA’s criticisms merely reflect its disagreement with EPA’s reasonable application of its discretion. In a facial challenge, this is not enough,” it wrote. “ABFA must show that there are ‘no set of circumstances’ in which EPA’s approach would be valid. EPA appropriately considered information included in DOE’s analysis and other economic information.”
Irwin’s study confirmed that the EPA’s issuance of SREs has not caused demand destruction:
There continues to be considerable interest in whether small refinery exemptions (SREs) under the RFS have ‘destroyed’ demand for ethanol in the physical market. It seems obvious that this would be the case since SREs have had the effect of annually waiving more than a billion gallons of the conventional ethanol mandate under the RFS since 2017. However, the analysis in two earlier farmdoc daily articles (September 13, 2018; December 13, 2018) provides little evidence that the aggregate blend rate for ethanol has been reduced by SREs.”
The northeast has relied on these hardship waivers because of the high cost of complying with the RFS ethanol mandate. Northeast refineries like Philadelphia Energy Solutions have filed for bankruptcy as a result of the costs associated with it already. For these reasons, Dr. J. Winston Porter, a former assistant administrator of the EPA, says that eliminating the small refinery exemptions could jeopardize the security of the entire RFS:
Ironically, failing to continue issuing hardship waivers represents the true threat to ethanol demand and the existing scope of the Renewable Fuel Standard. Should the EPA refrain from saving the small refineries struggling with the compliance costs, as was the intent of the law all along, bankruptcies will ensue, energy competition will fall. The EPA will then have no choice but to significantly lower renewable fuel volume obligations to prevent further instability. Is that really what the law’s proponents want?”
While the ostensible basis of ABFA’s concerns is that the EPA’s granting of SREs has created demand destruction on farmers, ethanol production remains at an all-time high.
Senator Grassley and other ethanol supporters are unlikely to be pleased with this decision, but perhaps they would be better served to focus on the trade war with China. That has certainly created a great deal of demand destruction for farmers.