Oil-State Senators Push Trump on Refinery Biofuel Waivers

(Bloomberg) -- The oil industry and its Capitol Hill allies are pressing the Trump administration to defend its decision to exempt oil refineries from requirements they blend biofuels into gasoline and diesel.

The administration has until the end of next Monday to request the full 10th Circuit U.S. Court of Appeals rehear a decision that threatens to curtail the use of waivers.

Republican senators from states with large oil-refining interests, including Ted Cruz of Texas, John Barrasso of Wyoming and James Inhofe of Oklahoma have made entreaties to the White House or the Environmental Protection Agency in recent days, warning that if the decision is applied nationwide, it could strain refineries, hike gasoline prices and jeopardize jobs. The senators' efforts were described by three people familiar with the matter who asked not to be named detailing private conversations.

At issue are requirements to use renewable fuels, such as corn-based ethanol and soy-based biodiesel. Although federal law authorizes the EPA to exempt small refineries facing an “economic hardship,” a January ruling by a three-judge panel of the 10th Circuit Court of Appeals throws into doubt the agency's ability to broadly issue those waivers.

If the decision stands, it is believed only two small refineries would still be eligible for hardship relief, according to a letter 13 Republican senators, led by Barrasso, sent to President Donald Trump on Feb. 27. Since the Jan. 24 ruling, expectations the EPA will dramatically restrict waivers have driven a 152% surge in the cost of renewable identification numbers, the credits refiners use to prove they have complied with biofuel quotas.

Trump to Pare Biofuel Waivers for Refineries on Court Ruling

The EPA has the legal option to apply the court decision to refineries only in the six states covered by the 10th Circuit, but top agency officials view that as unworkable, according to two people familiar with the matter. Administration officials including White House economic adviser Larry Kudlow had tentatively decided to apply the ruling nationwide. Oil industry allies are hoping Trump will personally intervene and order a shift in course.

Barrasso has spoken with EPA Administrator Andrew Wheeler and Kudlow, “urging them to appeal the 10th Circuit decision,” Sarah Durdaller, a spokeswoman for the senator, said by email. Representatives for Inhofe did not immediately respond to a request for comment.

Cruz spokesperson Lauren Blair Aronson said the senator has been “reaching out to all stakeholders, including the administration.”

“Failure to appeal the court's decision to invalidate hardship exemptions from refineries under RFS and apply that decision nationwide could put tens of thousands of blue-collar refinery jobs in jeopardy,” Aronson said. “Senator Cruz believes the administration has a critical role to play in ensuring this decision is reheard.”

Biofuel advocates also are pressing the administration on the issue. Senator Chuck Grassley, a Republican from Iowa, said he had urged administration officials to “follow the law” and wants the ruling applied nationwide.

Wheeler said Friday the agency is planning to make an announcement on its plans before the March 9 court deadline.

“Refiners are looking to see whether the Trump administration will stand up to protect small refineries and the jobs they support,” said Chet Thompson, president of the American Fuel and Petrochemical Manufacturers association. “If the administration hangs us out to dry on this and takes no other action to contain compliance costs, it will be a huge signal to our workforce.”

--With assistance from Mario Parker.

To contact the reporter on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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