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Exclusive: Chevron, Exxon seek 'small refinery' waivers from U.S. biofuels law

Reuters  |  NEW YORK 

By and Chris Prentice

NEW YORK (Reuters) - Global and have asked U.S. regulators for exemptions to the nation's policy that have historically been reserved for small companies in financial distress, according to sources familiar with the matter.

The requests will add fuel to a raging dispute between Big and Big Corn over how the should manage the U.S. Renewable Fuel Standard - a 2005 law that requires refiners to mix such as corn-based ethanol into the nation's fuel supply, or buy government-awarded credits from other who do the blending.

The (EPA) has already issued an unusually high 25 hardship waivers to small refineries in recent months, according to an agency source, driving blending credit prices down and helping the industry reduce compliance costs.

But the agency won't name the firms receiving the exemptions, citing a concern over disclosing private company information.

Both Chevron and Exxon , among the world's most companies, have asked EPA for waivers for their smallest facilities - Chevron's 54,500 barrel-per-day refinery in and the Exxon's 60,000 bpd refinery in Montana, two sources briefed on the matter told on condition of anonymity.

The exemptions would free the plants from their obligation to hand in blending credits earned or purchased for 2017, which came due this year, the sources said.

The disclosure of the Chevron and Exxon applications, which have not been previously reported, follow a report this month that the EPA has exempted three of ten refineries owned by , one of the biggest U.S. refining companies.

The waivers could save $50 million or more in regulatory costs for the company's 2016 obligations under the law.

- a Canadian backed by a Hong Kong billionaire - will also be seeking an exemption, this one covering the 2018 requirements for its small Superior, plant, told Reuters, disclosing the waiver for the first time.

Duval said Husky inherited a 2017 exemption when it bought the 50,000 bpd from for $435 million in November.

The waivers are intended for facilities producing less than 75,000 barrels per day (bpd) that can also prove compliance with the policy would cause them "disproportionate economic hardship."

A for Chevron, Braden Reddall, declined to confirm or deny the application, but said waivers provide an edge.

"Several competitors have reportedly received exemptions from the RFS," he said in a written statement to "If true, any refinery which has not been exempted from the RFS will be at a competitive disadvantage."

Exxon declined to comment.

The exceptions and the EPA's refusal to disclose them have infuriated the corn lobby, which argues the waivers hurt farmers by undermining demand for corn and should be used only sparingly for tiny facilities in dire straits.

"EPA is hiding behind poor excuses about proprietary business information to shield big oil companies from public scrutiny," five Republican senators, including and from Iowa, wrote in a joint statement Thursday.

"This looks like just another backdoor attempt by (EPA) (Scott) to destroy the Renewable Fuel Standard and circumvent congressional intent."

Bob Dinneen, of the said there is nothing 'small' about Exxon and Chevron, both of which rank in the top 20 of the Fortune 100.

"For these two companies to claim economic hardship is downright offensive and insulting to the hard-working farm families and ethanol producers that depend on the RFS," Dinneen said.

It's unclear whether the EPA has approved the Exxon or Chevron application. EPA declined to comment on which firms have applied for or received exemptions.

She said the agency considers any application to exempt a refinery of less than 75,000 bpd - regardless of the size of the company that owns it.

"EPA decisions on waivers are based on refinery-specific information," she said in an email. "We continue to work through petitions received for 2017."

Exxon reported net profits of $19.7 billion last year. Chevron reported earning $9.2 billion.

Both bill themselves as globally integrated companies, and neither breaks out the financial details for their individual facilities in the public disclosures they are required to file with the

Republican Senator John Barrasso, of Wyoming, home to several small refineries, praised the expansion of the exemption programme in a statement on Thursday. He did not address the controversy over the exemptions granted to some of the nation's largest refiners.

"I applaud and for recognizing the burdens of this programme. They know that we can't allow it to hurt our nation's small refineries," Barrasso said.

'DEMAND DESTRUCTION'

The EPA has historically doled out fewer than ten hardship exemptions per year to U.S. refineries, according to a former U.S. who spoke on condition of anonymity. A current EPA official, however, said the number reached 20 for 2016.

The EPA has come under pressure for being stingy with the waivers in the past. A successful lawsuit last year by led a federal court to order EPA to expand its definition of "economic hardship" - opening the door for more facilities to be eligible.

The has also signalled a willingness to help refining companies reduce their biofuels compliance costs - which industry players say has encouraged a surge in

Trump hosted a series of meetings with advocates for the corn and at the since late last year aimed at reforming biofuels regulations in a way that cuts costs for refiners without reducing overall biofuels demand. The effort failed to yield a deal due to protests from corn industry representatives.

Obtaining a waiver helps refiners in two ways: they no longer have to earn or purchase blending credits, called RINs, to prove compliance, and they can sell any RINs they have on hand into the open market. That can provide a company with a benefit ranging into the tens of millions of dollars.

Other big oil companies including also own refineries small enough to be eligible for a waiver, as does which is owned by billionaire investor and Trump ally

Officials for those companies did not respond to requests for comment on whether they are seeking exemptions.

Icahn's efforts last year to overhaul the biofuels programme - while acting as an to Trump on regulatory issues - drew scrutiny from federal investigators after lawmakers said it raised ethical concerns.

Biofuels proponents including has criticized the use of RFS exemptions as "demand destruction" for corn-based ethanol. Ethanol demand has been vital to farmers who are buffeted by low commodities prices and the threat of a global trade war.

The American Petroleum Institute, which represents big oil companies like Exxon and Chevron, has also opposed small refinery exemptions in the past, arguing for a level competitive playing field.

(Reporting by and Chris Prentice; Editing by and Brian Thevenot)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, April 13 2018. 05:10 IST
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