ACE Urges EPA to Finalize Full Reallocation of Small Refinery Exemptions in RFS Set 2 Rulemaking

In testimony delivered today during the U.S. Environmental Protection Agency's (EPA) virtual public hearing on how it plans to handle reallocation of small refinery exemptions (SREs) under the Renewable Fuel Standard (RFS), American Coalition for Ethanol (ACE) CEO Brian Jennings emphasized the need for EPA to fully reallocate gallons lost to SREs in order to get the RFS back on track.

"We appreciate the important step EPA is taking with this "Set 2" supplemental proposal to rectify and reallocate the impacts of small refinery exemptions (SREs) issued for the 2023 and 2024 RFS compliance years, as well as reallocation for SREs anticipated for 2025," Jennings stated in his testimony.

Without reallocation, Jennings underscored EPA's reasoning that obligated parties could use the oversupply of low-priced renewable identification numbers (RINs) to satisfy the 2026 and 2027 obligations without buying or blending physical gallons of ethanol and other renewable fuels.

"This type of demand destruction undermines the integrity of the RFS," Jennings said, adding that demand destruction occurred in 2018 and 2019 when SREs and low RIN prices discouraged refiners from blending ethanol above E10 and artificially restrained sales of E15, E30, and E85.

Jennings commended EPA for working to reallocate volumes that should have been legally blended and stated ACE's view that the Agency is bound by statute to finalize full and complete reallocation for 2026 and 2027.

"In other words, the Agency must reallocate 100% of the 2023 through 2025 exempted RVOs - an estimated 2.18 billion gallons - to the final Set 2 rule," Jennings said.

ACE also applauds EPA for indicating the Agency will prospectively account for and reallocate SREs as it undertakes RVO rulemakings beyond 2027. Jennings concluded by stressing its imperative for EPA to finalize the rule before the end of the 2025 calendar year to get the RFS back on track.