Small Refiner Exemption Protects Jobs without Destruction to Renewable Fuel Demand
As a farmer-owned cooperative, CountryMark serves as a strong advocate and state leader in the marketing of renewable fuels including ethanol and biodiesel blends. Due to disproportionate economic hardship, CountryMark applied for an exemption under the Environmental Protection Agency’s (EPA) Renewable Fuels Standard (RFS) for 2018 and has notified the EPA of its “intent to sue” because the EPA has not issued its determination within the timeframe required by law.
Under the EPA’s Renewable Fuels Standard (RFS), a small refinery like CountryMark that processes under 75,000 barrels per day of crude shall be granted an exemption from its annual Renewable Volume Obligations (RVOs) if it can demonstrate that compliance with the annual RVO would cause the refinery to suffer disproportionate economic hardship. In 2017, CountryMark’s RFS compliance costs were its third highest expense totaling $19.2 million causing disproportionate economic hardship. As such, CountryMark applied for and received an RFS exemption for 2017. CountryMark’s compliance costs for 2018 resulted in similar disproportionate economic impact; therefore, CountryMark currently has an exemption application pending with the EPA. CountryMark has sent a letter to the EPA requesting them to issue their determination on the application consistent with the timing required by law.
“CountryMark believes renewable fuels are good for farmers and the U.S. economy,” said Matt Smorch, Vice President of Refining and Logistics at CountryMark. “CountryMark has not made any changes in our continued support of renewable fuels since receiving the small refiner exemption. In fact, year-over-year, our purchase volumes of both ethanol and biodiesel have increased, due in part to blend incentives offered to CountryMark member customers.” Despite claims of demand destruction of 2 billion gallons of ethanol, U.S. government energy data shows that the small refiner exemptions provided for 2017 compliance have not led to reduced renewable fuel blending.
“The small refinery exemption was put into law to protect refineries that operate primarily in rural communities across the country. Refineries that employ thousands of hard-working American men and women, including our 500 employees at CountryMark. Essentially, the small refinery exemption is about protecting local jobs. Comparing our RFS compliance cost in 2017 to our net income shows the economic impact was truly disproportionate for our small refinery,” said Smorch.
As a refiner of both gasoline and diesel fuel products, CountryMark is an obligated party under the EPA’s RFS. As an obligated party, CountryMark generates Renewable Identification Numbers (RINs) when purchasing and blending ethanol and biodiesel. CountryMark submits RINs to the EPA in order to demonstrate RFS compliance. If an obligated party blends less than required, they must purchase RINS to remain compliant.
In 2018, CountryMark’s renewable fuel purchases included over 20 million gallons of ethanol (equaling 7 million bushels of corn) and over 5 million gallons of biodiesel (equaling 3 million bushels of soybeans). These purchases give CountryMark one of the highest renewable blend percentages in the Midwest. Nevertheless, CountryMark estimates the need for continued RIN purchasing which will result in higher RFS compliance costs that can cause disproportionate economic hardship.
CountryMark’s support for renewable fuels remains strong. For example, as a BQ9000 marketer, CountryMark offers premium biodiesel blends up to a B20 or 20 percent biodiesel. BQ9000 is an accreditation program that combines the ASTM standard for biodiesel and high quality systems for storage, sampling, testing, blending, shipping, distribution and fuel management practices. In addition, CountryMark offers ethanol blends including E10 or 10 percent ethanol, and E85 or 85 percent ethanol. CountryMark is also in the process of offering E15, a 15 percent ethanol blend.
Furthermore, CountryMark is advocating an increase to the gasoline octane standard which will create a future High Efficiency Fuel. The new fuel will have a Research Octane Number (RON) of 95, which will allow automakers to build more efficient vehicles while providing a market that allows growth in ethanol blending without increased mandates.
“CountryMark is centrally-focused on our customers while supporting our farmer-member owners,” said Smorch. “With that said CountryMark is committed to supplying the Midwest’s highest-quality fuels and lubricants and will continue to deliver on customer demands for renewable fuel blends.”