Valero tells EPA it will sue for not considering RIN policy request

Valero Energy Corp. notified the US Environmental Protection Agency of its intent to sue for not considering the independent refiner-marketer’s request to move the point of obligation under the Renewable Fuel Standard’s Research Identification Number program.

“Valero has worked tirelessly to provide EPA data and all information relevant to the point of obligation and the requested revision,” Richard J. Walsh, the company’s senior vice-president and deputy general counsel for litigation and regulatory law, told EPA Administrator Gina McCarthy in the Nov. 3 notice.

The company will continue to work with EPA regarding any information the regulatory agency might need to evaluate the renewable fuel credits program’s obligation point, Walsh said. “However, Valero must pursue all legal avenues available to promote a change in the RFS program that Valero believes is necessary for the program’s success.”

Valero can file a court action 60 days after sending the notice. It said EPA failed to perform nondiscretionary duties under the Clean Air Act to define the obligated party under the RFS. It said this specifically involves:

• Determining and publishing a regulation that ensures that the CAA’s RFS program requirements are met.

• Periodically reviewing the feasibility of complying with those requirements and the impacts compliance will have on each regulated individual or entity to allow for appropriate adjustment of statutory volumes.

• Regulating entities, as appropriate, to ensure EPA’s own rule does not necessitate use of the statute’s waiver authority to address an inadequate supply of renewable fuel.

“The harms flowing from these omissions are exacerbated by the continuing constraint on the supply of renewable fuel to consumers, a constraint that EPA has correctly acknowledged,” the notice said. It said EPA used its statutory waiver authority on Dec. 14, 2015, to reduce renewable fuel quotas for 2014, 2015, and 2016, but did not consider or address through rulemaking its determination of the appropriate obligated party to satisfy the RFS volumes.

“The current point of obligation itself functions as a renewable fuel supply constraint, and imposes unjustifiable impacts among obligated refiners,” it asserted.

Valero is directly and indirectly harmed as both a refiner and a renewable fuel producer by EPA’s alleged failure to address market inefficiencies and fulfill its statutory duties, the notice said. As a refiner, it is an obligated party under the RFS rules and must comply with volume mandates, it said. As a renewable fuel producer, it is harmed by any constraint on the renewable fuel market that does not ensure that transportation fuels contain at least the minimum statutorily specified renewable fuel volumes.

“Worse than harming the affected parties, however, the market inefficiencies created by the RFS in no way advance the CAA’s renewable fuel goals and, in fact, affirmatively undermine them,” Valero said. “Under the CAA and fundamental principles of administrative law, EPA is duty-bound to investigate the impact of its regulatory requirements and to appropriately adjust its regulations to ensure that they support the growth of the renewable fuel market.”

EPA established its renewable fuel credits program known as RINs to help refiners and importers meet volumetric obligations that Congress established under the 2005 Energy Policy Act and expanded under the 2007 Energy Independence and Security Act.

The American Fuel & Petrochemical Manufacturers also has called on EPA to move the RINs obligation point to the rack jobber level where excise taxes are collected already. The American Petroleum Institute does not support this proposal because it believes it would fall short of making necessary reforms to the RFS.

Contact Nick Snow at nicks@pennwell.com.

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