Corn vs Oil: Ethanol Company Blames Oil Refinery Waivers for Closure

Poet LLC attributes closure of Cloverdale plant to EPA mismanagement of Renewable Fuel Standard waivers
August 27, 2019

The owner of an ethanol bioprocessing facility in western Indiana says U.S. Environmental Protection Agency decisions are to blame for the facility’s shuttering.

POET LLC says hundreds of local jobs will be impacted by the plant closing in Cloverdale, Indiana, and the company will no longer process over 30 million bushels of corn annually.

“POET made strategic decisions to support President Trump’s goal of boosting the farm economy,” said POET president and COO Jeff Lautt, in a written statement. “However, these goals are contradicted by bailouts to oil companies. The result is pain for Midwest farmers and the reduction of hundreds of jobs and hundreds of millions of dollars of economic activity across Indiana.”

The company says the EPA’s mismanagement of waivers meant to protect small refineries from national ethanol requirements have drastically reduced demand for ethanol and weakened the incentives for retailers to offer higher ethanol-gasoline blends.

This is a picture of the bioprocessing facility in Cloverdale, Indiana.
POET LLC's Cloverdale bioprocessing facility opened in 2011 and is set to close this year. The company's leaders say the Trump administration's mismanagement of small refinery exemptions for the Renewable Fuel Standards have made producing ethanol unprofitable. POET LLC

The Clean Air Act requires that transportation fuel sold or introduced to the U.S. contain certain volumes of renewable fuels like biomass-based diesel, cellulosic biofuel, advanced biofuel or a totally renewable fuel.

The Renewable Fuel Standard is set for every category of renewable fuel each year, and is based on estimates of gasoline usage.

Companies can meet the requirements by adhering to the blending standard, or they can choose to buy “renewable identification numbers” from companies that meet or exceed the volumes of renewable fuel volumes required by the year’s RFS.

The Clean Air Act allows the EPA administrator to temporarily exempt small refineries, defined as ones with an average oil input no greater than 75,000 barrels per day, from the RFS if they can prove that a “disproportionate economic hardship” exists.

In early August, the EPA issued 31 new small refinery exemptions.

The EPA does not name the firms that receive the exemptions, citing concerns over disclosing private company information, but major oil companies have been identified as recipients of the waivers.

In 2018, the EPA granted Exxon Mobil Corp., one of the largest oil companies in the world, an exemption for one of its refineries in Montana. Chevron Corp. and the former Andeavor oil company, both Fortune 500 corporations, received small refinery exemptions.

Lautt said the EPA was mismanaging the waiver authority to the benefit of the oil industry, to the detriment of the renewable fuel industry.

The number of small refinery exemption petitions more than doubled since the beginning of the Trump administration, and the number of waivers approved has gone up by 61%.

“The Renewable Fuel Standard was designed to increase the use of clean, renewable biofuels and generate grain demand for farmers,” said Lautt. “Our industry invested billions of dollars based on the belief that oil could not restrict access to the market and EPA would stand behind the intent of the (RFS). Unfortunately, the oil industry is manipulating the EPA and is now using the RFS to destroy demand for biofuels, reducing the price of commodities and gutting rural economies in the process.”

This is an image of the Cloverdale bioprocessing facility.
The Cloverdale bioprocessing facility processed over 30 million bushels of corn annually.

Legislators in both houses of Congress have introduced legislation that would tighten deadlines for exemption petitions and reveal the identities of the companies that receive the exemptions.

Earlier this year, 35 members of Congress, including U.S. Rep. James R. Baird, R-Ind., sent a letter to EPA administrator Andrew Wheeler, asking him to stop granting improper small refinery exemptions.

The year has been tough for corn growers in Indiana and the rest of the country. Heavy spring precipitation slowed the year’s corn planting, and a tariff battle between the U.S. and China hurt agricultural exports.

To help farmers, the EPA lifted a ban on the sale of higher ethanol blends of gasoline during the summer months. The agency has also lifted bans on controversial and potentially harmful pesticides like sulfoxaflor and Wikipediachlorpyrifos that could help increase crop yields.

Indiana is the fifth-largest producer of ethanol in the nation. The state’s 13 ethanol plants, including the Cloverdale plant, make about 1.2 billion gallons of ethanol each year.

“My long-term fear isn’t for the biofuels industry, it’s for rural America,” said POET CEO Jeff Broin in a statement. “POET can continue to produce ethanol with cheap grain, but we don’t want to lose our family farmers. The EPA has robbed rural America, and it’s time for farmers across the Heartland to fight for their future.”

POET LLC says the Cloverdale facility will be idled for several weeks before the closure. The company said it has reduced production at half of its biorefineries and will consolidate jobs across its 28 biorefineries in the Midwest and South Dakota.

Corn vs Oil: Ethanol Company Blames Oil Refinery Waivers for Closure