The EPA’s Ethanol Mandate Exception

Last week I wrote a short piece on Kim Strassel’s article about the lone refiner which was exempted from the EPA’s ethanol mandates. Briefly, these mandates force refiners to blend a certain amount of ethanol into their gasoline. The problem is that the level mandated exceeds the amount needed for the current level of gasoline production. To comply with the regulations, the refiners are then required to purchase credits to offset the shortfall in ethanol that they use. These credits have become a major expense and, naturally, a portion of your gas bill. In its latest round of renewable fuel-mandates, the EPA granted one exemption but refused to identify which company was granted the exemption. Strassel has identified the company.

Further reporting has revealed that the refinery is Alon USA Energy‘s Krotz Springs facility in Louisiana. There’s reason to wonder why Krotz Springs alone got a deal.

The EPA maintains a program that allows “small refineries”—those with an average capacity of less than 155,000 barrels of crude daily—to apply for a hardship exemption from the mandate. Krotz Springs was one of four refineries that applied for 2013. The other three—Hunt Refining in Alabama, Kern Oil & Refining in California and Placid Refining in Louisiana—are small, privately held concerns. The biggest, Placid, has a capacity of about 57,000 barrels a day, according to January statistics from the federal Energy Information Administration.

Krotz Springs has a capacity of 80,000 barrels, so it meets the definition. Then again, Krotz Springs is just one of Alon’s five refineries, which are located in Louisiana, Texas and California, and have a combined capacity of about 215,000 barrels. A New York Stock Exchange-listed company, Alon isn’t exactly a mom-and-pop outfit.

She then digs into the “why” of the exemption. Why Krotz Springs and what prompted the decision to grant them the exemption. You will, I’m sure, be shocked to learn that lobbyists, Congressional delegations, Goldman Sachs and the 2014 elections all play a part. Do read her entire article to get the details. It’s no wonder that the administration wanted to keep this secret.

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