(Reuters) - Marathon Petroleum Corp, the second-biggest refining company in the United States, has asked the Environmental Protection Agency (EPA) for a hardship waiver exempting one of its facilities from the nation’s biofuels law, two sources with knowledge of the application told Reuters.
The request comes as the EPA expands its use of biofuel waivers in a way that has reduced regulatory costs for the oil industry by hundreds of millions of dollars in recent months, but which has also infuriated the powerful corn lobby.
EPA has authority to grant waivers freeing small refineries from their obligation to mix biofuels such as ethanol into their fuel under the Renewable Fuel Standard (RFS) if they can prove complying would cause them “disproportionate economic hardship.”
The waivers can save individual facilities tens of millions of dollars in regulatory costs, adding to a company’s bottom line.
Ohio-based Marathon made the waiver application for one of its facilities for the 2017 calendar year, according to the sources, who asked not to be named. The sources did not specify which facility the waiver would cover and did not know whether EPA had made a decision.
Marathon spokesman Jamal Kheiry declined to comment and EPA spokesman Jahan Wilcox did not respond to requests for comment.
Marathon’s smallest refinery is a 93,000 barrel per day plant in Canton, Ohio. While that plant has a nameplate capacity above the 75,000 bpd threshold that EPA uses for “small refineries,” the facility could meet the criteria by operating at reduced rates. Refineries typically bring down units at least once a year for maintenance work, limiting production.
It is also possible that Marathon made the request for a portion of one of its larger refining complexes, such as its Galveston Bay refinery in Texas, arguing that certain parts of the complex operate distinctly.
An EPA source said earlier this year that the agency has granted more than two dozen small refinery waivers for 2017 in recent months, a level that former officials say is about triple the number given each year under previous administrations.
The expanded use of biofuel waivers under President Donald Trump’s administration has been a flashpoint between the oil and corn industries. While refining industry representatives have said EPA is required to provide such exemptions to qualifying facilities, corn-state Republicans have said the program is being abused in a way that hurts corn farmers.
Republican Senator Chuck Grassley of Iowa said in an emailed statement that the move was a sign of “how broken this process is.”
“NOTE TO EPA definition of hardship: a condition that is difficult to endure, suffering, deprivation, oppression,” Grassley said separately on Twitter. “Surely Marathon doesn’t qualify for a waiver They had a net income of $3.4B in 2017 BILLIONS IN PROFITS ISNT HARDSHIP.”
He and other lawmakers have pressed the EPA to curb the exemptions and to name the companies that have received them.
EPA does not reveal the names of waiver applicants or recipients - arguing the information is confidential.
Sources familiar with the matter have told Reuters that large U.S. refiner Andeavor and billionaire Carl Icahn’s CVR Energy were among the companies that had been granted waivers recently – showing EPA is willing to award exemptions to plants owned by big, profitable companies.
Andeavor, which recorded net profits of $1.4 billion in 2017, said this month it saved $100 million in costs from waivers.
Majors Chevron Corp and ExxonMobil Corp have also asked for relief for smaller units, according to sources, though it is unclear if their requests were granted.
Marathon, which owns six refineries and sells gasoline through independent retailers and its Speedway unit, booked net income of $3.4 billion in 2017. It recently announced it is buying Andeavor in a $23.3 billion deal that would make it the nation’s largest refiner.
“This is the theater of the absurd. Marathon wants a small refinery hardship waiver at the very moment it is seeking to become the nation’s largest refiner,” Brooke Coleman, head of the Advanced Biofuels Business Council, said.
“The federal government should be protecting consumers by scrutinizing mergers like this instead of handing out dividends to multibillion dollar oil companies seeking to monopolize critical energy sectors.”
Prices of the biofuel blending credits that refiners need to prove compliance with the RFS, known as Renewable Identification Numbers (RINs), have fallen to five-year lows in recent weeks as the increase in hardship waivers has turned traditional buyers of credits into sellers.
Marathon has long called for a legislative overhaul of the RFS to ease the burden on refiners but began investing years ago in terminal blending capacity to help curb its RIN expenses.
Chief Financial Officer and Senior Vice President Timothy Griffith in April 2017 told investors and analysts on a conference call that the costs associated with the RFS are “incorporated into our trading and pricing decision and ultimately recovered and passed on to consumers.”
Reporting by Jarrett Renshaw and Chris Prentice in New York; Editing by Cynthia Osterman and Susan Thomas