Court Vacates Refinery RFS Exemptions

LINCOLN, Neb. (DTN) -- A federal court on Wednesday vacated three small-refinery exemptions to the Renewable Fuel Standard granted by the outgoing Trump administration on Jan. 19, according to a court ruling.

The EPA on May 3 asked the U.S. Court of Appeals for the 10th Circuit in Denver to nullify the SREs. The court sent the exemptions back to the agency for reconsideration.

"The motion concedes that the agency did not analyze determinative legal questions regarding whether petitioners' (Sinclair Wyoming Refining Company and Sinclair Casper Refining Company) refineries qualified to receive extensions of the small-refinery exemption under this court's controlling decision," the court said in a ruling on Wednesday (https://files.constantcontact.com/…).

The Trump administration granted the three exemptions just days before the Biden administration was to take office.

In a motion filed in the 10th Circuit, the agency said it did not follow proper procedure when, on Jan. 19, it granted the exemptions to Sinclair Wyoming Refining Company and Sinclair Casper Refining Company from their 2018 and 2019 obligations in the Renewable Fuel Standard.

In particular, the agency said its action did not account for case law established by the 10th Circuit in January 2020. The court ruled the EPA illegally granted exemptions to three refiners in 2017 and 2018 even though they did not qualify.

Earlier in May, the agency told the 10th Circuit mistakes were made in the Trump administration's 11th-hour action. In addition, EPA said vacating the three exemptions would preserve stability in the marketplace for renewable identification numbers (RINs) by ensuring those RINs Sinclair already retired to demonstrate compliance in 2018 and 2019 would remain retired.

The EPA filed a petition for review on March 15 of the previous agency action.

EPA said it is unsure whether it would make the same decision now, considering a U.S. Department of Energy analysis of the three exemption requests found the RFS was not to blame for economic hardship.

Ethanol interest groups had been pressing the Biden administration to abide by the 10th Circuit's decision.

Renewable Fuels Association President and CEO Geoff Cooper said in a statement the court's action will preserve demand for biofuels.

"We're pleased that the court has vacated these improperly granted waivers and is sending them back to EPA for reconsideration," he said.

"If these exemptions had been allowed to stand, they would have erased RFS blending requirements for 260 million gallons of low-carbon renewable fuels, destabilizing rural communities and taking a step backward in the fight against climate change. EPA did the right thing in April by requesting that these spurious exemptions be vacated, and we applaud the agency for honoring President (Joe) Biden's commitment to putting an end to the surge of illegitimate refinery waivers."

The biofuels industry is waiting for what is expected to be a Supreme Court ruling sometime this year on the small-refinery exemptions program.

Refining company HollyFrontier brought the question before the Supreme Court this spring in an appeal of the 10th Circuit.

That court found EPA acted improperly when it granted exemptions to three small refiners, including HollyFrontier, because they had not received exemptions in previous years.

An eventual ruling by the Supreme Court is likely to determine how EPA grants similar exemptions going forward.

See more DTN coverage here:

"SCOTUS Hears Arguments in Major RFS Case" (https://www.dtnpf.com/…)

"States, Refiners Plead to SCOTUS on RFS" (https://www.dtnpf.com/…)

"EPA Changes Course on RFS Exemptions" (https://www.dtnpf.com/…)

"EPA Reiterates RFS Position to SCOTUS" (https://www.dtnpf.com/…)

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @DTNeeley

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