EPA Fights for Refiner Waivers in Court

OMAHA (DTN) -- A biofuels interest group last month asked a federal court to stop EPA from granting additional small refinery waivers, and on Monday, the EPA filed a motion in an ongoing court case to fight the request tooth and nail.

One year ago, the Advanced Biofuels Association petitioned the U.S. Court of Appeals for the District of Columbia Circuit, asking for a review of those waivers to the Renewable Fuel Standard that to-date, have totaled about 2.6 billion gallons of biofuels not blended in gasoline.

The ABFA on March 6, 2019, filed a 97-page brief with the court alleging the EPA broke away from RFS requirements for granting small-refinery waivers starting in May 2017 and continued to deny a congressional order regarding which refiners qualify.

This week, the EPA argued in a response filed in the DC court that the Advanced Biofuels Association waited too long to file for an injunction.

"ABFA's preliminary injunction motion is too late," EPA said in court documents.

"Motions for emergency relief ordinarily must be filed no later than 30 days after docketing. ABFA fails to justify its almost year-long delay in seeking emergency relief. A small refinery seeking an exemption from its annual volume obligations must petition EPA and demonstrate it qualifies for each calendar year in which the exemption is sought. Therefore, ABFA knew when it filed its petition in May 2018 that EPA would have to act on small-refinery petitions for the 2018 compliance year during the course of this case. Indeed, ABFA repeatedly agreed not to oppose, and at times, joined EPA in seeking extensions of time."

In recent weeks, President Donald Trump's administration has taken heat for scrapping a proposal to make public more information about those companies receiving waivers.

In an April 12, 2019, notice, the EPA proposed changes to the renewables enhancement and growth support, or REGS, rule. The rule would have provided the petitioner's name, the name and location of small refinery facilities asking for waivers, the general nature of the relief requested, the time period for which relief is requested, and whether the agency granted or denied requests.

The partially redacted document filed by the ABFA in March shows the agency originally was allowed to grant temporary, two-year, exemptions starting in 2005. In recent years, however, the agency granted exemption extensions beyond two years -- including a refiner that never received a prior exemption.

The EPA approved waivers for small refiners that didn't have the minimum U.S. Department of Energy score to qualify, the brief said, and improperly considered the debts of small-refiners' parent companies when examining waiver requests.

In addition, the brief showed evidence the agency considered small-refiners' operating losses whether or not they were related to RFS compliance. The agency also considered what small refiners might spend on biofuel credits without looking at revenue they would later generate from sales of Renewable Identification Numbers, or RINs.

The Advanced Biofuels Association asked the court to declare the agency's methodology for determining disproportionate economic hardship as "unlawful" in asking for a national injunction to stop additional waivers from being granted.

On Monday, the EPA argued in court documents that the agency has followed the law in granting waivers. The agency granted 53 waivers for 2016 and 2017, and has received 40 waiver requests for 2018.

The Advanced Biofuels Association has argued the EPA changed the way it evaluates waiver requests.

"EPA's decisions fully explained its conclusion that, notwithstanding its previous approach, factors other than a threat to a small refinery's long-term viability can demonstrate disproportionate economic hardship on a small refinery," the EPA argued in court.

"Nothing in the statute precludes EPA from considering some of the same information as DOE, yet coming to a different conclusion on the question of 'disproportionate economic hardship.' ABFA attempts to sidestep these limitations by mounting a generic facial challenge to so-called 'modified evaluation criteria' that EPA applies when issuing small refinery exemptions. The 'modified evaluation criteria' ABFA purports to challenge are not reflected in any rule, or even a guidance document."

EPA said the Clean Air Act (CAA) requires the agency to act on a waiver petition in consultation with the U.S. Department of Energy and to consider findings of a 2011 DOE study on waivers.

The Advanced Biofuels Association has argued that falling prices of Renewable Identification Numbers, or RINs, in 2017 was caused by waivers granted.

EPA argued in its response that the falling prices are not evidence of waivers granted.

"The drop in RIN prices in 2017 that ABFA's members cite as evidence of harm is within the historical range of variation," EPA said. "This range reflects that RIN prices are affected by a wide variety of factors. The mere assertions of ABFA's members that the purported harm correlates to small refinery exemptions, in light of other potential factors, fails to meet the burden of proof necessary to warrant injunctive relief.

"ABFA's public interest arguments presuppose that Congress directed EPA to maximize the revenue for the renewable fuels industry at the expense of small refineries. This is a fundamentally flawed view of the CAA. While the RFS Program encourages the use of renewable fuels, it does not do so 'at all costs.'"

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

Follow him on Twitter @toddneeleyDTN

(BAS/SK)

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