EPA Rejects Nearly All RFS Exemptions

LINCOLN, Neb. (DTN) -- The EPA on Friday denied 26 of 28 remaining small-refinery exemptions to the Renewable Fuel Standard, according to an update posted to the agency's dashboard.

The EPA's latest update said the agency denied 22 total petitions from 2021 and 2022, one from 2023, one from 2018 and one each from 2016 and 2017. There are two SRE petitions pending for 2018.

The latest EPA actions remain in lockstep with the Biden administration's approach to SREs. So far, the Biden EPA has yet to grant an exemption.

In statements released on Friday, the major ethanol groups touted the Biden EPA's continued position against small-refinery exemptions.

"ACE members are grateful the Biden EPA is fulfilling its commitment to apply the law with respect to small-refinery exemptions, consistent with the agency's previous actions in April and June of 2022 and the 10th Circuit Court's ruling that small-refinery exemptions may only be granted when a small refinery's hardship is caused by the RFS program itself," said Brian Jennings, CEO of the American Coalition for Ethanol.

"Upholding the RFS in this way helps the program serve as an effective tool to maximize the use of cleaner biofuels available here and now."

Geoff Cooper, president and CEO of the Renewable Fuels Association, said, "Under their leadership, the RFS is finally working as intended to drive increased production and use of low-carbon renewable fuels. Today's action is consistent with the 10th Circuit Court's landmark decision and honors the administration's longstanding commitment to implementing the RFS in a way that is fair, transparent, and focused on growth."

Growth Energy CEO Emily Skor said the industry appreciates the Biden administration's commitment to "protect the integrity" of the RFS.

"Nearly two decades of data prove that the supposed 'cost' to refiners is an accounting fiction, and EPA's decision reflects those facts," Skor said in a statement.

BIDEN ADMINISTRATION ACTION

Earlier in 2022, the Biden administration announced the rejection of all remaining small-refinery exemptions -- about 100 in all -- as part of a broader release of RFS volumes for 2020 to 2022.

As a result of that action, at least 20 appeals were filed in the U.S. Court of Appeals for the District of Columbia Circuit. The appellants include Wynnewood Refining Company LLC, Delek US Holdings Inc., Sinclair Wyoming Refining Company LLC, CHS Inc., HollyFrontier Refining and Marketing LLC, Kern Oil and Refining Company, Cross Oil Refining and Marketing Inc., United Refining Company, American Refining Group Inc., Calumet Montana Refining LLC, Countrymark Refining and Logistics LLC, Ergon Refining Inc., Hunt Refining Company, Par Hawaii Refining LLC, Placid Refining Company LLC, San Joaquin Refining Company and the San Antonio Refinery LLC.

In April 2022, the agency reversed 31 small-refinery exemptions previously granted for 2018 but did not require the refiners to meet blending obligations.

Instead of requiring those refineries to blend biofuels or purchase renewable identification numbers, or RINs, the EPA released what it called an "alternative compliance demonstration approach" document that allowed the refineries to "resubmit their 2018 RFS annual compliance reports with zero deficit carryforward and no additional RIN requirements."

On June 3, 2022, EPA reaffirmed the alternative approach by granting the same relief to three refineries that had sought SREs for the 2016 and 2017 compliance years. Unlike the 31 SREs denied upon remand for the 2018 compliance year, these three refineries had never previously been granted the SREs.

In August 2019, the Trump administration approved 31 SREs for the 2018 RFS compliance year.

A coalition of biofuels and ag leaders, including Growth Energy, filed a petition in the D.C. appeals court challenging EPA's decision.

The coalition asked the court to stay the 2018 SRE case in November 2019 pending the outcome of related litigation in both the U.S. Court of Appeals for the 10th Circuit and D.C. appeals court.

In January 2020, the 10th Circuit ruled in Renewable Fuels Association et al. v. EPA that the agency has no power to "extend" an exemption that had lapsed.

The court also held EPA lacks authority to grant an exemption based on hardships not caused by RFS compliance, and found it was "arbitrary and capricious" for EPA to ignore its own prior studies showing that refiners recoup RFS compliance costs.

The Supreme Court on June 25, 2021, vacated the 10th Circuit ruling in HollyFrontier v. Renewable Fuels Association that EPA may only extend continuously pre-existing exemptions, but the other two holdings from the 10th Circuit decision remained intact.

EPA had the opportunity to apply the other two 10th Circuit precedents not challenged in the HollyFrontier case and request a remand and vacatur of the 31 SREs at issue in the D.C. Circuit.

However, on Aug. 25, 2021, EPA instead filed a motion to remand the SREs without vacatur. In response, the D.C. Circuit remanded the exemptions back to EPA, but, as a result of this biofuel coalition's motion in opposition, required the agency to make new determinations on the contested SREs no later than April 7, 2022.

Read more on DTN:

"EPA Denies 36 RFS Exemptions From 2018," https://www.dtnpf.com/…

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

Follow him on Twitter @DTNeeley

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