Refiner Challenges Waiver Denial

OMAHA (DTN) -- While EPA received 16 new applications for small-refinery exemptions to the Renewable Fuel Standard, a Colorado refining company is challenging the agency in court for rejecting its 2018 request for a waiver.

Suncor Energy U.S.A. Inc. filed an appeal of EPA's October 2019 decision in the U.S. Court of Appeals for the 10th Circuit in Denver.

The agency recently finalized a rule designed to account for biofuel gallons waived from the RFS.

Suncor, which received waivers for what were previously two refineries in Commerce City, Colorado, argued in its petition to the court the agency's action was "arbitrary, capricious, and not otherwise in accordance with law."

In a partially redacted letter from EPA to Suncor officials filed in court, the agency said it rejected the petition because the refineries no longer meet EPA's definition of a small refinery, which produces 75,000 barrels per day or less.

Suncor previously received waivers for what were two small refineries, one that produced nearly 33,000 bpd and another at nearly 67,000 in 2018. The refineries were among the original facilities to receive waivers in 2006. Since then, according to the EPA letter, Suncor has modified the refineries to operate as a single facility.

"EPA recognizes that the east refinery and the west refinery were among the small refineries that received the original small-refinery exemption in 2006," EPA said in the letter to Suncor. "However, Suncor has since done significant work to integrate the process operations of the two facilities so that they now function as a single refinery with an average aggregate daily crude oil throughput that exceeded 75,000 bpd in 2017 and 2018 and thus no longer meet the definition of a small refinery."

The agency said the Clean Air Act does not define the word refinery or the phrase "average aggregate daily crude oil throughput" in the small-refinery definition.

"The statutory and regulatory definitions provide neither guidance nor limits on how EPA must evaluate the words and phrases in the definition when determining whether a refinery meets the 'small-refinery' definition," EPA said in the letter. "EPA therefore has discretion to choose what factors and information it will consider in this evaluation."

EPA said the company itself "routinely characterizes" the two refineries and a single refinery, on the company's website, its 2018 annual report, and by company officials in media interviews.

"In order to properly account for the integrated nature of Suncor's operation, the most reasonable boundary is one encompassing both refineries in order to combine the average aggregate daily crude oil throughput and the overall transportation fuel production volume from both refineries' operations," EPA said in the letter.

As a result, the agency said, the refiners are "ineligible" to petition for an exemption.

From 2016 to 2018, the EPA has granted an average of 28 small-refinery exemptions per year and received an average of 33 requests.

One of the major concerns the biofuels industry has is the retroactive nature in which the EPA has granted small-refinery exemptions -- requests for a given year typically are made at the close of that compliance year.

In the most recent finalized RFS proposal, the agency opted to use the U.S. Department of Energy's estimate for small-refinery exemptions of about 700 million gallons per year, in attempt to account for exemptions in 2020.

The industry thought it had a deal with the White House that would have used a three-year rolling average of actual gallons exempted in 2016 to 2018, or about 1.35 billion ethanol-equivalent gallons.

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

Follow him on Twitter @toddneeleyDTN

(SK/AG)

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