DOJ Decides Not to Appeal SRE Ruling

Small Refiners Ask Court for a Full Rehearing of RFS Decision

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The U.S. Department of Justice decided not to appeal a recent court ruling on the small-refinery exemptions program. (DTN/Progressive photo by Matthew Wilde)

OMAHA (DTN) -- The U.S. Department of Justice did not file an appeal before the Tuesday deadline on a recent court ruling on the small-refinery exemptions program.

A review of the court docket in the U.S. Court of Appeals for the 10th Circuit in Denver by DTN shows the only appeals filed come from the three small refiners who were the subject of a biofuels industry lawsuit.

Because an EPA appeal was not filed, the agency is set to implement the court's Jan. 24 decision nationwide.

This means it is unlikely EPA would continue to grant the number of exemptions it has annually since 2016. The agency has granted an average of 28 exemptions since 2016. There are currently 25 pending requests for 2019.

The original lawsuit was filed in May 2018 by the Renewable Fuels Association, National Corn Growers Association, American Coalition for Ethanol and National Farmers Union.

In a joint statement on Wednesday morning, the groups said the decision was welcomed news for the struggling ethanol and agriculture industries.

"Abiding by the court's ruling is the right thing to do at a time when our industries and rural America are already suffering from the effects of COVID-19, the Saudi-Russia oil price war and ongoing trade disputes," the groups said.

"We look to the RFS as a source of demand stability and certainty, especially in these troubling times. Requesting a re-hearing would have only prolonged uncertainty in the marketplace and exacerbated the pain and frustration already being experienced in the Heartland. With this key milestone now behind us, we look forward to EPA applying the 10th Circuit decision nationwide to all SRE petitions, beginning with the 25 pending petitions for 2019 exemptions."

The groups also called on EPA to restore 500 million gallons of waived 2016 blending requirements in the Renewable Fuels Standard. That was ordered by the U.S. Court of Appeals for the District of Columbia in 2017.

"This is EPA's opportunity to turn the page and start a new chapter -- one in which the agency faithfully follows the law and implements the RFS in a manner consistent with Congressional intent," the groups said.

In a motion filed in the court on Tuesday, Wynnewood Refining Company LLC in Wynnewood, Oklahoma, said if EPA changes course, its business will falter.

"The nationwide price of RFS compliance credits tripled after the panel decision was published," the motion said.

"For small refineries like Wynnewood, which can never achieve compliance on their own and will forever be hostage to the volatile RIN market, this ruling is a death knell."

HollyFrontier Cheyenne Refining LLC in Cheyenne, Wyoming; HollyFrontier Refining and Marketing LLC; and HollyFrontier Woods Cross Refining LLC in Woods Cross, Utah; filed a similar motion.

Earlier this year, a three-judge panel from the 10th Circuit ruled EPA didn't have the authority to issue exemption extensions to three companies that were not originally granted waivers.

The ruling applied to about one-third of all small refineries in the country, meaning EPA is faced with either appealing the ruling or applying it nationally. An appeal would have asked the 10th Circuit for an en banc hearing -- a hearing before all judges in the 10th Circuit.

The administration's actions have been a roller coaster ride for ethanol, biodiesel and farmers, who have been battling ongoing market difficulties.

The odds of the 10th Circuit agreeing to an en banc hearing are long, as the court grants a hearing in just one-tenth of 1% of cases.

In the Jan. 24 ruling, the court also found EPA "abused its discretion" by not explaining its conclusion that a small refinery could suffer disproportionate economic hardship while also maintaining refiners passed RFS compliance costs on to consumers at the pump.

"None of the three small refineries here consistently received an exemption in the years preceding its petition," the court said in its ruling.

The court ruling added, "The EPA exceeded its statutory authority in granting those petitions because there was nothing for the agency to 'extend.' Further, one of the EPA's reasons for granting the petitions was to address disproportionate economic hardship caused by something other than compliance with the renewable fuels mandate. That, too, was beyond the agency's statutory authority."

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

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Todd Neeley