Court Rejects SRE Program Rehearing

EPA Must Still Decide How to Apply Court Ruling on RFS Waivers Case

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A federal court rejected a request by refining companies for a rehearing on EPA's small-refinery exemptions program. (DTN file photo by Emily Unglesbee)

OMAHA (DTN) -- Small refiners will not receive a rehearing before the entire U.S. Court of Appeals for the 10th Circuit in Denver on a case alleging EPA improperly granted small-refinery exemptions to the Renewable Fuel Standard in 2017 and 2018, the court announced in an order on Tuesday.

The ball is now in the EPA's court to decide how it will apply the original ruling by the 10th Circuit. In the Jan. 24 ruling, a three-judge panel ruled EPA didn't have the authority to issue exemption extensions to three companies that were not originally granted waivers. It 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.

On March 27, EPA announced its next steps on SREs following the Trump administration's decision not to appeal the ruling. The agency said it would wait for the court case to play out before taking action.

The court's decision Tuesday now starts a 90-day clock for the refiners to petition the U.S. Supreme Court.

Three refiners that lost the lawsuit, which was filed by biofuel interest groups, had requested an en banc hearing before all of the judges in the 10th Circuit. The court grants rehearing in just one-tenth of 1% of all cases.

In a March 27 news release, EPA stated it would not revisit or rescind any previously granted small-refinery exemptions. Because of COVID-19, EPA also stated it would focus on "protecting our employees and ensuring continued protection of public health and the environment from acute or imminent threats during the COVID-19 pandemic."

EPA added that investigating and initiating enforcement actions against small refineries "is a low priority for the agency." So EPA will wait until the appeals are completed to enforce any decision.

Currently, there are 25 small-refinery exemption requests pending for 2019. However, because the U.S. Department of Justice did not appeal the 10th Circuit Court's ruling, it is unlikely EPA would continue to grant the number of exemptions it has annually since 2016 -- an average of 28 per year.

In a motion for rehearing filed in the court by Wynnewood Refining Company LLC in Wynnewood, Oklahoma, said if EPA changes course on small-refinery exemptions, 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.

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

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Todd Neeley