EPA Abused Discretion by Denying Suncor Colorado Refineries Exemption from Clean Air Law, Court Says

by Michael Karlik (The Gazette) The federal appeals court based in Denver has overturned a 2019 decision of the U.S. Environmental Protection Agency that refused to grant Suncor Energy's Commerce City Refinery an exemption to a key environmental law.

Although the U.S. Court of Appeals for the 10th Circuit cautioned the EPA could find, upon further review, that Suncor still must participate in a greenhouse gas reduction program under the Clean Air Act, a three-judge appellate panel nevertheless concluded the EPA abused its discretion when it previously declined to exempt the energy company.

Suncor's appeal to the 10th Circuit involved a straightforward question with an ambiguous answer: Does the company's facility in Commerce City, consisting of an East Refinery and a West Refinery that are physically adjacent, count as a refinery? Or as two refineries?

The distinction matters in the EPA's application of the renewable fuel standard (RFS) program, which Congress first created in 2005 through the Clean Air Act. The RFS program requires renewable fuels to be blended into petroleum-based fuels, with the goal of lowering greenhouse gas emissions. Congress allowed "small refineries" to be exempt from the program — meaning refineries that process fewer than 75,000 barrels of crude oil daily.

Taken separately, Suncor's East Refinery and West Refinery processed well under 75,000 barrels per day at the time Suncor requested an exemption. However, if viewed as a single refinery, the Commerce City plant processed nearly 100,000 barrels per day in 2019, making it ineligible.

The 10th Circuit believed both interpretations were reasonable, given the ambiguity of existing regulations.

"East Refinery and the West Refinery could each potentially be classified as a 'refinery' because they each played some role in the conversion of crude oil into gasoline and diesel," wrote Senior Judge Mary Beck Briscoe in the Oct. 17 opinion, "yet the East Refinery and West Refinery, together, could also be considered a single 'refinery' because, as explained, they work together to convert crude oil into gasoline and diesel."

Still, she added, even if the EPA's conclusion was valid that the facilities are a single refinery, its reasoning was not.

Suncor itself publicly characterized the facilities as its "Commerce City Refinery," reported operating a single "98,000-barrel-per-day refinery" and had one vice president in charge of the entire facility.

Suncor then appealed the EPA's decision to treat the East and West facilities as a single refinery that was ineligible for a hardship exemption.

... EPA warned the 10th Circuit that a ruling in Suncor's favor could create an incentive for other large refineries to superficially subdivide their operations into facilities that fit the definition of small refinery, further evading compliance with the RFS program.

The panel's opinion seized on a technical distinction that neither the EPA nor Suncor focused on during the appeal. Although there was a dispute about whether the Commerce City plant consisted of one refinery or two, the law defines a refinery as "any facility" where fuel is blended. A facility, in turn, is the single location for "all of the activities and equipment associated with the production" of fuel.

"Curiously, however, the EPA’s decision in this case made no mention of this regulatory definition of 'facility'," Briscoe wrote. "In other words, we find it difficult to characterize the EPA’s interpretation as reasonable when it clearly appears to have ignored a regulatory definition that may well have allowed it to resolve Suncor’s petitions without the need to engage in any additional interpretation of the statutory and regulatory term 'refinery.'"

Although two physically-adjacent, integrated refineries could be a single facility, Briscoe elaborated, "the problem here is that the EPA’s decision does not make clear what level of integration will result in two operations being treated as a single 'refinery' for purposes of the RFS Program." READ MORE