EPA Denies Small Refinery Petitions

July 17, 2023

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by Cindy Zimmerman (Energy.AgWired.com) On Friday, EPA announced its decision denying 26 petitions seeking small refinery exemptions (SREs) from the Renewable Fuel Standard (RFS) program for one or more of the compliance years between 2016 and 2023.

Consistent with the April and July 2022 Denials of Petitions for RFS Small Refinery Exemptions, the action announced today applies EPA’s current interpretation of the Clean Air Act SRE provisions, consistent with a U.S. Court of Appeals for the Tenth Circuit holding in Renewable Fuels Association et al. v. EPA. The Tenth Circuit held that SREs may only be granted when a small refinery’s hardship is caused by compliance with the RFS program. After reviewing more than a decade of RFS market data and confidential information submitted by petitioning small refineries, EPA concluded that none of the 26 SRE petitions demonstrated disproportionate economic hardship caused by compliance with the RFS program.

Renewable Fuels Association President and CEO Geoff Cooper thanked the Biden Administration for keeping its promises to restore integrity and certainty to the RFS program. “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 Tenth 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. As a result of today’s announcement, drivers will enjoy greater access to cleaner, American-made, lower-cost renewable fuels.”

American Coalition for Ethanol (ACE) CEO Brian Jennings also welcomed the decision. “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 Tenth 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. 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.” READ MORE

EPA denies 26 biofuel mandate waivers, leaving only two pending (Agri-Pulse)

EPA denies 26 SRE petitions (Ethanol Producer Magazine)

EPA Rejects Nearly All RFS Exemptions: EPA Rejects 26 of 28 Previously Pending Small-Refinery Exemptions to RFS (DTN Progressive Farmer)

Biden Rejects Oil Refineries Seeking Biofuel-Blending Exemptions (Boomberg)

U.S. EPA denies nearly all biofuel blending exemption petitions (Reuters)

RFA Applauds EPA Decision to Deny Small Refinery Exemption Petitions (Renewable Fuels Association)

Small U.S. refiners plan to challenge biofuel blending waiver denials (Reuters)

Appeals court rejects refiners' challenge to EPA extension rule (Politico Pro)

D.C. Circuit Upholds Short RFS Compliance Timeline Against Refiners’ Suit (Inside EPA)

D.C. Circuit Weighs EPA Defense Of RFS Schedule After Denying Parallel Suit (Inside EPA)

US EPA denying small refineries biofuel blending waivers to aid corn, soybean demand (S&P Global)

Ethanol Blog: Refiners Appeal EPA Rejection of Small-Refinery Exemptions to RFS (DTN Progressive Farmer)

Biden Government Denies Refinery Pleas for Biofuel-Blending Exemption (Bloomberg/RigZone)

Growth Energy Files Motion In Support Of EPA’s Decision Against Refinery Exemptions (Ethanol Producer Magazine)

Growth Energy: EPA Is Right to Deny SREs (Growth Energy)

EPA Denies Oil Refineries Seeking Biofuel-Blending Exemption -- Ruling Says None Demonstrated Disproportionate Economic Hardship (Transport Topics)

EPA DENIES REFINER EXEMPTIONS, ETHANOL GROUPS SAY MOVE STRENGTHENS RFS (Brownfield Ag News)

Biofuels Groups Defend EPA’s Mass Denials Of Small Refinery RFS Waivers (Inside EPA)

EPA Defends Renewable Fuel Standards Rule Against Refiners (1) (Bloomberg)

Biofuel Cos. Say EPA Was Right To Nix Refiner Exemptions (Law360)

Excerpt from Reuters: The agency also disclosed which oil refiners submitted petitions in July 2022 or later, as well as which oil refiners are participating in an alternative compliance schedule that allows them flexibility in complying with biofuel blending laws.

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The administration has not yet extended a waiver to any refinery, reversing the policy of former President Donald Trump, whose administration granted 34 exemptions to oil refiners for the 2017 compliance year alone.

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The EPA publicized on Friday the names of refiners that submitted small-refinery exemption petitions from July 2022 or later. The agency added this information to its website to reflect its commitment to transparency around RFS decisions, it said.

Refiners that submitted petitions included Calumet Montana Refining and Ergon Refining. Their petitions were denied.

The agency also publicized the names of refiners that are using an alternative schedule to prove RFS compliance. Among those listed were Sinclair Wyoming Refining Company and Kern Oil and Refining Company.

Data from the EPA showed 17 small refineries have opted into the alternative compliance schedule for the 2020 compliance year, the only compliance year shown in the data. The group had retired 360 million credits to show compliance, and had 510 million credits outstanding, EPA's website showed. READ MORE

Excerpt from Reuters: A group of refiners plan to file a lawsuit challenging the Biden administration's rejection of waivers to exempt oil refiners from biofuel blending mandates which has left some on the hook for hundreds of millions of dollars, Par Pacific told Reuters on Monday.

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"We believe EPA's decision is arbitrary, capricious, and contrary to law," said Ashimi Patel with Par Pacific.

Par Pacific and CVR Energy (CVI.N) have some of the largest outstanding obligations.

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Par Pacific's gross RINs and environmental credit obligations stood at $347 million at the end of the first quarter 2023, based on market pricing then, a company filing showed. CVR Energy's outstanding liability was about $582 million at the end of the first quarter, another filing showed.

As the EPA under President Joe Biden has not granted any refiner an exemption, the EPA's decision last week was not a surprise, Tudor, Pickering, Holt and Co's Matthew Blair said in a note on Monday. READ MORE

Excerpt from Politico Pro: An appeals court on Tuesday denied refineries' petition to review an EPA rule extending the deadlines for meeting biofuel blending requirements under the Renewable Fuel Standard.

The filing examined EPA's authority to alter the compliance deadlines for refiners to catch up after the agency was delayed in issuing its rule.

Details: The U.S. Court of Appeals for the D.C. Circuit issued an opinion on Tuesday that denied refineries' consolidated challenge and rejected claims that EPA had acted arbitrarily and capriciously.

Refiners took aim at EPA's rule extending compliance reporting deadlines after it delayed publishing the biofuel blending volumes for 2020-2022. That rule meant refiners would not have to file compliance reports before knowing their renewable fuel obligations, but it compressed the intervals between the yearly compliance deadlines and established a new compliance schedule for 2023 and beyond.

Refineries had petitioned the court, arguing EPA's rule violated the Clean Air Act, or was arbitrary and capricious, given that they had less than 13 months between EPA's announcement of the standard and the reporting deadline. They also challenged the less than 12 months for compliance intervals, which refers to the time between reporting deadlines for successive compliance years. READ MORE

Excerpt from Inside EPA: The U.S. Court of Appeals for the District of Columbia Circuit is considering EPA’s newly filed defense of its “alternative” renewable fuel standard (RFS) compliance schedule for small refiners, which the sector says is unlawfully “compressed,” but it remains to be seen how a new D.C. Circuit ruling upholding another modified RFS schedule will affect the case. The agency filed a July 17 brief with the appellate court defending its alternative schedule for small refiners to supply RFS compliance credits,... READ MORE

Excerpt from DTN Progressive Farmer: Four refining companies petitioned U.S. appeals courts to review of EPA's recent rejection of 26 of 28 pending small-refinery exemptions to the Renewable Fuel Standard.

The agency made the announcement on July 14, denying 22 total SRE requests from 2021 and 2022, one from 2023 and one each from 2016, 2017 and 2018. There are two SRE petitions still pending for 2018.

The Biden administration has consistently rejected exemption requests and has yet to grant a single SRE. The Trump administration granted 88 exemptions.

Last week, the San Antonio Refinery, Calumet Shreveport Refining LLC, Hunt Refining Company and Calumet Montana Refining LLC filed petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit.

In addition, the San Antonio Refinery filed a petition in the Fifth Circuit, Calumet Shreveport in the Fifth Circuit, Hunt Refining in 11th Circuit and Calumet Montana in the Ninth Circuit.

The petitions were filed by the companies' attorney Perkins Coie LLC. The firm indicated in the filings the petitions were filed in multiple circuits as a "protective measure."

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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.

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

The 10th Circuit 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.

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 a 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

Excerpt from Growth Energy: Growth Energy, the nation’s largest biofuels trade association, filed briefs to intervene in three cases this week in support of the U.S. Environmental Protection Agency (EPA) and its decisions to deny small-refinery exemptions (SREs) for refiners seeking to avoid complying with their blending obligations under the Renewable Fuel Standard (RFS).

“Petitioners have tried over and over again to avoid complying with the RFS because less biofuel in America’s fuel mix means more money for them,” said Growth Energy CEO Emily Skor. “Thankfully, EPA has continued to rightly deny SREs, having demonstrated again and again that refiners have no good reason not to meet their blending obligations. In this week’s filings, Growth Energy continues to seek to defend the RFS—the nation’s most successful climate policy to date—from any attempts to weaken it.”

The cases are Calumet Montana Refining LLC v. EPA in the U.S. Court of Appeals for the District of Columbia Circuit, and San Antonio Refinery LLC v. EPA and Wynnewood Refining Co. LLC v. EPA, both in the U.S. Court of Appeals for the Fifth Circuit. Read Growth Energy’s briefs in Calumet here, San Antonio Refinery here, and Wynnewood here. READ MORE

Excerpt from Inside EPA: Biofuels groups are defending EPA’s mass rejection of renewable fuel standard (RFS) waivers for small refineries, pushing back on refiners’ claims that the denials rely on a regional appellate ruling that is no longer in force, and rejecting claims that EPA re-wrote statutory conditions for granting waivers and acted with unlawful retroactive effect. In their Nov. 1 intervenor brief filed with the U.S. Court of Appeals for the District of Columbia Circuit in Sinclair Wyoming Refining Co. LLC, et al.... READ MORE