US Court Rejects EPA's Decision to Withhold Small Refinery Biofuel Waivers

November 24, 2023

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by Heather Timmons (Reuters) A U.S. appeals court on Wednesday said it struck down the Biden administration's decision to deny small refiners "hardship waivers" that exempt them from nation's biofuel mandates, in a win for the refining industry.

In July, the Environmental Protection Agency (EPA) denied almost all outstanding petitions from oil refiners that argued the federal requirement that they blend ethanol and other biofuels into their fuel would cause them financial hardship.

The U.S. Court of Appeals for the Fifth Circuit found in favor of refineries that challenged the EPA's decision, including Ergon, Calumet Shreveport and Placid.

The court said in its 38-page decision that the EPA's rejection of the waiver requests was "impermissibly retroactive; contrary to law; and counter to the record evidence".

Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into the nation's fuel mix, or buy tradable credits from those that do.

The EPA can, however, award exemptions to some small refiners if they prove that the obligations cause them undue harm.

The biofuel industry, including producers of corn-based ethanol, have fought the small refinery waiver program for years, arguing that it has been overused in a way that helps the oil industry but hurts American farmers.

Refiners, meanwhile, have long argued that the nation's ethanol mandates impose unfair costs on fuel producers, and can threaten the viability of small plants. READ MORE

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Ethanol, Ag Groups Express Disappointment In Court’s SRE Decision (Ethanol Producer Magazine)
EPA loses court battle over renewable fuels exemptions -- The 5th Circuit found that EPA overstepped in rejecting small refineries' "economic hardship" argument for sidestepping the biofuel blending mandate. (Politico Pro)
EPA Faces Policy Concerns After Court’s Rejection Of RFS Waiver Denials (Inside EPA)
U.S. DISTRICT COURT RULES IN FAVOR OF REFINER WAIVER APPEAL (Brownfield Ag News)
Ethanol Industry Reacts to Waiver Ruling (Energy.AgWired.com)
GRASSLEY NOT SURPRISED BY FIFTH CIRCUIT DECISION ON SMALL REFINERY WAIVERS (Brownfield Ag News)
D.C. Circuit pauses suit over 2023 RFS waiver denials (Inside EPA)
Farm, Biofuels Coalition Responds to Fifth Circuit Small Refinery Exemptions Decision (Growth Energy)
D.C. Circuit sets date for RFS waivers hearing (Inside EPA)
D.C. Circuit Panel Doubts EPA Basis For RFS Refinery Waiver Denials (Inside EPA)
DC Circuit skeptical of EPA in biofuels battle: Judges may force the agency to rethink a set of denials for renewable fuel standard exemptions. (Politico Pro Greenwire)

Excerpt from Ethanol Producer Magazine: A coalition of ethanol and farm groups on Nov. 27 released a statement expressing disappointment in the Fifth Circuit Court of Appeals Nov. 22 decision remanding to the U.S. EPA six small refinery exemption (SRE) requests. The coalition, which includes the Renewable Fuels Association, Growth Energy, American Coalition for Ethanol and National Farmers Union, said it will continue to defend the Renewable Fuel Standard.

Six small refineries in 2022 filed petitions with the court challenging the EPA’s denial of their SRE petitions, The agency in December 2021 proposed to deny more than 60 SRE petitions filed by small refineries seeking exemptions from RFS blending requirements for one or more compliance years between 2016 and 2021. At that time, the EPA said its decision to deny those SREs was based on results from its review of the pending SRE petitions and supporting information, its legal, technical and policy analysis of the Clean Air Act provisions related to small refineries, and its application of the holding of the U.S. Court of Appeals for the Tenth Circuit in Renewable Fuels Association et al. v. EPA. The proposed denials were finalized in 2022.

In its ruling, the court said the petitioners’ SREs were denied by the EPA using a “novel CAA interpretation and economic theory that the agency published in December 2021.” The court concluded that the denials were “impermissibly retroactive,” “contrary to law,” and “counter to the record evidence.”

“While we are disappointed by this decision, we will continue to vigilantly defend the Renewable Fuel Standard and fight against the illegal abuse of small refinery exemptions,” the RFA, Growth Energy, ACE and NFU said in their statement. “As other Federal courts have determined, the RFS does not impose an economic burden on oil refiners because any compliance costs are passed down the supply chain. All refiners—regardless of their size or location—face equitable RFS obligations, and all of them pass through their costs to comply. This lawsuit was never really about purported economic hardship; rather, it was about a handful of entrenched oil refineries doing everything they can to dodge their legal obligations to blend renewable fuels and block consumer access to lower-cost, lower-carbon options at the pump.” READ MORE

Excerpt from Brownfield Ag News: U.S. Senator Chuck Grassley suggests it’s no surprise the Fifth Circuit Court sided with oil refiners that appealed the EPA’s denial of small refinery exemptions.

The states in the Judicial District are Texas, Louisiana, and Mississippi.

“Every state that produces a lot of oil and (are) very anti-ethanol.”

In their ruling last week, the Fifth Circuit Court said EPA’s rejection of the waiver requests was contrary to law and counter to the record evidence.

Grassley, a Republican from Iowa, tells Brownfield he applauds EPA for abiding by the Renewable Fuel Standard by denying the hardship waivers.

“They did the right thing, and that was kind of surprising because I don’t see the EPA doing the right thing an awful lot when it comes to ethanol.”

The court decision means refiners in that district can continue utilizing the SRE program. READ MORE

Excerpt from Inside EPA: A federal appeals court has paused consolidated litigation challenging EPA’s July denial of multiple small refinery waivers from renewable fuel standard (RFS) biofuel blending mandates, after one appeals court last week scrapped EPA’s earlier denial of Gulf Coast refiners’ waivers, while other courts have yet to rule in similar pending suits. The U.S. Court of Appeals for the District of Columbia Circuit Nov. 28 granted refiners’ unopposed motion to hold the case, Calumet Montana Refining LLC v. EPA , in... READ MORE

Excerpt from Inside EPA: The U.S. Court of Appeals for the District of Columbia Circuit has scheduled oral argument for April in small refiners’ case against EPA’s denial of dozens of requests for renewable fuel standard (RFS) compliance waivers, litigation that may result in a split with a regional appeals court that has overturned waiver denials on the Gulf Coast. The D.C. Circuit will hear argument April 16 in Sinclair Wyoming Refining v. EPA , a suit consolidating many challenges by small refiners to...READ MORE

Excerpt from Inside EPA: Judges on the U.S. Court of Appeals for the District of Columbia Circuit appear to doubt EPA’s basis for denying dozens of economic hardship waivers for small refineries from renewable fuel standard (RFS) compliance, questioning the agency’s cost “passthrough” theory and specifically its requirement for “ratable” surrender of RFS credits. At oral argument April 16 in Sinclair Wyoming Refining, et al. v. EPA, et al., Judges Nina Pillard, Neomi Rao and Florence Pan pressed attorneys for EPA to explain... READ MORE

Excerpt from Politico Pro Greenwire: A federal appeals court appears likely to side with petroleum refiners fighting EPA denials of their requests for exemptions from federal renewable fuel requirements.

During oral arguments Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit grilled attorneys for the agency on whether they took too narrow a view of what constitutes financial difficulty sufficient to excuse refiners from their obligations under the Clean Air Act’s renewable fuel standard.

“Is it your position that a small refinery that is facing proportionate compliance costs cannot experience disproportionate economic hardship,” Judge Cornelia Pillard, an Obama appointee, asked Jeffrey Hughes, a Justice Department attorney arguing on behalf of EPA.

The case centers on what factors EPA can consider when deciding to waive RFS requirements for small refineries that face disproportionate costs. The standard requires refineries to either blend increasing volumes of biofuels into gasoline and diesel fuel or to purchase credits — known as RINs — from facilities that blend more than the required amount. READ MORE

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