The U.S. Court of Appeals for the Tenth Circuit this week vacated three small refinery exemptions (SREs) granted in January to Sinclair, thus increasing ethanol compliance obligations for the 2018 and 2019 compliance years.
The RFS requires that obligated parties, which include refiners that produce gasoline or diesel fuel and importers of gasoline or diesel fuel, blend a certain number of gallons of ethanol and other biofuels into the national fuel supply. In the process, obligated parties obtain Renewable Identification Numbers (RINs) to show EPA that appropriate blending occurred. Obligated parties also have the option to purchase RINs to show compliance. Small refinery exemptions are petitions that small refiners can file with the EPA to be exempted from their blending requirements under the RFS. Such refiners need to cite economic hardship caused by the blending obligations in order to obtain a waiver.
Under the previous administration, the EPA in mid-January granted three SREs to refineries in Wyoming owned by Sinclair. However, the Renewable Fuels Association in January filed an emergency motion in the U.S. Court of Appeals for the D.C. Circuit for the court to issue a stay to EPA, temporarily preventing it from further processing the waivers. The D.C. Circuit shortly thereafter issued an order granting the stay and allowing EPA to respond.
Proceedings then moved to the Tenth Circuit in late April, where EPA petitioned the court to vacate the waivers. EPA argued that the previous administration “did not analyze determinative legal questions regarding whether Sinclair’s refineries qualified to receive extensions of the small refinery exemption under controlling case law,” thus the waivers should be vacated.
The 2018 compliance year petition EPA approved accounts for roughly 110 million RINs or approximately one billion gallons of gasoline and diesel that will be exempted from RFS blending obligations. The two 2019 compliance year SRE petitions combined account for roughly 150 million RINs or 1.39 billion gallons of gasoline and diesel that are exempted from RFS blending obligations. Thus, the ruling requires that Sinclair fulfill the requirement to either blend these gallons into its fuel supply or purchase RINs to demonstrate compliance.
