The Environmental Protection Agency (EPA) on August 25 asked the U.S. Court of Appeals for the District of Columbia to return the Trump Administration’s 2019 decision to grant 31 small refinery exemptions (SREs) to the agency for review.
The move immediately follows a June 25 Supreme Court decision that struck down a lower court’s ruling that said SREs must be granted consecutively to be valid. SCOTUS, in a 6-3 ruling, said SREs from the Renewable Fuel Standard (RFS) blending requirements do not need to be extended continuously to remain valid.
“Following the Supreme Court’s decision, EPA plans to consider what, if any, impact the remaining holdings in the 10th Circuit’s decision may have on EPA’s implementation of the small-refinery exemption provision generally, and what, if any, resulting impact that may have on small-refinery petitions adjudicated in the decision and challenged here,” EPA said in its motion.
EPA said it would have been “premature” to consider prior to the SCOTUS decision. EPA said small refineries that applied for extensions “have not received continuous extensions” of the exemption. “Therefore, had the Supreme Court upheld the 10th Circuit’s decision, most small refineries would have been statutorily ineligible to receive a further extension of the exemption,” EPA said in its motion.
Justice Neil Gorsuch wrote the opinion of the court in its 6-3 ruling and sided with Chief Justice John Roberts and Justices Clarence Thomas, Stephen Breyer, Samuel Alito, and Brett Kavanaugh. Justice Amy Coney Barrett filed the dissenting opinion along with Justices Sonia Sotomayor and Elena Kagan.
The U.S. Court of Appeals for the Tenth Circuit in May vacated three SREs originally granted in January to Sinclair, thus increasing ethanol compliance obligations for the 2018 and 2019 compliance years. This decision effectively increased demand for ethanol.
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/or other biofuels into the national fuel supply. In the process, the 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. SREs 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 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.
The above is EPA’s response.
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 that 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 10th Circuit ruling would have required that Sinclair fulfill the requirement to either blend these gallons into its fuel supply or purchase RINs to demonstrate compliance.
With the SCOTUS ruling, Sinclair would not be required to meet these blending obligations and thus the waivers would remain in effect. However, if SCOTUS grants EPA’s request for review, such a conclusion could be overturned.
