Appeals court temporarily blocks EPA waivers

Source: By Marc Heller, E&E News reporter • Posted: Thursday, January 21, 2021

A federal court yesterday put a hold on EPA’s latest small refinery exemptions (SREs) from federal biofuel-blending rules, responding to an emergency request from the ethanol industry.

The emergency stay ordered by the U.S. Court of Appeals for the District of Columbia Circuit means EPA can’t act on three exemptions it ordered on the last day of the Trump administration, at least for several weeks.

Biofuel groups said the exemptions, which EPA grants under a hardship-waiver provision of the renewable fuel standard, run afoul of the law and shouldn’t have been considered until a related case is resolved at the Supreme Court later this year. Sen. Chuck Grassley (R-Iowa) today called the three new exemptions a “disgrace.”

The court gave EPA until Feb. 3 to respond to the filing by the Renewable Fuels Association, with further filings due by Feb. 10.

The exemptions will be in limbo until the court has “sufficient opportunity to consider” the RFA’s emergency request, the court said.

Today’s ruling adds another twist to the long-running lobbying battle over requirements that refiners blend ethanol or other biofuel into gasoline — or buy renewable fuel credits as an alternative. The Trump administration awarded dozens of economic-hardship waivers to small refineries over four years, but President Biden’s campaign criticized them as a giveaway to the oil industry.

“We took this action immediately to prevent the agency from doing further economic damage to an industry already reeling from the impacts of COVID-19,” said RFA President and CEO Geoff Cooper on Tuesday as his organization filed its motion to halt the exemptions.

Refiners are hurting as well, industry groups say, with reduced consumer demand for fuel during the pandemic, as well as sharply higher prices for the renewable fuel credits.

Refiners and their allies on the issue say hardship waivers are necessary in cases where prices for renewable fuel credits spike, as they have occasionally. At times, companies say, the credits have exceeded labor as a small refinery’s top expense, and lawmakers intended the waivers as a safety net.

Supporters of the RFS dispute that assessment.

Congress wrote the exemptions into the RFS — part of the Clean Air Act — as a way to help small refineries adjust to the new biofuel mandates in the program’s early years and not to become available every year to any refinery that can make a case as long as the RFS continues.

In a reflection of the biofuel industry’s troubles, the Iowa Renewable Fuels Association today said ethanol production fell by 12% in that state in 2020, a drop of 500 million gallons.

The group blamed the pandemic, the refinery exemptions and trade disruptions for the decline.

“While a pandemic is unpredictable and trade disputes are difficult to resolve, there are steps that our leaders can take today to begin to heal the demand destruction done to Iowa’s ethanol producers,” said Iowa Renewable Fuels Association Executive Director Monte Shaw. “President Biden can instruct his EPA to properly enforce the RFS as Congress intended.”

EPA’s response to the new SRE challenge could offer hints about its approach to biofuel policy over the next few years. But that’s hard to tell for sure, a refining industry source told E&E News, because the agency doesn’t identify which refineries receive exemptions, nor EPA’s reasoning.

If the exemptions in question are extensions of ones from prior years, that could adhere to last year’s ruling in the 10th U.S. Circuit Court of Appeals that limited exemptions. That is the case the Supreme Court agreed to take up this spring.

The D.C. court’s action today could be encouraging for ethanol groups, Grassley said in a call with agricultural reporters, if it foreshadows a more skeptical approach to refinery exemptions by the Biden administration.

But the pending case at the Supreme Court has Grassley and others nervous. Normally, Grassley told reporters, the Supreme Court only takes a case from a circuit court when there’s disagreement at that level, which isn’t the situation this time.

“I can’t believe they’re taking it up,” said Grassley, who supports the 10th Circuit’s ruling against exemptions and said he hopes Biden’s EPA follows it. “It worries me that they’re taking it up.”