Court rebukes EPA for forcing 2 refineries to hit RFS targets

Source: Amanda Reilly, E&E News reporter • Posted: Thursday, August 17, 2017

A federal appeals court rejected the Obama administration decision forcing two Wyoming refineries to meet production targets under the renewable fuel standard.

The 10th U.S. Circuit Court of Appeals found U.S. EPA erred by failing to grant exemptions to two small Sinclair Oil Corp. refineries.

“We conclude that EPA has exceeded its authority under the [Clean Air Act],” Chief Judge Timothy Tymkovich, a George W. Bush appointee, wrote in his opinion for the three-judge panel.

The decision comes after the U.S. Court of Appeals for the District of Columbia Circuit late last month rejected the Obama EPA’s justification for reducing annual renewable fuel targets. In that case, the court also found EPA had gone beyond its authority in its interpretation of the law (Greenwire, July 28).

At issue in the 10th Circuit case are provisions that Congress included in the renewable fuel standard (RFS) for EPA to grant exemptions to small refineries from having to blend biofuel or purchase credits.

Under the RFS, all small refineries were exempt from complying with the RFS biofuel targets through 2011. After that point, Congress said, small refineries could petition EPA to extend the exemption if participating in the program would cause them “disproportionate economic hardship.”

Sinclair’s Wyoming refineries were among 13 of 59 small refineries that had already received an extension from complying with RFS requirements until 2013. When that extension ran out, the company petitioned EPA to further waive compliance from meeting annual biofuel targets.

The law requires EPA to consult with the Energy Department about petitions for hardship waivers and to consider a scoring matrix that DOE created in 2011 for granting exemptions. The matrix includes factors such as a refinery’s access to credit, the local market acceptance of renewable fuels and whether the cost of compliance would reduce the firm’s profitability to the point where it impaired future efficiency improvements.

Based on that matrix, DOE recommended that EPA waive half of the renewable fuel requirements for both of Sinclair’s Wyoming refineries. But EPA rejected the recommendations and denied both petitions, finding the company had failed to show that complying with the RFS would threaten the “viability” of the Wyoming refineries.

In yesterday’s opinion, Tymkovich found that the agency went wrong when it only examined whether the refineries would face an existential threat as a result of having to comply with yearly biofuel requirements.

“The EPA’s equation of ‘hardship’ and ‘viability’ improperly transforms Congress’s statutory text into something far beyond what Congress plausibly intended,” Tymkovich wrote.

Missing from EPA’s analysis were other factors included in the DOE matrix, such as reduced profitability and short-term negative effects. EPA also failed to compare the impacts of the RFS on the Wyoming refineries with larger operations, the judge said.

The D.C. Circuit and 8th U.S. Circuit Court of Appeals have previously upheld EPA decisions rejecting hardship exemption petitions. But Tymkovich wrote that those cases were different from the Sinclair refineries because the agency undertook the proper analysis and considered other economic factors.

The court vacated EPA’s decisions on the Wyoming refineries and sent the case back to the agency to take action consistent with the ruling. Judges Carlos Lucero and Nancy Moritz, both Democratic appointees, joined the opinion.

Senate Environment and Public Works Chairman John Barrasso (R-Wyo.) yesterday applauded the decision. His committee oversees the RFS implementation.

“The Obama administration’s EPA exceeded its authority when it ignored the Department of Energy’s recommendations and denied small refineries hardship waivers under the renewable fuel standard,” Barrasso said in a statement. “I’m glad the court has recognized this and given EPA an opportunity to follow the law.”

Click here to read the court’s decision.