Small refinery gets second win in battle for renewable-fuel hardship exemption

Source: By Reuters • Posted: Wednesday, November 18, 2020

NEW YORK (Reuters) – A federal appeals court vacated for the second time on Tuesday a U.S. Environmental Protection Agency denial of small oil refinery Ergon West Virginia Inc’s (EWVI) request for an exemption from the country’s biofuel regulations after finding the agency had treated a similar business differently, to EWVI’s disadvantage.

A three-judge panel of the 4th U.S. Circuit Court of Appeals asked the EPA to redo the analysis it conducted to decide that EWVI did not qualify for a hardship waiver for small refineries from the Renewable Fuel Standard (RFS) program. It said it was “concerned” by new evidence suggesting that the agency had treated another company’s production of lubricant in addition to vehicle-fuel as helping its case for its waiver, while treating EWVI’s lubricant production as undermining its waiver petition.

“This ruling will save jobs, so the court’s decision is very welcome news and urgently needed for EWVI and its employees,” Kris Patrick, the company’s chief operating officer, said in a statement.

EPA spokeswoman Enesta Jones said the EPA was reviewing the decision.

Tuesday’s ruling comes two years after the 4th Circuit held that the EPA had acted arbitrarily and capriciously when it adopted “clearly flawed” Department of Energy recommendations, without explanation, in denying EWVI’s 2016 petition for a waiver to RFS requirements.

RFS requires that refiners blend biofuels like ethanol into their fuel pool or buy credits from those who do. But small refineries like EWVI with capacity of less than 75,000 barrels per day can request exemptions. Scoring is used to determine whether a small refinery suffers disproportionate economic hardship and therefore qualifies.

After the 2018 remand, EPA re-did its analysis and again rejected EWVI’s waiver petition. The company challenged the decision anew in 2019.

In Monday’s ruling, the panel said that the agency had “largely cured” the problems the court had identified in its first ruling and remand.

Still, the court ruled again that the EPA had acted arbitrarily and capriciously, this time in light of a filing by EWVI that showed its chances of being granted a waiver by EPA had been hurt by DOE’s problematic scoring of its operations.

The ruling came after the company introduced evidence, as supplemental materials, claiming to “pro(ve) that ‘a similarly situated small refinery with the same lines of business as EWVI – including substantial lubricant production – received a score of ’10′” for a scoring category for which EWVI had been given a zero.

EWVI, represented by Jonathan Hardin of Perkins Coie, said the evidence showed that its production of lubricant should, similarly, have been analyzed as not constituting an area of business separate from its vehicle-fuel production. The scenario, it argued, would have resulted in the company also obtaining a score of 10 for the scoring category in question, bringing it closer to obtaining the waiver.

Writing for the panel, U.S. Circuit Judge G. Steven Agee said that the materials, filed under seal, showed inconsistencies between the scoring of the two refineries, and “reliably called into question” EPA’s reasoning for endorsing DOI’s scoring of EWVI.

Agee, joined by U.S. Circuit Judges Paul Niemeyer and Stephanie Thacker, vacated EPA’s denial of EWVI’s petition for a waiver and remanded the case for further proceedings.

The case is Ergon-West Virginia, Inc. v. EPA, United States Court of Appeals for the Fourth Circuit, No. 19-2128.

For Ergon-West Virginia, Inc.: Jonathan Hardin of Perkins Coie

For EPA: Patrick Jacobi, U.S. Department of Justice