July 13, 2022
One classic that my parents instilled in my millennial self was the cinematic masterpiece Rocky. But somehow, screaming “Adrian” before getting into a fight with my brother never won me any points with my parents. #horsehockey. Where am I going with this? Recently, Growth Energy filed a lawsuit against EPA that, well, goes the distance.
You might remember in April of this year, EPA denied 36 small refinery exemptions from the 2018 compliance year, 31 of which had already been granted. When EPA denied those exemptions, it afforded these small refineries an “alternative compliance approach.” Essentially, due to the fact that these denials came well-after the compliance year had ended, EPA allowed obligated parties (refineries and importers of nonrenewable fuel) to meet their 2018 compliance obligation without the need to buy or “redeem” additional RINs to retire against that obligation. As a matter of traditional compliance, small refineries have to buy and retire RINs against the obligation they incur as a result of their business activities.
To be absolutely clear, this alternative compliance approach is not typical. EPA allowing obligated parties a different approach to compliance was a deviation from what the regulations specify had to be done. However, had EPA not done this, the traditional compliance approach would have been to require obligated parties to find RINs that are at least four years old, which is not really a feasible task. Further, most of the small refinery exemptions from that year had already been granted, which means, these small refiners had concluded, predictably so, that their compliance obligation for the year 2018 was successfully waived. In essence, this alternative approach sought to seek a balance between EPA enforcing regulations for obligated parties and the market feasibility of acquiring RINs.
Cue the showdown between Rocky and Apollo Creed (i.e. Growth Energy and EPA). On June 27, Growth Energy filed suit against EPA for EPA’s “decision to excuse certain refineries from their obligations under the Renewable Fuel Standard (RFS).” In other words: “Addrrrriiaann!” At the end of the long wait for EPA’s decision, the final determination was that obligated parties have to meet their obligation…but they don’t need RINs to do it. Growth Energy understandably had to file suit because EPA, while it may be for a good reason, was not following the letter of the law.
Does this showdown make sense? Afterall, one of the reasons EPA granted this alternative compliance approach is because the feasibility of finding RINs that were generated in 2017 or 2018 is next to impossible. If Growth Energy is truly concerned about the RFS, wouldn’t it make sense to let sleeping dogs lie, so to speak?
Welllllll, I think that entirely depends on who you ask. On the one hand, rather than requiring small refiners to find RINs from 2017 or 2018, EPA could have required to small refineries to purchase and retire RINs from some other compliance year. On the other, 2018 was a long time ago and many of these small refiners had already been granted a waiver for that year.
I think Growth Energy’s greater point here is that EPA’s denial of small refinery exemptions has to be more than a pro forma effort. If EPA is going to go to the trouble of denying small refinery exemptions from four years ago, the majority of which had already been granted, there should be a better way to go about meeting compliance obligations. The RFS has seen again and again that small refinery exemptions can have a negative effect on the renewable fuels markets and Growth Energy’s suit is well-founded.
But will Growth Energy and EPA “go the distance?” It’s a little early to tell, but I think they might go blow for blow.