October 14, 2020
There are somethings that just should not be repeated: headaches, heartbreaks…global pandemics, the year 2020…too soon? The 10 Circuit Court case that happened earlier this year is not one of those things.
**DISCLAIMER** If you do not know what a small refinery exemption is or you do not understand what an RVO is, you will not understand this article. There are several articles on this page to help you understand those concepts. Read those articles first and then come back to this one. It’s a good time, I promise.
Sometimes, it’s ok to skip over the facts….just like candidates running for president do. However, just like when it comes time to vote, the facts are really important for you to know. What had happened was, a group of renewable fuel groups (“Biofuels Group”) brought suit against the EPA for granting small refinery exemptions to small refineries who did not meet the qualifications for an exemption. More specifically, the Biofuels Group brought suit against the EPA for granting the following refineries small refinery exemptions:
- Holly Frontier Cheyenne, LLC (“Cheyenne”): Cheyenne had been granted an exemption for the year 2012 but had not petitioned for an extension of the exemption for the years 2013 and 2014. However, in 2017 Cheyenne petitioned for an exemption for the compliance year 2016. The Department of Energy (“DOE”) recommended to EPA that Cheyenne should not be a granted an exemption. EPA, however, granted an exemption for the compliance year 2016 in full.
- Holly Frontier Woods Cross Refining, LLC (“Woods Cross”): Woods Cross had never petitioned nor been granted a small refinery exemption for any year. However, in the year 2017, Woods Cross petitioned EPA for an exemption for the compliance year 2016. Woods Cross did not identify as having a disproportionate economic hardship, a requirement to be granted an exemption. DOE recommended the EPA grant Woods Cross a partial exemption, but EPA, in its wisdom, granted a full exemption.
- Wynnewood Refining Company, LLC (“Wynnewood”): Wynnewood had been granted a blanket exemption for the year 2011 and 2012. However, Wynnewood had not received an exemption since the year 2012. Wynnewood petitioned EPA for an exemption in 2017 for the compliance year 2016. The DOE, noting that Wynnewood’s compliance would “not appear…to threaten the refinery’s economic viability,” recommended a partial exemption. EPA, nonetheless, granted Wynnewood a full exemption for the year 2016.
Why do you care about those facts? Before I answer that, there are a few things you need to keep in mind. As a reminder, for a small refinery exemption to be granted the petitioning refinery needs to be: (1) small (with a through put of less than 75,000 barrels per day) and (2) needs to show that compliance with RFS requirements would result in a disproportionate economic hardship. Additionally, a small refinery does not qualify for an exemption if, after the year 2012, the refinery has not petitioned for an exemption on an annual basis. Now, go back and read the facts again. Note how none of the named refineries had experienced a disproportionate economic hardship nor had they petitioned consistently for an exemption….so in other words, they didn’t qualify for an exemption.
In reviewing this case, the 10th Circuit was overwhelming clear with their sentiments on EPA’s actions. In the court’s own sassy words: “[t]hese ordinary definitions of ‘extension,’ along with common sense, dictate that the subject of an extension must be in existence before it can be extended.” In other words, you can’t grant an extension of something that never existed. The court concluded their sentiments by saying: “[g]ranting extensions of exemptions based at least in part on hardships not caused by RFS compliance was outside the scope of the EPA’s statutory authority.”
Now, back to why you should care about this. In order for EPA to grant full exemptions to any of the named refineries, EPA would have had to blatantly disregard the regulations. While EPA is allowed the authority to grant or deny petitions for small refinery exemptions as they see fit, in doing so, EPA is not allowed to completely disregard the regulations. As the court’s conclusions clearly noted: you can’t just make up the rules. While this is one case in one circuit, the hope is that this will have implications on EPA’s future actions. Perhaps, this decision will keep EPA from having headaches and handing out heart breaks to participants in the renewable fuel standard.