Refiners, Barrasso urge 10th Circuit rehearing of RFS waivers ruling

The refining sector, backed by the state of Wyoming and Senate environment committee Chairman John Barrasso (R-WY), is urging a federal appeals court to grant rehearing of its landmark decision striking down compliance waivers granted to small refiners for renewable fuel standard (RFS) biofuel blending obligations, as reported by Dow Jones Factiva.

After EPA declined to petition the U.S. Court of Appeals for the 10th Circuit for rehearing in Renewable Fuels Association (RFA) v. EPA, some refiners nonetheless asked the full court for rehearing the case en banc.

In the suit, a three-judge panel unanimously struck down the RFS waivers of three small refiners because EPA“extended” them for plants that previously lacked the exemptions. If applied nationally by EPA, the move would block almost all small refiners from obtaining the waivers.

Biofuels groups blame the waivers for destroying demand for their product, and major oil companies not eligible for waivers also back the ruling. But small refiners say it will “devastate” their business, by forcing them to buyincreasingly expensive RFS compliance credits known as renewable identification numbers (RINs). Under the RFS, refiners must blend increasing quantities of biofuels into the fuel supply with lower greenhouse gas emissions than gasoline, and they satisfy the mandate by “surrendering” RINs to EPA.

Now, the American Fuel & Petrochemical Manufacturers (AFPM), representing many small refiners, the state of Wyoming, and individual small refiners are also calling for the full 10th Circuit to rehear the case in recent amicus briefs.

Barrasso in a March 31 statement declared his support for the rehearing push. “I stand with Wyoming and fully agree with its amicus brief in support of our state’s small refineries. This court’s decision was poorly reasoned and will put thousands of small refinery jobs at risk. A decision with such grave consequences deserves, at a minimum, a rehearing before all the judges on the Tenth Circuit,” Barrasso said.

Wyoming’s March 31 brief says rehearing is essential to protect its own refineries and firms in other states that are home to small refiners. The state says, “refineries and the State now face the reality that, absent reconsideration, the panel’s holding could spell the end of refining in Wyoming and similarly situated states.”

In its March 31 brief, AFPM says the case “presents ‘an issue of exceptional public importance’ worthy of en banc rehearing because it would, contrary to congressional intent, disqualify the majority of the nation’s small refineries from obtaining Small Refinery Exemptions [SREs] from the RFS,” even when they can show the “disproportionate economic hardship” required by the Clean Air Act to win a waiver.

“A major flaw of the Panel decision that only refineries that have continuously obtained exemptions can qualify for SREs is that it ignores that an individual small refinery’s circumstances can change year-to-year as mandates rise and economic conditions change,” the group says.

AFPM says the ruling also contradicts the court’s 2017 ruling in Sinclair Wyoming Refining v. EPA, in which the court made it easier for refiners to show “disproportionate economic hardship,” and upheld waivers previously denied by EPA for plants that did not have waivers continuously in prior years.

The 10th Circuit in Sinclair “overturned EPA’s denial of the exemption request even though the Sinclair refinery at issue had not received an exemption for every year of the program,” AFPM says.

Also, the group says that if the 10th Circuit decision in effect controls policy nationwide, as many expect it will, this usurps the role reserved for the D.C. Circuit under the air law for matters that are “nationally applicable” or have“nationwide scope or effect.”

“Petitioners circumvented the Clean Air Act’s jurisdictional provision channeling challenges” over such EPA decisions to the D.C. Circuit, the group argues.

‘Ineligible For Relief’

Sinclair Wyoming Refining and Big West Oil in their March 31 brief say, “The panel’s decision compounds the very illegality identified in Sinclair. For years, EPA denied relief to small refineries based on its erroneously stringent application of the statute.” But under “the panel’s new ‘consistency’ requirement, these refineries are now ineligible for relief altogether as a result of EPA’s illegal administration of the statute,” where the agency previously denied some waivers.

A coalition of small refiners led by Alon Refining Krotz Springs in a separate March 31 brief warn that the 10th Circuit decision “could not have come at a worse time. RIN prices have almost tripled since the Panel Decision,and the COVID-19 pandemic has led to an economic recession that is expected to cause a significant drop in American demand for crude oil. These market conditions have created a perfect storm that will not only exacerbate hardships on small refineries, but will threaten their very survival.”

In its March 31 brief, Indiana refiner CountryMark Refining and Logistics stresses the effect of the panel’s ruling far beyond the 10th Circuit states of Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming.

“CountryMark submits this amicus brief to demonstrate that the impact of the panel’s decision reaches far beyond the Tenth Circuit, and it is just as devastating to CountryMark’s farmer-owned cooperative operating a small refinery serving members and customers in the State of Indiana and the surrounding region,” the refiner says. --Stuart Parker (sparker@iwpnews.com)