Federal Court Stays EPA Action on SREs

OMAHA (DTN) -- A federal court will review EPA's latest decision to grant three small-refinery exemptions to the Renewable Fuel Standard, pending a full review of the action.

The U.S. Court of Appeals for the District of Columbia Circuit issued an order Thursday morning following EPA's decision on Tuesday to grant two of 32 exemption requests for 2019 and one for 2018 that was previously denied.

"We took this action immediately to prevent the agency from doing further economic damage to an industry already reeling from the impacts of COVID-19," Renewable Fuels Association President and CEO Geoff Cooper said in a statement on Thursday.

"To avert additional harm to the ethanol industry, EPA must be prevented from returning any compliance credits to the unidentified refiners who were given these last-minute exemption handouts."

RFA said the two 2019 exemptions will amount to another 150 million gallons of lost renewable fuel demand. The 2018 exemption is expected to result in a loss of 110 million gallons of biofuel demand and was previously denied by the agency.

A federal appeals court ruled last year that the agency had illegally granted exemptions to three refiners in 2016. An appeal by refiners in that case will be heard by the Supreme Court.

The Trump EPA's latest action ends what has been a tumultuous relationship between Trump and the ethanol industry. In total, the Trump EPA granted 88 exemptions since 2016. The EPA still has 65 pending requests across multiple years.

Ethanol industry officials were encouraged late last week when the agency announced a handful of proposed rules.

A statement in a new EPA proposed rule sent a signal EPA may not act on any new small-refinery exemptions. EPA stated, "Due to the ongoing litigation, we take no position on the availability of SREs for the 2019 compliance year."

Last week, members of Congress and the biofuels industry were scrambling over EPA Administrator Andrew Wheeler potentially reversing course and approving more renewable fuel exemptions for small petroleum refiners in the last days of the Trump administration.

Several legal challenges to small-refinery exemptions are ongoing.

The Supreme Court will review a ruling from the U.S. Court of Appeals for the 10th Circuit in Denver that found EPA mishandled the SRE program.

The 10th Circuit ruling in January 2020 led the EPA to reject more than 50 requests for retroactive exemptions in recent months. The court's ruling was considered to be one of the biggest court victories by the biofuels and agriculture industries as it pertains to the RFS.

The justices, without comment, agreed to hear an appeal by HollyFrontier Corp. and Wynnewood Refining Co. The companies have argued the 10th U.S. Circuit ruling wrongly deprives small refineries of economic relief authorized by Congress. Under law, small refineries facing an "economic hardship" from the RFS can receive exemptions.

Oral arguments before the Supreme Court are expected to take place sometime this spring.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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