The U.S. Environmental Protection Agency’s denials of small refineries seeking exemptions to a renewable fuel program was vacated on Aug. 14 by a federal appeals court, which found the agency misinterpreted the law that outlines how to handle exemption applications.
An EPA spokesperson told The Epoch Times in an email that the agency is reviewing the decision and declined further comment.
The agency was directed by Congress as part of updates to the Clean Air Act to implement a Renewable Fuel Standard program. The program requires oil refineries to add ethanol and other renewable fuels to the nation’s energy supply by blending the fuels into gas or buying credits.
The law said small refineries subject to disproportionate economic hardship if required to comply with the program could ask the EPA for exemptions from the program’s requirements.
The EPA for years, relying on a U.S. Department of Energy study that found small refineries have unique obstacles that could make compliance more costly than larger companies, granted exemptions to many small refineries. But in 2022 it denied dozens of petitions, including 31 which it had initially granted, and rejected all remaining applications.
The EPA cited a decision from the U.S. Court of Appeals for the 10th Circuit, which said in a ruling that the EPA was wrongly considering economic hardships beyond those caused by compliance with the fuel program and that the agency should be looking at whether refineries could recoup the cost of complying with the program by passing on the costs to customers.
The U.S. Supreme Court, though, partially struck down the 10th Circuit’s ruling, and that appeals court in response vacated its entire decision.
In filings to the District of Columbia Circuit, the EPA continued citing the ruling, but “that holding is neither law in this circuit nor in the Tenth Circuit, where it has since been vacated,” the court said in its new decision.
The panel said that the EPA’s handling of hardship exemption applications went beyond the Clean Air Act (CAA) because Congress wrote that small refineries could show any economic hardship, not just hardship based on compliance with the renewable fuel program requirements.
“EPA’s definition of disproportionate economic hardship is inconsistent with the plain meaning of the hardship exemption and contradicts other provisions in the CAA,” the panel said. “The denial actions exclusively focused on compliance costs instead of economic hardship, neglected the CAA’s directive to consider ‘other economic factors,’ and introduced an overly strict causation requirement.”
The same court previously said that the EPA has broad discretion to consider a range of factors when considering whether to grant or deny petitions, but that discretion does not mean the EPA can restrict the meaning of economic hardship in a manner inconsistent with the law, the panel said.
The EPA’s denials were also arbitrary and capricious in part because the EPA never provided evidence for its claim that costs for program credits are immediately passed to customers of the refineries, according to the ruling.
The panel, which consisted of U.S. Circuit Judges Cornelia T.L. Pillard, Neomi Rao, and Florence Y. Pan, vacated the denials and remanded the cases back to the EPA.
The panel also took up challenges to the EPA, after issuing denials to 31 small refineries previously approved, allowing the refineries to avoid some of the program requirements for certain years.
The trade association Growth Energy said the EPA did not have the authority to take the action, but the association did not show standing, the panel said.
Sinclair Wyoming Refining Company, meanwhile, argued the EPA did not adequately explain why it did not extend the avoidance to it, but the judges said the EPA did provide details about the exclusion. And a challenge from Wynnewood Refining Company, which was among the refineries granted the avoidance, to the EPA was rejected because the EPA never acted on a request that Wynnewood made.
