Judge: Three 2016 SREs Were an Overstep of EPA Authority

09:58AM Jan 30, 2020
Corn Harvest 20
SREs had a big impact on ethanol use.
( Darrell Smith )

By Editors at Pro Farmer 


As we reported on Monday, a 10th Circuit Court ruled on Friday three small refinery exemptions (SREs) granted for the 2016 compliance year represented an overstepping of EPA’s authority. The Renewable Fuel Standard (RFS) is written in such a way that any hardship exemption after 2010 must take the form of an extension (see yesterday’s “First Thing Today” for more). That opens the possibility similar SREs could also be rescinded and could dramatically reduce EPA’s issuance of such waivers going forward. 

In its opinion, the court explained, “The amended Clean Air Act allows the EPA to grant an ‘extension’ of the small refinery exemption – not a stand-alone ‘exemption’ – in response to a convincing petition. The statute limits exemptions to situations involving ‘extensions,’ with the goal of forcing the market to accept escalating amounts of renewable fuels over time. None of the three small refineries here consistently received an exemption in the years preceding its petition. The EPA exceeded its statutory authority in granting those petitions because there was nothing for the agency to ‘extend.’”

The court also pointed to research indicating oil refineries are able to pass the cost of compliance on to consumers by raising fuel prices, indicating the waivers were not needed to help oil refineries financially.

The industry is still working to assess what the implications of this decision, but considering the number of SREs granted surged from seven in 2015 to 35 in 2017, the impact could be major. EPA granted 19 of 20 small refinery extension petitions in 2016, 35 of 36 eligible and maintained petitions in 2017, and 31 of 37 eligible and maintained petitions in 2018. The court opinion also points out the volume of exempted gasoline and diesel went from roughly 2 billion gallons in 2013 to a peak of 17 billion gallons in 2017, with another 13 billion gallons exempted in 2018.

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Geoff Cooper, president of the Renewable Fuels Association, said he hopes the court decision can eventually be applied to other waivers because the issues in question apply more broadly. RFA along with the National Farmers Union and the National Corn Growers Association were the parties that brought the lawsuit.

James Stock, an economist and professor at Harvard University who is versed in biofuel policy and cited by Reuters, also says the ramifications could be huge, noting the possibility that other waivers could be rescinded. “All of a sudden there would be vast amounts of past obligations due, combined with the prospect of very limited [waivers] going forward,” Stock explained.  

The language from the court opinion would certainly signal that is the case: “According to the EPA, 24 of these small refineries received extensions of their exemptions in the aftermath of the 2011 DOE [Department of Energy] study. That number should have tapered down from 2013 forward, because the only small refineries from this group which continued to be eligible for extensions were ones that submitted meritorious hardship petitions each year. This reading of “extension” means that once a small refinery figures out how to put itself in a position of annual compliance, that refinery is no longer a candidate for extending (really “renewing” or “restarting”) its exemption."

Read more SRE coverage here:

NW Iowa Ethanol Plant Idles Over SRE Waivers - AgWeb

EPA Announces 31 Small Refinery Exemptions ... - AgWeb