By Stephanie Kelly
(Reuters) - A U.S. appeals court has ruled that the Environmental Protection Agency must reconsider three of the biofuel waivers it recently granted to small oil refineries, arguing the agency's justification for approving the exemptions was flawed.
The decision https://www.ca10.uscourts.gov/opinions/18/18-9533.pdf from the U.S. Court of Appeals for the 10th Circuit dated Jan. 24 came after a coalition of biofuel industry groups had challenged the 2016 exemptions for Holly Frontier's Woods Cross and Cheyenne refineries, as well as CVR Energy's Wynewood refinery.
The biofuel industry has been incensed by a surge in biofuel waivers granted under President Donald Trump's administration, which it says is hurting farmers by undermining demand for corn-based ethanol.
Under the U.S. Renewable Fuel Standard, the nation's oil refineries are required to blend billions of gallons of biofuels such as ethanol into the fuel or buy credits from those that do. But the EPA can waive their obligations if they prove compliance would cause them financial distress.
According to the court's decision, the EPA overstepped its authority to grant the Holly Frontier and CVR waivers because the refineries had not received exemptions in the previous year. The court said the RFS is worded in such a way that any exemption granted to a small refinery after 2010 must take the form of an "extension".
"Because an 'extension' requires a small refinery exemption in prior years to prolong, enlarge or add to, the three refinery petitions in this case were improvidently granted," according to the court's 99-page decision. "We remand these matters to the EPA for further proceedings consistent with this opinion."
Biofuel groups cheered the decision and said it could raise questions about numerous other waivers granted to small refiners in recent years. The Trump administration has roughly quadrupled https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions the number of waivers it has handed out to small refiners.
"Although RFA will be digesting the opinion and the implications for other proceedings, we are pleased to see judicial agreement with our long-held position that EPA's recent practices and policies regarding small refinery exemption extensions were completely unlawful," according to a statement from the Renewable Fuels Association.
Consultancy ClearView Energy Partners said in a note to clients it expects the decision to raise prices for biofuel blending credits required for RFS compliance, called Renewable Identification Numbers.
Officials at the EPA, Holly Frontier, and CVR were not immediately available to comment.
(Writing by Richard Valdmanis; Editing by Daniel Wallis)