On March 9, the U.S. Court of Appeals for the 10th Circuit approved requests by the U.S. Department of Justice, HollyFrontier, and CVR Energy for an extension of the deadline to file motions asking for a rehearing en banc of Renewable Fuels Association et al. v. EPA, in which the Court found the EPA vastly exceeded its authority in granting compliance exemptions to three refineries from 2016 and 2018 Renewable Fuel Standard obligations. The new deadline for requesting a rehearing in the Tenth Circuit is March 24.
The petitioners in the case — the Renewable Fuels Association, National Corn Growers Association, American Coalition for Ethanol, and National Farmers Union — offered the following statement:
“We are very disappointed that the Administration has opted to kick the can on deciding whether to appeal the court decision, as all initial indications suggested EPA would not appeal the ruling and would correctly apply the decision nationally. This delay just prolongs uncertainty in the marketplace and stokes more angst and frustration in farm country. Still, we are hopeful the Administration will take this additional time to thoroughly review the court’s well-reasoned, unambiguous decision and carefully consider the adverse consequences of appealing. It is our hope that cooler heads prevail and that the White House reaches the logical conclusion that an appeal is both imprudent and unnecessary. Joining three refineries — who represent less than 1 percent of the nation’s oil refining capacity — in their appeal would be a rash and risky decision for the Administration. In fact, many oil refiners and the American Petroleum Institute have joined farmers and the ethanol industry in opposing an appeal and advocating for nationwide application of the court decision. An appeal by the Administration would be viewed by rural America as a senseless poke in the eye and a breach of the President’s commitments on ethanol and the Renewable Fuel Standard.”
As the EPA continues to mull an appeal, it may come under pressure from small refineries to act on pending retroactive small refinery exemption requests for 2019. The EPA may immediately deny pending 2019 exemption petitions that don’t comport with the court’s ruling, but it certainly cannot approve any of the pending petitions within the 10th Circuit unless they meet the unambiguous requirements for approval laid out by the court. Nationwide application of the 10th Circuit’s opinion by the EPA would in this instance provide a level playing field and help restore stability and certainty to the RIN markets.
In its motion, the Department of Justice stated, “The extension of time is necessary to allow the United States an opportunity to determine whether, and to what extent, the government will file a petition for rehearing en banc in this case.” The motion also acknowledges that the Court decision “…alters EPA’s interpretation and practice, which has been employed in the adjudication of past exemption petitions from many small refineries. The Court’s interpretation…could also have significant practical impacts on the RFS program going forward.” Of course, that the Tenth Circuit’s decision may alter EPA’s practices or have significant practical impacts does not mean the opinion is any less well-reasoned or persuasive—it merely indicates the extent to which EPA had been exceeding its statutory authority.
The petitioners also noted that the Court’s ruling comes less than a month after HollyFrontier announced it had returned $758 million to shareholders in 2019, with $533 million in stock buybacks. CVR Energy told investors it “delivered solid 2019 full-year and fourth quarter results…Our petroleum business again posted increased earnings year-over-year, driven by higher throughput rates, increased capture rates and higher refining margins despite lower crack spreads.” Yet, these are the same companies claiming they have disproportionate economic hardship compared to other refineries. As documented in a recent study by a Colorado State University economist, granting unwarranted exemptions to certain small refineries results in a windfall for their owners and an unlevel playing field in the refining sector.