Change of Direction, Administration Plans to Appeal 10th Circuit Court Decision on RFS Waivers

Background

Last week, Bloomberg writers Jennifer A Dlouhy and Jennifer Jacobs reported that, “Trump administration officials have decided to pare the number of oil refineries granted waivers from biofuel mandates, according to two people familiar with the matter.

“The decision in response to a January court ruling represents a win for biofuel producers who have battled the exemptions and accused the Trump administration of siding with the oil industry on the issue.”

The Bloomberg writers explained that, “A three-judge panel of the Denver-based 10th Circuit Court of Appeals ruled in January that the EPA wrongly waived three refineries from requirements to use plant-based fuels.

“In their ruling, the judges said the federal law mandating biofuel limits waivers to situations involving ‘extensions‘ and pointed out that none of the three refineries at issue had ‘consistently received an exemption’ in previous years.

“In response, administration officials have decided to apply the ruling nationwide and propose a new slate of biofuel quotas for 2020, according to the people who asked for anonymity to discuss internal deliberations.

That approach means that only a handful of oil refineries — those that have consistently won exemptions since 2008 — likely will qualify for the waivers going forward, down from dozens in recent years.

Also last week, Reuters writer Stephanie Kelly pointed out that, “According to the court’s decision, the EPA overstepped its authority to grant waivers in the past for HollyFrontier Corp’s Woods Cross and Cheyenne refineries and CVR Energy Inc’s Wynnewood refinery 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.’

According to EPA data, the agency granted seven biofuel waivers in 2015. That number rose to 35 in 2017 – meaning 28 waivers were given without having been granted in a previous year.

Meanwhile, DTN writer Todd Neeley reported last week that, “With speculation swirling following a press report the Trump administration is set to change the small-refinery exemption program in the Renewable Fuel Standard to apply a recent court decision nationally, a group of senators from oil-producing states asked President Donald Trump in a letter on Thursday to challenge the court ruling.”

And on Wednesday, Reuters writers Stephanie Kelly and Jeff Mason reported that, “The Trump administration has decided to drastically scale back the U.S. Environmental Protection Agency’s program exempting small oil refineries from the country’s biofuel regulations after a court case cast doubt on the legitimacy of the program, according to a person familiar with the matter.

“The agency, meanwhile, is discussing the possibility of instituting a cap or other restrictions on the price of biofuel blending credits, called RINs, that refiners must acquire to show compliance with the biofuel regulations, two other sources said. Such a move would serve as compensation to the oil industry if the lucrative waiver program went away.

“The sources said the possibility of price controls was discussed in an EPA meeting earlier this week with officials from the White House, the Department of Energy, and the Department of Agriculture, but it was unclear if the administration would ultimately adopt the idea.”

The Reuters article pointed out that, “EPA Administrator Andrew Wheeler had told lawmakers during a hearing on Wednesday morning that the agency expects to make an announcement on the waiver program soon and that he hoped the decision would ‘quell’ the market for RINs.”

Change of Direction, Administration Will Likely Appeal The 10th Circuit Court Decision

However on Thursday, Bloomberg writers Jennifer A Dlouhy, Mario Parker, and Jennifer Jacobs reported that,

President Donald Trump has decided to defend in court the U.S. government’s power to broadly waive biofuel requirements for many oil refineries.

“The decision to appeal a federal court ruling imperiling those exemptions follows an intervention by Attorney General Bill Barr and an intense pressure campaign by oil-state senators, including Ted Cruz, a Texas Republican. The plan was described by five people familiar with the matter who asked for anonymity before a formal announcement.”

The Bloomberg article stated that, “The appeal plan would mark a reversal for the White House, where top officials as recently as a week and a half ago had planned to accept the ruling and apply it nationwide. That approach would have meant just a handful of U.S. refineries — no more than seven — would be eligible for the exemptions.”

“The Trump administration has until the end of Monday to appeal the ruling en banc — asking the full 10th Circuit to consider the case. Even without the administration joining in, refiners involved in the case are expected to seek a rehearing.

“An appeal would be a blow to producers of corn-based ethanol and soybean-based biodiesel, who have complained the Trump administration too freely handed out the waivers and undermined a 15-year-old federal law mandating the use of those plant-based alternatives. Biofuel allies have also warned Trump of political fallout — in farm states, such as Iowa,” the Bloomberg article said.