By Lauren M. Graham, Ph.D.
On August 31, 2017, the U.S. Environmental Protection Agency (EPA) announced that requirements for reformulated gasoline and low volatility gasoline would be waived through September 15, 2017, for Alabama, Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Texas, Louisiana, and the District of Columbia. EPA exercised its emergency fuel waiver authority to help ensure an adequate supply of fuel throughout the South, Southeast, and the Mid-Atlantic in the wake of Hurricane Harvey. As required by law, EPA and the Department of Energy (DOE) evaluated the impacts of Hurricane Harvey on refineries in the Gulf Coast based on strict criteria provided in the Clean Air Act (CAA) and determined that granting a short-term waiver was consistent with the public interest. The CAA requires that waivers be limited as much as possible in terms of their geographic scope and duration. EPA and DOE continue to monitor the fuel supply situation and will act if it is determined that extreme and unusual supply circumstances exist in other areas.
By Lauren M. Graham, Ph.D.
On August 15, 2017, the U.S. Court of Appeals for the Tenth Circuit ruled two to one that the U.S. Environmental Protection Agency (EPA) exceeded its statutory authority under the Clean Air Act (CAA) when it denied Sinclair Oil Corporation’s request for a hardship exemption from the Renewable Fuel Standard (RFS) program. The statute requires that EPA grant exemptions on a case-by-case basis to small refiners that would suffer a “disproportionate economic hardship” in complying with the RFS program. According to the court ruling, EPA’s interpretation that there needed to be a threat to the refinery’s survival as an ongoing operation to be eligible for the exemption is outside the range of permissible interpretations of the statute and, therefore, inconsistent with Congress’s statutory mandate. To support its ruling, the court cited the U.S. Department of Energy’s (DOE) matrix analysis that lists three viability metrics that determine hardships, including reduced profitability, temporary negative events, and risk of closure. As a result of the ruling, EPA will have to reconsider Sinclair’s request for an exemption.
Justice Lucero respectfully dissented, stating that the majority decision did not consider EPA’s lengthy discussion, which demonstrates that the Agency considered all of the viability factors.
On March 13, 2017, the South Dakota Farmers Union announced that the National Farmers Union had passed a resolution calling for the U.S. Environmental Protection Agency (EPA) to open the market to higher blends of ethanol during its annual meeting in San Diego. The resolution, which was brought forward by the South Dakota Farmers Union delegation, promotes the use of higher blended fuels, such as E30, as a way to expand the retail fuels infrastructure and support the Renewable Fuel Standard (RFS).
In addition to passing the resolution, the National Farmers Union filed legal comments regarding EPA’s overreach in its interpretation of the Clean Air Act (CAA), which limits ethanol content to 15 percent. Doug Sombke, President of South Dakota Farmers Union, called on EPA and all government regulators to reverse statements and policies that unfairly limit the amount of ethanol in fuel and stated that both the state and national organization continue to seek greater market access for higher blended fuels.
On March 2, 2017, Congressmen Adrian Smith (R-NE) and Congressman Dave Loebsack (D-IA) reintroduced legislation to expand the current Reid Vapor Pressure (RVP) waiver to include E15 motor vehicle fuel. The Consumer and Fuel Retailer Choice Act aims to foster the development of a robust energy marketplace by offering the same regulatory relief that has been extended to E10. Under the Clean Air Act (CAA), the U.S. Environmental Protection Agency (EPA) is required to control the volatility of gasoline between June 1 and September 15 to limit vehicle emissions. Congress permitted a RVP waiver for E10 due to its reduced emissions. EPA, however, has continuously refused to extend the waiver to E15 despite its lower volatility compared to E10. The bipartisan legislation would remove the restriction on the sale of E15 during the summer months and allow the fuel to be sold year-round.
On September 14, 2015, the U.S. Environmental Protection Agency (EPA) published a Notice of Proposed Settlement Agreement; Request for Public Comment in the Federal Register. The notice is to settle lawsuits filed by Sinclair Wyoming Refining Company and Sinclair Casper Refining Company challenging EPA's denial of requests for extensions of small refinery temporary exemptions in August 2014. Under the Clean Air Act (CAA), small refineries are able to request an exemption of Renewable Fuel Standards (RFS) Program blending mandates that would result in significant economic harm. The settlement allows the refineries to submit a request for exemption and EPA has agreed to make a decision on the request within 90 days. Comments are due by October 14, 2015.
On June 2, 2015, federal appellate judges decided that EPA's methodology for evaluating small refineries (those with crude oil throughput averaging 75,000 barrels or less per day) for exemptions from the RFS program was fair. Hermes Consol. LLC v. EPA, No. 14-1016 (D.C. Cir. June 2, 2015). Under the Clean Air Act (CAA), EPA is allowed to exempt small refiners from the annual blending requirements if compliance would cause ''disproportionate economic hardship." There was a blanket exemption available for all small refineries in 2011 that expired in 2013. The case was brought by Hermes Consolidated, LLC, doing business as Wyoming Refining Company, a small refinery that applied for exemption from the 2013 renewable fuel blending requirements but was denied after EPA made mathematical errors while evaluating financial hardship. The court has ordered EPA to reconsider the petition from Hermes Consolidated, LLC, but has upheld EPA's overall methodology for conducting small refinery exception analyses.
As referenced in last week's Biobased and Renewable Products Update, EPA published a Proposed Consent Decree along with a request for comment in response to the Clean Air Act (CAA) lawsuit filed by the American Fuel & Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API). The decree will establish deadlines for EPA to propose and issue in final the 2015 RFS. Comments are being accepted until May 20, 2015.