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Appellate Court Rules EPA RFS Exemption Criteria Too Strict
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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.