(Reuters) - A U.S. court decision last week striking down three biofuel waivers that the Environmental Protection Agency gave oil refineries in 2017 has cast doubt on the legitimacy of dozens of other EPA exemptions granted under similar circumstances, according to industry experts and agency data.
That spells uncertainty for a handful of independent refiners that secured lucrative waivers from the Trump administration, and could fire up prices for the biofuel blending credits those facilities need to comply with the nation’s biofuel law.
“The potential ramifications are huge,” said James Stock, an economist and professor at Harvard University who has researched biofuel policy.
Under the U.S. Renewable Fuel Standard, oil refineries are required to blend billions of gallons of biofuels such as ethanol into their fuel or buy credits from those that do. The EPA can waive those obligations if they prove compliance would cause them financial distress.
The biofuel industry has been incensed by a near quadrupling of waivers granted by the Trump administration, saying it is undermining demand for corn-based ethanol. The oil industry argues the waivers are needed to protect refining jobs, and says the waivers do not affect actual ethanol usage.
The U.S. Court of Appeals for the 10th Circuit on Jan. 24 vacated here three biofuel waivers the EPA granted in 2017 to two small refineries owned by HollyFrontier and one by CVR Energy, which is controlled by Trump ally and billionaire investor Carl Icahn.
According to the court's decisihere the EPA overstepped its authority to grant the 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."
It also noted research showing oil refineries are able to pass the costs of complying with the RFS to consumers by raising fuel prices, suggesting the waivers were not needed to help the oil refineries financially.
Officials at Holly Frontier and CVR were not immediately available to comment. EPA spokesman Michael Abboud said the agency is reviewing the decision.
A coalition of biofuel industry groups had challenged the three exemptions, bringing the suit. Those groups hope the court decision can eventually be applied to other waivers because the issues in question apply more broadly, said Geoff Cooper, president of the Renwable Fuels Association industry group.
According to EPA data here the agency granted seven biofuel waivers in 2015. That number rose to 35 in 2017 – meaning 28 waivers were given without having been given in a previous year. The EPA does not name the refineries that receive the waivers, arguing the information is confidential, but Reuters has reported here that some have gone to small facilities owned by large companies like Exxon Mobil and Chevron Corp.
Harvard’s Stock said the case threatens to hit small oil refineries hard if it means the waivers will be rescinded and they must comply with the RFS.
“All of a sudden there would be vast amounts of past obligations due, combined with the prospect of very limited (waivers) going forward,” he said.
Prices of blending compliance credits, known as Renewable Identification Numbers (RINs), are up about 20% since the court decision to one-month highs.
Ericka Perryman, a spokeswoman for the American Fuel and Petrochemical Manufacturers refining industry group, said AFPM was “carefully reviewing the opinion and potential implications.”
Additional reporting by Mark Weinraub in Chicago; Writing by Richard Valdmanis; Editing by Nick Macfie