Court Dismisses Lawsuit Challenging EPA’s Small Refinery Renewable Fuel Blending Waivers

The U.S. Court of Appeals for the District of Columbia Circuit this week dismissed a lawsuit by the Advanced Biofuels Association (ABFA) challenging the U.S. EPA’s small refinery exemption (SRE) waivers issued under the RFS program. SRE waivers are available to refiners processing up to 75,000 barrels of oil per day if they can demonstrate RFS blending mandates cause “disproportionate economic hardship” to their refining operation. Once the economic hardship is demonstrated, the EPA waives all or part of the small refinery annual renewable fuel volumetric blending mandate.

Renewable fuel groups, alarmed at the increase in SRE waivers over the past three years, claims the EPA is using the SRE waivers to reduce statutory volumetric blending mandates for gasoline set forth in the Clean Air Act. The ABFA contends that EPA secretly changed its policy to grant waivers more liberally without transparency, or a rational decision-making basis for doing so. The Court dismissed the lawsuit because it failed to challenge any notice and comment rulemaking or other agency final action announcing the adoption of a new decision-making policy for SRE waivers. The Court reasoned that “while the petition’s identification of a pattern across myriad circumstances may be evidence of a final agency action, it is not itself a final agency action that, without more, can support a petition for review.”

However, the court signaled sympathy for the ABFA by criticizing the EPA for intentionally keeping the waiver decision-making policy shrouded in secrecy in order to prevent legal challenge. The Court’s criticism could bolster a pending lawsuit filed by the Renewable Fuels Association over a specific EPA waiver policy memo that has come to light and spells out the rationale for SRE waivers and the Agency’s preference for full rather than partial waivers for small refineries.