EPA issues guidance on future SRE actions, RFS compliance date

By Erin Voegele | March 27, 2020

The U.S. EPA on March 27 announced it intends to develop an “appropriate implementation and enforcement response” to the Tenth Circuit Court’s small refinery exemption (SRE) ruling “after appeals have been resolved and the court’s mandate has been issued.” The agency also said it will extend the Renewable Fuel Standard compliance date for small refineries to provide them with additional flexibility.

In addition, the EPA announced it does not intend to unilaterally revisit or rescind any previously granted SREs issued for prior compliance years. “As noted in the temporary policy on COVID-19 Implications for EPA's Enforcement and Assurance Program, issued yesterday, EPA is focused on protecting our employees and ensuring continued protection of public health and the environment from acute or imminent threats during the COVID-19 pandemic,” the agency said it its statement. “Therefore, investigating and initiating enforcement actions against small refineries that were previously subject to an exemption is a low priority for the agency.”

The statements related to SREs and the RFS compliance date were included in an announcement the EPA made on March 27 regarding steps it is taking to protect the availability of gasoline during the COVID-19 pandemic.

As part of that effort, EPA said it will provide additional flexibility to the marketplace to transition from winter-grade, high volatility gasoline to summer-grade low vapor pressure gasoline. “Due to the steep fall-off in gasoline demand as a result of the COVID-19 pandemic, gasoline storage capacity is limited and more time is needed to transition the distribution system in order to come into compliance for the summer driving season,” the agency said. “EPA will temporarily waive the summer low volatility requirements and blending limitations for gasoline.”

“Without a waiver of the summer gasoline requirements, parties upstream of retailers and wholesale purchasers would be required to stop selling the winter gasoline sitting in their storage tanks on May 1, 2020, which would prevent them from loading summer gasoline into the storage tanks, resulting in a shortage of gasoline,” the EPA continued. “By waiving the low volatility and blending limitations through May 20, 2020, EPA will ensure a steady supply of gasoline. EPA will continue to monitor the adequacy of gasoline supplies and, should conditions warrant, may modify or extend this waiver at a later date.”

Representatives of the biofuels industry expressed disappointment in the agency’s decision delay implementation of the Tenth Circuit Court’s Jan. 24 ruling that struck down three small refinery exemptions (SREs).

“As our plaintiff group said on Wednesday of this week, we appreciate the Trump Administration’s decision not to appeal our victory regarding SREs under the RFS in the Tenth Circuit Court,” said Brian Jennings, CEO of ACE. “While we urge EPA to immediately announce it will apply the Tenth Circuit’s precedent nationwide, ensuring a more legally-sensible approach to SREs going forward, it’s disappointing to learn the Agency prefers to punt this decision until the Tenth Circuit has deliberated on the appeal by HollyFrontier and CVR. We continue to believe the appeal by HollyFrontier and CVR has no merit. We fully expect EPA to comply with the law and end the mismanagement of the RFS. The economic fall-out of COVID-19 is doing substantial damage to the ethanol industry and we expect the Trump Administration to leave no stone unturned in responding instead of only benefiting oil at the expense of rural America."

“EPA’s attempt to kick the can on nationwide application of the Tenth Circuit Court decision has nothing to do with COVID-19 and everything to do with politics,” said Geoff Cooper, president and CEO of the RFA. “There is absolutely no reasonable justification for delaying implementation of the court’s decision. The court has already ‘issued a mandate’ and remanded three improperly granted exemptions back to the agency to resolve. EPA correctly chose not to seek a rehearing of the Tenth Circuit decision this week, signaling that it will abide by the decision and move swiftly to implement it. What are they waiting for? There is no rationale for EPA to wait for the courts to respond to the refiners’ hollow request for a rehearing before moving forward with adoption of the decision. In any event, given the unanimous and thoughtful decision by the Tenth Circuit panel that heard the case, we are confident that the ruling is going to be upheld. As ethanol plants are shutting down across the country and farmers are experiencing substantial demand losses, now is not the time for EPA to slow-walk implementation of a court order that would begin to restore integrity to the RFS program.”