On July 26, Sidley secured an important victory for a group of small oil refineries in two companion cases in the D.C. Circuit.
The cases involved a pair of decisions by the Environmental Protection Agency (EPA), which administers the Clean Air Act’s Renewable Fuel Standard (RFS). The RFS requires refineries to either blend biofuels into their products or else buy compliance credits from their competitors. For small refineries, which already run on tight margins and often lack the ability to blend themselves, this requirement can impose outsized burdens, costing them tens of millions of dollars annually. Recognizing this, Congress allowed small refineries to seek exemptions when complying with the RFS would cause “disproportionate economic hardship.”
In the first decision under review, EPA denied dozens of exemption requests, reasoning that the costs of complying with the RFS cannot impose disproportionate economic hardship because refineries pass their compliance costs through to their customers in the price of their fuel. EPA’s rationale effectively turned the exemption into a dead letter—ensuring that no small refinery would ever be eligible for relief. In the second decision under review, EPA extended alternative compliance relief to small refineries that had previously been granted hardship exemptions for one of the compliance years at issue before EPA retroactively denied the exemptions.
The D.C. Circuit ruled in favor of the small refineries in both cases. In Sinclair Wyoming Refining LLC v. EPA (No. 22-1074), the Court held that EPA had unlawfully narrowed the statutory criteria for small-refinery exemptions and had acted arbitrarily and capriciously in concluding that small refineries pass through all their compliance costs. In a consolidated case, Sinclair Wyoming Refining LLC v. EPA (No. 22-1073), the Court dismissed a challenge brought by biofuel producers to the alternative compliance action, concluding that the petitioners had not established any harm from EPA’s decision and therefore lacked standing to sue.
The D.C. Circuit’s decision is a major victory for Sidley’s clients and the nation’s other small refineries, ensuring that they remain eligible for hardship exemptions and do not face crippling compliance burdens from the RFS.
Eric McArthur, Peter Whitfield, Dan Feith, and Peter Bruland (all Washington, D.C.) represented the small refineries, and Dan argued No. 22-1073.
