U.S. court rejects refiners' challenge in EPA biofuel waivers case

FILE PHOTO: The U.S. Environmental Protection Agency (EPA) sign is seen on the podium at EPA headquarters in Washington, U.S., July 11, 2018. REUTERS/Ting Shen/File Photo

(Reuters) - A U.S. federal court on Tuesday rejected a challenge from two oil refining companies to its January ruling that the Environmental Protection Agency had been handing out biofuel waivers inappropriately.

In a major blow to the refining industry, the ruling effectively forces the EPA to reduce the number of waivers it can grant to refiners exempting them from their obligations under the U.S. Renewable Fuel Standard.

Under the RFS, refineries must blend billions of gallons of ethanol into their gasoline each year or buy credits from those that do - a policy that has expanded the market for corn but which the oil industry says costs them a fortune.

Before the ruling, the Trump administration’s EPA had sought to ease the regulatory burden on refiners by granting dozens of small facilities exemptions from the RFS.

But the 10th Circuit Court of Appeals ruled in January that such Small Refinery Exemptions can only be used as extensions for refineries that had secured them continuously each year since 2010. That standard would exclude all but two refineries from consideration for future waivers.

Oil refiners HollyFrontier and CVR Energy, both of which had received waivers the court considered inappropriate, had sought a rehearing in the case but were denied on Tuesday, according to court filings reviewed by Reuters.

The EPA said it was holding off on deciding on pending waiver requests until the court case is ended.

The agency is expected to apply the court’s ruling nationally, effectively gutting the exemption program, but is also considering other measures to ease the regulatory burden on refiners like limiting prices for blending credits.

Reporting by Stephanie Kelly; Editing by Richard Valdmanis, Leslie Adler and Sonya Hepinstall