On Friday, the 4th Circuit U.S. Court of Appeals vacated and remanded a 2016 decision by the U.S. Environmental Protection Agency (EPA) to reject Ergon’s petition for a small refiner waiver under the Renewable Fuel Standard (RFS). Ergon, a West Virginia-based oil refiner, had petitioned EPA for a small refiner exemption from the renewable volume obligations due to disproportionate economic hardship.

In its decision, the court found fault with the underlying Department of Energy (DOE) analysis that was used to reach this decision. Specifically, it determined that DOE’s economic analysis was “plainly arbitrary.” The court also faulted EPA for ignoring flaws in the analysis before rejecting the petition and for only providing a “cursory consideration” of how the price of Renewable Identification Numbers (RINs) affected the Ergon refinery. According to industry analysts, last week’s decision by the 4th Circuit U.S. Court of Appeals is consistent with similar cases before the court, but it offers a different basis for its conclusion by finding fault with the DOE analysis.

EPA only denied one of 20 small refiner exemptions for 2016 and approved all petitions for 2017 it has processed to date. The Ergon petition has become the latest battle over the future of the RFS program between ethanol supporters who believe the exemptions are undermining the program and refiners who believe the exemptions are needed to control costs.

The court has sent the matter to EPA to reconsider the petition after DOE and EPA complete a new analysis to address the flaws identified by the court. Some industry insiders believe that EPA could comply with the ruling by issuing Ergon new 2018 RIN credits.