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U.S. EPA erred in denying renewable fuel hardship exemption -courts

NEW YORK, Aug 15 (Reuters) - The U.S. Environmental Protection Agency used too strict of a test when it wrongfully denied Sinclair Oil's request for an exemption from the country's biofuel regulations, a U.S. appeals court ruled on Tuesday.

The ruling could potentially broaden the rules governing such exemptions, forcing the EPA to grant more in future years under the controversial Renewable Fuel Standard program.

The EPA denied Sinclair's request for an exemption from a U.S. policy that requires refiners to blend biofuels like ethanol into their fuel pool or buy credits from those who do. The EPA ruled Sinclair did not qualify for an exemption under the policy's hardship waiver for small refiners as the company's two Wyoming plants were profitable and would not be forced to close if they participated in the program.

But the 10th U.S. Circuit Court of Appeals in Denver ruled on Tuesday the threat of closure was not the only test the EPA should use. The agency must consider other factors, such as decreased profitability and temporary, negative impacts, the court ruled, in a split 2-1 decision.

The ruling means the EPA will now have to reconsider Sinclair's application for an exemption.

"The EPAs interpretation takes the statutory language too far. First, as a matter of textual exegesis, a 'hardship is something that 'makes ones life hard or difficult - not just something that makes continued existence impossible," said the ruling by the court.

U.S. President Donald Trump has promised to cut down on burdensome regulations, providing hope to refiners that he would overhaul the U.S. renewable fuels program. But the White House is set to reject a key request from refiners to shift the blending obligation away from them.

The EPA's hardship exemption applies to refineries under 75,000 barrels-per-day. Refiners, large and small, have complained for years that the program is too costly and threatens the viability of the nation's plants.

Privately-held Sinclair and EPA could not immediately be reached for comment. (Reporting by Jarrett Renshaw; Editing by Andrew Hay)