(Adds comment from Sinclair)
NEW YORK, Aug 15 (Reuters) - The U.S. Environmental Protection Agency used too strict of a test when it denied Sinclair Oil Corp's request for an exemption from the country's biofuel regulations, a U.S. appeals court ruled on Tuesday.
The ruling could broaden the rules governing such exemptions and force the EPA to grant more of them under the Renewable Fuel Standard program, which requires that refiners blend biofuels like ethanol into their fuel pool or buy credits from those who do. Refiners of all sizes have complained for years that the program was too costly and threatened the viability of U.S. plants.
The EPA ruled that Sinclair did not qualify for a hardship waiver for small refiners, with capacity of less than 75,000 barrels per day, as the Salt Lake City, Utah-based company's two Wyoming plants were profitable and would not be forced to close if they were in the program.
The EPA granted 29 annual exemptions under the program from 2013 through the end of 2016, the agency said in June.
The 10th U.S. Circuit Court of Appeals in Denver ruled that 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, it said in the 2-1 decision.
The EPA will now have to reconsider Sinclair's application for an exemption.
"The EPA's interpretation takes the statutory language too far. First, as a matter of textual exegesis, a 'hardship' is something that 'makes one's life hard or difficult - not just something that makes continued existence impossible," according to the ruling.
Sinclair said in an emailed statement it was grateful for the decision. The EPA did not respond to request for comment.
U.S. President Donald Trump has promised to cut down burdensome regulations, providing refiners hope 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. (Reporting by Jarrett Renshaw and Emily Flitter; Editing by Andrew Hay and Richard Chang)