Biofuel Groups, States File Amicus Briefs in SCOTUS SRE Case

by Erin Voegele (Ethanol Producer Magazine) The Advanced Biofuels Association, Coalition for Renewable Natural Gas, the National Biodiesel Board and a group of eight states on March 31 filed amicus briefs with the U.S. Supreme Court urging the court to affirm the Tenth Circuit Court of Appeals’ January 2020 ruling on small refinery exemptions (SREs).

The Tenth Circuit Court of Appeals on Jan. 24, 2020, issued a ruling that struck down three SREs that the court said were improperly issued by the EPA and held that the agency cannot “extend” exemptions to any small refineries whose earlier, temporary exemptions had lapsed.

In its amicus brief, the ABFA discusses the impact of SREs on producers of advanced biofuels, stressing that the petitioners in the case do not acknowledge the adverse economic impact that the renewable fuels industry must absorb when dozens of small refineries are excused from their statutory Renewable Fuel Standard blending requirements. The maximum downside from a small refinery complying with the RFS is that it must offset its renewable fuels deficit by purchasing renewable identification numbers (RINs) from the marketplace, the ABFA explained, adding that the cost of those RINs is largely passed on to customers. Producers of advanced biofuels, however, are left holding fuel for which they can no longer command a fair price when blending obligations are lowered through the use of SREs, causing direct harm to the biofuels industry.

The ABFA also stressed that while the petitioners have gone to great lengths to try to link small refinery closures and conversions to the lack of SREs, those closures clearly relate to external factors, such as the COVID-19 pandemic, that have no relation to the RFS program. “ABFA’ members, on the other hand, have suffered losses—ranging from business closures to shelving expansion plans—that are directly attributable to dozens of small refineries receiving extensions of exemptions for which they were statutorily ineligible,” the ABFA wrote.

A separate amicus brief filed by the RNG Coalition and Producers of Renewables United for Integrity Truth and Transparency argue that the petitioners’ interpretation of the SRE provisions of the RFS “is inconsistent with the text, structure, and history of the statute and EPA’s regulations.” The brief states that Congress was deliberate in how it structured the RFS program to create an enforceable mandate for production. The “free-standing” SRE interpretation held by the petitioners would undermine the RFS by removing the certainty Congress sought, the groups said, as they fundamentally change the schedule Congress established to meet its goals.

Growth Energy and the American Farm Bureau Federation also filed an amicus brief on March 31. One argument presented in the brief stresses that Tenth Circuit Court of Appeals’ interpretation of RFS statute—not the petitioners’—serves the principal statutory purpose of the RFS in forcing the market to use annually increasing amounts of renewable fuel. “Providing an exemption in the RFS program’s initial years afforded refineries ample opportunity to prepare to meet their escalating RFS obligations, given that those obligations were specified in the statute,” the groups wrote. “Allowing refineries to obtain exemptions in later years after achieving compliance would render the statute self-defeating.”

In its brief, the NBB stressed that SREs “must be construed narrowly to achieve Congress’s goals.” Expansive SREs not only directly undermine congressional purpose, they also harm small businesses across rural America, the NBB said, including biofuel producers, biotechnology companies, other businesses that support the biofuels industry, fuel retailers and independent farmers. According to the NBB, the glut in SREs approved by the EPA in 2016, 2017 and 2018 reduced demand for biomass-based diesel fuel by an estimated 2 billion gallons, from about 13 billion gallons to about 11 billion gallons. “As a result, biomass-based diesel’s benefits for energy security, the environment, and the rural economy—which Congress sought to drive through the RFS—have been reduced,” the group said.

An amicus brief was also filed by the states of Iowa, Nebraska, Illinois, Michigan, Minnesota, Oregon, South Dakota and Virginia, stressing the “Tenth Circuit got it right” regarding the EPA’s authority to grant “an extension” of an SRE. A more expansive interpretation of RFS’s programs SRE provisions, as advanced by the petitioners, “has the practical effect of cutting the renewable fuel mandates significantly below the levels required by statute,” the states said. “This guts the RFS, rendering it ineffective in creating demand for renewable fuel. And without the demand created by the RFS, the renewable fuel industry will continue to suffer substantial economic harm.”

The states go on to explain that that harm is not hypothetical, estimating that SREs awarded for compliances years 2016, 2017, and 2018 caused more than $2 billion in lost demand for renewable fuel each year. “Because the renewable fuel industry anchors many rural economies, the harms inflicted by reversing the Tenth Circuit’s decision would ripple out to devastating effect on rural communities and states,” the states said, noting a gutted RFS also harms the environment and U.S. energy independence efforts.

The RFA, NCGA, NFU and ACE released a statement thanking the eight states for filing the brief. “The biofuels respondents appreciate the support of the broad array of interests that have been harmed by these unauthorized small refinery exemptions,” they said in the statement. “As the filings make clear, the exemptions have had a devastating effect on rural economies and on the demand for all types of renewable fuels. We remain hopeful that the Supreme Court will affirm the Tenth Circuit’s well-reasoned decision, and we are very grateful that these states and other renewable fuel and agriculture interests have stepped up to endorse the decision as well.”