U.S. Supreme Court Backs Refineries in Biofuel Waiver Dispute

June 25, 2021

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by Andrew Chung and Stephanie Kelly (Reuters/Yahoo!) The U.S. Supreme Court on Friday bolstered a bid by small oil refineries to win exemptions from a federal law requiring increasing levels of ethanol and other renewable fuels to be blended into their products, a major setback for biofuel producers.

The 6-3 ruling overturned a lower court decision that had faulted the U.S. Environmental Protection Agency for giving refineries in Wyoming, Utah and Oklahoma extensions on waivers from renewable fuel standard (RFS) requirements under a law called the Clean Air Act even though the companies' prior exemptions had expired.

The case involved exemptions given to units of HollyFrontier Corp and CVR Energy Inc.

In ruling in favor of the refineries, conservative Justice Neil Gorsuch, writing for the court, compared the extensions at issue in this case to those granted in everyday life, such as to a student who needs more time for a term paper even though the deadline had passed, or a contract whose terms had expired.

"It is entirely natural - and consistent with ordinary usage - to seek an 'extension' of time even after some time lapse," Gorsuch said.

In a dissent, conservative Justice Amy Coney Barrett, joined by liberal justices Sonia Sotomayor and Elena Kagan, faulted the majority's interpretation of the word "extend." The "EPA cannot 'extend' an exemption that a refinery no longer has," Barrett wrote.

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Iowa Renewable Fuels Association Executive Director Monte Shaw said his group is "extremely disappointed" with the ruling but noted that the lower court had faulted the EPA's decisions on other grounds as well.

"We fully expect the Biden EPA ... to deny the vast majority of RFS exemption extension requests that are pending or that will be submitted in the future," Shaw said.

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At issue in the case was whether the EPA impermissibly exempted units of HollyFrontier and CVR Energy in 2017 and 2018 when they had not received continuous prior extensions of an initial exemption.

Several biofuel producer groups including the Renewable Fuels Association challenged the waivers. The Denver-based 10th U.S. Circuit Court of Appeals last year found that the EPA had exceeded its authority "because there was nothing for the agency to 'extend.'" READ MORE

Growth Energy Statement on SCOTUS HollyFrontier v. RFA Opinion (Growth Energy)

Biofuels Coalition Disappointed in Supreme Court Decision to Overturn Tenth Circuit’s RFS Refinery Exemption Ruling (Renewable Fuels Coalition)

SCOTUS biofuel waiver decision – What it means, the good news, reactions, why it isn’t over yet (Biofuels Digest)

Supreme Court sides against ethanol, rules oil refineries can continue to get exemptions from renewable fuel standard (WHO Des Moines)

Gov. Ricketts: U.S. Supreme Court decision on biofuels 'hurts farm families' (Lincoln Journal Star)

U.S. Supreme Court rules against ethanol industry, making it easier for oil refineries to seek biofuel exemptions (Des Moines Register)

Supreme Court Rules in Favor of Small Refineries in Biofuel Waiver Dispute (Epoch Times)

BIOFUELS COALITION BREAKS DOWN SIGNIFICANCE OF SCOTUS RULING ON SRE PROGRAM (Bloomberg)

BIOFUELS BALL IN BIDEN’S COURT: (Politico's Morning Energy)

U.S. biofuel groups urge EPA to curb oil refinery waivers despite ruling (Reuters)

After Supreme Court biofuels ruling, eyes on EPA (E&E News)

Ethanol, Ag Move Beyond SCOTUS Ruling: Ag, Ethanol: EPA Still Must Follow Key Aspects of 10th Circuit Ruling (DTN Progressive Farmer)

Biofuels groups say SCOTUS decision shouldn’t vastly increase SREs (Ethanol Producer Magazine)

Biofuels Coalition Fighting To Prevent Misuse Of SREs (WNAX; includes AUDIO)

BIOFUELS COALITION BREAKS DOWN SIGNIFICANCE OF SCOTUS RULING ON SRE PROGRAM (Brownfield Ag News)

US biofuel groups urge EPA to curb oil refinery waivers despite ruling: Refining industry and representatives push hard for the opposite, asking Biden administration to ease compliance costs (Fox News)

US Supreme Court ruling to have limited impact on biofuel waivers (Fastmarkets)

Thanks to Renewable Fuels Association for the following list:

Agri-Pulse: SCOTUS overturns 10th Circuit in key biofuel mandate waiver case

AgWeb: Corn, Soybean, Soybean Oil Futures Fall on Supreme Court’s Ruling in Favor of Refiners

Argus Media: US Supreme Court backs refinery biofuel waivers: Update

Associated Press: High court expands eligibility for Clean Air Act exemption

Bloomberg: Oil Refiners Win Easier Biofuel Waivers at Supreme Court

Brownfield: Supreme Court overturns Tenth Circuit court ruling on mall refinery exemptions

Brownfield: Biofuels Coalition not deterred despite SCOTUS overturning part of Tenth Circuit ruling on RFS waivers

DTN: SCOTUS Sides with Refiners on RFS

DTN: Biofuels Interests Look For Silver Lining in Supreme Court Ruling on Small-Refinery Exemptions Case

E&E News: Supreme Court sides with small refineries on RFS waivers

E&E News: Trump-appointed justices split on ethanol ruling

Energy AgWired: SCOTUS Disappoints Biofuels Coalition with Ruling

Ethanol Producer: Supreme Court reverses Tenth Circuit decision on SRE ‘extensions’

Farm Progress: Supreme Court RFS ruling favors small ethanol refineries

Forbes: The Supreme Court Deals Ethanol A Blow By Undermining The Renewable Fuel Standard

Hagstrom Report: Supreme Court overturns 10th Circuit decision on RFS exemptions

Oil & Gas Journal: Supreme Court rules in favor of refiners on exemptions from renewable fuel obligations

Platts: US Supreme Court reverses lower court's Small Refinery Exemption decision, refiners can apply after lapse

Politico: Supreme Court overturns limits on ethanol blending exemptions

SCOTUSblog: In dispute over renewable fuels, justices unravel “extensions” of “exemptions”

The Hill: Supreme Court rules in favor of oil refineries in blending waiver dispute

Washington Examiner: Amy Coney Barrett issues first dissent in biofuel exemption case

Excerpt from Growth Energy: “The Supreme Court disagreed with the lower court’s view of extensions, but today’s decision does nothing to change the 10th Circuit’s ruling that exemptions cannot be granted when refiners cannot properly trace their hardship to compliance with the Renewable Fuel Standard (RFS),” said Skor. “In the past, the biofuel industry has looked to the courts to halt abuse. Today, new leaders at the Environmental Protection Agency have shown a willingness to defend the RFS, most recently by reversing three improperly granted exemptions. We look forward to working with the Biden administration to keep a lid on exemptions, further strengthen the RFS, and fast-track our progress toward decarbonization. Engine smart and earth kind biofuels are vital to achieving the nation’s climate goals.” READ MORE

Excerpt from Renewable Fuels Coalition: A coalition of renewable fuel and farm groups expressed “extreme disappointment” in today’s U.S. Supreme Court decision overturning a 2020 appellate court ruling that struck down three improper small refinery exemptions granted by previous EPA administrators. However, because certain elements of the appellate court ruling were left unchallenged and were not reviewed by the Supreme Court, the groups remain optimistic that the Biden administration will discontinue the past administration’s flagrant abuse of the refinery exemption program.

Today’s decision stems from a May 2018 challenge brought against EPA in the U.S. Court of Appeals for the Tenth Circuit by the Renewable Fuels Association, the National Corn Growers Association, National Farmers Union, and the American Coalition for Ethanol, working together as the Biofuels Coalition. The petitioners argued that the small refinery exemptions were granted in direct contradiction to the statutory text and purpose of the RFS.

In January 2020, the Tenth Circuit decided that EPA cannot “extend” exemptions to any small refineries whose earlier, temporary exemptions had lapsed. According to the Circuit Court ruling, “the statute limits exemptions to situations involving ‘extensions,’ with the goal of forcing the market to accept escalating amounts of renewable fuels over time.” While the Supreme Court failed to affirm this portion of the Tenth Circuit decision, the Biofuels Coalition pointed out that the appellate court also ruled that EPA’s exemption decisions must reconcile the agency’s consistent findings that all refineries recover the costs of compliance with the RFS, and that EPA may only use hardship caused by the RFS to justify granting exemptions. Despite today’s Supreme Court decision, EPA must still resolve those other aspects of the Tenth Circuit ruling.

“Nearly a year and a half ago, the Tenth Circuit handed down a unanimous decision that was ultimately adopted by the very agency we took to court in the first place,” coalition members said. “While we are extremely disappointed in this unfortunate decision from the Supreme Court, we will not stop fighting for America’s farmers and renewable fuel producers. Further, we are optimistic that other elements of the Tenth Circuit decision, which were not reviewed by the Supreme Court, will compel the Biden administration and EPA’s new leadership to take a far more judicious and responsible approach to the refinery exemption program than their predecessors did.”

Irrespective of today’s decision, the Biofuels Coalition thanked President Biden and EPA Administrator Regan for taking swift action to rein in the previous administration’s mismanagement of the small refinery exemption program. After carefully reviewing the issue, new EPA leadership in February reversed the agency’s previous position and announced support for the Tenth Circuit decision. In April, EPA decided to revoke three last-minute refinery exemptions granted the day before President Biden’s inauguration; and in May, EPA announced it would cooperate with a Government Accountability Office investigation into the past administration’s adjudication of small refinery exemptions.

As of today, 70 small refinery exemption petitions remain pending with EPA, for the compliance years 2011-2020. READ MORE

Excerpt from Biofuels Digest: In today’s Digest, the SCOTUS decision details, why this case matters, why it isn’t over yet, Senate, House and international policy news that can help, reactions from leaders in the biofuels industry like RFA, Growth Energy, National Biodiesel Board, and more.

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However, the new precedent will give future administrations wide clearance to exempt oil refineries from annual blending quotas,” according to Bloomberg. And let’s not forget that small refinery waivers surged under former President Trump which didn’t make biofuel producers happy.

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Michael McAdams, President of the Advanced Biofuels Association said, “We are greatly disappointed by the Supreme Court’s ruling to overturn the 10th Circuit decision with regard to small refinery exemptions. Frankly, the Court got this one wrong. We do not expect, however, that this decision will impact the current Administration’s view on using SREs moving forward.”

Kurt Kovarik, National Biodiesel Board’s Vice President for Federal Affairs, said, “The Supreme Court decision is dismaying because it leaves uncertainty about when EPA may offer exemptions to small refineries. These exemptions harm biodiesel and renewable diesel producers when they reduce demand for advanced biofuels. EPA has provided multiple ways for refiners to meet the Clean Air Act’s RFS requirements, including an outsized bank of reserve RIN credits. The agency must issue the 2021 RFS rules as soon as possible and ensure that RFS volumes it sets are met, with full accounting for any small refinery exemptions in plans to grant.”

Doug Durante, Executive Director, Clean Fuels Development Coalition told The Digest, “Between the courts, the oil industry, and EPA chipping away at the RFS it only underscores that we need to create new demand beyond the confines of the RFS, which frankly may continue to shrink. Ethanol’s highest value is as an octane additive and to reduce the carbon in gasoline by replacing aromatics. The pending re-write of the fuel economy rule is a perfect opportunity to do that and the ethanol industry needs to make that case, as we are doing through the High Octane Low Carbon Alliance.”

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Iowa Renewable Fuels Association Executive Director Monte Shaw said, ... However, it is important to remember this case only applied to one of the three major findings from the 10th Circuit Court. Today’s decision allows refiners to apply to extend RFS exemptions that have lapsed. But this case did not impact the 10th Circuit’s ruling that refiners must still prove economic harm directly related to compliance with the RFS. Just as importantly, the 10th Circuit also found that EPA cannot use RIN costs as a cause of economic harm while simultaneously admitting RIN costs are recovered in the refiner’s crack spread. As the Biden EPA has pledged to follow the 10th Circuit Court ruling, today’s decision allows refiners to request an RFS exemption extension, but it does not make it easier for refiners to actually receive one. We fully expect the Biden EPA to keep their commitment to the RFS and to apply the 10th Circuit Court standards relating to economic harm, and as a result, to deny the vast majority of RFS exemption extension requests that are pending or that will be submitted in the future.”

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Former Deputy Undersecretary of Agriculture and now Managing Director of Ocean Park, an Investment Bank that has advised on many biofuels transactions, John Campbell told The Digest, " ... The RFS has served the biofuels industry well but the time has come to consider reform that takes into account new fuel demand realities and increasing need for decarbonization of the liquid fuel supply.”

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Michael Newman, Chief Operating Officer of Parhelion Underwriting Inc. told The Digest, " ... “A possible alternative is a national clean fuel standard, along the lines of California Low Carbon Fuels Standard, to supercede the RFS at the end of 2022,” said Newman. “It is a program with flexibility for how the government’s goals are achieved – including through the purchase of carbon credits generated by electrical vehicle producers, a price cap to fix the ‘price spike’ and a focus on carbon intensity.”

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Some other good news

Another hopeful sign was the Senate’s passage of the Growing Climate Solutions Act, legislation that would break down barriers for farmers and foresters interested in participating in carbon markets.

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Former Sens. Saxby Chambliss (R) and Heidi Heitkamp (D), co-chairs of the Bipartisan Policy Center’s Farm and Forest Climate Solutions Task Force, hailed Senate passage of the Growing Climate Solutions Act of 2021.

“The bill provides USDA with clear bipartisan direction to help producers and forest landowners implement practices that capture carbon, reduce emissions, improve soil health, and make their operations more sustainable,” noted former Sen. Heitkamp.

The Growing Climate Solutions Act creates a certification program at USDA to bolster technical assistance and help address challenges that can prevent farmer and forest landowners from fully participating in voluntary environmental credit markets.

“America’s farmers, ranchers, and forest landowners can play a pivotal role in capturing carbon while creating another income stream for their operations. The 92-8 vote in the Senate indicates the strong support for helping producers access new carbon market opportunities,” former Sen. Chambliss said.

And hey, Oregon approved E15 for customers too!

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n case you missed this positive piece of news last week, the UK aviation industry launched the first interim decarbonization targets of at least 15% by 2030 and 40% by 2040, having reaffirmed their commitment to net zero by 2050. The new interim targets lay foundations for rapid acceleration of aviation decarbonization in the coming decades, with new data on the impact of Covid-19 on aviation demand. The focus is on ramping up SAF, permanent carbon removal, and new low and zero carbon technologies – such as electric and hydrogen powered aircraft – so that they can become mainstream in the 2030s. READ MORE