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

Source: By Todd Neeley, DTN Staff Reporterʥ Posted: Saturday, June 26, 2021

Biofuels interests are pinning their hopes on the Biden administration changing course in how EPA operates the small-refinery exemptions program in the Renewable Fuel Standard. (DTN file photo)
Biofuels interests are pinning their hopes on the Biden administration changing course in how EPA operates the small-refinery exemptions program in the Renewable Fuel Standard. (DTN file photo)

Though the Supreme Court sided with refining interests on Friday in a case about whether small refineries can receive extensions of exemptions to the Renewable Fuel Standard long after those exemptions expired, biofuels interests are hanging their hopes on how the Biden administration will implement the RFS program going forward.

In recent weeks a report surfaced that the Biden administration was considering providing RFS relief to refiners. Because the EPA defended biofuels’ interests before the Supreme Court on the latest case, the hope is the Biden EPA will be less with granting small-refinery exemptions than was the Trump administration.

Trump’s EPA granted 88 such exemptions and 70 still are pending. Biofuels groups were obviously upset with the Supreme Court’s decision but pinned their hopes on the Biden EPA.

The Biden EPA has the authority to grant as many or as few exemptions as it wishes. The RFS gives the agency broad authority. Part of the spin coming from biofuels interests is the U.S. Court of Appeals for the 10th Circuit’s 2020 ruling set “guardrails” for how the EPA should consider exemption requests, providing some limits.

We shall see.

Sen. Charles Grassley, R-Iowa, pointed out the importance of those guardrails.

“The 10th Circuit correctly interpreted the law: Refiners shouldn’t be allowed to renew expired waivers for biofuels blending requirements,” he said in a statement. “Still, the Supreme Court preserved the lower court’s tighter guardrails on small-refinery exemptions, which must demonstrate actual economic hardship from compliance with the RFS to be eligible for a waiver.”

Grassley said the Biden administration needs to keep its promise to biofuels producers to “limit welfare to big oil.”

The co-chairs of the House Biofuels Caucus said in a statement on Friday they are concerned about the consequences of the Supreme Court’s decision, that “could have a devastating impact on farmers and producers who are still fighting to recover from the volatile markets, unpredictable weather, and trade instability of the past several years.”

Caucus co-chairs Reps. Cindy Axne, Angie Craig, Rodney Davis, Dusty Johnson, Mark Pocan and Adrian Smith, said they were however “encouraged that the Environmental Protection Agency had reversed its position” on small-refinery exemptions prior to the Supreme Court’s decision.

“Under the previous administration, the EPA greatly expanded the number of small-refinery waivers that were issued while undermining transparency and accountability in the SRE process,” they said. “By issuing dozens of waivers between 2016 and 2020, the EPA saved the oil industry hundreds of millions of dollars while threatening rural economies and harming the biofuels industry at large.”

Iowa Republican Gov. Kim Reynolds said, “Today’s ruling by the U.S. Supreme Court is a disappointing setback for Iowa agriculture and our renewable fuel industry. The decision not only undermines demand for ethanol and biodiesel but creates an environment where waivers could grow exponentially.

“Now more than ever we need the Biden administration to take a clear stance against small-refinery exemptions in order to limit the negative impact of this ruling.”

Kurt Kovarik, vice president of federal affairs for the National Biodiesel Board 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.”

Kevin Scott, soybean farmer from Valley Springs, South Dakota, and president of the American Soybean Association, said the court’s ruling puts the pressure on the Biden EPA to limit the number of exemptions it grants.

“SREs should be issued to small refiners only when the economic viability of a refiner is threatened solely because of the RFS, and any gallons exempted can be spread out among others to ensure that biofuel blending targets truly are met,” he said.

Todd Neeley can be reached at todd.neeley@dtn.com

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