May 4, 2021 | AD & Biogas, Business+Finance, Climate, Policies + Regulations

U.S. Supreme Court Hears RFS Exemption Case

On April 27 the U.S. Supreme Court heard oral arguments in its review of the Tenth Circuit U.S. Court of Appeals’ 2020 rulings limiting small refiner “economic hardship” exemptions (SREs). The Tenth Circuit unanimously concluded that “extensions” of an original 2011 blanket SRE can only be granted where applicants have continuously maintained their extensions. The arguments focused largely on how the Renewable Fuel Standard’s (RFS) use of the word “extension” should be interpreted. Small refineries urged a broad interpretation of “extension” that would allow EPA to grant a waiver of RFS RINs obligations whenever “economic hardship” from acquiring RINs occurs — that extensions were meant to be free-standing “safety valves.”   EPA and biofuel groups urged a narrow interpretation — that Congress meant shrinking extensions to be a “funnel” incentivizing renewable-fuel blending by all refiners.

BioCycle Contributing Editor Mike Levin, a former appellate lawyer, has been tracking the litigation and listened to the Supreme Court session. “Many Justices had problems believing Congress meant ‘to drive refiners out of business’ if they complied one year when RINs prices were low and they didn’t need a waiver, but RINs prices went through the roof the next year,” explains Levin. “They wanted to know if Congress intended such results. Justice Breyer apparently doubted this intent, noting that wildly fluctuating prices which justify a ‘safety valve’ are ‘inherent in marketable permits regimes like the RINs scheme.’’’

Biofuel counsel responded that “to prevent RFS blending requirements being undermined, Congress meant waivers to be increasingly rare,” adds Levin. “They also noted that almost all refiners continuously complied since 2014, and the government repeatedly found no ‘hardship’ since they pass RINs costs to their customers. And that the RFS already contains other safety valves if company-specific or general RINs hardship should occur.”

Concludes Levin: “Many experts have come to grief trying to predict outcomes based on oral arguments. We’ll have to wait and see.”

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