Supreme Court overturns 10th Circuit decision on RFS exemptions
In a blow to the ethanol industry, the Supreme Court today, June 25, overturned the 10th Circuit Court of Appeals ruling that had struck down three small refinery exemptions from the Renewable Fuel Standard that governs the use of ethanol in the nation’s fuel supply.
The vote was 6-3. Justice Neil Gorsuch delivered the opinion of the court in which Chief Justice John Roberts and Justices Clarence Thomas, Stephen Breyer, Samuel Alito and Brett Kavanaugh joined.
Justice Amy Coney Barrett filed a dissenting opinion in which she was joined by Justices Sonia Sotomayor and Elena Kagan.
The petitioners argued that the small refinery exemptions were granted in direct contradiction to the statutory text and purpose of the RFS.
The Renewable Fuels Association, the National Corn Growers Association, National Farmers Union, and the American Coalition for Ethanol, working together as the Biofuels Coalition, argued that the exemptions were improper because they had not been continuous.
But the court ruled that the word “extension” had not been defined in the statute that established the RFS and that the 10th Circuit had “erred” by imposing a continuity requirement and concluding that a small refinery is permanently ineligible for an extension once an exemption lapses.
“While the Supreme Court failed to affirm this portion of the 10th 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,” the groups said in a joint news release.
“Despite today’s Supreme Court decision, EPA must still resolve those other aspects of the 10th Circuit ruling,” the groups added.
“Nearly a year and a half ago, the 10th 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 10th 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.”
Growth Energy CEO Emily Skor said, “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.”
“In the past, the biofuel industry has looked to the courts to halt abuse,” Skor said.
“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.”
Iowa Renewable Fuels Association Executive Director Monte Shaw added, “We are extremely disappointed the Supreme Court didn’t uphold the 10th Circuit Court ruling on eligibility to request RFS refinery exemption extensions.”
“I am not a lawyer, but it sure seems like the 10th Circuit Court got it right when they determined that a refinery can’t extend something it no longer has,” 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.”
The coalition noted that, as of today, 70 small refinery exemption petitions remain pending with EPA, for the compliance years 2011-2020.
Despite the coalition’s optimism that the Biden administration will be “far more judicious and responsible,” a Delaware refinery has asked for an exemption and the Biden administration is believed to be considering how to help a refinery in President Biden’s home state.
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