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Supreme Court Setback for Biofuel Producers

Late last week, Reuters writers Andrew Chung and Stephanie Kelly reported that, “The U.S. Supreme Court on Friday made it easier for 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 justices 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.”

McConnell, Michael, Olga Liefert, and Tom Capehart, Feed Outlook, FDS-21f, U.S. Department of Agriculture, Economic Research Service, June 14, 2021.

The Reuters article noted that, “The 6-3 ruling, authored by conservative Justice Neil Gorsuch, compared these extensions to ones granted in everyday life such as to a student wanting more time to complete a term paper even though the deadline has passed or a business contract whose term 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 ruling’s interpretation of the word ‘extend.’ The ‘EPA cannot ‘extend’ an exemption that a refinery no longer has,’ Barrett wrote.”

“President Joe Biden’s administration has been considering ways to provide relief to U.S. oil refiners from biofuel blending mandates,” the Reuters article said.

The Reuters writers explained that,

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.

“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.'”

Also last week, Bloomberg writer Jennifer A. Dlouhy reported that, “The EPA has wide latitude to exempt refineries from federal mandates that they mix renewable fuels into gasoline and diesel, the U.S. Supreme Court ruled Friday, a victory for oil companies seeking a break from the requirements.

“In a 6-3 decision, the justices rejected arguments that the Environmental Protection Agency’s exemption power is limited to only a handful of refineries that have received uninterrupted annual waivers from the Renewable Fuel Standard.

“Writing for the majority, Justice Neil Gorsuch said that nothing in the Renewable Fuel Standard law itself ‘commands a continuity requirement.'”

Ms. Dlouhy explained that,

The case turned on the justices’ interpretation of just a few words in the Renewable Fuel Standard law — specifically its provision allowing a small refinery to petition the EPA ‘at any time’ for an ‘extension’ of its initial, automatic exemption.

“Biofuel producers unsuccessfully argued the law’s use of the word ‘extension’ inherently meant refineries can only qualify if they have an existing exemption to prolong.”

DTN writer Todd Neeley reported last week that, “As of Friday, 70 additional exemption petitions remain pending with EPA for compliance years 2011 to 2020. Without knowing specifically how many gallons are involved, staff at the Renewable Fuels Association estimated it would likely fall somewhere in the range of about 3.1 billion to 3.3. billion gallons of biofuels that could be affected if EPA were to grant all those petitions.”

Dow Jones writer Kirk Maltais reported last week that, “Corn for December delivery fell 3.1% to $5.19 1/4 a bushel, on the Chicago Board of Trade Friday, in response to weather models showing strong rainfall in many growing areas, as well as the Supreme Court siding with the EPA on the issue of biofuel waivers.”

The Dow Jones article stated that, “The U.S. Supreme Court has ruled in favor of small oil refineries in the biofuel waiver dispute–which pressured corn futures Friday. In its opinion headed by Justice Neil Gorsuch, the court ruled that providing waivers for small oil refineries not to have to blend the required levels of ethanol into their gasoline output did not exceed the EPA’s authority.”

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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