Ethanol, Ag Move Beyond SCOTUS Ruling

Ag, Ethanol: EPA Still Must Follow Key Aspects of 10th Circuit Ruling

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Ethanol and agriculture interests believe a federal appeals court decision in 2020 will continue to work in the ethanol industry's favor on small-refinery exemptions. (DTN file photo)

LINCOLN, Neb. (DTN) -- Last week's ruling by the Supreme Court doesn't necessarily mean EPA will return to granting large numbers of small-refinery exemptions to the Renewable Fuel Standard Ethanol, industry officials said during a press call Monday.

The Supreme Court ruled Friday small refiners could receive extensions of exemptions even years after previous exemptions expired. Between 2016 and 2020, the Trump administration granted 88 exemptions totaling about 4 billion gallons of lost biofuels demand.

Ethanol industry officials, however, said a January 2020 decision by the U.S. Court of Appeals for the 10th Circuit in Denver at the center of the Supreme Court case still holds EPA's feet to the fire. The 10th Circuit ruled the EPA illegally granted three waivers.

The Supreme Court, however, left in place two other key facets of the 10th Circuit decision in the HollyFrontier case. In that case the 10th Circuit ruled EPA can grant an exemption only if "disproportionate economic hardship" claimed by a refiner is caused by the RFS.

Second, the court said EPA has to reconcile any decisions to grant exemptions with the agency's own conclusions that RFS compliance costs to refiners are passed on to consumers at the pump.

"So, we do remain quite confident and optimistic," said Geoff Cooper, CEO and president of the Renewable Fuels Association.

"The Supreme Court decision was a setback. It will definitely not result in the reopening of the barn door on massive granting of small-refinery exemptions. We think EPA has plenty of tools left in the toolbox to restore sanity to the RFS program and we would expect them to use those tools."

Sen. Charles Grassley, R-Iowa, said during a call with agriculture journalists Monday he believes the Supreme Court ruling has put biofuels in a tougher spot than when the 10th Circuit issued its ruling.

"We're back to relying on the political branches of government," Grassley said. "And we're finding ourselves in the same position we were in prior to the 10th Circuit opinion, because I thought the 10th Circuit opinion accomplished more than what we could in the Obama administration or the Trump administration."

After the 10th Circuit ruling the EPA held back on granting exemptions.

The industry continues to watch and wait to see how the Biden administration responds to small-refinery exemption requests. In February, the Biden EPA put out a statement saying it supported the 10th Circuit decision.

"As long as the Environmental Protection Agency adheres to the other restraints that were put in place or established by that 10th Circuit decision," said Brian Jennings, CEO of the American Coalition for Ethanol, "our larger efforts to really rein in, to really put the brakes on the number of these small-refinery exemptions, granted by EPA should ultimately prevail.

"We are convinced that EPA will dramatically reduce the number of these small-refinery exemptions going forward."

Matthew Morrison, an attorney representing the Renewable Fuels Association, American Coalition for Ethanol, National Corn Growers Association and National Farmers Union on the 10th Circuit and Supreme Court cases, said the groups will continue to push the EPA on the issue.

Morrison, partner with Pillsbury Winthrop Shaw Pittman LLP, said the groups' efforts now are focused on convincing the Biden administration to end the exemptions.

"President Biden has been clear since the early days of his campaign that he intended to end the misuse of the small-refinery exemption program," Morrison said.

EPA could issue a new policy statement or decree, he said, "to reflect the obvious fact that few if any small-refinery exemptions are anticipated going forward.

"So, it's also a matter of equity. I think to the vast majority of refineries that have been dutifully complying with the RFS program for the last 15-plus years by contributing their fair share."

Morrison said another step EPA could take is to require all RFS exempted volumes to be redistributed among nonexempt parties, to ensure that the statutory volumes of renewable fuel are met.

"It (the agency) could return to the projections of small-refinery exemptions based on past actions," he said.

"There is still ongoing litigation that's going to continue to press these issues before the courts. We only took to the Supreme Court one specific discrete issue of many in the small-refinery exemption program."

Morrison said Friday's Supreme Court decision also did not address another key issue that's been litigated during the past few years.

"EPA issuance of small-refinery exemptions without somehow recovering or redistributing those exempt volumes," he said, "would mean that EPA has failed to ensure the statutory volumes set by Congress must be met. And again, that's what the statute specifically says that EPA must ensure the statutory volumes are met.

"And this is an issue that's an important part of a few pieces of litigation still ongoing."

Rob Larew, president of the National Farmers Union, said, "It is our hope that the current administration under President Biden will continue to make sure that as they consider the additional waiver request and going forward, that they do keep those protections in place and keep the underpinning law very strong."

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

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Todd Neeley