In a bid to curb the emission of greenhouse gasses and reduce American dependence on foreign oil sources, Congress passed the Energy Policy Act of 2005, which included the Renewable Fuel Standard (RFS). The RFS imposes Renewable Volume Obligations (RVO) on transportation fuel producers in the U.S., requiring them to include a threshold amount—increasing annually—of renewable fuels such as those derived from corn, grain, or sugarcane.
Though hailed by environmental groups as a step in the right direction, the RFS has promulgated the acceleration of a ‘turf war’ between oil refineries and the putative beneficiaries of the RFS, the corn industry. Among the refineries’ tools to ‘fight back’ are Small Refinery Exemptions (SRE), which allow refineries with aggregate crude oil output less than or equal to 75,000 barrels per day, to be granted waivers of their RVOs if they can demonstrate compliance would cause disproportionate economic hardship.
Over the last four years, there has been more than a four-fold surge in the number of petitions for extensions of SREs granted by the EPA, substantially reducing the required use of renewable fuel volumes and causing a marked decrease in incentives for production of renewable fuels. This dramatic increase in the granting of waivers has not gone unnoticed or unchallenged.
In May 2018, the National Corn Growers Association, along with the Renewable Fuels Association and the American Coalition for Ethanol and National Farmers Union filed suit to reverse a series of EPA-granted petitions for SREs. In January 2020, the 10th Circuit Court of Appeals struck down three such petitions, finding that the EPA had failed to demonstrate that, in the case of the particular refineries at issue, the exemption for which the extension was sought had existed in the first place, or that the disproportionate hardship claimed by the refineries at issue was actually caused by RFS compliance.
In January 2021, the Supreme Court granted the small refineries’ application for a writ of certiorari and will hear argument in April. The court’s eventual decision is expected to have far-reaching implications on the future of the SREs—and the balance of the battle for biofuels itself.