Oil Refiners Win at Supreme Court With Easier Waivers on Biofuel
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(Bloomberg) -- 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.”
Under President Joe Biden, the agency was expected to issue fewer waivers and force more refineries to satisfy annual biofuel quotas by either blending plant-based alternatives into their products or buying compliance credits from other companies that have. However, the new precedent will give future administrations wide clearance to exempt oil refineries from annual blending quotas.
And it gives the Biden administration more options for addressing concerns by some lawmakers and industry officials, who have argued that climbing compliance costs imperil some independent refiners, particularly in the Northeast U.S. Several governors and non-integrated refineries, including PBF Energy Inc., and Delta Air Lines Inc.’s Monroe Energy LLC, have urged EPA to lower quotas.
Several refiners rose on the ruling. PBF Energy Inc. jumped as much as 9.9%, HollyFrontier Corp. climbed as much as 3.4%, and CVR Energy Inc. jumped as much as 5.4%, helping drive the S&P Oil & Gas Exploration and Production Select Industry Index up 1.6%. Biofuel makers Darling Ingredients Inc. and Renewable Energy Group Inc. sank to session lows.
The waivers had surged under former President Donald Trump, provoking a backlash from biofuel advocates who argued Congress only intended the exemptions to be short-term relief, helping funnel refiners into compliance with the blending requirements over time. Refiners, by contrast, have argued Congress intended the waivers to serve as an essential safety valve, helping insulate a critical domestic industry from spiking compliance costs.
In his opinion for the court, Gorsuch noted the lack of clarity from the Renewable Fuel Standard law on the matter. “Neither the statute’s text, structure, nor history afford us sufficient guidance to be able to choose with confidence between the parties’ competing narratives and metaphors,” he wrote.
The dispute at the Supreme Court arose after the Renewable Fuels Association and other biofuel supporters challenged three waivers the EPA issued to refineries owned by Hollyfrontier and CVR Energy’s Wynnewood Refining Co. In January 2020, the 10th U.S. Circuit Court of Appeals sided with the challengers, saying the EPA had exceeded its authority. The refineries appealed to the Supreme Court, and the federal government, under Biden, switched sides to favor the biofuel supporters.
The high court heard oral arguments in April.
The case is HollyFrontier Cheyenne Refining, LLC v. Renewable Fuels Association, 20-472.
(Updates with shares in sixth paragraph.)
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