The United States biofuels industry is regrouping after recently being dealt two court defeats in a little more than a week.

The first blow came July 25 when the U.S. Supreme Court sided with refiners in a case over small-refinery exemptions. The court struck down part of the 10th Circuit Court of Appeals decision and ruled small refiners could receive extensions of exemptions even years after previous exemptions expired. Between 2016 and 2020, the Trump administration granted 88 waivers totaling about 4 billion gallons of lost biofuels demand.

Doug Noem, immediate past president for the South Dakota Corn Growers Association and a farmer near Lake Norden, S.D., said that adds uncertainty to the climate in the biofuels industry going forward.

“So that’s another challenge that we’re trying to overcome or fight through to try to stop these costly exemptions from happening,” he said.

The Supreme Court, however, left in place two other key components of the 10th Circuit decision. 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 Renewable Fuels Standard. This would rule out refiners trying to use recent record high RIN prices as a reason to be granted a waiver. Additionally, biofuels industry leaders said they did not think the ruling would lead to EPA granting large numbers of SREs because of the Biden administration’s current stance on climate change. Noem said that’s what they’re hoping for.

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A second blow came on July 2 when the D.C. Circuit Court of Appeals for the District of Columbia reversed a 2019 rule by the Environmental Protection Agency that lifted outdated restrictions on the sale of E15 or a 15% fuel blend. The case, the American Fuel & Petrochemical Manufacturers, et al. vs. EPA, was a challenge by oil refiners to the rulemaking that allowed E15 sales year-round. The court said in its 19-page opinion on a case brought by refining interests that the so-called Reid-vapor pressure waiver rule that opened the door to E10 sales originally does not apply to E15 even though the Trump administration declared the two blends to be substantially similar fuels. The Reid vapor pressure waiver is a measure of the volatility of gasoline.

Noem said the South Dakota Corn Growers Association is also disappointed in that court ruling. However, it will not affect E15 year-round sales for the 2021 driving season.

“Now that really doesn’t change anything as far as sales for the next 45 days. We’ve got time to make a decision of how we want to proceed in defending the E15 usage as we like to see it,” he said.

In the long run, Noem said they really want Congress to pass permanent legislation to make sure the industry doesn't have to face this same dilemma over and over.

Recent court decisions have hurt the ethanol industry, which in turn may hurt corn farmers. (Erin Ehnle Brown / Grand Vale Creative LLC)
Recent court decisions have hurt the ethanol industry, which in turn may hurt corn farmers. (Erin Ehnle Brown / Grand Vale Creative LLC)
Noem said the E15 decision was instrumental in increasing market share for ethanol in the U.S. and was helping to offset some of the Small Refinery Exemptions that had been granted the last few years. Plus, since the E15 order was made it helped increase the RIN prices significantly, so he said there was an advantage.

Biofuels groups including Growth Energy, the Renewable Fuels Association, and the National Corn Growers Association were intervenors on behalf of EPA in the case and released a joint statement in reaction to the court ruling saying they were concerned the court’s ruling could affect E15 sales this summer.

“We disagree with the court’s decision to reject EPA’s move to expand the RVP waiver to include E15, a decision that could deprive American drivers of lower carbon options at the pump and would result in more carbon in the atmosphere,” the statement said.

Iowa Renewable Fuels Association Executive Director Monte Shaw said he believes the waiver rule does apply to E15.

"Every legal, regulatory and legislative option will be pursued to reverse this decision," he said in a statement.

The court decisions follow recent news that suggested the Biden Administration was looking at ways to provide the oil refiners relief from the Renewable Fuels Standard in response to their claims the recent record high RIN prices were causing economic damage. The mechanism to achieve that could come through the granting of additional SREs or a general waiver from the RFS.

A plane carrying a message in support of Joe Biden flies near the POET Biorefining plant in Preston, Minn., where Minnesota Gov. Tim Walz stopped on Oct. 24, 2020. Noah Fish / Forum News Service
A plane carrying a message in support of Joe Biden flies near the POET Biorefining plant in Preston, Minn., where Minnesota Gov. Tim Walz stopped on Oct. 24, 2020. Noah Fish / Forum News Service
Noem said the industry hasn't received any details from the Biden administration on this change in biofuels policy and it comes as quite a surprise.

“It’s kind of crazy because all the way through the election process President Biden was touting ethanol as a positive for climate change. Now he’s gotten pressure from some place, maybe the oil companies, to give them what they consider relief from blending more ethanol,” he said.