Exemptions Under The Renewable Fuel Standard

• Published date: 16 November 2021
• Subject Matter: Environment, Energy and Natural Resources, Energy Law, Environmental Law, Oil, Gas & Electricity, Renewables
• Law Firm: Husch Blackwell LLP
• Author: Andrew Eastman and Michael Blackwell

Pursuant to the Renewable Fuel Standard ("RFS"), the U.S. Environmental Protection Agency ("U.S. EPA") issues annual renewable volume obligations ("RVOs"), which set the minimum aggregate volume of renewable fuel that refiners must blend with transportation fuel for the following calendar year.

Refineries producing transportation fuel meet their RVOs by blending the required volume of renewable fuel into gasoline or diesel fuel or by acquiring credits (called renewable identification numbers, or "RINs"). The RFS permits "small" refineries - those producing fewer than 75,000 barrels of fuel per day - to claim an exemption by showing that meeting their RVOs would cause them "disproportionate economic hardship."

In 2018, renewable fuels groups alleged U.S. EPA had granted an unprecedented number of such exemptions without accounting for RVOs erased by the exemptions (which would have otherwise been met by purchasing renewable fuels or RINs). They claimed the exemptions totaled nearly 2.25 billion gallons of lost renewable fuel demand (which industry groups call "lost volumes") and had undercut demand for their products by billions of dollars.

The issue came to a head in the June 2021 U.S. Supreme Court matter HollyFrontier Cheyenne Refining, LLC v. Renewable Fuels Association, 141 S. Ct. 2172, 210 L. Ed. 2d 547 (2021). The central question in HollyFrontier was whether a refinery which had obtained an RVO exemption on the grounds of "disproportionate economic hardship" and then allowed such exemption to lapse (and then met its RVO during the period of lapse), could later claim the same benefit again by seeking to extend that previously lapsed exemption. In the Renewable Fuels Association's view, the...