The Supreme Court is expected to rule as soon as this week on its review of a 10th Circuit case that struck down the Trump Administration's aggressive approach to issuing "small refinery exemptions" under the Renewable Fuel Standard (RFS). Markets appear to be assuming that the Court will uphold the lower court ruling but the outcome is far more uncertain. Should the Court reverse the lower court ruling, and find that the Environmental Protection Agency (EPA) does in fact have broad authority to issue small refinery exemptions, it would likely result in an immediate, short-term drop in RIN prices.
The Court is unlikely to obligate EPA to issue more exemptions, but simply state that the agency has discretion to do so. Given the Biden Administration's less friendly attitude to refinery concerns than the Trump Administration, NATSO does not anticipate a return to the aggressive approach to exemptions that existed over the past few years.
Given that RIN prices are at all time highs, and that President Biden's home state of Delaware houses a PBF refinery that is having difficulty complying with the RFS, there will be tremendous pressure on the Biden Administration to find ways to lower RIN prices. There does not seem to be any firm understanding within the Administration as to how they intend to respond to this pressure.
EPA also is trying to issue proposed renewable volume obligations (RVOs) for 2021 and 2022 by the end of this month. Expectations are that these volumes will remain largely flat. This proposal could include the first indication of the Administration's thinking on RIN prices.
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