The Supreme Court could rule as early as June 25 on the legality of the Trump Administration's aggressive approach to issuing small refinery exemptions under the Renewable Fuel Standard (RFS). If the ruling doesn't come by then, it will come at some point between now and early to mid-July.
The Court's decision takes place against the backdrop of discussions within the Biden Administration surrounding how to prevent prices for renewable identification numbers from reaching exceedingly high levels. These discussions appear to be driven primarily by efforts to assist a Delaware refinery that has a longstanding relationship with the President and his allies in Congress.
Although it's unclear whether and how the Biden Administration will seek to take pressure off of RIN prices, the "cleanest" approach is to lower the annual blending mandates ("renewable volume obligations," or "RVOs") for 2021 and 2022. NATSO expects proposed RVOs for 2021-2022 to be issued by July 4.
Given the dip in gasoline demand brought on by the pandemic, this is a far more defensible approach than some of the concepts the Trump Administration pursued, such as RIN price caps and one-off small refinery exemptions.
At the same time, if the Supreme Court rules in favor of small refiners, it would provide a clear roadmap for the Biden Administration to pursue additional small refinery exemptions, likely less aggressively than the Trump Administration but enough to put a dent in RIN prices.
All else being equal, a ruling in favor of small refiners could cause RIN prices to dip, and a ruling against small refiners will impose somewhat less substantial upward pressure on RIN prices.
These moves should be relatively short-term, since the Biden Administration's desire and ability to implement policies to lower RIN prices is not at all dependent on the Supreme Court's decision.
The CEO of Growth Energy, one of the two leading trade associations representing the ethanol industry, testified before Congress June 22 that her organization would support a technology-neutral national clean fuel standard if it is preceded by a reassessment of federal carbon emission models for renewable fuels. She said outdated government carbon emission models that understate the greenhouse-gas reduction benefits of biofuels must be addressed as part of any push to move to a clean fuel standard. The other ethanol trade group, the Renewable Fuels Association, has similarly endorsed a national low carbon fuel standard.
The Wall Street Journal recently reported that the SEC is preparing to require public companies to disclose more information about how they respond to threats linked to climate change, while businesses are gearing up for a fight. The SEC's new chairman, Gary Gensler (Biden appointee) has said climate-related disclosure is a top priority. “The SEC has broad authority to require disclosures by companies selling securities. But how it elicits specific information about climate change, whose impact on every company's bottom line isn't always clear, is likely to become a political lightning rod and set off a burst of lobbying in Washington.
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