NEW YORK (Reuters) – U.S. renewable fuel credits fell more than 15% on Friday, traders said, after news the Trump administration plans to appeal a federal court decision that cast doubt on a program exempting small oil refineries from biofuel blending laws.
The administration had previously intended to respond to the court decision by scaling back the waiver program. But a conversation between President Donald Trump and Senator Ted Cruz of Texas helped push the administration to shift course, two sources familiar with the matter said.
Renewable fuel blending credits, or RINs, which refineries must earn or purchase to show compliance with the U.S. Renewable Fuel Standard (RFS), traded at 34 cents each on Friday morning, down from 40.5 cents each the previous session, traders said.
The RFS requires refineries to blend billions of gallons of biofuels into the country’s fuel pool each year, or buy the credits from those that do, a requirement that has created a valuable market for corn but which refiners say is too costly.
Since the adoption of the RFS, the Environmental Protection Agency has granted waivers to small refiners exempting them from their obligations if they prove compliance would cause them financial distress. The Trump administration has roughly quadrupled the number of exemptions since it took office in January 2017.
In January, the 10th U.S. Circuit Court of Appeals challenged the program, saying the EPA overstepped its authority by granting those waivers because the RFS requires them to take the form of “extensions” after the year 2010, and none of the refineries had received them in the previous year.
The bulk of waivers granted to refineries by the EPA in recent years do not meet that standard.
After the court decision, prices for renewable fuel credits skyrocketed, at one point gaining around 250%.
White House economic adviser Larry Kudlow recently informed Senator Chuck Grassley of Iowa, a vocal supporter of biofuels interests, that the administration had decided to appeal the ruling instead of curtailing the waiver program, two sources told Reuters on Thursday.
Senators representing oil states had previously engaged in a major drive this week to steer the administration to appeal the decision ahead of a March 9 deadline. The senators claim the program is essential for keeping refineries that provide tens of thousands of jobs afloat.
The news is a blow to farmers and biofuels advocates, who claim the exemptions hurt demand for corn-based ethanol. The oil industry rebuts that claim.
U.S. biofuel laws for years have been a major point of contention between the oil industry and Big Corn, two pivotal political constituencies for Trump as he seeks re-election this November. During his time in office, Trump has tried and often failed to appease both sides.
Reporting by Stephanie Kelly; editing by Richard Valdmanis and Jonathan Oatis