U.S. Supreme Court Denies Request To Hear Case Challenging The Point Of Obligation Under The RFS

Recently, the U.S. Supreme Court denied a request to review a challenge to the RFS point of obligation brought by Valero Energy Corp. and the American Fuel and Petrochemical Manufacturers (AFPM).

Independent merchant refiners petitioned the EPA in 2016 to consider changing the point of obligation under the RFS which is used to identify the party required to meet annual renewable fuel blending mandates established by the EPA.

The EPA rejected the petition for rulemaking stating it did not anticipate any benefit from moving the point of obligation to position holders at the terminal rack.

Instead, the agency contended such a change would significantly increase the complexity of the RFS program and reduce its effectiveness by exponentially increasing the number of obligated parties subject to annual blending mandates.

Independent merchant refiners who do not blend renewable fuel support moving the point of obligation to blenders position holders at the terminal rack so refiners would no longer be required to purchase RIN credits which they currently rely on each year to meet their entire renewable fuel blending mandate.

Merchant refiners say the cost of RIN credits is increasingly expensive and creates an uneven playing field by producing windfall profits for blenders who create and sell the RIN credits back to them for compliance with RFS blending mandates.

Renewable fuel blenders, on the other hand, want to keep the point of obligation at the refiner so they can continue to earn profits off the sale of RIN credits they create through blending and use them to subsidize the price of gasoline and diesel fuel at their own retail outlets.

Valero and AFPM requested the Court to decide whether the language of the Clean Air Act requires EPA to determine the point of obligation each year in the same rulemaking that sets annual RFS blending mandates for obligated parties. The Supreme Court’s denial of their request likely ends the effort to move the point of obligation to the position holder at the terminal rack.

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