CBOT soy oil futures slide after US high court backs small refineries on biofuel waivers

CBOT soybean oil futures contracts as far as December 2022 were seen trading lower June 25, after the US Supreme Court backed small oil refineries in a dispute related to biofuel waivers.

The front-month soy oil (N) contract was trading at 59.21 cents/lb at 1555 GMT, down 5.6% from the previous day's close.

Soy oil, which is used as a feedstock in biodiesel, has seen a sharp uptick in demand from the biofuel industry recently. This resulted in the July contract reaching an all-time high of 73.74 cents/lb June 7.

In its June 25 ruling, the Supreme Court announced that small oil refineries can obtain exemptions from a federal law mandating biofuel blending requirements, without having to continuously qualify for waivers.

In a 6-3 vote, the apex court overruled a circuit court's decision that found the US Environment Protection Agency at fault for extending waivers of three refineries in Wyoming, Utah and Oklahoma despite the fact that their prior exemptions had expired.

As per federal law, small oil refineries can only seek to extend their waiver, and the EPA can only extend waivers already granted.

In January 2020, refining company HollyFrontier appealed the circuit court's decision in Denver, arguing that small refiners should be eligible for a waiver any year they are facing financial hardships, even in a scenario when they haven't sought a waiver for a few years.

The Supreme Court overturned the lower court's decision, saying there was no statute mandating continuity for qualification in the Renewable Fuel Standard.

"The plain meaning of 'extension' does not require unbroken continuity," the court document said.

Also, the court said it would direct how the EPA provides extensions to refiners going forward.