On Tuesday, the U.S. Court of Appeals for the District of Columbia rejected arguments from oil refiners in its challenge to the Environmental Protection Agency (EPA) 2013 biofuel mandate, ruling that the government has “wide latitude” to decide whether to modify renewable fuel use targets and by how much. The oil refiners had argued that EPA has not thoroughly considered how renewable fuel credits are used to satisfy federal targets.

The Renewable Fuel Standard requires increasing amounts of biofuels such as ethanol to be blended into U.S. gasoline and diesel supplies through 2022.  U.S. refiners need to accumulate credits, called Renewable Identification Numbers (RINs) to prove they have blended their share of renewable fuels into gasoline and diesel.  If they do not blend, they need to buy RINs.

The oil industry urged EPA to lower the federal mandate to use 16.55 billion gallons of biofuels in 2013, saying it would unduly burden refiners.  However, they were unsuccessful in convincing EPA to lower the 2013 mandate. In its court challenge, PBF Energy said that EPA should not consider the use of left over ethanol credits from 2012 when setting targets for 2013.  However, the court said that “this contention is meritless,” saying that “EPA was entitled to conclude, as it did, that it had wide latitude to consider a range of factors as appropriate.”

Monroe Energy argued that EPA’s decision not to cut 2013 biofuel targets failed to take into account that companies might need to carry over some RIN credits for use in 2014, when it finalized the 2013 targets. Monroe Energy said a spike in RIN prices last year could cost the company more than $100 million.  RINs topped out at around $1.45 each in July 2013 and remain elevated.

However, the court said that expensive fuel credits were not enough to warrant vacating the target and that there was “no ground to conclude the 2013 standards are unlawful simply because RINs are costlier than in prior years.”  The court added that higher RIN prices should be an incentive to invest in more fueling infrastructure and in diversification of the fuel supply.

The court also rejected claims from the refineries that the 2013 rule should be thrown out because it was issued more than eight months after the legislative deadline of November 30.  This decision seems to indicate that the delay, while inconvenient, does not prohibit refiners from complying with the rules, some legal experts said.  The court held that refiners “still had notice under the statute establishing the mandates” to plan ahead for their compliance.

EPA’s final 2014 quotas are due out in June.