Refiners File Opening Brief

Small Refiners Argue to SCOTUS That Federal Appeals Court Made Error on Exemptions Ruling

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A group of refiners filed an opening brief in a small-refinery waivers case set to be heard by the Supreme Court. (DTN file photo by Elaine Shein)

OMAHA (DTN) -- Refining companies at the center of an upcoming Supreme Court case filed an opening brief this week, arguing the Renewable Fuel Standard allows small refiners to receive exemptions at any time.

Attorneys for HollyFrontier and Wynnewood Refining Company said Congress intended for small refiners to have the ability to request exemptions whenever they are able to prove economic hardship in complying with the RFS.

In January 2020, the U.S. Court of Appeals for the 10th Circuit in Denver ruled the EPA improperly granted three exemptions to companies that had not received exemptions continuously.

Congress originally granted a blanket RFS exemption to refiners producing less than 75,000 barrels per day, up to 2011. Then Congress directed EPA to grant two-year extensions of the exemption to those companies that could prove disproportionate economic hardship.

The 10th Circuit, however, ruled three refiners received exemptions in 2016 and 2017, although they did not receive them continuously from 2011 forward.

"But this hardly undermines the key point -- that Congress is unlikely to have written the statute as it did, with bifurcated subparagraphs and the expansive, unqualified phrase 'at any time,' if EPA could not extend the exemption to small refineries currently suffering from disproportionate economic hardship," the refiners argued in their brief, "simply because they did not need or obtain an exemption in an earlier year. The lower court has effectively read Congress as giving small refineries the right 'at any time' to file petitions that can never be granted."

In January, the Supreme Court also granted leave to file amicus briefs in support of the refiners to CountryMark Refining and Logistics and the American Fuel and Petrochemical Manufacturers.

CountryMark is a farmer-owned cooperative that operates in Indiana, Illinois, Michigan, Ohio and Kentucky, https://www.dtnpf.com/….

At the end of November 2020, CountryMark filed a petition for review with the U.S. Court of Appeals for the Seventh Circuit in Chicago, https://www.dtnpf.com/….

EPA CHANGED COURSE

EPA changed course on small-refinery exemptions, announcing Monday it agrees with a court of appeals decision last year.

The EPA statement means the Biden administration will not be defending the Trump administration's stance on the small-refinery exemptions to the RFS. Monday was the deadline for EPA to file a brief with the Supreme Court, https://www.dtnpf.com/….

From 2016 to 2020, EPA granted 88 small-refinery exemptions. Estimates show the exemptions amounted to more than 4 billion gallons of lost demand for biofuels including ethanol and biodiesel.

Refiners argue in their brief that if the 10th Circuit decision is upheld, small refineries likely would be unable to qualify for exemptions going forward.

"Congress recognized, however, that these mandates could drive small refineries out of business, undermining its energy-independence goal and harming small communities," the refiners said.

"The 10th Circuit, however, held that EPA had authority to grant small refineries a hardship exemption only if they had received uninterrupted, continuous extensions of their exemptions every year since 2011 -- an interpretation of 'extension' that excludes nearly all small refineries (including petitioners here). In the court's view, once a small refinery meets the RFS's requirements in a single year, EPA can never again grant it a hardship exemption, even if the refinery faces disproportionate hardship based on the increased blending requirements of the next year."

In making its January 2020 ruling, refiners contend, the 10th Circuit improperly imposed a continuity requirement.

"But even if 'extension' means an increase in time, the 10th Circuit incorrectly imposed a continuity requirement," the brief said.

"Once it exists, an exemption can be extended even if it lapses. Here, the statute granted all small refineries initial exemptions at the time of enactment. It is entirely natural -- and consistent with the temporal definition of 'extension' -- to say that small refineries whose exemptions have lapsed are seeking an 'extension' of their prior exemptions because they are experiencing hardship after an interlude during which they met the RFS's requirements."

Restricting small refineries to receiving exemptions only if they received them continuously, the brief said, runs contrary to the nature of the RFS itself.

"The RFS requirements increase annually, and the difficulty in meeting them necessarily varies substantially from year to year based on market factors that small refineries cannot control and may lack resources to address," the refiners argued.

"Congress intended to pursue energy independence through support for renewable fuels but recognized that imposing demands that could put small refineries out of business would both undermine energy independence and harm numerous small communities."

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley