Ethanol Groups Petition Supreme Court

LINCOLN, Neb. (DTN) -- The nation's two largest ethanol interest groups petitioned the Supreme Court on Monday to overturn a lower court ruling that threw out EPA's 2022 denial of six small-refinery exemption petitions to the Renewable Fuel Standard in 2023.

The Renewable Fuels Association and Growth Energy argued in their petition that the U.S. Court of Appeals for the Fifth Circuit was not the proper venue and several appeals courts were split on where the cases should have been heard.

The groups asked the Supreme Court to reverse the appeals court's November 2023 decision, arguing the U.S. Court of Appeals for the District of Columbia Circuit was the proper venue.

In 2022, the Biden administration rejected 105 exemptions previously granted to small refineries. Refining companies filed numerous appeals to the Third, Seventh, Ninth, 10th and 11th circuits. All of the courts concluded the D.C. Circuit was the proper venue except for the Fifth Circuit. The Fifth Circuit then issued a ruling overturning EPA's action on six exemptions.

"There's a simple reason why the Third, Seventh, Ninth, 10th, and 11th circuits have all found that EPA's SRE decisions should be litigated in the D.C. Circuit," Growth Energy CEO Emily Skor said in a statement.

"SREs have nationwide impacts on the entire U.S. renewable fuels market, and EPA has developed and applied a nationwide SRE policy to assess them. Furthermore, the court should not allow oil industry interests to take advantage of a fragmented system of judicial review and forum shop for more favorable courts at the expense of a coherent SRE program. Only by funneling SRE challenges to the D.C. Circuit can we ensure consistent, nationwide SRE policy and avoid regulatory and market uncertainty for the nation's transportation fuel supply."

When the Fifth Circuit denied a motion by ethanol interests to change the venue to the D.C. Circuit, the Fifth Circuit ruled it was the proper venue and said the decision would not be nationally applicable.

The Supreme Court receives about 8,000 petitions for review annually but grants hearings to only about 80 cases.

When EPA assessed the SRE petitions in 2022, the agency applied a single, nationwide legal requirement that to be eligible for an SRE petitioning refineries are required to demonstrate a direct causal relationship between RFS compliance and their claimed economic hardship.

RFA'S COOPER

Geoff Cooper, president and CEO of the Renewable Fuels Association, said it was clear the Fifth Circuit erred in its 2023 decision.

"EPA decisions on small-refinery exemption petitions are inherently national in scope because the RFS establishes proportional renewable fuel volume requirements for every obligated party in the nation," he said in a statement.

"When an exemption is granted, regardless of where the refinery is located, a nationwide shortfall of renewable fuel blending is created. As underscored by five other circuit courts and the dissenting opinion in the Fifth Circuit, the D.C. Circuit is obviously the only proper venue for reviewing EPA's denial of small-refinery exemption petitions. The Supreme Court should overturn the Fifth Circuit's flawed opinion and ensure that any SRE challenges are considered by the singular D.C. Circuit venue."

In their petition, the ethanol groups said the Supreme Court should grant a review solely based on the split in opinion among federal appeals courts.

"Initially, seven panels in four circuits -- the Third, Seventh, Ninth, and 10th Circuits -- uniformly concluded that the D.C. Circuit is the only proper venue to review EPA's 2022 exemption actions," the petition said.

"The Fifth Circuit disagreed with all those panels. It concluded that it, not the D.C. Circuit, is the proper venue to hear the challenges before it. The 11th Circuit thereafter expressly rejected the Fifth Circuit's position and aligned with the Third, Seventh, Ninth and 10th Circuits. Finally, the Fifth and 11th Circuits each denied rehearing petitions notwithstanding the other's decision. Thus, the circuit split on where to review the 2022 exemption actions could not be more direct, entrenched, or consequential."

2023 COURT RULING

In its 2023 ruling, the Fifth Circuit had called out the EPA for changing its interpretation of the SRE regulations.

"EPA's new interpretation and approach -- which it applied in the denial actions -- displaced the adjudicative methodology the agency had relied on for over a decade," the court said in its ruling.

"In that prior approach, EPA granted and denied petitions based on DOE's findings through its application of the DOE scoring matrix. That scoring matrix -- developed as part of the statutorily mandated 2011 DOE study -- 'was designed to evaluate the full impact of disproportionate economic hardship on small refiners and used to assess the individual degree of potential impairment.'"

The court said starting with the April 2022 denial of the exemption requests, "EPA has now completely abandoned" the scoring matrix.

"Instead, EPA now adjudicates petitions using an approach it announced in a December 2021 publication," the court said, which includes determining whether refiners experience disproportionate economic hardship and on the idea that refiners are able to recover the costs of renewable identification numbers by passing those costs on to consumers at the pump.

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

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