A Clash over Renewable Fuels Hinges on the Meaning of a Single Word

April 27, 2021

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by Emily Hammond (SCOTUSBlog) On Tuesday, the Supreme Court will hear oral argument in HollyFrontier Cheyenne Refining, LLC v. Renewable Fuels Association. The case presents an issue of statutory interpretation involving the Renewable Fuel Standard program — a part of the Clean Air Act that calls for incorporating renewable fuels into transportation fuels. With the meaning of the word “extension” at the core of the dispute, the case promises to yield insights into the justices’ interpretive stances. As clean-energy initiatives are introduced in Congress and considered by federal agencies, observers likely will also watch for whether and how the justices are willing to consider the policy implications of the broader statutory context.

Statutory background

To understand the question presented, some background on the statutory scheme is helpful. The RFS program — which was initially introduced in 2005 and expanded to its current form in 2007 — requires entities importing or producing gasoline and diesel fuel to blend renewable fuels into their transportation fuels. To that end, Congress established annual numerical volumes of renewable fuel, advanced biofuel and cellulosic biofuel that must be blended into transportation fuels; these requirements increase each year. Using the statutory volumes and projections by the Energy Information Administration, the Environmental Protection Agency sets the annual percentage amount that must be met to achieve the statutory volumes. In turn, regulated entities use those percentages to determine their blending obligation.

The statutory scheme establishes a credit-based compliance mechanism using Renewable Identification Numbers. These can represent either actual gallons of renewable fuels that a refiner has blended into its transportation fuels or credits purchased from others on a market established by Congress and implemented by EPA. Still, Congress recognized that compliance might cause economic hardship and included special provisions for small refineries in 42 U.S.C. § 7545 — those whose “average aggregate daily crude oil throughput is 765,000 barrels or less for a calendar year.”

These small-refinery provisions are at the heart of HollyFrontier. First, in subparagraph (A) of Section 7545(o)(9), labeled “Temporary exemption,” the statute provided that small refineries need not comply with the RFS program until 2011. This initial exemption could be extended for at least two additional years for small refineries if the Department of Energy, after conducting a study, found that compliance would cause “disproportionate economic hardship.” Second, in subparagraph (B), labeled “Petitions based on disproportionate economic hardship,” the statute provides that “a small refinery may at any time petition” EPA “for an extension of the exemption under subparagraph (A) for the reason of disproportionate economic hardship.” This finding is to be made in consultation with the Department of Energy and in consideration of “other economic factors.”

The question presented revolves around the meaning of the term “extension” in subpart (B): Can EPA grant an extension to small refineries for which the temporary exemption in subpart (A) had previously expired? Put another way, must small refineries have a continuous, unbroken exemption to be eligible for an extension of the original exemption? READ MORE

Supreme Court weighs whether to limit issuance of exemptions to biofuel blending requirements (The Hill)

Biofuel, refiner groups anxiously await SCOTUS ruling (Agri-Pulse)

U.S. Supreme Court Hears Arguments In Renewable Fuel Standard Case (Iowa Public Radio)

Justices batter biofuels, refiners in waiver case (Agri-Pulse)

Justices Hint at Limits on Oil Refineries in Feud on Ethanol (Bloomberg)

U.S. Supreme Court divided in biofuel waivers dispute (Reuters)

Justices hit biofuel blending in 'hypothetical-rich case' (E&E News)

US Supreme Court hears oral arguments in cases involving Renewable Fuel Standards Program and noncitizen re-entry (Jurist.org)

U.S. Supreme Court hears high-stakes arguments in biofuels case (Iowa Capital Dispatch)

SCOTUS Hears Arguments in Biofuels Coalition Case (Energy.AgWired.com)

Supreme Court hears arguments in SRE challenge (Ethanol Producer Magazine)

Supreme Court hears arguments on RFS (Farm Progress)

SCOTUS Hears Arguments in Major RFS Case: DOJ Attorney Tells SCOTUS Most Small Refineries Have Complied With RFS (DTN Progressive Farmer)

SUPREME COURT HEARS RFS EXEMPTION CASE (Brownfield Ag News)

U.S. renewable fuel credits climb to highest since at least 2013 -traders (Reuters)

SCOTUS WEIGHS BIOFUELS WAIVERS: (Politico's Morning Energy)

Ethanol Report 4-28-21: Ethanol Industry's Day in the Supreme Court (Energy.AgWired.com; includes AUDIO)

Corn growers await the results of big oil and ethanol's battle (RFD TV; includes VIDEO)

GRASSLEY READY TO THROW HIS WEIGHT AROUND IN SUPPORT OF BIOFUELS IN SCOTUS CASE (Brownfield Ag News)

Ethanol Report 4-28-21 The Supreme Court heard oral arguments this week on the appeal of a case over the Small Refinery Exemption program under the Renewable Fuel Standard (RFS). (Energy.AgWired.com; includes AUDIO)

Justices and litigants spar over whether renewable-fuel law creates a “funnel” or a “safety valve” (SCOTUS blog)

Oil And Ethanol Fight At The Supreme Court Over The Word “Extension” (Forbes)

Excerpts from SCOTUSblog: The petitioners are three small refineries who argue that the word “extension” in the statute’s exemption language provides a metaphorical safety valve for small refiners who would suffer disproportionate economic hardship in any given year if required to comply with the program. The respondents, several renewable fuel associations, contend that the provision is more like a funnel, designed by Congress to achieve full compliance with the standard over time such that an extension would be available only to those who had continuously received an exemption. In an additional wrinkle, the federal government was originally aligned with the refineries’ view, but following the change in presidential administration, it switched its position before the court.

Coming into Tuesday’s argument, the main themes in the parties’ briefs centered on approaches to statutory interpretation. But the parties had also debated whether deference to the Environmental Protection Agency would be appropriate under the doctrine of Chevron USA, Inc. v. Natural Resources Defense Council, Inc., given a 2014 EPA regulation that interpreted the meaning of small refineries in a way consistent with an overall safety-valve approach. Early in his questioning of Peter Keisler, who represented the refineries, Chief Justice John Roberts sought to dispose of that possibility — not because the 2014 regulation had failed to interpret “extension,” as the renewable fuel associations argued, but because EPA itself had changed its view of the question presented.

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(Assistant to the Solicitor General Christopher) Michel responded that Chevron did not apply under these circumstances because EPA had not interpreted the word at issue, and EPA no longer held the view that “extension” did not require continuity.

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Justice Stephen Breyer asked Keisler about congressional intent, emphasizing that it appeared to be a scheme designed to ensure increasing levels of compliance over time. Here Keisler argued that a safety valve would better achieve the statutory goals because it would keep more small refineries in business — and able to blend renewable fuels — even if in some years they could not comply.

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Michel responded that the statute is ultimately “aimed at transforming the fuel supply”; requiring continuity for an extension of the exemption achieves full compliance with the program’s scheme over time. READ MORE