The US Supreme Court has agreed to review a court decision denying economic hardship exemptions for small refineries dealing with the costs of the federal renewable fuel mandate.
The case was accepted by the Supreme Court Jan. 8 and, according to one observer, could be argued before the court in April.
HollyFrontier Cheyenne Refining LLC v. Renewable Fuels Association is the latest case in a long tug-of-war between refiners and the farm lobby. The Renewable Fuels Association and other agricultural interests advocate for the blending of corn-based ethanol into gasoline, an obligation that for refiners is an often costly complication.
A decision in January 2020 by the US Circuit Court of Appeals for the Tenth Circuit vacated hardship exemptions that the Environmental Protection Agency (EPA) had granted for three refineries—HollyFrontier Corp.’s refineries in Woods Cross, Utah, and Cheyenne, Wyo., and CVR Energy Inc.’s Wynnewood, Okla., refinery.
The appellate court decision applies only within the Tenth Circuit. In that six-state region, the decision, if allowed to stand, means the eventual extinction of small-refinery exemptions under the Renewable Fuel Standard (RFS), the refining companies told the Supreme Court in requesting review.
Seventeen refiners tried to get around the problem by requesting retroactive exemptions from EPA, but the agency denied the requests (OGJ Online, Sept. 15, 2020).
“At any time” or not
The Tenth Circuit decision overturned established EPA policy put in place after the RFS program was created by the Energy Policy Act of 2005 and expanded by the Energy Independence and Security Act of 2007, two acts that amended the Clean Air Act.
As amended, the law says, “A small refinery may at any time petition the Administrator for an extension of the exemption...for the reason of disproportionate economic hardship.”
The appellate court ruling meant that only a refinery that has received an exemption every year since 2011 could be given another extension. This hinged on the court’s interpretation of the word “extension” as implying continuation of something year-by-year without gaps.
The refiners said the word “extension” has various meanings depending on context, and that the court failed to take into account the provision for a refinery to “at any time” petition. Through its ruling, the court is not allowing petitions at any time.
In addition, RFS markets and refinery economics fluctuate from year to year, making the value of exemptions variable rather than continuous.
Questions about impact
The Renewable Fuel Association defended that interpretation in urging the Supreme Court to refuse review, and the group said the refiners were exaggerating the potential economic impacts of the decision. The association was joined by three other agricultural sector groups in its litigation.
EPA agreed with the refiners until the appellate court issued its decision, after which the agency switched sides amid the difficult politics of an election year.
The American Fuel & Petrochemical Manufacturers (AFPM), a trade group representing most US refiners, has supported HollyFrontier and CVR in the litigation.
“It is critically important, for the sake of many small fuel manufacturers and thousands of refining jobs, to resolve the questions of this case quickly,” AFPM said Jan. 8.
HollyFrontier already has demonstrated a partial impact. The company ended oil refining at its Cheyenne refinery in August and is switching the facility to biodiesel production. It cited the court decision as one of its several reasons for the change.