Supreme Court Considers Exception to Renewable Fuels Requirements

The nation’s high court heard arguments Tuesday in a case concerning whether small refinery companies experiencing financial hardship can apply for exemptions to a renewable fuels mandate in the Clean Air Act.

(Image by adege/Pixabay)

WASHINGTON (CN) — Looking closely at a Clean Air Act program that pushes oil companies to incorporate renewable fuels into transportation fuels, the Supreme Court heard virtual arguments Tuesday in a case that could have been resolved without high court intervention.

Despite no circuit split over the issue, the justices opted to take up the case in January 2021. Three small oil and gas refineries had objected to a 10th Circuit ruling that remanded questions about exemptions within the Congress-implemented Renewable Fuel Standard program back to the Environmental Protection Agency.

The program began in 2005 and expanded in 2007 and mandates that businesses importing or producing fuel for transportation must blend renewable fuels into their products. Congress set numbers for how much of the fuel must composed of renewables; the requirements increase each year.

Speaking on behalf of HollyFrontier Cheyenne Refining, a Dallas-based petroleum firm, attorney Peter Keisler of Sidley Austin said Tuesday that the statute establishing the renewable fuel program exempted all small refineries from its requirements during the first years of the program and that the language Congress used in the text authorizes them to seek extensions of that exemption at any time due to financial hardship.

The companies’ use of the exemption need not be continuous, the attorney said.

“Even if ‘extension’ is read in its temporal sense, that does not require continuity,” said Keisler. “No dictionary defines extension to require continuity.”

An attorney for the Renewable Fuels Association argued at the hearing, conversely, that the EPA could extend exemptions only to refineries that had continuously received exemptions since the Renewable Fuel Standard program began.

“‘Extension’ may have other possible meanings in different contexts, but its ordinary meaning, to lengthen or prolong, is the only plausible meaning in the context of this statutory provision, and petitioners have offered no compelling reason to depart from that ordinary meaning,” argued attorney Matthew Morrison, of Pillsbury, on behalf of the fuels association Tuesday.

According to Morrison, the EPA’s unauthorized carve-outs have cost biofuels producers billions of dollars in lost revenue, which has in turn devastated rural economies dependent on the renewable fuels industry.

“Petitioners’ suggestion that there should be a permanent safety valve to excuse them from their compliance obligations is belied by the text and structure of the statute,” Morrison said. “And it’s antithetical to Congress’s goal of increasing the volume of renewable fuel in the nation’s transportation system.”

Justice Elena Kagan appeared unconvinced by the small refineries’ argument. She offered Keisler a hypothetical scenario.

“Suppose that I rented an apartment five years ago. I rented it for a year, and then I decided to give it up. Five years later, I’m now really tired of where I’m living, and I want to move back. I call the landlord and say, ‘I’d like an extension of my lease.’ What would the landlord say?”

Keisler acquiesced.

“I think the landlord would scratch your head and think that’s a very strange context in which to be using the word extension,” Keiser said. “I agree with that.”

But he maintained that the interpretation of the word “extension” here is different than the one he is pushing for. 

“Congress has used the word in the context of government benefits and programs that existed lapsed and resumed,” Keiser said.

During questioning, Justice Clarence Thomas asked Morrison where his clients’ interest in the case stemmed from — and why they cared that the small refineries did not receive the exemption.

Morrison said such compliance exemptions can affect the demand for his clients’ products as well as the price of the fuel that they sell.

“There have been almost four billion gallons over the last few years that have been lost as a result of small refinery exemptions. That has had a devastating effect on the renewable fuel sector,” Morrison said.

Reexamining the meaning of the statute in question, Justice Amy Coney Barrett asked Morrison whether, “so long as they are continuous,” a small business’s exemptions could go on into perpetuity.

“Theoretically, if it is possible that a small refinery could submit a meritorious petition each year that shows it had a disproportionate economic hardship,” Morrison answered.

Barrett’s response indicated she may see the text in a different light than the attorney.

“It seems to me, if ‘temporary’ doesn’t really mean temporary, then maybe [the text] doesn’t cast as much light as you say on what ‘exemption’ means either,” Barrett said.

Christopher Michel, assistant to the solicitor general, spoke on behalf of the federal government at Tuesday’s arguments, agreeing with the Renewable Fuels Association that the small refineries should not be granted an extension exemption.

“If a small refinery no longer has the exemption, it cannot obtain an extension,” Michel said. “The EPA cannot grant something that does not exist.”

Previously, the 10th Circuit ruled that the word “extension” means an enlargement of a period of time. Appealing in their petition to the Supreme Court, the small refineries argued that the case should be reviewed because small operations, such as themselves, in the 10th Circuit’s jurisdiction would face disproportionate financial hardships compared to those outside the region — and could even be forced to shut down.

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