Small refineries say financial hardship entitles them to extend the initial exemption they were granted when Congress established the renewable fuel program.
WASHINGTON (CN) — Small refineries can apply to extend their original exemptions under a Clean Air Act program that pushes oil companies to incorporate renewable fuels into transportation fuels, the Supreme Court ruled 6-3 Friday.
“The analysis can be guided only by the statute’s text—and that nowhere commands a continuity requirement,” Justice Neil Gorsuch wrote for the majority in a 16-page opinion.
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, mandating that businesses that import or produce fuel for transportation blend renewable fuels into their products. Congress set numbers for how much of the fuel must be composed of renewables; the requirements increase each year.
In his ruling reversing the appeals court’s action, Gorsuch noted that the Clean Air Act’s text, structure, and history didn’t offer the justices “sufficient guidance to be able to choose with confidence” between the parties’ arguments.
“We mention this only to observe that both sides can offer plausible accounts of legislative purpose and sound public policy,” he wrote, “and that it would therefore be a mistake to rely on appeals to some abstract intuition that the number of small refineries receiving exemptions ‘should have tapered down’ over time.”
Disagreeing with this interpretation, Justice Amy Coney Barrett penned a dissenting opinion. Forming an unlikely minority lineup, the conservative newcomer was joined in her dissent by liberal Justices Sonia Sotomayor and Elena Kagan.
“The statute’s text and structure direct a clear answer: EPA cannot ‘extend’ an exemption that a refinery no longer has,” Barrett wrote in the 13-page dissent. “Because the court’s contrary conclusion caters to an outlier meaning of ‘extend’ and clashes with statutory structure, I respectfully dissent.”
Citing an argument made by the Renewable Fuels Association for the continuity requirement, Barrett analogized the language using the example of a hotel guest who opts to spend a few more days on vacation.
“That guest likely would ask to ‘extend [her] visit.’ Now suppose the same guest returns to the same hotel three years later and, upon arrival, requests to ‘extend’ her prior stay,” Barrett wrote. “The hotel employee would no doubt ‘scratch her head.’ Why? Because it is highly unnatural to speak of ‘extending’ a stay that ended years before.”
Arguing on behalf of HollyFrontier Cheyenne Refining, a Dallas-based petroleum firm, attorney Peter Keisler of Sidley Austin had told the justices in April that the statute establishing the renewable fuel program exempted all small refineries from its requirements during the first years of the program. Keisler said the language Congress used in the text authorizes them to seek extensions of that exemption at any time due to financial hardship.
Matthew Morrison, an attorney with Pillsbury Winthrop for the Renewable Fuels Association, denied this, however, stating that the EPA could extend exemptions only to refineries that had continuously received exemptions since the Renewable Fuel Standard program began.
A HollyFrontier spokesperson said the company was pleased with the court’s ruling in a statement Friday, appealing to the Biden administration to act in accordance when altering the Renewable Fuel Standard program in the future.
“As refiners both large and small face all time high renewable identification number costs and are recovering from the economic impacts of Covid-19, we urge EPA to immediately take action to make the RFS a workable program for U.S. refiners and consumers,” the spokesperson said.
On the opposing side, the Renewable Fuels Association said in a statement Friday that while its members are disappointed with the high court’s ruling, they “remain optimistic that the Biden administration will discontinue the past administration’s flagrant abuse of the refinery exemption program.”
While the Supreme Court ruled on the continuity portion of the 10th Circuit’s prior decision, the appeals court had also sent other questions back to the EPA regarding the agency’s exemption decisions.
“Despite today’s Supreme Court decision, EPA must still resolve those other aspects of the 10th Circuit ruling,” the association said.
The Department of Justice did not respond to a request for comment Friday. Through the U.S. Solicitor General’s Office, it had agreed with the Renewable Fuels Association at oral arguments that the small refineries should not be granted an extension exemption.
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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