May 12, 2021
“If the facts are against you, argue the law. If the law is against you, argue the facts. If the law and the facts are against you, pound the table and yell like hell.” -Carl Sandburg
Recently, the United State Supreme Court (SCOTUS) heard oral arguments on the 10th Circuit case regarding EPA’s granting of three different extensions of Small Refiner Extensions (SREs). As you might recall, in order to be granted a small refiner exemption, a small refinery had to be considered “small” and had to have had experienced a disproportionate economic hardship. Further, once a refiner either failed to apply or was denied an exemption, the refiner was supposed to be precluded from being granted an exemption in any future years. In other words, failure to apply or be granted an extension of the original exemption resulted in the refiner losing that exemption. Just so you understand where the case is at with SCOTUS, here is the recap on what the original 10th circuit case was specifically about:
- Holly Frontier Cheyenne, LLC (“Cheyenne”): Cheyenne had been granted an exemption for the year 2012 but had not petitioned for an extension of the exemption for the years 2013 and 2014. However, in 2017 Cheyenne petitioned for an exemption for the compliance year 2016. The Department of Energy (“DOE”) recommended to EPA that Cheyenne should not be a granted an exemption. EPA, however, granted an exemption for the compliance year 2016 in full.
- Holly Frontier Woods Cross Refining, LLC (“Woods Cross”): Woods Cross had never petitioned nor been granted a small refinery exemption for any year. However, in the year 2017, Woods Cross petitioned EPA for an exemption for the compliance year 2016. Woods Cross did not identify as having a disproportionate economic hardship, a requirement to be granted an exemption. DOE recommended that EPA grant Woods Cross a partial exemption, but EPA granted a full exemption.
- Wynnewood Refining Company, LLC (“Wynnewood”): Wynnewood had been granted a blanket exemption for the year 2011 and 2012. However, Wynnewood had not received an exemption since the year 2012. Wynnewood petitioned EPA for an exemption in 2017 for the compliance year 2016. DOE, noting that Wynnewood’s compliance would “not appear…to threaten the refinery’s economic viability,” recommended a partial exemption. EPA, nonetheless, granted Wynnewood a full exemption for the year 2016.
The 10th Circuit disagreed with EPA’s granting of these exemptions and held that these refineries were required to meet their compliance obligations. The refineries appealed this decision to SCOTUS and the arguments on this case were recently heard.
What does it look like when SCOTUS hears oral arguments? The petitioner (the party appealing the case) gets to present an argument for 10 minutes and then the justices get to question the petitioner about their arguments. The respondents (the party responding to the appeal) then also get 10 minutes to present their arguments and also have to respond to questions from the justices.
Who said what? As you might expect, the case hinged nearly entirely on the definition of the word “extension”. The Petitioners, (HollyFrontier et al) argued that the word extension means “to grant” while the respondents argued that the definition of “extension” means “to lengthen.” Was this a case that was “edge of your seat” exciting to listen to? Well….no, not really. Lawyers arguing about two different applicable definitions for the same word is hardly a scintillating experience. However, the implications this case might have are more suspenseful.
To everyone in the renewable fuel industry, this case stands for the possibility that EPA has to reign in their actions and abide by the letter of the regulations. Since 2016, the number of SREs granted to small refiners that haven’t quite deserved them has only increased. The 10th Circuit case that was before SCOTUS is a perfect example of EPA’s unilateral extension of the scope of their regulatory authority. Having this case before SCOTUS is an opportunity for EPA as well as participants in the renewable fuel standard to have some clear legal guidance, possibly providing some much-needed certainty to the industry.
So what did SCOTUS decide? Who’s got the correct definition? Well, as of right now, not even SCOTUS has an answer to that question. Once SCOTUS hears a case, they need a certain amount of time talk the case over, take a vote, and write an opinion. The opinion on the case is expected to be published sometime in June or even as late as early July.
So, then no one really knows what’s going on? That’s pretty much true, but some people are getting a little nervous. #epa. Last week, EPA filed a motion to vacate with SCOTUS to remove SREs given to the three refineries listed in this article. Does this mean that SCOTUS will not side with the refineries? No, it doesn’t mean that at all. It simply means that EPA’s might be proactively anticipating the direction the case might be headed.
While it’s anybody’s guess how this case will turn out, the renewable fuel industry has a better legal argument. Participants in the renewable fuel standard will have to wait and see which side yelled louder.