April 14, 2021
A lawyer is the only person who writes a 21-page argument and calls it a “brief.” Sometimes, just one “brief” won’t do it. Recently, the states of Iowa, Nebraska, Illinois, Michigan, Minnesota, Oregon, South Dakota, and Virginia, (“the States”) filed a brief as amici curiae, or, as it’s better known, an “amicus brief.”
Before I go any further, let’s talk legal-ese for a moment. An amicus brief is filed by individuals or entities not party to the original case, but who have an interest in the outcome. It’s a little like saying, “hey, we know this isn’t our fight, but we care what happens here because of ‘x, y, z’.” In other words, it’s like filing a “back-up brief” on behalf of whichever side you’re trying to promote. In this case, the States are supporting the Respondents, which are the renewable fuel industry advocates.
How did we get here? As you may recall, in January of 2020, the 10th Circuit ruled on case between a few refiners and several different renewable fuel-supporting coalitions. The court determined that EPA had granted three different small refiner exemptions (SREs) to refiners who did not qualify for those exemptions. The reason the 10th Circuit case was so critical is because it reversed an earlier decision which effectively argued the exact opposite position. The 10th Circuit case was appealed, which means it went to the Supreme Court of the United States (SCOTUS) and SCOTUS granted certiorari (agreed to hear the case). SCOTUS is set to hear oral arguments from the parties on April 27.
Now that we’ve got that out of the way, let’s talk about what the States said and why this is important. To use their words directly, the States filed the following three arguments:
- Authorizing the unfettered granting of new small-refinery exemptions would gut the Renewable Fuel Standard (RFS);
- Petitioners’ [EPA] broad interpretation would cause substantial economic harm to the rural economies of many States; and
- An ineffective Renewable Fuel Standard would harm the environment and efforts to obtain energy independence[1]
While the last argument is important, I am going to focus on the first two for the purposes of this discussion. The first argument, as you might imagine, centers around the harm the renewable fuel industry has suffered as a result of the granting of these SREs. In other words, they argued that 2016 through 2020 had been a disaster. To be honest, they’re not wrong. When EPA grants an SRE, the annual Renewable Volume Obligations (RVOs) are not re-calculated to include the exemptions. Remember, the RVOs drive the production of renewable fuels and the trading of RINs on the marketplace. To understand more about that, read Easy Peezy Lemon Squeezy: The Ins And Outs Of The Renewable Volume Obligation written by me. #shamelessplug. This means, that the gallons EPA exempted are simply taken out of the market without regard to the consequences.
To say the disregarded consequences have been dire, would be an understatement. For example, since 2017, EPA has granted 86 SREs over three compliance years[2]. To put this more in terms of dollars and cents, the renewable fuel industry has lost an average of $2 billion per year for those three years or $6.4 billion dollars for all three years. While those numbers may be comparatively small to other industries, they are definitely more than pocket change.
The second argument centers around what happens if EPA continues to grant SREs as rampantly as they have been. Essentially, the States argue that, if EPA’s trend of granting SREs because they feel like it continues, the states will suffer irreparable economic harm. To illustrate their point, the states use some fairly alarming but convincing statistics. In October of 2019, before the advent of COVID and the “new normal,” a total of 19 ethanol plants had closed across the nation[3]. In Iowa, for example, the renewable fuel industry accounted for nearly $4 billion of the gross domestic product for the year 2020[4]…so even in a year where the transportation industry saw a noticeable decline, a good chunk of Iowa’s 2020 budget came from the renewable fuel industry. Additionally, the renewable fuel industry in Iowa alone is responsible for over 37,000 jobs and generates an average of $1.8 billion in income for Iowa households[5]. I’m focusing on Iowa because I live here and I have seen these effects first-hand, but I don’t want to undermine the dire consequences these SREs have had on the other states…except for Nebraska…#iowarules.
Alright, so, the states that signed and filed the brief suffered severe consequences, but if we’re being honest, no one really cares about the “fly over states” anyways. I mean, that’s why they’re called “fly over” states right? Actually, west and east coast, you might want to care…a lot…According to the States, the renewable fuel industry is an economic imperative. In the year 2020, even with COVID and all that it has entailed, the renewable fuel industry supported more than 300,000 jobs and $18.6 billion in income for households nationwide[6]. The States estimate that the SREs have had a devastating economic impact on the national GDP, to the tune of $34.7 billion. Again, that’s not a trillion-dollar government contract, but that’s not a small impact either.
In the more abstract, the States point out the impact these continued SREs will have on rural communities. For those of you from larger cities or states that are more densely populated, allow me to paint you a picture. Many towns within the States consist of a gas station, one or two bars, a church and soy or cornfields as far as the eye can see. That’s absolutely not an exaggeration. Ethanol and biodiesel plants and blenders of biofuels provide jobs and revenue for these rural communities. These jobs and revenue aren’t just limited to the actual plant or gas station, but to the farmers whose crops or cattle are the basis for biofuels. As the States correctly point out, these rural communities will suffer irreparable economic harm if SREs continue to be so liberally granted causing these biofuel plants and gas stations are put out of business.
So, why does it matter that the States filed the brief? It matters, if not for all of the foregoing reasons, because the States are not direct participants in the RFS. It’s one thing for a party that is directly harmed to come forward, it is another for a party with less direct harm to come forward. Things have gotten so bad that the States who have benefitted from the RFS, whether directly or indirectly, have started to notice. It has started to affect the “bottom-line” of these states’ budgets as well provided real-world harm to many rural communities located within the States.
What will SCOTUS do? Great question. Both the Respondents and the States have made persuasive arguments, but sometimes that’s not enough and also, the Petitioners (the refiner side) have also made persuasive arguments. One thing is for certain, April 27 cannot come soon enough!
[1]Brief for Iowa et al., p. 8-14, HollyFrontier Cheyenne Refining et al., v. Renewable Fuels Association et al., Nos. 20-472 (2021).
[2] Id. at 7.
[3] Id. at 11.
[4] Id. at 12.
[5] Id. at 12.
[6] Id. at 13.