The Supreme Court on Friday gave a helping hand to small oil refineries that seek “hardship exemptions” from requirements of Renewable Fuel Standards (RFS) under the Clean Air Act.
By a 6-3 vote, the majority ruled in HollyFrontier Cheyenne Refining, LLC v. Renewable Fuels Association that these exemptions could be extended to refineries even if previous exemptions had lapsed. The ruling rejected the decision of the U.S. Court of Appeals for the Tenth Circuit that interpreted the word “extension” literally to mean that a small refinery may obtain an exemption only if their previous exemptions were continuous.
But as with other recent Supreme Court cases, the change in presidential administrations may alter the outcome in the case. In the Biden administration’s brief before the court, acting solicitor general Elizabeth Prelogar told the justices that after the HollyFrontier case was granted review on January 8, the Environmental Protection Agency “engaged in a ‘detailed review’ of the court of appeals’ decision and the agency’s position.” She continued that “following the change of Administration,” the EPA’s review “reached the ‘considered assessment that the Tenth Circuit’s reasoning better reflects the statutory text and structure, as well as Congress’s intent in establishing the RFS program.”
Winston & Strawn partner Jonathan Brightbill said Friday, “This is an important decision for small refineries subject to the renewable fuels standards. Affirmance of the Tenth Circuit would have essentially ended the exemption program. It is significant, however, that EPA and the Acting Solicitor General flipped the legal position of the United States after the change in administration. While this HollyFrontier decision means that EPA still has discretion to grant these exemptions, EPA may be less willing to do so.”
But for now, the decision stands as a victory for refineries that were worried that if the Tenth Circuit ruling stood, it “would foreclose most small refineries from obtaining hardship exemptions and create a one-way ratchet that would effectively phase out the exemption,” according to a brief by Sidley Austin’s Peter Keisler on behalf of Dallas-based HollyFrontier.
Another refinery that was part of the case, CVR Energy, based in Sugar Land, Texas did not respond to a request for comment.
Stephanie Sebor, another partner at Winston & Strawn, said, “As much as this decision is a win for small refineries, it is a loss for biofuels manufacturers, who sought to increase the amount of ethanol and other renewables into transportation fuels.” Stock in biofuel companies, which benefit from the RFS program, dipped after the decision was announced.
In a statement, Renewable Fuels Association said, “A coalition of renewable fuel and farm groups expressed extreme disappointment in today’s U.S. Supreme Court decision overturning a 2020 appellate court ruling that struck down three improper small refinery exemptions granted by previous EPA administrators.” The association added, “The groups remain optimistic that the Biden administration will discontinue the past administration’s flagrant abuse of the refinery exemption program.”
The Supreme Court decision was mainly an exercise in statutory interpretation, with competing views of the meaning of the word “extension.” Justice Neil Gorsuch writing for the majority said, “Think of the forgetful student who asks for an ‘extension’ for a term paper after the deadline has passed, the tenant who does the same after overstaying his lease, or parties who negotiate an ‘extension’ of a contract after its expiration.”
But Justice Amy Coney Barrett, in her dissent, countered Gorsuch, writing, “Consider a hotel guest who decides to spend a few more days on vacation. That guest likely would ask to ‘extend [her] visit.'” She continued, “Now suppose the same guest returns to the same hotel three years later and, upon arrival, requests to ‘extend’ her prior stay. The hotel employee would no doubt scratch her head.”
Barrett’s dissent was her first since joining the court last October. Justices Sonia Sotomayor and Elena Kagan joined the dissent, triggering social media comments that the decision was a case of “the guys against the gals.”
But Justice Amy Coney Barrett, in her dissent, countered Gorsuch, writing, “Consider a hotel guest who decides to spend a few more days on vacation. That guest likely would ask to ‘extend [her] visit.'” She continued, “Now suppose the same guest returns to the same hotel three years later and, upon arrival, requests to ‘extend’ her prior stay. The hotel employee would no doubt scratch her head.”
Barrett’s dissent was her first since joining the court last October. Justices Sonia Sotomayor and Elena Kagan joined the dissent, triggering social media comments that the decision was a case of “the guys against the gals.”