Did the EPA exceed its authority by exempting refineries from statutory obligations?

The Renewable Fuel Standard requires “refiners, blenders, and importers of transportation fuel to blend increasing amounts of renewable fuels into their products each year.” The requirement is for refiners to blend billions of gallons of corn-based ethanol and other biofuels into their fuel. Alternatively, refineries can buy credits from those refineries that do blend their fuels. This law was intended to help farmers and reduce dependence on foreign oil. Because the requirements might have a disproportionately harsh impact on small refineries, provision was made for exemptions for them. Three such small refineries were given an initial blanket exemption in 2010.

The Renewable Fuel Standard began with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007.

On Friday, January 8, 2021, the Supreme Court agreed that they will hear arguments in the case of HollyFrontier Cheyenne Refining v. Renewable Fuels Association. The focus of the dispute is a statutory provision that reads, “A small refinery may at any time petition the for an extension of the exemption…for the reason of disproportionate economic hardship.” Collaterally, the Supreme Court will determine whether the EPA acted outside the bounds of its authority when making those three exemptions referenced above.

Now that the blanket exemption has expired, this case is expected to clarify the circumstances in which the EPA, on a case-by-case basis, may make exemptions for small refineries. The U.S. Court of Appeals for the 10th Circuit held that the EPA could only grant an extension if there had been an exemption previously, and vacated the EPA’s orders granting three small refineries exemptions from renewable fuel standards. A small refinery that did not receive or seek an exemption prior was not eligible for an extension, they said, as you cannot extend something that does not already exist.

The court also found that the hardship the EPA relied upon to grant those extensions was caused by factors aside from compliance with renewable fuel obligations.

The Trump administration had ramped up the number of exemptions granted to the industry. Biofuel producers claim the waivers issued undercut demand for their products. Most refineries that have gotten exemptions in recent years have not secured them continuously, which puts them at odds with the 10th Circuit decision.

Kurt Kovarik, spokesman for the National Biodiesel Board, said, “We are disappointed in the Supreme Court’s decision to review the case but will continue to vigorously pursue a resolution to the damage that small refinery exemptions do to the biodiesel industry.”

The Fueling American Jobs Coalition, advocates for refiners, praised the Supreme Court’s decision, calling this an “urgent time” for refiners who are hammered by the economic downturn.

In a brief opposing the refineries’ position, Jeffrey Wall, Acting Solicitor General, wrote, “The government agrees with petitioners that the question presented has important implications for the renewable fuel standard program. This case, however, would be an unsuitable vehicle for addressing the question.”

The court is expected to hear the case in April 2021.