Amicus Curiae Brief — HollyFrontier Cheyenne Refining, LLC, et al., Petitioners v. Renewable Fuels Association, et al.
Supreme Court briefNov 11, 2020
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No. 20-472
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In The
Supreme Court of the United States
---------------------------------♦--------------------------------HOLLYFRONTIER CHEYENNE
REFINING, LLC, ET AL.,
Petitioners,
v.
RENEWABLE FUELS ASSOCIATION, ET AL.,
Respondents.
---------------------------------♦--------------------------------On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Tenth Circuit
---------------------------------♦--------------------------------BRIEF OF AMICI CURIAE STATES OF WYOMING,
LOUISIANA, OHIO, OKLAHOMA, TEXAS,
UTAH, AND WEST VIRGINIA
IN SUPPORT OF PETITIONERS
---------------------------------♦--------------------------------BRIDGET HILL
Attorney General
JAMES KASTE
Deputy Attorney General
MATT VANWORMER*
Senior Assistant Attorney General
*Counsel of Record
OFFICE OF THE WYOMING ATTORNEY GENERAL
2320 Capitol Avenue
Cheyenne, Wyoming 82002
(307) 777-6946
matt.vanwormer@wyo.gov
Counsel for Amicus Curiae State of Wyoming
[Additional Counsel Listed At End]
================================================================================================================
COCKLE LEGAL BRIEFS (800) 225-6964
WWW.COCKLELEGALBRIEFS.COM
i
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .................................
ii
STATEMENT OF INTEREST .............................
1
SUMMARY OF THE ARGUMENT .....................
2
ARGUMENT ........................................................
3
I.
Small refineries cannot survive without
access to the hardship exemption .............
3
II.
Small refinery shutdowns will have devastating consequences ................................... 10
III.
Shutdowns were not what Congress intended when it created the Renewable
Fuel Standard ............................................ 16
CONCLUSION..................................................... 20
ii
TABLE OF AUTHORITIES
Page
CASES
King v. Burwell,
576 U.S. 473 (2015) .................................................19
Renewable Fuels Ass’n v. EPA,
948 F.3d 1206 (10th Cir. 2020) ...................... 1, 17, 18
Sinclair Wyo. Ref. Co. v. EPA,
887 F.3d 986 (10th Cir. 2017) .............................. 6, 20
STATUTES
42 U.S.C. § 7545 ....................................................... 4, 5
Energy Independence and Security Act of 2007,
Pub. L. No. 110-140, 121 Stat. 1492 (2007) ..............4
Energy Policy Act of 2005, Pub. L. No. 109-58,
119 Stat. 1067 (2005) ................................................4
REGULATIONS
40 C.F.R. § 80.1407 .......................................................8
40 C.F.R. §§ 80.1425-.1429 ...........................................5
40 C.F.R. § 80.1426 .......................................................4
40 C.F.R. § 80.1427 .......................................................5
40 C.F.R. § 80.1429 .......................................................4
OTHER AUTHORITIES
53 Cong. Rec. S15421 (daily ed. Dec. 13, 2007) ..........18
146 Cong. Rec. S3519 (daily ed. May 4, 2000) .............4
iii
TABLE OF AUTHORITIES—Continued
Page
Clifford Krauss, High-Price Ethanol Credits
Add to Refiners’ Woes, N.Y. Times (Aug. 22,
2016) ..........................................................................6
Diesel vehicles are big in Wyoming, Casper Star
Tribune (June 17, 2014) ............................................8
Garlan Joseph VanHook, EPA Not to Blame for
RFS Pitfalls: A Call to Congress to Restructure
the RFS Program, 9 Ky. J. Equine, Agric. &
Nat. Res. L. 165 (2017) ............................................17
H.R. Rep. No. 109-215, pt. 1 (2005) ............................17
Jad Mouawad, Rising Demand for Oil Provokes
New Energy Crisis, N.Y. Times (Nov. 9, 2007) ........19
James D. Hamilton, Causes and Consequences of
the Oil Shock of 2007-08, Brookings Papers on
Econ. Activity (2009) ...............................................17
Jennifer Hiller, Exxon quarterly profit falls 5.2%
on weak refining, chemical margins, Reuters
(Jan. 31, 2020) ...........................................................7
Jordan Blum, Exxon Mobil’s profit tumbled 30%
in 2019, 5% in final quarter, Houston
Chronicle (Jan. 31, 2020) ..........................................7
Letter from Gary Herbert, Governor, State of
Utah, to President Donald J. Trump (Sept. 16,
2019) ........................................................................15
Letter from Greg Abbott, Governor, State of Tex.,
to Hon. Andrew Wheeler, Admin., EPA (July
12, 2019) ..................................................................13
iv
TABLE OF AUTHORITIES—Continued
Page
Letter from Hon. Mitch B. Carmichael, Senate
President, Hon. Roger Hanshaw, Speaker of
the House, State of WV, to Mr. William Crozer,
Special Assistant, to the President & Deputy
Director, Office of Intergovernmental Affairs
(Sept. 6, 2019) ..........................................................12
Letter from Marian Orr, Mayor, Cheyenne, Wyo.,
to U. S. President Donald J. Trump (Feb. 29,
2020) ........................................................................11
Letter from Mark Gordon, Governor, State of
Wyo., to Hon. Donald J. Trump, President of
the U. S. (Feb. 28, 2020) ..........................................12
Letter from Mark McManus, General President,
United Ass’n of Journeymen & Apprentices of
the Plumbing & Pipe Fitting Indus. of the
U. S. and Can., to Hon. Donald J. Trump,
President of the U. S. (Aug. 30, 2019) .....................12
Letter from Members of Congress, to Hon.
Donald J. Trump, President of the U. S. (Mar.
3, 2020) ....................................................................13
Letter from Members of the Pa. Congressional
Delegation, to President Donald J. Trump
(July 26, 2019) .........................................................14
Letter from Phil Bryant, Governor, State of
Miss., to Admin. Andrew Wheeler, EPA (Aug.
8, 2019) ....................................................................15
Letter from Tom Wolf, Governor, State of Pa., to
Hon. Andrew Wheeler, Admin., EPA (May 11,
2020) ........................................................................14
v
TABLE OF AUTHORITIES—Continued
Page
Liz Hampton, Wave of North American oil and
gas bankruptcies to continue at $40/bbl crude:
Report, Reuters (July 9, 2020) ................................16
Marc Heller, Agency denies retroactive RFS
waivers for small refiners, E&E News (Sept.
14, 2020) ....................................................................9
Philip Rossetti, The Renewable Fuel Standard’s
Policy Failures and Economic Burdens,
American Action Forum (April 19, 2018) .................6
Rocky Mountain Power, Gateway South
Transmission Project Wyoming Industrial
Development Information and Siting Act
Section 109 Permit Application (July 2020) ...........11
Sens. Urge EPA To Appeal 10th Circ. Refinery
Waiver Ruling, Law 360 (March 4, 2020) .................7
S. Rep. No. 109-78 (2005) ............................................17
S. Rep. No. 114-281 (2016) ............................................5
Statement of Adam Sieminski, Administrator,
Energy Information Administration, before
the Subcommittee on Energy and Power
Committee on Energy and Commerce, 113th
Cong. (June 26, 2013) ................................................7
Steven Peters, States Where People Drive the
Most, 24/7 Wall St. (July 8, 2016) ...........................10
U. S. Energy Info. Admin., Biofuels explained ............7
U. S. Energy Info. Admin., Refinery Capacity
Report (June 2020) ....................................................9
vi
TABLE OF AUTHORITIES—Continued
Page
U. S. Energy Info. Admin., State Profiles and
Energy Estimate ......................................................10
U. S. Energy Info. Admin., Total Energy: Annual
Energy Review (Sept. 2012) ....................................10
U. S. EPA, RFS Small Refinery Exemptions ............ 2, 9
U. S. Gov’t Accountability Office, Renewable
Fuel Standard: Information on Likely
Program Effects on Gasoline Prices and
Greenhouse Gas Emissions (May 2019) ...................6
Wyo. Dep’t of Health, Office of Rural Health,
What is Rural ..........................................................10
1
STATEMENT OF INTEREST1
This case will determine whether small refineries
in Wyoming and across the nation survive. In the decision below, the Tenth Circuit determined that small refineries could no longer obtain a hardship exemption
from the progressively more onerous requirements of
the Renewable Fuel Standard unless they had continuously received exemptions from 2011 to the present.
Renewable Fuels Ass’n v. EPA, 948 F.3d 1206 (10th Cir.
2020). This decision likely marks the beginning of the
end for most small refineries. Few small refiners can
meet this test today and eventually none will be able
to meet it. Absent access to the hardship exemption,
the whole small refining industry may soon disappear.
Loss of this industry will have devastating economic
consequences, and this result directly contravenes the
primary reason the Renewable Fuel Standard exists—
to ensure domestic energy security.
Petitioners have amply demonstrated that the
Tenth Circuit’s interpretation of the Renewable Fuel
Standard is deeply flawed. Amici curiae—the States of
Wyoming, Louisiana, Ohio, Oklahoma, Texas, Utah,
and West Virginia—write separately to underscore the
exceptional importance of this Court’s review. The decision below will have significant consequences for
States with small refineries. These refineries often are
the keystone employer in small communities. They
1
Pursuant to Supreme Court Rule 37.2(a), amici have timely
notified counsel of record of their intent to file an amicus brief in
support of Petitioners.
2
provide high paying jobs and tax revenues and keep
the cost of fuel low in the localities they serve. Amici
States have a strong interest in ensuring that these
important economic engines are not forced to close
their doors and lay off their workers because of the
misinterpretation of one word in the Renewable Fuel
Standard.
---------------------------------♦---------------------------------
SUMMARY OF THE ARGUMENT
While seemingly a simple matter of statutory construction, the functional elimination of the hardship
exemption warrants this Court’s review because of the
near certainty that it will destroy the small refining
industry, causing severe economic harm to the States,
their communities, and the people who depend on this
industry for their livelihoods.
According to the Tenth Circuit’s interpretation,
small refineries can only receive an exemption under
the Renewable Fuel Standard if they sought and received an extension of the exemption in 2011 and every
year thereafter. Nationwide, no more than seven small
refineries currently qualify for an exemption under
this standard.2 The vast majority of small refineries
will never again receive a hardship exemption under
2
U. S. EPA, RFS Small Refinery Exemptions (last updated
October 15, 2020), https://www.epa.gov/fuels-registration-reportingand-compliance-help/rfs-small-refinery-exemptions (showing that
only seven refineries qualified for an exemption in 2015).
3
the Tenth Circuit’s test. Absent the exemption, small
refineries are not economically viable.
Loss of the small refining industry will cause substantial harm to the communities these businesses
serve and the thousands of jobs they support. For example, all of Wyoming’s five refineries are small refineries. Each of these refineries provides significant
economic benefits to the community where they are located and the State as a whole. As a result of the decision below, Petitioner, HollyFrontier Cheyenne, has
already laid off roughly 200 employees. Similar losses
will likely occur in other States and communities with
small refineries.
This outcome directly contradicts one of Congress’s core purposes in enacting the Renewable Fuel
Standard, namely to ensure stability in the domestic
supply of fuels. Congress never intended the Renewable Fuel Standard to force the closure of small refineries. Instead, Congress recognized that compliance by
small refiners would be difficult and provided a lenient
avenue for exemption to ensure that those businesses
remained viable.
---------------------------------♦---------------------------------
ARGUMENT
I.
Small refineries cannot survive without
access to the hardship exemption.
Congress amended the Clean Air Act in 2005 and
2007 in response to the country’s once dwindling oil
4
reserves to “move the United States toward greater energy independence and security” through “increase[d]
production of clean renewable fuels[.]” Energy Policy
Act of 2005, Pub. L. No. 109-58, § 1501, 119 Stat. 594,
1067 (2005); Energy Independence and Security Act of
2007, Pub. L. No. 110-140, § 202, 121 Stat. 1492, 152122 (2007); see also 146 Cong. Rec. S3519 (daily ed. May
4, 2000) (statement of Sen. Lugar) (regarding biofuels’
ability to insulate the economy from disruptive spikes
in the oil market). In short, Congress believed that it
could reduce dependence on foreign oil by mixing gasoline and diesel fuel with increasing amounts of domestically produced renewable fuels.
To achieve that goal, Congress designed the Renewable Fuel Standard to set annual, increasing target volumes for renewable fuels in the transportation
sector, known as Renewable Volume Obligations
(RVOs). 42 U.S.C. § 7545(o)(2)(B)(i)(I)-(IV). The EPA
then established a tradable credit system in which refiners and importers can satisfy their annual RVOs by
producing or purchasing Renewable Identification
Numbers (RINs). 40 C.F.R. § 80.1426(a)-(g); 42 U.S.C.
§ 7545(o)(5)(A)-(C). Refiners and importers can create
a RIN by either blending a gallon of renewable fuel into
conventional fuel or importing a gallon of renewable
fuel. 40 C.F.R. 80.1426(e), 80.1429(b). Refiners and
importers can then either use the produced RINs to
achieve compliance with the RVO or sell them on
an open market so that other refiners without blending
or importing facilities can purchase enough RINs
5
to satisfy their own RVOs. Id. §§ 80.1425-.1429,
80.1427(a)(1).
Congress recognized that the Renewable Fuel
Standard would impose undue costs and operational
burdens on small refineries which would, in turn, undermine the statute’s central goal of stabilizing the domestic energy market. Accordingly, Congress built in a
hardship exemption for small refiners producing an
average aggregate daily crude oil throughput of 75,000
barrels or less. 42 U.S.C. § 7545(o)(9). Initially, the critical relief measure took the form of a two-year blanket
exemption for all refiners meeting the throughput criteria. Id. at § 7545(o)(9)(A)(i). Thereafter, the blanket
exemption could be extended for an additional two
years for reasons of economic hardship. Id. at
§ 7545(o)(9)(A)(ii)(II). Following that second extension,
a small refinery could petition the EPA for a calendaryear hardship exemption at any time if the fuel mandates subjected the refiner to disproportionate economic hardship. Id. at § 7545(o)(9)(B)(i).
These sequential exemptions provide an essential
safety valve for the nation’s small refining sector, allowing members to stay competitive and profitable in
light of the statute’s costly compliance obligations.
Whenever EPA has applied the hardship exemption in
a restrictive manner, both Congress and the courts
have consistently disapproved. In 2015, when the EPA
granted a mere seven hardship petitions, the Senate
subsequently issued a stinging rebuke stating that
such a stringent implementation was “inconsistent
with congressional intent. . . .” S. Rep. No. 114-281, at
6
70 (2016). Rather, “Congress explicitly authorized the
Agency to grant small refinery hardship relief to ensure that small refineries remain both competitive and
profitable.” Id. Similarly, in a legal challenge to the
EPA’s restrictive 2015 application of the exemption,
the Tenth Circuit found that the agency’s view went
beyond the statute, making hardship relief for small
refineries contingent on “a death knell” rather than
“simple privation.” Sinclair Wyo. Ref. Co. v. EPA, 887
F.3d 986, 996-97 (10th Cir. 2017).
Over time, as the renewable fuel obligation under
the statute has increased so have RIN prices. From
2006 to 2018, RIN prices fluctuated from lows of one to
five cents per gallon to highs of more than $1.50 per
gallon.3 This fluctuation means that projected costs of
national compliance with the Renewable Fuel Standard ranges from $5.8 to $19.3 billion in a given year.4
For some small refineries, the expense of compliance
exceeds the yearly cost of labor, maintenance, and
energy.5 Today these increasing costs are set in an
3
U. S. Gov’t Accountability Office, Renewable Fuel Standard: Information on Likely Program Effects on Gasoline Prices
and Greenhouse Gas Emissions, at 26 (May 2019), https://www.
gao.gov/assets/700/698914.pdf
4
Philip Rossetti, The Renewable Fuel Standard’s Policy Failures and Economic Burdens, American Action Forum (April 19,
2018), https://www.americanactionforum.org/research/renewablefuel-standards-policy-failures-economic-burdens/
5
Clifford Krauss, High-Price Ethanol Credits Add to Refiners’ Woes, N.Y. Times (Aug. 22, 2016), https://www.nytimes.com/
2016/08/23/business/energy-environment/high-price-ethanol-creditsadd-to-refiners-woes.html
7
economic climate where even massive refiners like
Exxon have reported a 67% drop in refining revenue.6
To make matters worse, the price of RINs tripled following the Tenth Circuit’s decision.7
Increasing RIN costs strain the profit margins of
small refiners, a problem often magnified by unique regional factors. Wyoming’s small refiners, for example,
suffer from constant RIN deficiency. The Renewable
Fuel Standard requires that refiners blend renewable
fuels with diesel fuel and gasoline. The blend requirement is reasonably achievable for gasoline because the
market and the existing fleet of U. S. vehicle engines
can tolerate a gasoline blend containing ten-percent
ethanol.8 Diesel fuel, however, must generally be
blended at a much lower percentage.9 The Administrator recognized that “typical biodiesel blending yields
6
Jennifer Hiller, Exxon quarterly profit falls 5.2% on weak
refining, chemical margins, Reuters (Jan. 31, 2020), https://www.
reuters.com/article/us-exxon-mobil-results/exxon-quarterly-profitfalls-52-on-weak-refining-chemical-margins-idUSKBN1ZU1OI;
Jordan Blum, Exxon Mobil’s profit tumbled 30% in 2019, 5% in
final quarter, Houston Chronicle (Jan. 31, 2020), https://www.
chron.com/business/energy/article/Exxon-Mobil-s-5-7B-profit-dips5-percent-in-15019311.php?cmpid=ffcp
7
Sens. Urge EPA To Appeal 10th Circ. Refinery Waiver Ruling, Law 360 (March 4, 2020), https://www.law360.com/articles/
1250020/sens-urge-epa-to-appeal-10th-circ-refinery-waiver-ruling
8
U. S. Energy Info. Admin., Biofuels explained, https://www.eia.
gov/energyexplained/biofuels/use-of-biodiesel.php
9
See Statement of Adam Sieminski, Administrator, Energy
Information Administration, before the Subcommittee on Energy
and Power Committee on Energy and Commerce, 113th Cong., at
10 (June 26, 2013), https://www.eia.gov/pressroom/testimonies/
sieminski_06262013.pdf
8
only about one-third of the RINs required” and that refiners “must make up for the shortfall by purchasing
the now higher-priced RINs.”10 That issue continues to
plague small refiners across Wyoming.
To close this gap, certain refiners can export diesel
fuel to foreign markets, thereby escaping the Renewable Fuel Standard requirement. See 40 C.F.R.
§ 80.1407(f )(5). For refiners fortunate enough to maintain operations near a coast, such as those in Louisiana
or Texas, this option for relief is at least theoretically
available. However, for small, landlocked refiners situated in places like Wyoming, export is not economically
feasible. Consequently, small refiners in Wyoming
must purchase costly RINs from a volatile market.
For refiners in Wyoming, the strain from purchasing RINs can be particularly immense. Wyoming drivers own a higher percentage of diesel passenger
vehicles than any other state.11 Accordingly, demand
for diesel in Wyoming is high. This exacerbates the
RIN deficiency that small refiners in Wyoming face and
makes them more vulnerable to the negative financial
impacts of the Renewable Fuel Standard.
On its face, the decision below only impacts refiners in the Tenth Circuit. However, there is a very real
possibility that the EPA will apply the decision below
10
Id.
Diesel vehicles are big in Wyoming, Casper Star Tribune
(June 17, 2014), https://trib.com/business/energy/diesel-vehiclesare-big-in-wyoming/article_c7aa54bd-dbda-5283-b0fb-ba1afff4463d.
html
11
9
nationwide. See, e.g., U. S. EPA, RFS Small Refinery
Exemptions (showing an across-the-board upward
trend in hardship petition approval in 2017 and 2018,
following the Tenth Circuit’s Sinclair decision). Small
refineries across the country are anticipating this
outcome. After the Tenth Circuit’s decision, the EPA
received fifty-two petitions asking for retroactive exemptions to fill in missing years between 2011 and the
present, but the agency denied each of these requests.12
To put the severity of this issue in perspective,
fifty-four of the country’s 135 operating refineries qualify as a small refinery under the Renewable Fuel
Standard.13 Together, these fifty-four refineries account for 1.97 million of the nation’s 18.5 million barrel-per-day refining capacity.14 In other words, small
refineries make up forty percent of all U. S. refineries
and ten percent of the U. S. domestic refining capacity.
Considering that each of the retroactive exemption petitions may be tied to fifty-two of the nation’s fifty-four
small refineries, the Tenth Circuit’s decision presents
a clear threat to the small refining industry as a whole.
12
Marc Heller, Agency denies retroactive RFS waivers for
small refiners, E&E News (Sept. 14, 2020), https://www.eenews.
net/greenwire/2020/09/14/stories/1063713647?utm_medium=
email&utm_source=eenews%3Agreenwire&utm_campaign=edition
%2BiZ%2B%2FftFV%2B2LxUfHtN5bxJQ%3D%3D
13
Data extrapolated from information available in the Energy Information Administration’s annual Refinery Capacity Report. See U. S. Energy Information Administration, Refinery
Capacity Report (June 2020), https://www.eia.gov/petroleum/
refinerycapacity/refcap20.pdf
14
Id.
10
Removing the Renewable Fuel Standard’s hardship
exemption risks returning the nation to 2006 refining
capacity levels, erasing all gains in domestic refining
since the statute took effect.15
II.
Small refinery shutdowns will have devastating consequences.
Closure of any refinery would cause devastating
consequences. For example, although Wyoming has the
smallest population in the United States, in 2018 it
was ranked first in the nation for overall per capita energy consumption, and second for energy devoted to
the transportation sector.16 Forty-seven percent of the
State’s residents live in frontier areas—areas where
there are fewer than six people per square mile—and
studies show that Wyoming drivers must travel a
greater annual distance than drivers in any other
state.17 If Wyoming residents must purchase gasoline
and diesel fuel from out of state refineries, costs will
15
See U. S. Energy Information Administration, Total Energy: Annual Energy Review (Sept. 2012), https://www.eia.gov/total
energy/data/annual/showtext.php?t=ptb0509
16
See U. S. Energy Information Administration, State Profiles and Energy Estimate, https://www.eia.gov/state/?sid=US
17
Wyoming Department of Health, Office of Rural Health,
What is Rural, https://health.wyo.gov/publichealth/rural/office
ofruralhealth/what-is-rural/ (last visited March 26, 2020); Steven
Peters, States Where People Drive the Most, 24/7 Wall St. (July 8,
2016), https://247wallst.com/special-report/2016/07/08/states-wherepeople-drive-the-most/ (estimating that, based off of data from
the Federal Highway Administration, Wyoming citizens drove an
average of 22,306 miles in 2015).
11
inevitably increase due to increased transportation expenses and decreased competition. Consequently, continued operation of Wyoming’s five small refiners is
essential to the State and the livelihood of its residents
who must bear any substantial increases in fuel costs.
To make matters worse for residents, increased
fuel costs would be paired with substantial workforce
reductions and lost revenues across the State’s rural
economy. Already, following the Tenth Circuit’s decision, the HollyFrontier Cheyenne refinery has been
forced to close its petroleum refining operations resulting in more than 200 citizens losing their high-paying
jobs. See Letter from Marian Orr, Mayor, Cheyenne,
Wyo., to U. S. President Donald J. Trump (Feb. 29,
2020).18 And, while the City of Cheyenne with a population of 60,000 might be better situated to bear these
losses, the State’s other refiners are located in much
smaller communities. For example, the Sinclair refining facility in Carbon County, Wyoming, is the largest
employer in the county.19 If the Sinclair facility closes,
the people of Carbon County will face crippling unemployment, severely diminished economic activity, and
substantially reduced tax revenues. It is these sort of
consequences for some of the nation’s most rural and
18
https://www.fuelingusjobs.com/library/public/Letters/Letterto-POTUS.pdf
19
Rocky Mountain Power, Gateway South Transmission Project Wyoming Industrial Development Information and Siting Act
Section 109 Permit Application, p. 11-8—11-11 (July 2020), http://deq.
wyoming.gov/media/attachments/Industrial%20Siting/Application
%20and%20Permits/Gateway%20South%20Transmission%20
Project/GatewaySouth_Final_Application_20200728.pdf
12
vulnerable communities, on top of broader statewide
losses to Wyoming’s $266 million petrochemical industry, that warrant this Court’s review. See Letter from
Mark Gordon, Governor, State of Wyo., to Hon. Donald
J. Trump, President of the U. S. (Feb. 28, 2020) (discussing how the Tenth Circuit’s decision will risk the
loss of thousands of jobs from Wyoming’s 10,000 man
petrochemical workforce).20
The potential impacts from the Tenth Circuit’s decision are by no means limited to Wyoming. Since 2019,
numerous states, trade associations, and members of
the United States Congress have written the EPA and
the President to explain the profound market disruption that would occur if access to the small refinery exemption was sharply constrained. See, e.g., Letter from
Hon. Mitch B. Carmichael, Senate President, Hon.
Roger Hanshaw, Speaker of the House, State of WV, to
Mr. William Crozer, Special Assistant to the President
& Deputy Director, Office of Intergovernmental Affairs
(Sept. 6, 2019) (discussing the fact that eliminating the
small refinery exemption will endanger roughly 400
high-paying jobs in the state’s rural Appalachian communities)21; Letter from Mark McManus, General
President, United Ass’n of Journeymen & Apprentices
of the Plumbing & Pipe Fitting Indus. of the U. S. and
Can., to Hon. Donald J. Trump, President of the U. S.
(Aug. 30, 2019) (highlighting that the importance of
20
https://www.fuelingusjobs.com/library/public/Letters/doc
06080920200228141613.pdf
21
https://www.fuelingusjobs.com/library/public/Letters/
Renewable-Fuel-Standards.pdf
13
the small refinery exemption extends well-beyond the
oil and gas industry, as its absence likewise risks the
jobs of the union’s 355,000 members)22; Letter from
Members of Congress, to Hon. Donald J. Trump, President of the U. S. (Mar. 3, 2020) (explaining that the
Tenth Circuit’s ruling twists Congressional intent and
fails “to fully grasp” the harm it will inflict on the
American economy).23
To illustrate the breadth of practical impacts
wrought by the Tenth Circuit’s decision to forever close
access to the small refinery exemption, it is important
to recognize that even the nation’s largest refining
markets will suffer enormous consequences. The State
of Texas, for example, produces 5.7 million barrels of
oil daily and operates approximately one-third of the
nation’s refining capacity. See Letter from Greg Abbott,
Governor, State of Tex., to Hon. Andrew Wheeler, Admin., EPA (July 12, 2019).24 Although many of the refineries in the state are large operations, nearly 25%
meet the definition of a small refinery under the Renewable Fuel Standard.25 These small refineries employ a significant workforce, account for a substantial
share of the $14 billion in state and local taxes and
royalties paid by the Texas refining industry, and
22
https://www.fuelingusjobs.com/library/public/Letters/2019
0905-UA-RFS-POTUS-ltr.pdf
23
https://www.fuelingusjobs.com/library/public/Letters/030
320_Letter_SRE_POTUS.pdf
24
https://www.fuelingusjobs.com/library/public/Letters/OWheelerAndrew201907120355.pdf
25
Id.
14
supply a quarter of the state’s refining capacity.26
Alarmingly, the Tenth Circuit’s order imperils this industry by stripping from those refineries what Governor Abbott referred to as “an essential safety valve” for
the state’s industry.27
The situation is not different in other major refining states like Pennsylvania, Utah, and Mississippi
whose Governors and Congressional Representatives
have separately implored the EPA and President to
preserve the hardship exemption for small refineries.
In his 2020 letter to the EPA, Pennsylvania’s Governor,
Tom Wolf, explained that the absence of the small refinery exemption could greatly undermine the state’s
energy supply, workforce, and broader economy. See
Letter from Tom Wolf, Governor, State of Pa., to Hon.
Andrew Wheeler, Admin., EPA (May 11, 2020)28. Pennsylvania’s Congressional delegation likewise informed
the President that in 2012 alone the state’s largest refiner needed to purchase $832 million dollars’ worth of
RINs under the Renewable Fuel Standard. See Letter
from Members of the Pa. Congressional Delegation, to
President Donald J. Trump (July 26, 2019).29 The
scaled cost of RINs would be untenable for the state’s
small refiners. See Letter from Tom Wolf, Governor,
State of Pa., to Hon. Andrew Wheeler, Admin., EPA
26
Id.
Id.
28
https://www.fuelingusjobs.com/library/public/Letters/20205-11-TWW-v3-Wheeler-EPA-renewable-fuel-standard.pdf
29
https://www.fuelingusjobs.com/library/public/Letters/PARFS-Refinery-Letter-to-POTUS.pdf
27
15
(May 11, 2020). Similarly, Utah Governor, Gary Herbert,
in a separate 2019 letter wrote the President to emphasize that the small refinery exemption offers an
“essential” form of relief to the state’s five billion dollar
small refining sector. See Letter from Gary Herbert,
Governor, State of Utah, to President Donald J. Trump
(Sept. 16, 2019).30 Without the “crucial small refinery
RFS exemption in place[,]” Governor Herbert explained that the state’s small refining sector would
face “unfair economic disadvantage,” thereby imperiling “hundreds of high-paying jobs” and a “critical market for Utah’s rural oil and gas producers.”31
Echoing the concerns of Pennsylvania and Utah,
Mississippi Governor, Phil Bryant, likewise wrote to
the EPA Administrator in 2019 to explain that limiting
the small refinery exemption would “threaten the viability of small refineries, their employees, and the local
communities that rely on them.” See Letter from Phil
Bryant, Governor, State of Miss. to Admin. Andrew
Wheeler, EPA (Aug. 8, 2019).32 According to Governor
Bryant, Mississippi’s largest small refiner employs
roughly “250 people in the impoverished Mississippi
Delta” and supplied over $24 million dollars to the
30
https://www.fuelingusjobs.com/library/public/Letters/
Governor-Herbert-to-President-Trump-RFS-Relief-Refinery-Letter.
31
Id.
32
https://www.fuelingusjobs.com/library/public/Letters/8-82019-To-Andrew-Wheeler-at-EPA-RE-SRE-waivers.pdf
16
community.33 Accordingly, closing access to the exemption would cause severe harm to the state.34
Today, in light of numerous exacerbating factors
like the historic downturn in the oil and gas industry
and the pandemic, the magnitude of the nationwide
impact from the Tenth Circuit’s decision cannot be
overstated.35 In one fell swoop, the court has gutted the
safety valve Congress created to ensure the continued
viability of small refiners. Rather than providing domestic energy security, the decision below threatens
that very interest. The Renewable Fuel Standard has
become a serious threat to the economy and refining
capacity of the nation. Accordingly, it is critically important for the Court to review this matter before
America’s small refining industry disappears.
III. Shutdowns were not what Congress intended when it created the Renewable
Fuel Standard.
The Tenth Circuit selectively construed the legislative and executive history of the Renewable Fuel
Standard to force the conclusion that the overriding
33
Id.
Id.
35
Liz Hampton, Wave of North American oil and gas bankruptcies to continue at $40/bbl crude: Report, Reuters (July 9, 2020),
https://www.reuters.com/article/us-north-america-oil-bankruptcy/
wave-of-north-american-oil-and-gas-bankruptcies-to-continue-at40-bbl-crude-report-idUSKBN24A2U1 (discussing that low oil
prices and surges in virus cases have fueled a wave of bankruptcies in the oil and gas sector).
34
17
purpose of the statute was to increase biofuel production at all costs. See Renewable Fuels Ass’n, 948 F.3d at
1247 (finding that the law is “designed to force the market to create ways to produce and use greater and
greater volumes of renewable fuel each year”). That
conclusion, however, misunderstands that the biofuel
production mandate was simply the means by which
the statute achieved its true end—domestic energy security. S. Rep. No. 109-78, at 6, 18-19 (2005) (stating
that the need for the statute arose from a “widening
gap between supply and demand, accompanied by reliance on foreign sources to close that gap”). Congress
enacted the Renewable Fuel Standard at a time when
the United States faced escalating insecurity over the
availability of domestic fuel sources.36 The period between 2005 and 2007 was a time of war in the Middle
East, dramatic market instability, and all-time high
prices for oil.37 Accordingly, to avoid revisiting the domestic turmoil wrought by the oil and gas shortages of
the 1970s’ OPEC embargo, Congress enacted the Renewable Fuel Standard with a central goal of breaking
dependence on foreign energy through a stable supply
of domestically manufactured fuel. H.R. Rep. No. 109215, pt. 1, at 169 (“Energy security is critical in a world
36
Garlan Joseph VanHook, EPA Not to Blame for RFS Pitfalls: A Call to Congress to Restructure the RFS Program, 9 Ky. J.
Equine, Agric. & Nat. Res. L. 165, 185 (2017) (asserting it “should
not be ignored . . . [that] Congress’s prevailing goal was energy
independence”).
37
See James D. Hamilton, Causes and Consequences of the
Oil Shock of 2007–08, Brookings Papers on Econ. Activity (2009),
https://www.brookings.edu/wp-content/uploads/2016/07/2009a_
bpea_hamilton-1.pdf
18
of growing demand and regional political instability.
Dependence on any single source of energy, especially
from a foreign country, leaves America vulnerable to
price shocks and supply shortages.”).
The Tenth Circuit’s review of the Congressional
intent behind the statute, however, discounts this core
purpose by fixating on the Renewable Fuel Standard’s
ancillary benefits. Renewable Fuels Ass’n, 948 F.3d at
1215-20. The court closely explored Congress’s remarks on the environmental and agricultural advantages of renewable fuels, including jobs created
from increased corn cultivation, potential reductions in
greenhouse gases from widespread use of cellulosic
fuels, and the unspecified “geopolitical benefits” from
having a robust supply of ethanol. Id. Based on these
remarks, the Tenth Circuit concluded that the Renewable Fuel Standard should force certain small refiners
out of the market over time. Id. at 1248-49 (reasoning
that allowing a durable exemption would decrease the
overall volume of biofuel and thereby undermine the
statute’s central directives and purpose).
The legislative history actually reveals that Congress did not design the Renewable Fuel Standard to
increase ethanol production at all costs, but rather to
secure national energy reserves through the production of domestic fuels. 53 Cong. Rec. S15421, S15431
(daily ed. Dec. 13, 2007) (stating that “the increase in
renewable fuels represent[s] a step forward in our common effort to make America more energy independent”). The Tenth Circuit’s analysis undermines this
core goal by essentially creating a blind ethanol
19
production mandate that skews implementation of the
statute in favor of secondary environmental and agricultural justifications for the law’s enactment. While
important, those incentives cannot justify an outcome
that undermines the core purpose behind the Renewable Fuel Standard. King v. Burwell, 576 U.S. 473, 498
(2015) (“A fair reading of legislation demands a fair understanding of the legislative plan.”). Taken to its logical end, the court’s view would mean that Congress
fully intended to bar any new small refinery from entering the market after 2006 and force countless others
from the market in the near-term; and, incredibly, that
Congress did this on the precipice of another global energy crisis.38 This cannot have been the case. Cf. King,
576 U.S. at 498 (finding that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them[,]” and it would therefore be
improper to embrace a statutory reading that might
undermine that larger statutory purpose).
Indeed, the Tenth Circuit’s interpretation requiring small refiners to continuously receive exemptions
creates perverse incentives for non-compliance with
the Renewable Fuel Standard. In other words, even
if a small refiner were capable of satisfying the Act’s
requirements in a particular year without an exemption, the small refiner would nonetheless be motivated
38
See Jad Mouawad, Rising Demand for Oil Provokes New Energy Crisis, N.Y. Times (Nov. 9, 2007), http://www.nytimes.com/
2007/11/09/business/worldbusiness/09oil.html?_r=1amp;hpamp;
oref=slogin
20
to seek the exemption or risk forever forfeiting an exemption in future years.
It is far more reasonable and congruent with the
goals of the statute to conclude that Congress intended
to provide a flexible, readily available safety valve for
small refineries. See Sinclair, 887 F.3d at 989 (reasoning that Congress was “aware the RFS Program might
disproportionately impact small refineries” and therefore sought “to protect these small refineries.”). This
reading preserves the function of the Renewable Fuel
Standard, while avoiding an ethanol or death mandate
for small refiners. Because Congress did not intend
for the Renewable Fuel Standard to force the shutdown of small refineries, this Court should grant the
Petition.
---------------------------------♦---------------------------------
CONCLUSION
The petition for certiorari should be granted.
Respectfully submitted,
BRIDGET HILL
Attorney General
JAMES KASTE
Deputy Attorney General
MATT VANWORMER*
Senior Assistant Attorney General
*Counsel of Record
21
OFFICE OF THE WYOMING ATTORNEY GENERAL
2320 Capitol Avenue
Cheyenne, Wyoming 82002
(307) 777-6946
matt.vanwormer@wyo.gov
Counsel for Additional Amici
JEFF LANDRY
Attorney General
STATE OF LOUISIANA
DAVE YOST
Attorney General
STATE OF OHIO
PATRICK MORRISEY
Attorney General
STATE OF WEST VIRGINIA
MIKE HUNTER
Attorney General
STATE OF OKLAHOMA
SEAN D. REYES
Attorney General
STATE OF UTAH
KEN PAXTON
Attorney General
STATE OF TEXAS
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.