Amicus Curiae Brief — HollyFrontier Cheyenne Refining, LLC, et al., Petitioners v. Renewable Fuels Association, et al.

No. 20-472

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 Writ of Certiorari to the United

States Court of Appeals for the Tenth Circuit

___________

MOTION FOR LEAVE TO FILE

BRIEF AND AMICUS CURIAE BRIEF OF

THE AMERICAN FUEL & PETROCHEMICAL

MANUFACTURERS IN SUPPORT OF

PETITIONERS

___________

RICHARD MOSKOWITZ

MARK W. DELAQUIL

TYLER KUBIK

ANDREW M. GROSSMAN

AMERICAN FUEL &

Counsel of Record

CHRISTOPHER H. MARRARO

PETROCHEMICAL

CORY N. BARNES

MANUFACTURERS

1800 M Street, NW,

BAKER & HOSTETLER LLP

Ste. 900 North

1050 Connecticut Ave., N.W.

Washington, D.C. 20036 Washington, D.C. 20036

(202) 844-5474

(202) 861-1697

rmoskowitz@afpm.org agrossman@bakerlaw.com

Counsel for the Amicus Curiae

MOTION FOR LEAVE TO FILE

AMICUS CURIAE BRIEF

Pursuant to Supreme Court Rule 37.2(b), the

American Fuel & Petrochemical Manufacturers

(AFPM) respectfully moves for leave to file the accompanying amicus brief in support of Petitioners.

As required under Supreme Court Rule 37.2(a), all

parties were timely notified of AFPM’s intent to file

this amicus brief. Petitioners consented, as did Respondent Environmental Protection Agency. Respondents the Renewable Fuels Association, American Coalition for Ethanol, National Corn Growers

Association, and National Farmers Union did not

consent.

The Petition for Certiorari involves a question of

paramount importance and consequence for the

small refineries that produce transportation fuels

used by countless citizens and businesses across the

United States. AFPM’s amicus brief explains how

the court’s decision below upends a carefully balanced statutory scheme designed to protect these refineries, while simultaneously creating untenable

market conditions and disparate adverse effects for

small refineries and communities already reeling

from the ongoing pandemic. It also sets forth textual

arguments and relevant congressional history overlooked by the court below. AFPM respectfully submits that this analysis would inform the Court’s consideration of the question presented by the Petition.

2

As the leading trade association for the domestic

refinery industry, AFPM’s interest in this case is advocating in support of the small refineries that will

be irreparably harmed, and likely forced out of the

marketplace altogether, if the decision below stands.

For the foregoing reasons, the motion should be

granted.

Respectfully submitted,

RICHARD MOSKOWITZ

TYLER KUBIK

AMERICAN FUEL & PETROCHEMICAL

MANUFACTURERS

1800 M Street, NW,

Ste. 900 North

Washington, D.C. 20036

(202) 844-5474

rmoskowitz@afpm.org

NOVEMBER 2020

MARK W. DELAQUIL

ANDREW M. GROSSMAN

Counsel of Record

CHRISTOPHER H. MARRARO

CORY N. BARNES

BAKER & HOSTETLER LLP

1050 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 861-1697

agrossman@bakerlaw.com

No. 20-472

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 Writ of Certiorari to the United

States Court of Appeals for the Tenth Circuit

___________

AMICUS CURIAE BRIEF OF

THE AMERICAN FUEL & PETROCHEMICAL

MANUFACTURERS IN SUPPORT OF

PETITIONERS

___________

RICHARD MOSKOWITZ

MARK W. DELAQUIL

TYLER KUBIK

ANDREW M. GROSSMAN

AMERICAN FUEL &

Counsel of Record

CHRISTOPHER H. MARRARO

PETROCHEMICAL

CORY N. BARNES

MANUFACTURERS

1800 M Street, NW,

BAKER & HOSTETLER LLP

Ste. 900 North

1050 Connecticut Ave., N.W.

Washington, D.C. 20036 Washington, D.C. 20036

(202) 861-1697

(202) 844-5474

rmoskowitz@afpm.org agrossman@bakerlaw.com

Counsel for the Amicus Curiae

i

TABLE OF CONTENTS

INTEREST OF THE AMICUS CURIAE ...................1

INTRODUCTION AND SUMMARY OF

ARGUMENT.............................................................2

ARGUMENT ...............................................................3

I. The Question Presented Is Important and

Requires Review ..................................................3

A. Congress Understands the Importance of

Small Refineries and Intended to Shield

them from Disproportionate Economic Harm

on an Ongoing Basis ..................................... 3

B. The Decision Below Threatens Small

Refineries and the Communities that

Depend on Them ........................................... 9

C. The Decision Below Upends the RFS

Program’s National Uniformity, and Creates

an Unequal Playing Field for Small

Refineries .................................................... 15

D. The Decision Below Undermines the RFS

Program....................................................... 17

II. The Decision Below Is Obviously Wrong .........18

CONCLUSION ..........................................................25

ii

TABLE OF AUTHORITIES

Page(s)

Cases

Astoria Federal Savings & Loan

Association v. Solimino,

501 U.S. 104 (1991)..............................................19

Central Bank of Denver v. First

Interstate Bank,

511 U.S. 164 (1994)..............................................21

Field v. Mans,

157 F.3d 35 (1st Cir. 1998) ..................................19

Renewable Fuels Association v. United

States EPA,

948 F.3d 1206 (10th Cir. 2020)................ 18, 21, 24

Sinclair Wyoming Refining Co. v.

United States EPA,

887 F.3d 986 (10th Cir. 2017)................................6

Sprietsma v. Mercury Marine,

537 U.S. 51 (2003)................................................19

United States v. Principie,

531 F.2d 1132 (2d Cir. 1976) ...............................19

Statutes

33 U.S.C. § 1342 ........................................................22

iii

42 U.S.C. § 7545 ................................................ passim

Other Authorities

161 CONG. REC. H9693 (daily ed. Dec.

17, 2015) ...............................................................24

77 Fed. Reg. 1,320, 1,340 (Jan. 9, 2012)...............6, 16

80 Fed. Reg. 77,231, 77,511 (Dec. 14,

2015) .....................................................................16

85 Fed. Reg. 7016 ......................................................17

CONG. RESEARCH SERVS., THE

RENEWABLE FUEL STANDARD (RFS):

FREQUENTLY ASKED QUESTIONS

ABOUT SMALL REFINERY EXEMPTIONS

(SRES) (March 2, 2020) .........................................4

DEPT. OF ENERGY, SMALL REFINERY

EXEMPTION STUDY: AN

INVESTIGATION INTO

DISPROPORTIONATE ECONOMIC HARM

(March 2011) ......................................................5, 6

Elliot Blackburn, Marathon Petroleum

to shut two US refineries: Update,

ARGUS MEDIA (Aug. 3, 2020)................................12

Erwin Seba & Laura Sanicola, Oil

Refiners Face Reckoning as Demand

Plummets, REUTERS (Apr. 2, 2020) .....................10

iv

Extend, Webster’s Third New

International Dictionary (1986) ..........................20

Extension, BLACK’S LAW DICTIONARY

(11th ed. 2019) .....................................................20

Extension, Cambridge Online

Dictionary.............................................................20

Extension, Lexico Online Dictionary ........................20

Extension, Merriam-Webster Online

Dictionary.............................................................19

Kelly Tyko, How Much is Gas? Prices

Continue to drop due to coronavirus.

Here's where gas is selling for under

$1., USA TODAY (Apr. 18, 2020) ..........................10

Letter from Brian J. Zolkos et al. to

President Trump (Aug. 24, 2020) ........................11

Letter from Oklahoma Governor Kevin

J. Stitt to EPA Administrator

Andrew Wheeler (Mar. 2, 2020) ..........................13

Letter from Senator John Barrasso et

al. to EPA Administrator Andrew

Wheeler (May 19, 2020) .......................................17

Letter from Senator John Barrasso et

al. to President Trump (Feb. 27,

2020) .......................................................................8

v

Letter from Utah Governor Gary R.

Herbert to President Trump (March

5, 2020) .................................................................14

Letter from Wyoming Governor Mark

Gordon to President Trump (Feb. 28,

2020) .....................................................................13

Overview of Small Refinery Exemptions

Data (Table 2) ....................................................2, 7

Press Release, Envtl. Prot. Agency,

EPA Takes Action to Protect

Integrity of the Renewable Fuel

Standard Program, Support

American Farmers (Sept. 14, 2020) ......................8

Robert Brelsford, Marathon

Permanently Idles Two US

Refineries, OIL & GAS J. (Aug. 3,

2020) .....................................................................12

Rebecca Elliot, Gasoline Is Cheap This

July Fourth. Fuel Retailers Aren’t

Complaining, WALL ST. J. (July 4,

2020) .....................................................................11

S. REP. NO. 114-281 (2016)....................................8, 24

vi

Shalini Nagarajan, Oil Hits Five-Month

Lows After New Lockdowns in

Europe and US COVID-19 Cases

Trigger 'Fire-Sales,' but the Market

is Still Far Off from Black April,

BUS. INSIDER (Nov. 2, 2020) .................................10

Stephanie Kelly, U.S. Gasoline Refining

Profits Slump to 2008 Levels Amid

Coronavirus Fears, REUTERS (Mar.

16, 2020) ...............................................................11

This Week in Petroleum, ENERGY

INFORMATION ADMINISTRATION (Sep.

2, 2020) .................................................................10

U.S. ENERGY INFO. ADMIN., REFINERY

CAPACITY REPORT 38-43 (June 2020) .......... passim

1

INTEREST OF THE AMICUS CURIAE 1

The American Fuel & Petrochemical Manufacturers is the leading trade association for the domestic

refining and petrochemical industry, and its members produce most of the refined petroleum products

and petrochemicals manufactured in the United

States.

Many of AFPM’s members operate small refineries whose survival depends on the continued availability of small refinery economic hardship exemptions from the Renewable Fuel Standards program

requirements under the Clean Air Act. These refineries provide a crucial source of transportation fuel

to local communities located far from major fuel production and transportation hubs. AFPM’s members,

especially those located within the Tenth Circuit,

have a strong and direct interest in ensuring the

continued operation and success of the RFS program’s exemption provision, which the decision below has cast into uncertainty.

1 Pursuant to Rule 37.2(a), all parties received at least 10 days’

notice of the amicus curiae’s intent to file this brief. In accordance with Rule 37.6, counsel for the amicus curiae certifies that

no counsel for any party authored this brief in whole or in part

and that no person or entity other than the amicus curiae, its

members, or its counsel made a monetary contribution intended to fund the brief’s preparation or submission.

2

INTRODUCTION AND

SUMMARY OF ARGUMENT

When Congress enacted the Clean Air Act’s Renewable Fuel Standards program, it specifically exempted all small refineries altogether for several

years and authorized the Environmental Protection

Agency to issue additional small refinery exemptions

(SREs) “at any time” thereafter on a showing of disproportionate economic hardship. See 42 U.S.C.

§ 7545(o)(9)(A)-(B). In this way, Congress recognized

that small refineries often lack the financial resources, infrastructure, and economies of scale needed to comply with the RFS program’s general mandate that fuel manufacturers blend renewable fuels

(e.g., ethanol) into their products or purchase credits

known as “Renewable Identification Numbers”

(RINs) on the open market. See id. at § 7545(o)(5).

Following Congress’s instruction, EPA has regularly

issued exemptions to small refineries that demonstrate disproportionate economic hardship, with 31

of the 56 total small refineries in the U.S. receiving

exemptions for compliance year 2018. 2

The decision below throws this well-functioning

program into turmoil, holding that almost no refineries are eligible for exemptions irrespective of the

economic hardship that RFS compliance would im2 EPA has yet to issue any SREs for compliance years 2019 or

2020. See Overview of Small Refinery Exemptions Data (Table

2), EPA, https://www.epa.gov/fuels-registration-reporting-andcompliance-help/rfs-small-refinery-exemptions (last updated

Oct. 15, 2020).

3

pose on them, up to and including closure. In so doing, the Tenth Circuit eviscerated a central provision

of the RFS program that Congress intended to protect small refineries and the communities they serve.

Worse, it did so at a time that the entire fuel industry is struggling due to the COVID-19 pandemic,

causing a double-blow to small refineries, some of

which have already been forced to shut down. Given

the importance of small refineries and the transportation fuel they produce, and the distorting impact of

the decision below on fuel and RIN markets, review

is required to restore Congress’s carefully articulated

statutory scheme, restore the national uniformity in

the RFS program’s operation that Congress intended, and prevent the destruction of an entire sector of

the refining industry.

ARGUMENT

I.

The Question Presented is Important and

Requires Review

A. Congress Understands the Importance

of Small Refineries and Intended to

Shield them from Disproportionate

Economic Harm on an Ongoing Basis

Small refineries are critically important to the nation’s transportation fuel industry. “[S]mall refineries consist of about 40% of the nation’s total number

of operating refineries” and “comprise about 12% of

total crude oil distillation capacity in the United

4

States.” 3 But capacity figures alone understate their

importance. In many states and communities that

are located far from major fuel production and

transportation hubs, small refineries provide the only economic source of transportation fuels for consumers and businesses. For example, the only refineries in Montana, North Dakota, Oklahoma, Utah,

West Virginia, Wisconsin, and Wyoming are small

refineries. In these rural areas, small refineries also

provide much needed jobs, resources, and tax revenues for local communities.

Because of these refineries’ importance, Congress

understood the RFS program’s potential to damage

small refineries’ economic viability. Unlike larger refineries of transportation fuels, smaller refineries

often lack the financial resources and appropriate

infrastructure needed to blend renewable fuels costeffectively. Most small refineries operate solely as

manufacturers, and thus cannot easily spread RFS

compliance costs across the entire supply chain or

other lines of business like their larger counterparts.

Moreover, many small refineries operate in rural areas and rely on pipelines to transport their fuel

products to consumers—but those pipelines prohibit

the transport of ethanol-blended fuels. As a result,

small refineries often have no choice but to purchase

CONG. RESEARCH SERVS., THE RENEWABLE FUEL STANDARD

(RFS): FREQUENTLY ASKED QUESTIONS ABOUT SMALL REFINERY

EXEMPTIONS

(SRES)

4

(March

2,

2020),

https://crsreports.congress.gov/product/pdf/R/R46244.

3

5

RIN credits on the open market instead of blending

renewable fuels to satisfy their RFS obligations.

In 2011, the Department of Energy—at Congress’s

direction—confirmed that these inherent limitations

can, in fact, create disproportionate economic hardships for small refineries “if blending renewable

fuel…or purchasing [RIN credits] increases their

costs of products relative to competitors to the point

they are not viable, either due to loss of market

share or lack of working capital to cover the costs of

purchasing RINs.” 4 The Department also identified

numerous other factors that could create a disproportionate economic hardship for small refineries

based on changing market conditions:

• When the costs of RFS compliance are in “lower

refining margin environment[s]” that have “a

material effect on small refinery profitability.” 5

• Scenarios where RIN prices "might be substantially higher than their historical value[.]” 6

• Scenarios where small refineries “must purchase RINs that are far more expensive than

those that may be generated through blending[.]” 7

DEPT. OF ENERGY, SMALL REFINERY EXEMPTION STUDY: AN

INVESTIGATION INTO DISPROPORTIONATE ECONOMIC HARM vii

(March 2011), https://www.epa.gov/sites/production/files/201612/documents/small-refinery-exempt-study.pdf.

4

5 Id. at 22-23.

6 Id. at vii.

7 Id. at 2.

6

• When “compliance costs and characteristics”

that are “unique to each small refinery” “make

them more vulnerable to financial distress[.]” 8

To account for these hardships, Congress created

a safeguard for small refineries by authorizing EPA,

in coordination with the Department of Energy, to

grant SREs “at any time.”

See 42 U.S.C.

§ 7545(o)(9)(B)(i); Sinclair Wyoming Ref. Co. v. EPA,

887 F.3d 986, 989 (10th Cir. 2017) (“Congress was

aware the RFS Program might disproportionately

impact small refineries because of the inherent scale

advantages of large refineries and therefore created

three classes of exemptions to protect these small

refineries.”).

Since then, EPA has administered the RFS program by granting SREs on a case-by-case basis considering a small refinery’s competitive position in the

marketplace and corresponding demonstration of

disproportionate economic hardship in any given

compliance year. See 42 U.S.C. § 7545(o)(9)(B)(i); 77

Fed. Reg. 1,320, 1,340 (Jan. 9, 2012), available at

2012 WL 32558 (“[S]eparate from the DOE determination, EPA may extend the exemption for individual small refineries on a case-by-case basis if they

demonstrate disproportionate economic hardship.”).

8 Id. at 3.

7

FIGURE 1: Annual SRE Data for 2013–2019 9

As shown in Figure 1, EPA granted a program low

of only seven SREs in 2015. In the three following

compliance years, however, EPA granted 19, 35, and

31 SREs, respectively. This implementation practice

reflects EPA’s recognition that the economic circumstances facing small refineries vary substantially

from year to year and that the burden of RFS compliance on these refineries is worsening. RFS mandates are continuously increasing and RIN prices are

volatile; there may not be economic hardship when

RINs cost a few pennies apiece, but the same is not

true in years when the price of RIN credits has

surged. Sensitivity to RFS compliance costs is ever

changing, and EPA requires flexibility in the number

of SREs it can grant on a yearly basis to implement

§ 7545(o)(9)(B) in a manner consistent with congressional intent.

9 Note 2, supra.

8

But such flexibility is impossible under the Tenth

Circuit’s reading of § 7545(o)(9)(B). The decision below leaves no room for EPA to account for the variable market conditions raised in the 2011 DOE study

that can impose a disproportionate economic effect

on small refineries in some years but not others. In

this way, the decision below directly frustrates Congress’s stated intention in authorizing RFS exemptions: “that small refineries remain both competitive

and profitable.” 10

If adopted nationwide, the court’s reasoning would

effectively eliminate the SRE program altogether.

EPA granted only seven SREs in 2015 and has refused to grant any “gap-filling” petitions to cover

years in which small refineries did not previously

apply for and receive an exemption, 11 and so only a

small number of the nation’s small refineries could

even be eligible for future SREs under the logic of

the decision below. While the total number of small

refineries that would remain eligible for exemptions

is not publicly known, it is estimated to be as low as

two. 12

10 S. REP. NO. 114-281, at 70-71 (2016).

11 Press Release, Envtl. Prot. Agency, EPA Takes Action to Protect Integrity of the Renewable Fuel Standard Program, Support American Farmers (Sept. 14, 2020), available at

https://www.epa.gov/newsreleases/epa-takes-action-protectintegrity-renewable-fuel-standard-program-support-american1.

12 Letter from Senator John Barrasso et al. to President Trump

(Feb.

27,

2020)

(available

https://www.fuelingusjobs.com/library/public/Statements/2-

at

9

B. The Decision Below Threatens Small

Refineries and the Communities that

Depend on Them

As most small refineries cannot economically

comply with their RFS obligations through renewable fuel blending alone, the decision below forces

small refineries to rely substantially or even entirely

on the RIN marketplace. But since that decision—

and likely because of that decision—RIN prices have

skyrocketed, hitting five times previous price levels.

FIGURE 2: 2020 Ethanol RIN Prices (as of

Nov. 6, 2020)

At the same time, refiner profits are in free fall

across the industry, due to the COVID-19 pandemic

and resulting drop in demand for transportation

27_Senators-Call-on-President-Trump-to-Fight-for-SmallRefineries.pdf).

10

fuel. While RIN prices are soaring, gasoline prices

have plummeted. “The coronavirus outbreak has cut

global gasoline demand by 50% and jet fuel demand

by 70%.” 13 And in April of 2020, three states in the

Tenth Circuit had gasoline prices under $1 per gallon. 14 The U.S. Energy Information Administration

even noted that as of September 2, 2020, average

gasoline retail prices were at their lowest seasonal

levels since 2004, with gasoline consumption (measured by product supplied) at its lowest levels since

1974. 15 And while fuel markets recovered somewhat

during the summer months, recent spikes in COVID19 cases globally have caused oil prices to drop once

again. 16

13 Erwin Seba & Laura Sanicola, Oil Refiners Face Reckoning

as Demand Plummets, REUTERS (Apr. 2, 2020 12:05 AM),

https://www.reuters.com/article/us-health-coronavirus-refineryruncuts/oil-refiners-face-reckoning-as-demand-plummetsidUSKBN21K0C8.

14 Kelly Tyko, How Much is Gas? Prices continue to drop due to

coronavirus. Here's where gas is selling for under $1., USA TO(Apr.

18,

2020),

DAY

https://www.usatoday.com/story/money/2020/04/18/gas-prices2020-coronavirus-lowest-gasoline-prices-covid-19/5160056002/.

15 This Week in Petroleum, ENERGY INFORMATION ADMINISTRA-

(Sep.

2,

2020),

https://www.eia.gov/petroleum/weekly/archive/2020/200902/incl

udes/analysis_print.php.

TION

16 Shalini Nagarajan, Oil Hits Five-Month Lows After New

Lockdowns in Europe and US COVID-19 Cases Trigger 'FireSales,' but the Market is Still Far Off from Black April, BUS.

INSIDER

(Nov.

2,

2020),

https://markets.businessinsider.com/news/stocks/oil-priceseurope-lockdowns-us-covid-cases-record-trigger-firesales-202011-1029752531.

11

Moreover, losses from depressed fuel prices are

borne most heavily by refineries. As both the Wall

Street Journal 17 and Reuters 18 have recognized, refinery margins have tanked by as much as 95 percent or more in response to near-historic low wholesale prices of fuel. Small refineries, which are often

unable to blend renewable fuels and instead must

purchase currently-inflated RIN credits, are being

hit hardest of all.

On top of these dismal market conditions, the decision below has, unsurprisingly, already proved too

much to bear for multiple small refineries. In an August 24, 2020 letter from multiple small refinery executives to President Trump, it was noted that

“[s]ince the COVID-19 crisis began, at least three

small refineries have already permanently shut

down while others face financial distress due to the

historic downturn in demand and historically high

RIN prices.” 19 This includes the shutdown of Petitioner HollyFrontier’s Cheyenne, Wyoming, refinery

17 Rebecca Elliot, Gasoline Is Cheap This July Fourth. Fuel Re-

tailers Aren’t Complaining, WALL ST. J. (July 4, 2020),

https://www.wsj.com/articles/gasoline-is-cheap-this-july-fourthfuel-retailers-arent-complaining-11593855001.

18 Stephanie Kelly, U.S. Gasoline Refining Profits Slump to

2008 Levels Amid Coronavirus Fears, REUTERS (Mar. 16, 2020),

https://financialpost.com/pmn/business-pmn/u-s-gasolinerefining-profits-slump-to-2008-levels-amid-coronavirus-fears-2.

19 Letter from Brian J. Zolkos et al. to President Trump (Aug.

24,

2020)

(available

at

https://www.fuelingusjobs.com/library/public/Letters/SaveSmall

Refineries-8-24-2020.pdf).

12

and the indefinite idling of operations at Marathon’s

Gallup, New Mexico refinery—both small refineries

within the Tenth Circuit. 20 There are also five refineries in Utah, all of which are small refineries, that

are jeopardized by the decision below. 21

Small refineries lack the means to offset these

highly inflated costs of RFS compliance and current

market realities in response to the Tenth Circuit’s

decision. And this hardship is not limited to just

small refineries within the Tenth Circuit. The marketplace for RINs is national—skyrocketing RIN

prices in response to the decision below must be

borne by struggling small refineries everywhere in

the U.S. on top of the crushing impacts caused by

COVID-19.

Moreover, it is not just the small refineries themselves that are threatened by this string of economic

blows. Numerous executive officials and Members of

Congress from Tenth Circuit states have publicly

called attention to how the decision below will likely

20 Robert Brelsford, Marathon Permanently Idles Two US Re&

GAS

J.

(Aug.

3,

2020),

fineries,

OIL

https://www.ogj.com/refiningprocessing/refining/article/14180915/marathon-permanentlyidles-two-us-refineries; Elliot Blackburn, Marathon Petroleum

to shut two US refineries: Update, ARGUS MEDIA (Aug. 3, 2020),

https://www.argusmedia.com/en/news/2128888-marathonpetroleum-to-shut-two-us-refineries-update.

21 U.S. ENERGY INFO. ADMIN., REFINERY CAPACITY REPORT 38-43

(June

2020),

available

at

https://www.eia.gov/petroleum/refinerycapacity/refcap20.pdf.

13

have devastating effects to communities that rely on

the small refineries that support them:

• February 28, 2020 letter from Wyoming Governor Mark Gordon to President Trump: “Wyoming is home to five refineries that are disproportionately harmed by the RFS. In Wyoming,

the refining and petrochemical industry employees nearly 10,000 individuals and contribute $266 million dollars in local and state tax

revenue.” 22

• March 2, 2020 letter from Oklahoma Governor

Kevin Stitt to EPA Administrator Wheeler:

“[S]everal entities that are vital to Oklahoma’s

economy will be negatively impacted by this decision. Within the 10th Circuit alone, it is estimated that this decision will put nearly a dozen

small refineries under severe financial stress

and put many jobs at risk.” 23

• March 3, 2020 letter from Utah Governor Gary

Herbert to President Trump: “Utah’s refineries

are at the center of Utah’s thriving energy

economy, providing hundreds of high-paying

jobs and over a billion dollars annually to

22 Letter from Wyoming Governor Mark Gordon to President

Trump

(Feb.

28,

2020)

(available

at

https://www.fuelingusjobs.com/library/public/Letters/doc060809

20200228141613.pdf).

23 Letter from Oklahoma Governor Kevin J. Stitt to EPA Administrator Andrew Wheeler (Mar. 2, 2020) (available at

https://www.fuelingusjobs.com/library/public/Letters/10thCircut-Court-Letter.pdf).

14

Utah’s economy. These refineries also provide a

critical market for Utah’s rural oil and gas producers.” 24

The decision below also jeopardizes the financial

well-being of numerous other states and communities outside of its jurisdiction that also depend on

small refineries for sources of local fuel, jobs, and tax

revenues. Manufacturers of transportation fuel in

Montana, North Dakota, West Virginia, and Wisconsin also consist exclusively of small refineries, and

thus small refineries represent 100 of the refining

capacity and refining jobs in those states. 25 Montana

alone has four refineries, all of which are small refineries that produce transportation fuel. 26 If the

federal circuits with jurisdiction over these states

adopt the Tenth Circuit’s reasoning, or if the EPA

does so on a nationwide basis, small refineries

around the nation will face unprecedented and irremediable economic hardship, notwithstanding Congress’s choice to enact a safeguard against just that.

In these ways, the decision below will continue to

cause widespread uncertainty and volatility in the

RIN market, and the small refineries and the communities where they are located will continue to

Letter from Utah Governor Gary R. Herbert to President

Trump

(March

5,

2020)

(available

at

https://www.fuelingusjobs.com/library/public/Letters/UtahEnergy-Advisor-Support-of-RFS-Decision-Review-3-5-20.pdf).

24

25 See note 21, supra.

26 Id.

15

bear the brunt of these untenable market conditions

without any possibility of review.

C. The Decision Below Upends the RFS

Program’s National Uniformity, and

Creates an Unequal Playing Field for

Small Refineries

The decision below casts aside EPA’s nationwide,

uniform review criteria and creates an uneven playing field for small refineries based solely on their geographic location.

The Tenth Circuit is home to 11 small refineries

that are potentially eligible for a SRE. 27 There are

more small refineries in the Tenth Circuit than any

other judicial circuit in the nation. 28 In fact, just two

states in the Tenth Circuit (Wyoming and Utah,

with four and five small refineries, respectively)

comprise a substantial percentage of the nations’

small refineries. 29 As there are no larger refineries

in these states, Wyoming and Utah citizens and

communities are uniquely reliant on the continued

viability of these facilities. Under the decision below,

however, these refineries are now subject to a novel

regulatory scheme that places them at a severe competitive and economic disadvantage.

There is no indication that Congress intended the

RFS program to operate in this way and be imple27 See note 21, supra.

28 See id.

29 See id.

16

mented differently across the U.S. based on varying

judicial decisions. EPA sets yearly renewable volume

obligations (RVOs) for the nation as a whole, and the

RIN market is not limited to certain geographic

boundaries. But now, under the Tenth Circuit’s decision, EPA must administer the RFS program and

SRE petitions separately based on a small refinery’s

location, even though all refineries nationwide are

subject to the same RVO metrics and the same volatility in the RIN market caused by one circuit’s decision. This outcome is in stark contrast to a proper

interpretation of the Clean Air Act, which requires

both the availability of SREs for all small refineries

and a single, uniform yearly standard so that obligated parties under the RFS program can have sufficient advanced notice and regulatory certainty. See,

e.g., 80 Fed. Reg. 77,231, 77,511 (Dec. 14, 2015)

(“EPA believes the Act is best interpreted to require

issuance of a single annual standard…thereby

providing advance notice and certainty to obligated

parties regarding their regulatory requirements. Periodic revisions to the standards…would be inconsistent with the statutory text, and would introduce

an undesirable level of uncertainty for obligated parties.”); 77 Fed. Reg. 1320, 1340 (Jan. 9, 2012) (same),

available at 2012 WL 32558.

This arbitrary and disproportionate impact on

Tenth Circuit refineries, and corresponding disruption to the RFS program’s uniformity nationwide,

should not stand.

17

D. The Decision Below Undermines the

RFS Program

Restricting EPA’s ability to grant SREs to small

refineries within the Tenth Circuit jeopardizes

EPA’s administration of the entire RFS program. For

2020, EPA’s calculation of the total renewable fuel

volume obligations for the entire nation was based

on a presumption that 770 million gallons would be

exempted from the program via SREs. 30 This presumption included SREs expected to be issued to

small refineries within the Tenth Circuit, which is

home to 11 small refineries. 31 But if EPA can no

longer grant SREs to ineligible Tenth Circuit refineries (or even more ineligible small refineries if extended nationwide), then the entire foundation of the

agency’s 2020 RVO determination will be in doubt,

and refineries will be left to comply with inflated

RVO obligations that even EPA did not expect them

to meet. In other words, EPA’s 2020 RVO calculation

is substantially undermined and frustrated by the

decision below.

At the same time, that decision calls into question

the legitimacy of every SRE the EPA has granted

since 2015, to the extent those SREs were granted to

a small refinery who did not maintain continuous

30 See 85 Fed.Reg. 7016; Letter from Senator John Barrasso et

al. to EPA Administrator Andrew Wheeler (May 19, 2020)

(available

at

https://www.fuelingusjobs.com/library/public/Letters/Senatorsletter-5-19-20-jb-et-al-to-epa-pd.pdf).

31 Note 21, supra.

18

exemptions. As discussed above, in the last few years

alone, EPA has issued dozens of SREs to small refineries that would not be eligible under the logic of the

decision below. This situation creates further uncertainty for small refineries nationwide.

II.

The Decision Below is Obviously Wrong

By interpreting Section 7545(o)(9) to require an

unbroken line of SREs for a refinery to remain eligible for future SREs, the decision below makes a hash

of the statutory text.

Section 7545(o)(9) provides, first, that RFS obligations “shall not apply to small refineries” until a set

date 32 and, second, that “[a] small refinery may at

any time petition the Administrator for an extension

of [that] exemption…for the reason of disproportionate economic hardship.” 42 U.S.C. § 7545(o)(9)(A)(B).

The decision below interpreted the word “extension” in section 7545(o)(9)(B)(i) to mean “an increase

in length of time” or to “prolong, enlarge, or add to,”

such that any break in a refinery’s exemption status

renders it ineligible for further exemptions. 948 F.3d

at 1245. But that interpretation is untenable, because it reads the words “at any time” out of the

statute entirely. It is a cardinal rule of statutory interpretation that statutes should be construed “so as

32 After DOE’s 2011 study confirmed disproportionate economic

hardships on small refineries, EPA applied the exemptions under subpart (A)(i) for an additional two years up to 2013, pursuant to § 7545(o)(9)(A)(ii)(II).

19

to avoid rendering superfluous” any statutory language. Astoria Federal Savings & Loan Ass’n v. Solimino, 501 U.S. 104, 112 (1991); see also Sprietsma

v. Mercury Marine, 537 U.S. 51, 63 (2003). Yet that

is precisely what the decision below did.

By far the better reading here is one that gives effect to all of the statutory language. What the court

below overlooked is that the word “extension” need

not, and often does not, denote unbroken continuity.

For example, in Field v. Mans, the First Circuit noted that, absent definition, an “ordinary meaning” of

the term “extension” in a statute can be “an offer to

make available (as a fund or privilege).” 157 F.3d 35,

43 (1998). Likewise, in United States v. Principie, the

Second Circuit found there was an “extension” of a

previous authorization for a wiretap even though the

original order had expired before the extension was

granted, and even though the renewed authorization

was amended to cover a new location. 531 F.2d 1132,

1142 (1976). The pinched interpretation of this word

adopted by the decision below was not at all required.

Indeed, the same dictionaries cited by the court

below recognize that “extension” is often used in

ways that do not require unbroken continuity, but

rather to refer to a grant or expansion of something

to a new area. For example, Merriam-Webster’s leading alternative definition of “extension” is “an enlargement in scope or operation.” Extension, Merri-

20

am-Webster Online Dictionary.33 Likewise, the

Cambridge Online Dictionary states that “extension”

can mean “an increase in the size or range of something.” Extension, Cambridge Online Dictionary. 34

And the Lexico Online Dictionary notes that an “extension” can mean “[a]n application of an existing

system or activity to a new area.” Extension, Lexico

Online Dictionary. 35

Moreover, Webster’s Third defines “extend” as “to

make available (as a fund or privilege) often in response to an explicit or implied re-quest; GRANT.”

Webster’s Third New International Dictionary 804

(1986). Black’s Law Dictionary provides an alternative definition of “extension” as “[a] period of additional time to take an action, make a decision, accept

an offer, or complete a task.” Extension, BLACK’S LAW

DICTIONARY (11th ed. 2019).

Given that the word “extension” readily encompasses non-continuous applications, the adoption by

the court below of a narrow definition that defies the

statutory text as a whole was obviously wrong.

Worse, that interpretation conflicts with Congress’s evident intention in establishing the exemption program: relieving small refineries from the

Available

at

https://www.merriamwebster.com/dictionary/extension (last visited Nov. 10, 2020).

33

34

Available

at

https://dictionary.cambridge.org/us/dictionary/english/extension

(last visited Nov. 10, 2020).

35 Available at https://www.lexico.com/definition/extension (last

visited Nov. 10, 2020.)

21

“disproportionate economic impact” of RFS compliance. Congress defined the central requirement for

obtaining an exemption as such hardship, 42 U.S.C.

§ 7545(o)(9)(B)(i), and it went on to identify the exemptions specifically as “hardship exemption[s].”

Economic hardship of the sort addressed by the statute is not static, unchanging from year to year,

which is precisely why Congress provided that small

refineries could apply for exemptions “at any time.”

Confirming as much, where Congress sought to

address the temporal aspects of extensions, it did so

specifically, as in an adjacent provision providing for

an earlier extension period “of not less than 2 additional years.” Id. at § 7545(o)(9)(A)(ii)(II). “Congress

knew” how to impose temporal limitations on EPA’s

exemption authority “when it chose to do so,” Central

Bank of Denver v. First Interstate Bank, 511 U.S.

164, 176–77 (1994), and it did not do so in its openended grant of authority to issue SREs, for the good

reason that small refineries do not face the same

economic hardships year after year. The decision below ascribes to Congress an understanding of energy

markets that is not only ahistorical, but absurd.

To justify its novel construction of the statute, the

court below posited that Congress’s intention may

have been to “funnel[] small refineries toward compliance over time.” 948 F.3d at 1246. Even putting

aside the conflicting “at any time” language, that

supposition ignores that Congress regularly legislates what are commonly known as “antibacksliding” requirements, including in the Clean

Air Act, and that is not what it did here. Compare 42

22

U.S.C. § 7545(o)(9)(B)(i) with 33 U.S.C. § 1342(o)(1).

If Congress wanted to impose an anti-backsliding

rule with respect to RFS obligations, it could easily

have done so. It did not.

The statutory language here, however, does not

look anything like that. And that is because Congress understood RFS compliance costs for small refineries are not static and are not reasonably predictable. Neither are oil prices, fuel demand, small

refinery profits, compliance budgets, and regional

market conditions. For example, if a small refinery

annually produces 200 million gallons of transportation fuel with an RVO of 10 percent and RIN prices

around fifteen cents ($0.15) per gallon (as was the

case shortly before the Tenth Circuit’s decision in

January 2020), RFS compliance costs for that year

would be approximately $3 million.36 However, if

RIN prices increase to around sixty cents ($0.60) per

gallon or higher (in line with current market prices 37), the same refinery’s compliance costs would

quadruple to $12 million or higher as a result. This

rudimentary example demonstrates why a small refinery cannot simply be funneled into to complete

RFS compliance over time, as there are too many

economic variables changing each year.

Nor should small refineries be ineligible for economic hardship relief in response to circumstances,

like the current global pandemic, that are unforesee36 200 million gallons, multiplied by 10 percent RVO (0.10),

multiplied by RIN price of $0.15 equals $3 million.

37 See Figure 2, supra.

23

able and out of their control simply because an exemption was not granted in prior years. Yet, under

the Tenth Circuit’s reasoning, those refineries must

now weather even the most drastic changes in circumstances without receiving the economic hardship

relief Congress intended. This result is untenable,

effectively punishing small refineries (and perhaps

even forcing them out of business altogether) for not

receiving a SRE when market conditions were favorable.

As a result, the Tenth Circuit’s overly restrictive

interpretation of the statute is fundamentally at

odds with how Congress has expected the EPA and

DOE to administer SREs under the RFS program.

For example, in 2015 the House of Representatives

issued the following explanatory statement concerning EPA’s proper issuance of SREs:

Under section 211(o)(9)(B) of the

Clean Air Act, a small refinery may

petition the [EPA] for an exemption

from the Renewable Fuel Standard

(RFS) on the basis that the refinery

experiences a disproportionate economic hardship under the RFS [even if

the refinery is profitable enough to

cover the costs of compliance, since]

profitability does not justify a disproportionate regulatory burden where

Congress has explicitly given EPA authority, in consultation with the Secretary, to reduce or eliminate this burden.

24

161 CONG. REC. H9693, H10105 (daily ed. Dec. 17,

2015) (emphasis added). The Senate subsequently

echoed this directive in 2016 when, in response to

EPA’s denial of SREs to certain small refineries that

remained profitable notwithstanding a disproportionate economic impact, it clarified that the denials

were “inconsistent with congressional intent because

[§ 7545(o)(9)(B)] does not contemplate that a small

refinery would only be able to obtain an exemption

by showing that the RFS program threatens its viability.” S. REP. NO. 114-281, at 70.

Congress has therefore reminded EPA on several

occasions that it is “explicitly authorized…to grant

small refinery hardship relief to ensure that small

refineries remain both competitive and profitable. In

the intensely competitive transportation fuel market, small entities cannot remain competitive and

profitable if they face disproportionate structural or

economic metrics…or other site-specific factors identified in DOE’s original 2011 Small Refinery Exemption Study Prepared for Congress.” Id. (emphasis

added).

There is no support at all for the contrary view of

the decision below that Congress intended the RFS

program to be so “aggressive and market forcing” 38

as to jeopardize the economic viability of small refineries altogether. To the contrary, Congress directed

the EPA to “ensure…small refineries remain competitive and profitable.” 39 If the Tenth Circuit’s decision

38 948 F.3d at 1247.

39 Note 10, supra.

25

stands, however, Congress’s mandate will be impossible.

CONCLUSION

The Petition should be granted.

Respectfully submitted,

RICHARD MOSKOWITZ

TYLER KUBIK

AMERICAN FUEL & PETROCHEMICAL

MANUFACTURERS

1800 M Street, NW,

Ste. 900 North

Washington, D.C. 20036

(202) 844-5474

rmoskowitz@afpm.org

MARK W. DELAQUIL

ANDREW M. GROSSMAN

Counsel of Record

CHRISTOPHER H. MARRARO

CORY N. BARNES

BAKER & HOSTETLER LLP

1050 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 861-1697

agrossman@bakerlaw.com

Counsel for the Amicus Curiae

NOVEMBER 2020