Amicus Curiae Brief — HollyFrontier Cheyenne Refining, LLC, et al., Petitioners v. Renewable Fuels Association, et al.
Supreme Court briefMar 1, 2021
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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 Writ Of Certiorari To The
United States Court Of Appeals
For The Tenth Circuit
---------------------------------♦--------------------------------BRIEF OF AMICI CURIAE STATES OF WYOMING,
TEXAS, LOUISIANA, UTAH, OKLAHOMA,
WEST VIRGINIA, AND MONTANA
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) 777-7895
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 .....................
1
ARGUMENT ........................................................
3
I.
The Tenth Circuit did not afford proper
deference to the EPA .................................
6
II.
Small refineries cannot survive without
access to the hardship exemption ............. 15
III.
Small refinery shutdowns will have devastating consequences ................................... 19
IV.
No alternative remedies will alleviate the
harm caused by the Tenth Circuit’s decision............................................................. 25
CONCLUSION..................................................... 28
ii
TABLE OF AUTHORITIES
Page
CASES
Ams. for Clean Energy v. EPA,
864 F.3d 691 (D.C. Cir. 2017) ....................................8
Dakota Prairie Refining, LLC v. EPA,
No. 16-2692 (8th Cir. June 13, 2016) .................... 8, 9
Field v. Mans,
157 F.3d 35 (1st Cir. 1998) ........................................7
King v. Burwell,
576 U.S. 473 (2015) .................................................13
Martin v. Occupational Safety &
Health Review Comm’n,
499 U.S. 144 (1991) .................................................14
Renewable Fuels Ass’n v. EPA,
948 F.3d 1206 (10th Cir. 2020) ........................ passim
Sinclair Wyo. Ref. Co. v. EPA,
887 F.3d 986 (10th Cir. 2017) ...................... 10, 14, 18
Skidmore v. Swift,
323 U.S. 134 (1944) ........................................... 2, 6, 7
STATUTES
42 U.S.C. § 7545 ............................................ 4, 5, 26, 27
Energy Independence and Security Act of 2007,
Pub. L. No. 110-140, 121 Stat. 1492 (2007) ..............3
Energy Policy Act of 2005, Pub. L. No. 109-58,
119 Stat. 594 (2005) ..................................................3
iii
TABLE OF AUTHORITIES – Continued
Page
REGULATIONS
40 C.F.R. § 80.1407 .....................................................17
40 C.F.R. §§ 80.1425 through .1429 .............................4
40 C.F.R. § 80.1426 .......................................................4
40 C.F.R. § 80.1427 .......................................................4
40 C.F.R. § 80.1429 .......................................................4
Renewable Fuel Standard Program: Standards
for 2018 and Biomass-Based Diesel Volume
for 2019, 82 Fed. Reg. 58486 (December 12,
2017) ........................................................................27
OTHER AUTHORITIES
146 Cong. Rec. S3519 (daily ed. May 4, 2000) .............3
153 Cong. Rec. S15421 (daily ed. Dec. 13, 2007) ........12
Clifford Krauss, High-Price Ethanol Credits
Add to Refiners’ Woes, N.Y. Times (Aug. 22,
2016) ........................................................................16
Diesel vehicles are big in Wyoming, Casper Star
Tribune (June 17, 2014) ..........................................18
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. Resources L. 165 (2017) ..................................11
H.R. Rep. No. 109-215.................................................12
iv
TABLE OF AUTHORITIES – Continued
Page
Jad Mouawad, Rising Demand for Oil Provokes New Energy Crisis, N.Y. TIMES (Nov.
9, 2007) ................................................................13
James D. Hamilton, Causes and Consequences of
the Oil Shock of 2007-08, Brookings Papers on
Econ. Activity (2009) ...............................................11
Jennifer Hiller, Exxon quarterly profit falls 5.2%
on weak refining, chemical margins, Reuters
(Jan. 31, 2020) .........................................................16
Jordan Blum, Exxon Mobil’s profit tumbled 30%
in 2019, 5% in final quarter, Houston Chronicle (Jan. 31, 2020) ....................................................16
Letter from Gary Herbert, Governor, State of
Utah, to President Donald J. Trump (Sept. 16,
2019) ........................................................................24
Letter from Greg Abbott, Governor, State of Tex.,
to Hon. Andrew Wheeler, Admin., EPA (July
12, 2019) ..................................................................22
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) ..........................................................21
Letter from Marian Orr, Mayor, Cheyenne, Wyo.,
to U.S. President Donald J. Trump (Feb. 29,
2020) ........................................................................20
v
TABLE OF AUTHORITIES – Continued
Page
Letter from Mark Gordon, Governor, State of
Wyo., to Hon. Donald J. Trump, President of
the U.S. (Feb. 28, 2020) ...........................................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) .......................................21
Letter from Members of Congress, to Hon. Donald J. Trump, President of the U.S. (Mar. 3,
2020) ........................................................................22
Letter from Members of the Pa. Congressional
Delegation, to President Donald J. Trump
(July 26, 2019) .........................................................23
Letter from Phil Bryant, Governor, State of
Miss., to Admin. Andrew Wheeler, EPA (Aug.
8, 2019) ....................................................................24
Letter from Tom Wolf, Governor, State of Pa., to
Hon. Andrew Wheeler, Admin., EPA (May 11,
2020) .................................................................. 23, 24
Liz Hampton, Wave of North American oil and
gas bankruptcies to continue at $40/bbl crude:
report, Reuters (July 9, 2020) .................................25
Merriam-Webster Online Dictionary ...........................7
Philip Rossetti, The Renewable Fuel Standard’s
Policy Failures and Economic Burdens, American Action Forum (April 19, 2018) ........................15
vi
TABLE OF AUTHORITIES – Continued
Page
Rocky Mountain Power, Gateway South Transmission Project Wyoming Industrial Development Information and Siting Act Section 109
Permit Application (July 2020) ...............................20
Sens. Urge EPA To Appeal 10th Circ. Refinery
Waiver Ruling, Law 360 (March 4, 2020) ...............16
S. Rep. No. 109-78 (2005) ............................................11
S. Rep. No. 114-281 (2016) ..........................................10
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) ........................................................17
Stephanie Kelly, U.S. EPA receives 52 new petitions for retroactive biofuel blending waivers,
Reuters (June 18, 2020) ............................................6
Steven Peters, States Where People Drive the
Most, 24/7WallStreet (July 8, 2016) .......................19
U.S. Dep’t of Energy, Small Refinery Exemption
Study (Mar. 2011) ....................................................15
U.S. Energy Info. Admin., Biofuels explained ............17
U.S. Energy Info. Admin., Refinery Capacity Report (June 2020) .................................................. 6, 18
U.S. Energy Info. Admin., State Profiles and Energy Estimate ...........................................................19
U.S. Energy Info. Admin., Total Energy: Annual
Energy Review (Sept. 2012) ....................................19
vii
TABLE OF AUTHORITIES – Continued
Page
U.S. EPA, Annual Compliance Data for Obligated Fuel Exporters under the Renewable
Fuel Standard (RFS) Program ...............................26
U.S. EPA, RFS Small Refinery Exemptions .... 5, 9, 18, 27
U.S. Gov’t Accountability Office, Renewable Fuel
Standard: Information on Likely Program Effects on Gasoline Prices and Greenhouse Gas
Emissions (May 2019) .............................................15
Wyo. Dep’t of Health, Office of Rural Health,
What is Rural ..........................................................19
1
STATEMENT OF INTEREST
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
currently meet the Tenth Circuit’s test, and eventually
none will be able to meet it. Absent access to the hardship exemption, the whole small refining industry may
soon disappear.
The decision below will have devastating economic
consequences for states with small refineries. These refineries often are the keystone employer in small communities. They 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
According to the Tenth Circuit, small refineries
can only receive a hardship exemption under the
2
Renewable Fuel Standard if they sought and received
an extension of the exemption in 2011 and every year
thereafter. The vast majority of small refineries will
never again receive an exemption under the Tenth Circuit’s test.
The Tenth Circuit erred by affording no deference
to the Environmental Protection Agency’s interpretation of the exemption. The EPA’s decision to approve
exemptions for small refineries that missed prior exemption years was reasonable and persuasive. The
court below should have given the EPA’s reasoning in
the adjudications at least some weight under Skidmore. Instead, the court overlooked ambiguity in the
statutory language, supported its conclusion by referencing only an isolated example of agency practice, and
arrived at an outcome that undermines a core purpose
of the Renewable Fuel Standard – namely, to ensure
stability in the domestic supply of fuels.
Absent the hardship exemption, small refineries
are not economically viable. Structural and geographic
limitations force small refiners to comply with the Renewable Fuel Standard by purchasing credits on an
open market. Volatility in this market, which increased
after the Tenth Circuit’s decision, makes the cost of
compliance unsustainable.
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 the refineries in Wyoming are small refineries. Each provides significant economic benefits to
3
the community where it is 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.
The Clean Air Act includes mechanisms, apart
from the hardship exemption, that are designed to ease
the burdens of the Renewable Fuel Standard. For example, the EPA may reduce national renewable fuel
volume requirements to avert severe economic harm to
states or regions. The Clean Air Act also grants individual refineries an extra one-year period to correct
non-compliance with the Renewable Fuel Standard.
Neither of these remedies, however, can meaningfully
offset the impacts of the Tenth Circuit’s decision on the
nation’s small refineries.
---------------------------------♦---------------------------------
ARGUMENT
Congress amended the Clean Air Act in 2005 and
2007 in response to the country’s once dwindling oil reserves to “ensure jobs for our future with secure, affordable, and reliable energy” and 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. 10958, 119 Stat. 594 (2005); Energy Independence and Security Act of 2007, Pub. L. No. 110-140, 121 Stat. 1492
(2007); see also 146 Cong. Rec. S3519 (daily ed. May 4,
2000) (statement of Sen. Lugar) (regarding biofuels’
4
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 to satisfy their own RVOs. Id. §§ 80.1425 through .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 Renewable Fuel Standard’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
5
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 calendar-year 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.
However, in the decision below, the Tenth Circuit
drastically curtailed eligibility for future hardship exemptions. The court held that small refineries can only
qualify for an exemption if they sought and received an
exemption in 2011 and all years thereafter. Renewable
Fuels Ass’n, 948 F.3d at 1249. Nationwide, no more
than seven small refineries could qualify for an exemption under this standard.1
But following the Tenth Circuit’s decision, fiftytwo of the nation’s small refineries sought retroactive
1
U.S. EPA, RFS Small Refinery Exemptions (last updated
January 21, 2021), https://www.epa.gov/fuels-registration-reportingand-compliance-help/rfs-small-refinery-exemptions (showing that
only seven refineries qualified for an exemption in 2015).
6
exemptions.2 With only fifty-four small refiners in the
entire United States, the number that could qualify for
an exemption under the Tenth Circuit’s restrictive
standard may actually be as low as two.3
The Tenth Circuit acknowledged the consequences
of its holding, noting that “a small refinery in 2016 or
2017 had many years to ponder operational issues and
compliance costs, including whether it made sense to
enter or remain in the market. . . .” Renewable Fuels
Ass’n, 948 F.3d at 1247. The Tenth Circuit sought to
“limit[ ] but preserve[ ] the small refinery exemption,”
but instead it ensured the full eradication of the exemption. Id. This outcome was far from necessary and
contrary to law.
I.
The Tenth Circuit did not afford proper
deference to the EPA.
The Tenth Circuit acknowledged it must review
the EPA’s informal adjudications of hardship petitions
using Skidmore deference. 948 F.3d at 1244. Under
Skidmore, a court must afford weight to an agency’s
decisions according to “the thoroughness evident in
2
Stephanie Kelly, U.S. EPA receives 52 new petitions for retroactive biofuel blending waivers, Reuters (June 18, 2020), https://
www.reuters.com/article/us-usa-biofuels-epa/u-s-epa-receives-52-newpetitions-for-retroactive-biofuel-blending-waivers-idUSKBN23P36G
3
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/refinery
capacity/refcap20.pdf
7
[the agency’s] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to
persuade. . . .” Skidmore v. Swift, 323 U.S. 134, 140
(1944). But the Tenth Circuit did not apply Skidmore
deference to the EPA’s adjudications of hardship petitions. The court afforded no weight to the EPA’s view
of the hardship exemption, basing its decision instead
on a narrow construction of a single word. In doing so,
the court overlooked ambiguity in the statutory language, found confirmation in an isolated example of
agency practice, and created an outcome that conflicts
with a core purpose of the Renewable Fuel Standard.
The Tenth Circuit cut short any deference it might
afford to the EPA at the outset, finding that an “extension” can mean only one thing. In the court’s view, the
ordinary meaning of “extension” would “dictate that
the subject of an extension must be in existence before
it can be extended.” 948 F.3d at 1245. This rigid construction ignores the possibility that “extension” can
have multiple meanings. In addition to prolonging
something already in existence, “extend” can also mean
to “proffer” or “make available.” Extend, MerriamWebster Online Dictionary;4 see also Field v. Mans, 157
F.3d 35, 43 (1st Cir. 1998) (finding that, absent a statutory definition, the term “extension” can mean “to
make available (as a fund or privilege)”).
The Tenth Circuit’s singular understanding of the
term “extension” foreclosed the possibility of a broader
4
https://www.merriam-webster.com/dictionary/extend.
8
analysis of the hardship exemption. The court viewed
its role as enforcing “[p]lain and unambiguous statutory language according to its terms.” 948 F.3d at 1243
(internal quotation marks and citation omitted). The
court also drew support from Americans for Clean Energy v. EPA, where the District of Columbia Circuit
identified plain language in the Clean Air Act as the
“primary guide to Congress’ preferred policy” sufficient
to override even persuasive policy arguments from the
EPA. Id. at 1249 (quoting Ams. for Clean Energy v.
EPA, 864 F.3d 691, 712 (D.C. Cir. 2017)).
While the Tenth Circuit did not end its analysis in
the text of the statute, it exercised a constrained review of the EPA’s treatment of the hardship exemption
in an attempt to show that its reading of “extension”
matched agency practice. To this end, the court pointed
to the EPA’s rejection of a prior hardship petition from
Dakota Prairie Refining, LLC. 948 F.3d at 1247. In this
prior adjudication, the EPA explained that “only small
refineries that previously had received the initial exemption . . . qualify for an extension of that exemption.” Petition for Review at 4, Dakota Prairie Refining,
LLC v. EPA, No. 16-2692 (8th Cir. June 13, 2016).
The Tenth Circuit’s exclusive focus on Dakota
Prairie is problematic because the EPA addressed a
separate question in that adjudication. Dakota Prairie
Refining began operating after the Renewable Fuel
Standard’s initial two-year exemption for small refineries had expired. Id. at 5. Thus, the EPA had to consider whether a small refinery, not in existence during
the first exemption period, could later petition for a
9
hardship exemption. Id. The EPA said no, explaining
that “newer small refineries have the ability to consider whether they believe the establishment of the
RFS program and its requirements will cause economic hardship before beginning operations.” Id. But
the EPA did not address the issue in this case –
whether small refineries that received the initial exemption would need to continuously maintain that exemption in order to successfully petition in future
years.
Even if Dakota Prairie were more on point, the
Tenth Circuit should not have elevated the EPA’s pronouncements in a single adjudication above broader
trends in the EPA’s treatment of the hardship exemption. If the EPA’s practices truly matched the Tenth
Circuit’s understanding of an “extension,” it would
have granted at most seven hardship petitions in any
year after 2015. Yet the EPA approved thirty-five out
of thirty-seven hardship petitions for the 2017 compliance year and thirty-two out of forty-four petitions for
the 2018 compliance year.5 Without a doubt, the EPA’s
practice at the time of the Tenth Circuit decision confirms the agency’s broader understanding of the term
“extension.”
The Tenth Circuit characterized the EPA’s increased approval of hardship petitions after 2016 as
“open[ing] up a gaping and ever-widening hole in the
statute.” 948 F.3d at 1248. To the contrary, the EPA
sought to harmonize its treatment of the hardship
5
U.S. EPA, RFS Small Refinery Exemptions, supra note 1.
10
exemption with explicit guidance from Congress and
the courts on how the exemption was meant to operate.
After the EPA granted a mere seven hardship petitions in 2015, a Senate committee issued a stinging
rebuke stating that such a stringent implementation was “inconsistent with congressional intent. . . .”
S. Rep. No. 114-281, at 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 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).
From 2013 to 2015, the EPA applied an unduly restrictive test for disproportionate economic hardship,
thereby denying hardship exemptions to small refineries that may have otherwise qualified. See Sinclair,
887 F.3d at 999. Aware of this, the EPA could not reasonably require small refineries in 2016, or any future
year, to show continuous receipt of hardship exemptions. Doing so would punish small refineries for actions beyond their control. The Tenth Circuit erred by
overlooking the EPA’s broader approach to the hardship exemption, which evolved in response to critical
feedback from the Senate and another panel of the
Tenth Circuit.
11
Finally, the Tenth Circuit justified its narrow reading of “extension” by selectively construing the legislative and executive history of the Renewable Fuel
Standard and forcing the conclusion that the overriding purpose of the statute was to increase biofuel production at all costs. 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. 10978, 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.6
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.7 To avoid revisiting the
domestic turmoil wrought by the oil and gas shortages
of the 1970s’ OPEC embargo, Congress enacted the
6
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”).
7
See James D. Hamilton, Causes and Consequences of the
Oil Shock of 2007-08, Brookings Papers on Econ. Activity (2009),
https://www.nber.org/papers/w15002
12
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. 109-215, pt. 1, at 169 (“Energy security is critical
in a world 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 discounts this core purpose
by fixating on the Renewable Fuel Standard’s ancillary
benefits. 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. 153 Cong. Rec. S15421,
S15431 (daily ed. Dec. 13, 2007) (statement of Senator
McConnell) (stating that “the increase in renewable
13
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 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 nearterm; and, incredibly, that Congress did this on the
precipice of another global energy crisis.8 This cannot
have been Congress’s intended outcome. 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
8
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
14
the Renewable Fuel Standard Act. 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
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.
The Tenth Circuit should have at least given
“some weight” to the EPA’s view of the hardship exemption. Martin v. Occupational Safety & Health Review Comm’n, 499 U.S. 144, 157 (1991). But instead of
evaluating the persuasiveness of the EPA’s position,
the Tenth Circuit rejected it outright. The Tenth Circuit reached its decision by ignoring ambiguity in the
statutory text, focusing on a single agency action dealing with an inapplicable, unique circumstance, and
overlooking a core purpose of the Renewable Fuel
Standard. For these reasons, this Court should overturn the decision below.
15
II.
Small refineries cannot survive without
access to the hardship exemption.
In 2011, the Department of Energy evaluated the
potential for renewable fuel mandates to impose disproportionate economic hardship on small refiners.
U.S. DOE, Small Refinery Exemption Study (Mar. 2011).9
The DOE recognized that small refineries often have
“less integration with upstream and downstream operations” and “limited access to capital,” making them
more vulnerable to volatility in the refining industry.
Id. at vi, 36. According to the DOE, the additional costs
of complying with the Renewable Fuel Standard could
“significantly impact the operation of the firm, leading
eventually to an inability to increase efficiency to remain competitive, eventually resulting in closure.” Id.
at 36. The DOE’s concerns were well-founded.
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.10 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.11
9
https://www.epa.gov/sites/production/files/2016-12/documents/
small-refinery-exempt-study.pdf
10
U.S. Gov’t Accountability Office, Renewable Fuel Standard: Information on Likely Program Effects on Gasoline Prices
and Greenhouse Gas Emissions 26 (May 2019), https://www.
gao.gov/assets/700/698914.pdf
11
Philip Rossetti, The Renewable Fuel Standard’s Policy
Failures and Economic Burdens, American Action Forum (April
16
For some small refineries, the expense of compliance
exceeds the yearly cost of labor, maintenance, and energy.12 Today these increasing costs are set in an economic climate where even massive refiners like Exxon
have reported a 67% drop in refining revenue.13 To
make matters worse, the price of RINs tripled following the Tenth Circuit’s decision.14
Increasing RIN costs strain the profit margins of
small refiners, a problem often magnified by unique regional factors. For example, small refiners in Wyoming
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 United States vehicle engines can tolerate a gasoline blend containing
19, 2018), https://www.americanactionforum.org/research/renewablefuel-standards-policy-failures-economic-burdens/
12
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
13
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
14
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
17
ten-percent ethanol.15 Diesel fuel, however, must generally be blended at a much lower percentage.16 The
Administrator recognized that “typical biodiesel blending yields only about one-third of the RINs required”
and that refiners “must make up for the shortfall by
purchasing the now higher-priced RINs.”17 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
15
U.S. Energy Info. Admin., Biofuels explained, https://www.
eia.gov/energyexplained/biofuels/use-of-biodiesel.php
16
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
17
Id.
18
vehicles than any other state.18 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
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).19 The slew of
petitions for retroactive hardship exemptions after the
Tenth Circuit’s decision shows that small refineries
across the country are anticipating this outcome.
To put the severity of this issue in perspective,
fifty-four of the country’s 135 operating refineries
qualify as small under the Renewable Fuel Standard.20 Together, these fifty-four refineries account for
1.97 million of the nation’s 18.5 million barrel-per-day
refining capacity.21 In other words, small refineries
make up forty percent of all U.S. refineries and ten
percent of domestic refining capacity. Removing the
18
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
19
U.S. EPA, RFS Small Refinery Exemptions, supra note 1.
20
See U.S. Energy Info. Adm., Refinery Capacity Report
(June 2020), supra note 3.
21
Id.
19
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.22
III. 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.23 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.24 If Wyoming residents must purchase
gasoline and diesel fuel supplied by out-of-state
22
See U.S. Energy Info. Admin., Total Energy: Annual Energy Review (Sept. 2012), https://www.eia.gov/totalenergy/data/
annual/showtext.php?t=ptb0509
23
See U.S. Energy Info. Admin., State Profiles and Energy
Estimate, https://www.eia.gov/state/?sid=US
24
Wyoming Department of Health, Office of Rural Health,
What is Rural, https://health.wyo.gov/publichealth/rural/officeof
ruralhealth/what-is-rural/; Steven Peters, States Where People
Drive the Most, 24/7WallStreet (July 8, 2016), https://247wallst.
com/special-report/2016/07/08/states-where-people-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).
20
refineries, costs will inevitably increase due to increased transportation expenses and decreased competition. Consequently, continued operation of small
refiners in Wyoming 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).25
And, while the City of Cheyenne with a population
of 60,000 might be better situated to bear these losses,
the other refiners in Wyoming are located in much
smaller communities. For example, the Sinclair refining facility in Carbon County, Wyoming is the largest
employer in the county.26 If the Sinclair facility closes,
the people of Carbon County will face crippling
25
https://www.fuelingusjobs.com/library/public/Letters/Letterto-POTUS.pdf
26
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%20
and%20Permits/Gateway%20South%20Transmission%20Project/
GatewaySouth_Final_Application_20200728.pdf
21
unemployment, severely diminished economic activity,
and substantially reduced tax revenues. Consequences
of this nature, on top of broader statewide losses to Wyoming’s $266 million petrochemical industry, warrant
this Court’s correction of the lower court’s constrained
interpretation of the hardship exemption. 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 10,000man petrochemical workforce).27
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);28 Letter from Mark McManus, General
President, United Ass’n of Journeymen & Apprentices
27
https://www.fuelingusjobs.com/library/public/Letters/doc06080
920200228141613.pdf
28
https://www.fuelingusjobs.com/library/public/Letters/RenewableFuel-Standards.pdf
22
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
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);29 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).30
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).31 Although many of the refineries in Texas are large operations, nearly 25% meet
the definition of a small refinery under the Renewable
Fuel Standard.32 These small refineries employ a
29
https://www.fuelingusjobs.com/library/public/Letters/20190905UA-RFS-POTUS-ltr.pdf
30
https://www.fuelingusjobs.com/library/public/Letters/030320_
Letter_SRE_POTUS.pdf
31
https://www.fuelingusjobs.com/library/public/Letters/O-Wheeler
Andrew201907120355.pdf
32
Id.
23
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 supply a quarter of the state’s refining capacity.33 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.34
The situation is not different in other major refining states like Pennsylvania, Utah, and Mississippi. Governors and congressional representatives
from these states have 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).35
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).36 The
33
Id.
Id.
35
https://www.fuelingusjobs.com/library/public/Letters/20205-11-TWW-v3-Wheeler-EPA-renewable-fuel-standard.pdf
36
https://www.fuelingusjobs.com/library/public/Letters/PA-RFSRefinery-Letter-to-POTUS.pdf
34
24
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
(May 11, 2020).37
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).38 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.”39
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).40 According to Governor
37
Supra, note 35.
https://www.fuelingusjobs.com/library/public/Letters/GovernorHerbert-to-President-Trump-RFS-Relief-Refinery-Letter.pdf
39
Id.
40
https://www.fuelingusjobs.com/library/public/Letters/8-8-2019To-Andrew-Wheeler-at-EPA-RE-SRE-waivers.pdf
38
25
Bryant, Mississippi’s largest small refiner employs
roughly “250 people in the impoverished Mississippi
Delta” and supplied over $24 million dollars to the
community.41 Accordingly, closing access to the exemption would cause severe harm to the state.42
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.43 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 Tenth Circuit’s
decision threatens that very interest. The Renewable
Fuel Standard has become a serious threat to the economy and refining capacity of the nation.
IV. No alternative remedies will alleviate the
harm caused by the Tenth Circuit’s decision.
The small refinery hardship exemption is one of
several statutory tools the EPA can use to adjust Renewable Fuel Standard requirements. Congress also has
41
Id.
Id.
43
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).
42
26
authorized the EPA to reduce the annual renewable
fuel volume targets after determining that “implementation of the requirement would severely harm the economy or environment of a State, a region, or the United
States” or when “there is an inadequate domestic supply.” 42 U.S.C. § 7545(o)(7)(A). The EPA Administrator
may grant these national reductions upon petition of a
party or upon the Administrator’s own motion. Id.
Separately, an individual refinery that is unable to
generate or purchase sufficient RINs can carry a deficit
forward, without penalty, into the following compliance
year. Id. § 7545(o)(5)(D). However, the refinery then
has only one year to generate or purchase enough RINs
to cover both the past year’s deficiency and the current
year’s obligation. Id.
While the above measures may reduce some burdens of the Renewable Fuel Standard, they will not alleviate the harm created by the Tenth Circuit’s
decision. As the past illustrates, nationwide reductions
of the renewable fuel requirement do not prevent small
refineries from suffering disproportionate impacts.
Starting in 2014, the EPA has reduced annual renewable fuel requirements below the statutory targets.
U.S. EPA, Annual Compliance Data for Obligated Fuel
Exporters under the Renewable Fuel Standard (RFS)
Program, Table 2;44 cf. 42 U.S.C. § 7545(o)(2)(B)(i)(I).
In 2018, for example, the Clean Air Act’s target
for renewable fuels was twenty-six billion gallons. 42
44
https://www.epa.gov/fuels-registration-reporting-andcompliance-help/annual-compliance-data-obligated-parties-and
27
U.S.C. § 7545(o)(2)(B)(i)(I). The EPA reduced this target to 19.29 billion gallons, more than twenty-five percent below the prescribed volume. Renewable Fuel
Standard Program: Standards for 2018 and BiomassBased Diesel Volume for 2019, 82 Fed. Reg. 58486,
58487 (December 12, 2017).
Unfortunately, across-the-board reductions in the
renewable fuel requirements do not lessen the burden
on small refineries. As evidence, forty-four small refineries petitioned the EPA for hardship exemptions for
the 2018 compliance year.45 Nationwide reductions
may protect the larger class of obligated parties, but
they do not offset the disproportionate compliance
costs suffered by the small refineries that purchase
most or all of their RINs in a highly volatile market.
The second mechanism – a one-year carryover of
RIN deficiencies – provides no additional benefit for
struggling small refineries. Carrying a RIN deficiency
forward forces a small refinery, in the next year, to satisfy both their annual RVO and the outstanding RIN
deficiency. Without a hardship exemption, small refineries that carry over deficiencies would only end up
having to dig themselves out of a deeper hole.
The lack of any suitable fallback protections for
small refineries and the communities they benefit
makes correction of the Tenth Circuit’s error even
more critical.
---------------------------------♦--------------------------------45
U.S. EPA, RFS Small Refinery Exemptions, supra note 1.
28
CONCLUSION
The Court should reverse the court of appeals.
Respectfully submitted,
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) 777-7895
matt.vanwormer@wyo.gov
Counsel for Additional Amici
JEFF LANDRY
Attorney General
STATE OF LOUISIANA
KEN PAXTON
Attorney General
STATE OF TEXAS
SEAN D. REYES
Attorney General
STATE OF UTAH
MIKE HUNTER
Attorney General
STATE OF OKLAHOMA
PATRICK MORRISEY
Attorney General
STATE OF WEST VIRGINIA
AUSTIN KNUDSEN
Attorney General
STATE OF MONTANA
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.