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

IN THE

Supreme Court of the United States

————

HOLLYFRONTIER CHEYENNE REFINING, LLC,

HOLLYFRONTIER REFINING & MARKETING, LLC,

HOLLYFRONTIER WOODS CROSS REFINING, LLC, &

WYNNEWOOD REFINING CO., LLC,

Petitioners,

RENEWABLE FUELS ASSOCIATION, et al.,

Respondents.

————

On Writ of Certiorari to the

United States Court of Appeals

for the Tenth Circuit

————

BRIEF OF SMALL REFINERIES COALITION AS

AMICUS CURIAE SUPPORTING PETITIONERS

————

JONATHAN G. HARDIN

Counsel of Record

PERKINS COIE LLP

700 Thirteenth St., NW

Suite 800

Washington, DC 20005

(202) 654-6297

jhardin@perkinscoie.com

Counsel for Amicus Curiae

Small Refineries Coalition

March 1, 2021

WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................

INTEREST OF AMICUS CURIAE .....................

SUMMARY OF ARGUMENT .............................

ARGUMENT ........................................................

I. Small refineries operate with limited

access to resources under constrained

market conditions, making RFS compliance

difficult ......................................................

II. The RFS imposes disproportionate

economic hardship on small refineries

that increases over time ...........................

III. Congress could not have meant what the

Tenth Circuit says it did ...........................

A. Congress did not intend to force small

refineries to comply or go out of

business................................................

B. Congress intended to keep small

American refineries in business .........

CONCLUSION ....................................................

(i)

TABLE OF AUTHORITIES

CASES

Page(s)

Chevron U.S.A., Inc. v.

Nat. Res. Def. Council, Inc.,

467 U.S. 837 (1984) ...................................

FCC v. Fox Television Stations, Inc.,

556 U.S. 502 (2009) ...................................

Hermes Consol., LLC v. EPA,

787 F.3d 568 (D.C. Cir. 2015) ................... 10, 11

Renewable Fuels Assoc. v. EPA,

948 F.3d 1206 (10th Cir. 2020) ..... 10, 11, 20, 25

Sinclair Wyo. Refin. Co. v. EPA,

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

United States v. Woods,

571 U.S. 31 (2013) .....................................

STATUTES

42 U.S.C. § 7411(j)(1)(E) ..............................

42 U.S.C. § 7412(f)(4) ...................................

42 U.S.C. § 7545(o)(1)(K)............................ 1, 5, 25

42 U.S.C. § 7545(o)(2)(A) ..............................

42 U.S.C. § 7545(o)(9)(A) .............................. 11, 26

42 U.S.C. § 7545(o)(9)(B) .................. 11, 20, 21, 22

Consolidated Appropriations Act, 2016,

Pub. L. 114-113, 126 Stat. 2241

(Dec. 18, 2015) ...........................................

iii

TABLE OF AUTHORITIES—Continued

REGULATIONS

Page(s)

40 C.F.R. § 80.1406 ......................................

40 C.F.R. § 80.1426 ......................................

40 C.F.R. § 80.1427 ......................................

40 C.F.R. § 80.1428 ......................................

40 C.F.R. § 80.1429 ......................................

75 Fed. Reg. 14,670 (Mar. 26, 2010) ............

77 Fed. Reg. 1320 (Jan. 9, 2012) ..................

84 Fed. Reg. 10,584 (Mar. 21, 2019) ............

84 Fed. Reg. 26,980 (June 10, 2019) ............

84 Fed. Reg. 36,763 (July 29, 2019) .............

85 Fed. Reg. 7050 (Feb. 6, 2020) ..................

OTHER AUTHORITIES

161 Cong. Rec. H9693 (daily ed. Dec. 17,

2015) ..........................................................

Am. Fuel & Petrochemical Mfrs., Strong

Domestic

Consumption

Contradicts

Ethanol “Demand Destruction” Claims

(Nov. 18, 2019), https://www.afpm.org/

newsroom/blog/strong-domestic-consump

tion-contradicts-ethanol-demand-destruc

tion-claims .................................................

TABLE OF AUTHORITIES—Continued

Page(s)

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/highprice-ethanol-credits-add-to-refinerswoes.html ..................................................

Comments on Proposed Denial of Petitions

for Rulemaking to Change the RFS Point

of Obligation (Feb. 22, 2017), Docket ID

No. EPA-HQ-OAR-2016-0544-0406, https://

www.regulations.gov/comment/EPA-HQOAR-2016-0544-0406 ................................

Cong. Research Serv., The Renewable Fuel

Standard (RFS): Frequently Asked Questions About Small Refinery Exemptions

(SREs) (Mar. 2, 2020), https://crsreports.

congress.gov/product/pdf/R/R46244 ........passim

Elliot Blackburn, Marathon Petroleum to

shut two US refineries: Update, Argus

Media (Aug. 3, 2020), https://www.argus

media.com/en/news/2128888-marathon-pe

troleum-to-shut-two-us-refineries-update ...

Erin Voegele, Wheeler claims ethanol demand

not impacted by SREs, Ethanol Producer

(Sept. 23, 2019), http://ethanolproducer.

com/articles/16562/wheeler-claims-ethanoldemand-not-impacted-by-sres ..................

Farm-Energy, Biodiesel Cloud Point and

Cold Weather Issues (Apr. 3, 2019),

https://farm-energy.extension.org/biodieselcloud-point-and-cold-weather-issues/.......

TABLE OF AUTHORITIES—Continued

Page(s)

Letter from Brian J. Zolkos et al. to

President Donald Trump (Aug. 24, 2020),

https://www.fuelingusjobs.com/library/p

ublic/Letters/SaveSmallRefineries-8-242020.pdf .....................................................

Letter from Cdr. Kirk S. Lippold to EPA

(Feb. 8, 2017), Docket ID No. EPA-HQOAR-2016-0544-0143, https://www.regu

lations.gov/document?D=EPA-HQ-OAR2016-0544-0143 .........................................

Letter from Governor of Mississippi Phil

Bryant to Admin. Andrew Wheeler, EPA

(Aug. 8, 2019), https://www.fuelingus

jobs.com/library/public/Letters/8-8-2019To-Andrew-Wheeler-at-EPA-RE-SRE-wa

ivers.pdf .....................................................

Letter from Governor of Wyoming Mark

Gordon to President Donald Trump (Feb.

28, 2020), https://www.fuelingusjobs.com/

library/public/Letters/doc060809202002

28141613.pdf .............................................

Letter from Hon. Mitch B. Carmichael, Senate

President, and Hon. Roger Hanshaw,

Speaker of the House, State of West

Virginia, to Mr. William Crozer, Special

Assistant to the President & Deputy

Director, Office of Intergovernmental

Affairs (Sept. 6, 2019), https://www.fuel

ingusjobs.com/library/public/Letters/Ren

ewable-Fuel-Standards.pdf ......................

TABLE OF AUTHORITIES—Continued

Page(s)

Letter from the Office of the Governor of

Utah to President Donald Trump (Mar. 5,

2020), https://www.fuelingusjobs.com/lib

rary/public/Letters/Utah-Energy-AdvisorSupport-of-RFS-Decision-Review-3-5-20.

pdf ..............................................................

Letter from Senator John Barrasso et al. to

President Donald Trump (Feb. 27, 2020),

https://www.fuelingusjobs.com/library/pu

blic/Statements/2-27_Senators-Call-on-Pr

esident-Trump-to-Fight-for-Small-Refiner

ies.pdf ........................................................

Ass’n for Convenience & Fuel Retailing,

Selling America’s Fuel (Apr. 12, 2019),

https://www.convenience.org/Topics/Fuel

s/Who-Sells-Americas-Fuel .......................

Philip Rossetti, The Renewable Fuel

Standard’s Policy Failures and Economic

Burdens, American Action Forum (Apr.

19, 2018), https://www.americanactionfo

rum.org/research/renewable-fuel-standa

rds-policy-failures-economic-burdens/ .....

vii

TABLE OF AUTHORITIES—Continued

Page(s)

The Renewable Fuel Standard – Implementation Issues Before Subcomm. on

Energy and Power on the Energy and

Com. Comm., 114th Cong. (2016), written

witness statement of Bob Dinneen,

Renewable Fuels Association (June 22,

2016), https://energycommerce.house.gov/

committee-activity/hearings/hearing-onthe-renewable-fuel-standard-implemen

tation-issues ..............................................

Robert Brelsford, Marathon permanently

idles two US refineries, Oil & Gas J. (Aug.

3, 2020), https://www.ogj.com/refiningpr

ocessing/refining/article/14180915/marat

hon-permanentlyidles-two-us-refineries .....

S. Rep. No. 114-281 (2016) ..................... 10, 20, 23

Scott Irwin, Small Refinery Exemptions and

Ethanol Demand Destruction, farmdoc

daily (8):170 (Sept. 13, 2018), https://

farmdocdaily.illinois.edu/2018/09/smallrefinery-exemptions-and-ethanol-demanddestruction.html .......................................

Press Release, Sen. John Kennedy, “Sen.

Kennedy Asks Agriculture Secretary

Perdue to Stop Threatening Thousands

of Louisiana Energy Jobs” (June 28,

2019), https://www.kennedy.senate.gov/

public/2019/6/sen-kennedy-asks-agricult

ure-secretary-perdue-to-stop-threateningthousands-of-louisiana-energy-jobs .........

viii

TABLE OF AUTHORITIES—Continued

Page(s)

Statement of Adam Sieminski, Administrator, Energy Information Administration,

before the Subcomm. on Energy and Power

Comm. on Energy and Commerce, 113th,

Cong. 10 (June 26, 2013), https://www.

eia.gov/pressroom/testimonies/sieminski_

06262013.pdf .............................................

7-8

Statement of Andrew R. Wheeler, EPA

Administrator, Science and Technology

at the Environmental Protection Agency

Before the H. Comm. on Science, Space, &

Technology, 116th Cong. (Sept. 19, 2019),

https://science.house.gov/hearings/scienc

e-and-technology-at-the-environmentalprotection-agency ...................................... 26-27

Sonny Perdue, Sec’y of Agric., U.S. Dep’t of

Agric. at the Nat’l Ass’n of Farm Broad.

Annual Convention (Nov. 15, 2019) .........

U.S. Dep’t of Energy, Small Refinery

Exemption Study: An Investigation into

Disproportion ate Economic Hardship

(Mar. 2011), https://www.epa.gov/sites/

production/files/2016-12/documents/smallrefinery-exempt-study.pdf..........................passim

U.S. Energy Info. Admin., Almost all U.S.

gasoline is blended with 10% ethanol

(May 4, 2016), https://www.eia.gov/today

inenergy/detail.php?id=26092 ..................

TABLE OF AUTHORITIES—Continued

Page(s)

U.S. Energy Info. Admin., Refinery Capacity

Report (June 2020), https://www.eia.gov/

petroleum/refinerycapacity/refcap20.pdf ... 8, 26

U.S. Energy Info. Admin., U.S. Imports of

Biomass-Based Diesel Fuel, https://www.

eia.gov/dnav/pet/hist/LeafHandler.ashx?

n=PET&s=M_EPOORDB_IM0_NUS-Z0

0_MBBL&f=A (last updated Jan. 29,

2021) ..........................................................

U.S. EPA, Denial of Petitions for

Rulemaking to Change the RFS Point of

Obligation, EPA-420-R-17-008 (Nov. 2017),

available at https://nepis.epa.gov/ ............

U.S. EPA, Overview of RFS Small Refinery

Exemptions, https://www.epa.gov/fuels-reg

istration-reporting-and-compliance-help/

rfs-small-refinery-exemptions (last updated

Feb. 18, 2021) ............................................ 22, 27

U.S. EPA, Profile of the Oil and Gas

Extraction Industry (Oct. 2000), http://

www.oilandgasbmps.org/docs/GEN02-EPA

SectorNotebook-ProfileofOilandGasIndu

stry.pdf ......................................................

U.S. EPA, RIN Trades and Price

Information, https://www.epa.gov/fuels-reg

istration-reporting-and-compliance-help/

rin-trades-and-price-information

(last

updated Feb. 10, 2021) .............................

TABLE OF AUTHORITIES—Continued

Page(s)

U.S. EPA, Spreadsheet of RIN Generation

Data for the Renewable Fuel Standard,

https://www.epa.gov/fuels-registration-rep

orting-and-compliance-help/spreadsheetrin-generation-data-renewable-fuel (last

updated Feb. 18, 2021) .............................

U.S. Gov’t Accountability Office, Biofuels:

Challenges to the Transportation, Sale,

and Use of Intermediate Ethanol Blends

(June 2011), https://www.gao.gov/assets/

320/319297.pdf ..........................................

U.S. Gov’t Accountability Office, Renewable

Fuel Standard: Information on Likely

Program Effects on Gasoline Prices and

Greenhouse Gas Emissions (May 2019),

https://www.gao.gov/assets/700/698914.p

df ................................................................

U.S. Senate, Explanatory Statement for the

Department of the Interior, Environment,

and Related Agencies Appropriations

Bill, 2021, https://www.appropriations.

senate.gov/imo/media/doc/INTRept.pdf ...

INTEREST OF AMICUS CURIAE

The Small Refineries Coalition’s members1 (“Coalition”)

are refineries that produce gasoline and diesel fuel and

are subject to the Renewable Fuel Standard (“RFS”)

program. Each Coalition member qualifies as a “small

refinery.” See 42 U.S.C. § 7545(o)(1)(K).

The Coalition litigates and files amicus briefs when

its members’ objectives are directly implicated, as

here. The Supreme Court’s decision in this case will

directly affect the ability of Coalition members to maintain eligibility for small refinery hardship exemptions

when they need them in light of shifting market

conditions now and in the future. If this Court affirms

the Tenth Circuit’s decision, most Coalition members

would be permanently disqualified from receiving hardship exemptions, regardless of how much economic

hardship they will suffer in future years due to increasingly burdensome RFS obligations and potentially

disparate market conditions. If this Court reverses the

Tenth Circuit’s decision, by contrast, Coalition members

would remain eligible to receive hardship exemptions

on a case-by-case basis in future years as needed. The

Coalition filed an amicus brief in support of rehearing

this case en banc in the Tenth Circuit and has

Members of the Coalition are Alon Refining Krotz Springs,

Inc.; Alon USA, LP; American Refining Group, Inc.; Calumet Montana

Refining, LLC; Calumet Shreveport Refining, LLC; Delek Refining,

Ltd.; Ergon Refining, Inc.; Ergon-West Virginia, Inc.; Hunt Refining

Company; Lion Oil Company; Par Hawaii Refining, LLC; Placid

Refining Company LLC; Sinclair Casper Refining Company; Sinclair

Wyoming Refining Company; U.S. Oil & Refining Company; and

Wyoming Refining Company. Counsel for a party did not author

any part of this brief. See Sup. Ct. R. 37.6. Nor did counsel for any

party make a monetary contribution intended to fund the preparation or submission of this brief. No person other than the amicus

or its members or counsel made such a monetary contribution.

intervened or filed amicus briefs in other cases involving the small refinery hardship exemption and the

broader RFS program. See, e.g., Amicus Brief of Small

Refineries Coalition, Renewable Fuels Assoc. v. EPA

(“RFA”), No. 18-9533 (10th Cir. filed Mar. 31, 2020),

Doc. #010110327658; Motion for Leave to Intervene,

Renewable Fuels Assoc. v. EPA, No. 19-1220 (D.C. Cir.

filed Nov. 21, 2019), Doc. #1817104; see also id., Doc.

#1826369 (order granting motion).2

SUMMARY OF ARGUMENT

Congress designed the small refinery hardship exemption as an ongoing safety valve available for any small

refinery that experiences disproportionate economic

hardship from RFS compliance during any given year.

The Tenth Circuit’s decision eviscerates this protection in contravention of Congress’s intent for small

refineries and denies Congress’s promise that small

refineries could apply for a hardship exemption “at

any time.” Congress did not intend for small refineries

to go out of business if, after some period of initial

compliance, they later become unable to comply with

increasingly burdensome RFS obligations in some

future period. Rather, Congress intended for small refineries to remain competitive and profitable under the

RFS in order to promote American energy independence.

In enacting the RFS, Congress ordered the U.S.

Department of Energy (“DOE”) to study whether and

how small refineries would suffer disproportionate

economic hardship from complying with the RFS program. The study ultimately concluded that RFS

Pursuant to Supreme Court Rule 37.2(a), amici have timely

notified counsel of record of their intent to file an amicus brief in

support of Petitioners. Counsel of record for each party provided

written consent.

compliance can impose disproportionate economic hardship on small refineries and that the hardship would

increase with time. This is because small refineries

are not on an even playing field with their larger,

vertically integrated competitors: small refineries operate

with limited access to resources under constrained

market conditions. Small refineries, which are often

located in isolated, rural communities, have less access

to capital, distribution pipelines and terminals, and

branded retail markets. As a result, they lack the

infrastructure—both the physical equipment and the

sales and market development—necessary to blend

enough renewable fuel to meet the increasing RFS

requirements (or to export any fuel, which is not subject

to the RFS requirements).

Even before the DOE completed its study, Congress

was aware that these enduring characteristics of small

refineries could result in disproportionate economic

hardship in particular years. The risk of such hardship

would not disappear once a small refinery came into

compliance for a particular period. To the contrary, the

risk would only grow more acute over time as RFS

requirements increased. Because small refineries cannot

blend enough fuel to comply with the RFS, they must

buy compliance credits in a volatile, unregulated

market. In this unpredictable market, the cost of a

single ethanol credit has ranged from one to five cents

per gallon to more than $1.50 per gallon. Larger

competitors, on the other hand, can blend enough

renewable fuel both to comply with their own RFS

obligations and sell excess credits on the market for

windfall profits. As a result, small refineries cannot

pass on their compliance costs in the fuel they sell if

they want their prices to remain competitive. In

addition, small refineries’ compliance obligations increase

with every passing year. These changing circumstances

mean that even if a small refinery can meet its RFS

obligations one year without hardship, it might still

need the hardship exemption “safety valve” the next

year.

All evidence indicates that Congress wanted to

maintain, not phase out, the availability of small refinery

hardship relief. Specifically, at every opportunity,

Congress has spoken in favor of more hardship relief

for small refineries. And keeping small refineries in

business serves Congress’s stated goal for the RFS of

promoting American energy independence because

small refineries are a critical part of that goal, making

up 40 percent of domestic refineries and 12 percent of

domestic refining capacity. This Court should reverse

the Tenth Circuit’s erroneous decision.

ARGUMENT

I. Small refineries operate with limited access

to resources under constrained market

conditions, making RFS compliance

difficult.

Congress directed the DOE to study the economic

hardship that the RFS program would impose on small

refineries. The DOE concluded that small refineries

“operate with limited access to resources under constrained market conditions” and that those permanent,

structural characteristics would make RFS compliance

exceptionally difficult when compared with larger

competitors in the oil industry. U.S. Dep’t of Energy,

Small Refinery Exemption Study: An Investigation

into Disproportionate Economic Hardship 24 (Mar.

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

Study”).

As the DOE Study explained, the oil industry covers

“a broad spectrum of companies” ranging from large

integrated refiners to small refineries. Id. at 23. “At

one extreme, the multi-national super majors,” such as

BP and Chevron, “have full vertical integration.” Id.

That means they have operations upstream (exploration

and development of crude oil deposits), midstream

(transportation and storage), and downstream (refining,

marketing, distribution, and sales). Id.3 These large

integrated refiners enjoy economies of scale from ownership of upstream operations, large refining operations,

and interests in the refined product distribution

supply chain. Id. In the middle of the spectrum, some

large independent refiners that do not directly engage

in upstream operations nevertheless own pipelines

and storage facilities or participate in joint ventures

involving vertically integrated refiners and/or crude

oil suppliers. Id. at 23–24 & nn.25–26. As a result,

some large independent refiners benefit from their

owners’ vertical integration. Id. at 24.

At the other extreme, small refineries produce an

average aggregate daily crude oil throughput of just

75,000 barrels or fewer, see 42 U.S.C. § 7545(o)(1)(K),

and lack vertical integration, DOE Study at 24. They

“operate with limited access to resources under constrained market conditions,” making compliance with

the RFS difficult. Id.; see also Respondent EPA’s Br.

at 1, RFA, No. 18-9533 (filed Mar. 25, 2019), Doc.

#010110144321 (“EPA Br.”) (“small refineries can

suffer from disproportionate structural and economic

impacts of the RFS (e.g., due to poor access to capital

and credit, and poor refining margins) that disadvantage

See U.S. EPA, Profile of the Oil and Gas Extraction Industry

at 15 (Oct. 2000), http://www.oilandgasbmps.org/docs/GEN02EPASectorNotebook-ProfileofOilandGasIndustry.pdf.

a refinery relative to larger refineries that may not

face similar structural challenges”).4

First, “small independent refiners generally lack the

revenue streams generated by crude oil production

and national product marketing to counteract the

historic volatility in cash flows from the refining

industry.” DOE Study at 36.

Second, and relatedly, small refineries generally

lack sufficient capital to invest in blending infrastructure to blend enough renewable fuel into their gasoline

and diesel to meet the RFS requirements. See id. at 23,

34. Gasoline and diesel fuel produced at domestic

refineries is distributed either (1) by truck from the

refinery’s loading rack, or (2) through distribution

terminals, which receive fuel from refineries by

pipeline, barge, or rail.5 Due to technical constraints,

For as long as EPA has applied 42 U.S.C. § 7545(o)(9)(B) and

up until February 22, 2021, EPA agreed with Petitioners’

interpretation of the RFS statute based upon canons of statutory

interpretation, legislative history, science, and public policy. See,

e.g., Br. for the Fed. Respondent in Opp. to Certiorari at 11

(stating that Petitioners were “correct” that “extension” can mean

to make available or grant); see also EPA Br. EPA abruptly

flipped positions following the change in presidential administrations. There have been no relevant legal or factual changes since

EPA’s most recent briefing in this case. As a result, EPA’s

reversal is unreasonable. See generally FCC v. Fox Television

Stations, Inc., 556 U.S. 502, 515–16 (2009) (An agency operates

outside “the bounds of reasonable [statutory] interpretation”

under Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467

U.S. 837 (1984), when it reverses position and (1) fails to account

for serious legitimate reliance interests engendered by the prior

policy or (2) rests upon factual findings that contradict those

which underlay its prior policy.).

See U.S. EPA, Denial of Petitions for Rulemaking to Change

the RFS Point of Obligation, EPA-420-R-17-008, at 9–10 (Nov.

2017), available at https://nepis.epa.gov/.

blended fuel generally cannot be transported via pipeline.6

Instead, blending gasoline and diesel fuel with renewable fuels (such as ethanol) generally occurs immediately

before fuel is distributed for consumption, and this can

occur at the refinery’s loading rack (“upstream blending”)

or at distribution terminals, bulk storage facilities,

and/or retail gas stations (“downstream blending”). DOE

Study at B-8–B-9. Small refineries generally lack the

capital to invest in blending infrastructure to blend sufficient fuel downstream. Id. at vi, vii, 23. Some small

refineries have added upstream blending infrastructure

at the refinery rack. However, relatively little fuel is

distributed through the refinery rack. Id. at B-8. As a

result, small refineries lack the physical capacity to blend

sufficient renewable fuel to meet the RFS requirements.

Third, small refineries have geographic and structural limitations on selling their product. They lack

the capital for market development for blended fuels.

Small refineries do not have a national reach like their

large integrated competitors. Because small refineries

serve local customers, regional preferences constrain

their ability to sell blended fuel. Some states are less

receptive to blended fuel than others. See, e.g., id. at

22, 34. “Some locations, due to either logistical obstacles or consumer behavior, still sell clear (unblended)

gasoline.” Id. at 34. In addition, diesel fuel must

generally be blended at a much lower percentage.7 In

See U.S. Gov’t Accountability Office, Biofuels: Challenges to

the Transportation, Sale, and Use of Intermediate Ethanol

Blends, GAO-11-513, at 18–19 (June 2011), https://www.gao.gov/

assets/320/319297.pdf.

See Statement of Adam Sieminski, Administrator, Energy

Information Administration, before the Subcomm. on Energy and

Power Comm. on Energy and Commerce, 113th Cong. 10 (June

Indiana, for example, customers resist biodiesel because

it does not work as well in the severe cold.8

Fourth, small refineries lack the economies of scale

necessary to export fuel, which can reduce a refiner’s

obligation under the RFS. The RFS applies to transportation fuel sold only within the United States. 42

U.S.C. § 7545(o)(2)(A)(i). Small refineries do not have

the tankage, production volume, or ability to afford the

shipping and handling costs. Large integrated refiners,

on the other hand, can produce fuel in large enough

quantities to export to reduce their obligations under

the RFS.

Any hardship that befalls small refineries will flow

straight through to their local communities. The states

and rural communities where these small refineries

are located depend on their operations. Small refineries provide the only source of transportation fuels for

consumers and businesses, including farmers, in many

states and communities that are located far away from

major fuel production and transportation hubs. For

example, the only refineries in Montana, North Dakota,

Utah, West Virginia, Wisconsin, and Wyoming are small

refineries.9 In their rural communities, small refineries

provide critical jobs, resources, and tax revenues. These

26, 2013), https://www.energy.gov/sites/prod/files/2013/06/f1/213-13_Adam_Sieminski%20FT%20HSS%26T.pdf.

See Farm-Energy, Biodiesel Cloud Point and Cold Weather

Issues (Apr. 3, 2019), https://farm-energy.extension.org/biodieselcloud-point-and-cold-weather-issues/; Amicus Brief of Countrymark

Refining and Logistics at 8, RFA, No. 18-9533 (filed Mar. 31, 2020),

Doc. #010110327255.

U.S. Energy Info. Admin., Refinery Capacity Report 38–43

(June 2020) (“Refinery Capacity Report”), https://www.eia.gov/

petroleum/refinerycapacity/refcap20.pdf.

jobs are often some of the highest paying in the area.10

As the Governor of Wyoming has noted, “Wyoming is

home to five refineries that are disproportionately

harmed by the RFS. In Wyoming, the refining and

petrochemical industry employs nearly 10,000 individuals and contribute[s] $266 million dollars in local and

state tax revenue.”11 Mississippi’s largest small refiner

employs roughly 250 people in the impoverished

Mississippi Delta.12 Ergon, a small refinery in West

Virginia, employs more than 400 people with a total

gross payroll of $27 million in 2018 alone and “use[s]

many outside services that support local businesses.”13

If small refineries are forced to shutter due to the

See, e.g., Letter from the Office of the Governor of Utah to

President Donald Trump (Mar. 5, 2020), https://www.fuelingus

jobs.com/library/public/Letters/Utah-Energy-Advisor-Support-ofRFS-Decision-Review-3-5-20.pdf.

Letter from Governor of Wyoming Mark Gordon to President

Donald Trump (Feb. 28, 2020), https://www.fuelingusjobs.com/

library/public/Letters/doc06080920200228141613.pdf; see Press

release, Sen. John Kennedy, “Sen. Kennedy Asks Agriculture

Secretary Perdue to Stop Threatening Thousands of Louisiana

Energy Jobs,” (June 28, 2019), https://www.kennedy.senate.

gov/public/press-releases?ID=64CD14A5-3DD7-4DD8-ABEB39A2B2A06A55 (cited in CRS Report at 19 n.128).

Letter from Governor of Mississippi Phil Bryant to Admin.

Andrew Wheeler, EPA (Aug. 8, 2019), https://www.fuelingusjobs.

com/library/public/Letters/8-8-2019-To-Andrew-Wheeler-at-EPARE-SRE-waivers.pdf.

Letter from Hon. Mitch B. Carmichael, Senate President,

and Hon. Roger Hanshaw, Speaker of the House, State of West

Virginia, to Mr. William Crozer, Special Assistant to the President

& Deputy Director, Office of Intergovernmental Affairs (Sept. 6,

2019), https://www.fuelingusjobs.com/library/public/Letters/Ren

ewable-Fuel-Standards.pdf.

Tenth Circuit’s decision, the economic consequences

will ripple through rural communities across the country.

II. The RFS imposes disproportionate economic hardship on small refineries that

increases over time.

Congress intended to keep small refineries “competitive and profitable,”14 and the federal government,

including Congress, understood that the burden on

small refineries from the RFS would grow heavier, not

lighter, over time. Given the basic structural characteristics of small refineries discussed above in Part I, the

lack of vertical integration, capital, and market power

and the structure of the RFS program, small refineries

cannot “funnel[]” themselves “toward compliance over

time.” RFA, 948 F.3d 1206, 1246 (10th Cir. 2020)15

(relying on dicta from Hermes Consol., LLC v. EPA,

787 F.3d 568, 578 (D.C. Cir. 2015)).

When the Tenth Circuit said that small refineries

could be “funnel[ed]” toward permanent compliance,

the panel really meant that small refineries that have

one good year but later experience disproportionate

economic hardship from RFS compliance should just

go out of business. RFA, 948 F.3d at 1247 (suggesting

that small refineries should “ponder . . . whether it

ma[kes] sense to . . . remain in the market in light of

the statute’s challenging renewable fuels mandate”);

see also id. at 71 (suggesting that the RFS was

intended to be “aggressive” and “forc[e]” small refineries

that could not maintain compliance out of the “market”).

It is beyond implausible to suggest that despite

S. Rep. No. 114-281, at 70–71 (2016).

The Tenth Circuit’s opinion is reproduced at Petition

Appendix 1a–94a.

specifically including a “hardship exemption” for small

refineries in the statute, 42 U.S.C. § 7545(o)(9)(B)(iii),

Congress actually intended to shut small refineries

down if they could not hack it. It is even less plausible

to think that Congress wanted to preserve only small

refineries that had never come into compliance while

showing the door to companies that can comply in

some years but not others because of fluctuating market

conditions, creating an incentive for small refineries to

avoid achieving the program’s goals for fear of forfeiting eligibility for future exemptions.

In fact, the Tenth Circuit (and the dicta in the D.C.

Circuit opinion upon which it relied) created the concept

of “funnel[ing]” small refineries towards compliance

out of whole cloth. That concept does not appear in the

statute, the legislative history, or the DOE Study that

Congress commissioned. And it does not remotely describe

the relevant market dynamics. The only support the

Tenth Circuit cites for its assertion that small refineries should exit the market is a single sentence of dicta

from Hermes, see RFA, 948 F.3d at 1246 (citing 787

F.3d at 578), which in turn cites only the words “temporary exemption,” the title of 42 U.S.C. § 7545(o)(9)(A),

which is not the subsection at issue here. The word

“temporary” in subsection (A) does not mean that

Congress intended to put small refineries out of

business if they could not comply with the RFS after a

previous year of achieving compliance. Rather, the

“temporary exemption” in subsection (A) refers to a

distinct two-year exemption that is not at issue

here. See Br. of Petitioners at 11, 19, 40–41. This

case involves subsection (B), “[p]etitions based on

disproportionate economic hardship,” under which a

small refinery can apply for an exemption on a caseby-case basis “at any time.” 42 U.S.C. § 7545(o)(9)(B).

Put simply, nothing supports the Tenth Circuit’s

assertion that Congress intended the RFS program to

gradually put small refineries out of business. Instead,

Congress intended the exact opposite: to keep small

American refineries competitive and profitable and

promote American energy independence by providing

small refineries an appropriate exemption to the RFS

“at any time” compliance would impose disproportionate hardship.

Congress knew that compliance would not become

progressively easier for small refineries over time,

given their inability to blend the increasing amounts

of renewable fuel required under the RFS and their

resulting reliance upon purchasing compliance credits

from others. See, e.g., DOE Study at 17–18, 23. Small

refineries (unlike their large counterparts) must rely

on purchasing compliance credits called Renewable

Identification Numbers (“RINs”) on a largely unregulated and unpredictable market, because they cannot

self-generate the necessary credits through blending.

See Sinclair Wyo. Refin. Co. v. EPA, 887 F.3d 986,

988–89 (10th Cir. 2017). The pricing of RINs changes

from year to year based on unpredictable market dynamics, and the RFS program’s renewable fuel volume

mandates increase year after year. DOE Study at

17–18.

A RIN is created when a renewable fuel producer

makes renewable fuel—such as ethanol. 40 C.F.R.

§ 80.1426. Until the renewable fuel is blended into

petroleum-based transportation fuel, the RIN remains

“assigned” to the physical volume of renewable fuel.

Id. § 80.1428. The RIN is “separated” when the

renewable fuel is blended with transportation fuel. Id.

§ 80.1429. Obligated parties use separated RINs to

demonstrate RFS compliance. Id. § 80.1427. Each

obligated party must turn in enough RINs to equal its

proportionate share of the amount of renewable fuel

that Congress wants blended into the country’s transportation fuel that year (known as its “Renewable

Volume Obligation” or “RVO”). Id. § 80.1406(b). An

obligated party that cannot separate enough RINs on

its own to meet its RVO must buy RINs from others.

RINs are traded on an unregulated spot market or

bought and sold through private contracts.16 The

market is unpredictable and subject to manipulation,

which disproportionately harms small refineries.17

In contrast, large integrated oil companies that are

involved in multiple segments of the petroleum supply

chain—refining, transportation, marketing, distribution,

and sales—can “easily obtain financing for blending

facilities,” can control the downstream blending of renewable fuel, and are less geographically constrained. DOE

Study at 23–24; see EPA Br. at 32 (“inherent scale

advantages of large refineries”). These entities secure

surplus RINs because of the large amount of blending

and retail they control. For example, 50 percent of

retail outlets sell fuel under the brand of one of the 15

largest refiner-suppliers through supply agreements.18

As a result, large refiner-suppliers can self-generate

See Regulation of Fuels and Fuel Additives: Changes to

Renewable Fuel Standard Program, 75 Fed. Reg. 14,670, 14,722

(Mar. 26, 2010).

See Modifications to Fuel Regulations To Provide Flexibility

for E15; Modifications to RFS RIN Market Regulations, 84 Fed.

Reg. 10,584, 10,584 (Mar. 21, 2019) (“EPA is proposing regulatory

changes to . . . improve functioning of the renewable identification number (RIN) market and prevent market manipulation.”);

see also id. at 10,585 (“deter potential manipulative and other

anti-competitive behaviors in the RIN market”).

See Ass’n for Convenience & Fuel Retailing, Selling

America’s Fuel (Apr. 12, 2019), https://www.convenience.org/Top

ics/Fuels/Who-Sells-Americas-Fuel.

RINs to meet their annual RFS requirements and then

sell their excess RINs into the market. Id.

The RFS renewable fuel targets˜ and therefore

small refineries’ compliance obligations˜ become more

difficult for small refineries to achieve with every

passing year. See Cong. Research Serv., The Renewable

Fuel Standard (RFS): Frequently Asked Questions About

Small Refinery Exemptions (SREs) 21 (Mar. 2, 2020),

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

(“CRS Report”). The RFS statute specifies minimum

annual volume targets (in billions of gallons) from

12.95 billion gallons of renewable fuel in 2010 and

ascending to 36 billion gallons in 2022. Id. at 2–3.

Id. at 3. At the same time, “[g]asoline consumption has

trended downwards for years for a variety of reasons

(e.g., fuel economy standards, behavioral choices,

economic conditions) and is currently steady.” Id. at 21.

Also, as the renewable fuel volume obligation has

increased, so has the volatility and overall RIN

prices. DOE Study at 17–18. The DOE anticipated

that the blendwall19 was coming, i.e., that it would

A blendwall is “the aggregate limit to which a renewable fuel

can be blended into its recipient motor fuel” based on physical

eventually be impossible to blend all of the mandated

renewable fuel into conventional transportation fuels

and that reaching the blendwall would have “significant economic consequences” for small refineries. Id.

at 3, 17. Indeed, after the E10 blendwall was reached

in 2013, the price for ethanol RINs increased by

approximately 5,000 percent, and prices have fluctuated wildly ever since.20 From 2010 to 2018, RIN prices

fluctuated from lows of one to five cents per gallon to

highs of more than $1.50 per gallon.21 More recently,

RIN prices tripled within weeks of when the Tenth

Circuit’s decision issued.22 Similar fluctuations mean

that projected costs of national compliance with the

RFS have ranged from $5.8 to $19.3 billion in a given

year.23 Given this volatility, a small refinery’s ability

limitations, regulatory restrictions, and market forces. DOE Study

at 3, 13, A-1. A blendwall is specific to a particular renewable fuel

and specific to a particular motor fuel. Id. at 13.

See Modifications to Fuel Regulations to Provide Flexibility

for E15; Modifications to RFS RIN Market Regulations, 84 Fed.

Reg. 26,980, 27,013 & n.216 (June 10, 2019); see also DOE Study

at 13–19 (describing the blendwall and its implications for small

refineries); U.S. EPA, RIN Trades and Price Information, https://

www.epa.gov/fuels-registration-reporting-and-compliance-help/rintrades-and-price-information (last updated Feb. 10, 2021) (showing

D6 RIN prices ranging from $0.02/RIN on June 18, 2012 to

$1.05/RIN on Aug. 5, 2013, and from $0.06/RIN on Jan. 20, 2020

to $0.18/RIN on Feb. 24, 2020).

U.S. Gov’t Accountability Office, Renewable Fuel Standard:

Information on Likely Program Effects on Gasoline Prices and

Greenhouse Gas Emissions, GAO-19-47, at 26 (May 2019), https://

www.gao.gov/assets/700/698914.pdf.

See supra n.20.

Philip Rossetti, The Renewable Fuel Standard’s Policy

Failures and Economic Burdens, American Action Forum (Apr.

19, 2018), https://www.americanactionforum.org/research/renew

able-fuel-standards-policy-failures-economic-burdens/.

to comply with RFS requirements in any given year

hardly guarantees its ability to comply in subsequent

years.

The volatility and increases in RIN prices disproportionately harm small refineries because, unlike their

large competitors that can self-generate RINs through

blending, small refineries must purchase RINs to

comply with the RFS. As discussed above, obligated

parties acquire RINs to satisfy their RVOs by either

(1) blending renewable fuels into conventional fuels, or

(2) purchasing RINs. Because small refineries lack the

financial resources and infrastructure needed to blend

renewable fuels cost effectively, they have no choice

but to purchase RINs on the open market to satisfy

their RFS obligations. See DOE Study at 23 (small

refineries’ “limited product slates coupled with an

inability to blend renewable fuels means that many of

the small refiners must enter the market to buy

RINs”).

In addition, the harm to small refineries from high

RIN prices (which is significant) is compounded because

high RIN prices actually benefit their competitors, the

large integrated refiners and non-refining blenders

(e.g., large retail marketing chains). Because large

integrated refiners can blend enough renewable fuel to

meet or exceed their RVOs, they have lower and often

no compliance costs relative to small refineries that

must purchase RINs on the market. See id. at B-4–B5. In fact, these large refiners make money from the

RFS because they can sell excess RINs on the market.

Id. at B-5. Large refiners have no extra RFS-related

costs that they have to pass on to customers or swallow

(and may even benefit by selling excess RINs). Nonrefining blenders that are exempt from the RFS

similarly have no RFS-related costs to pass down the

supply chain. Because these parties do not incur RIN

costs, they are positioned to sell fuel at competitive

prices without any pressure to recover compliance

costs. This is precisely why large refiners can lower the

price of their fuel, undercutting their small refinery

competition. Large retailers do the same through “RIN

theft” contracts with a limited number of small refineries that can blend some renewable fuels into their

gasoline and diesel. In a “RIN theft” contract, a

downstream blender forces the upstream small refinery

to discount its blended fuel, giving a substantial

portion of the value of the RIN to the exempt downstream blender. As a result, an increase in RIN prices

can “significantly impair the profitability of [] small

refineries,” id., because small refineries cannot pass

the cost of their RINs through to their customers. The

small refineries must instead eat these costs to remain

competitive, or else they will be pushed out of the

market. Id. at 22–23. The DOE clearly demonstrated

that small refineries would not be able to pass their

compliance costs to customers when their competitors

have no compliance costs. Id. at B-4–B-5. As the DOE

Study explains, when a small refinery must purchase

RINs “that are far more expensive than those that may

be generated through blending, this will lead to

disproportionate economic hardship for those effected

[sic] entities.” Id. at 2. The President of the Renewable

Fuels Association, one of the respondents before this

Court, made this very point in testimony before Congress:

RINs are primarily traded in a “closed loop”

market amongst parties in the gasoline supply

chain. That is, a party buying a detached RIN

[e.g., a small refinery] will incur an additional

cost, but the counterparty selling the RIN

[e.g., a large, vertically integrated refiner]

will simultaneously incur a profit. In this

manner, one party’s RIN expense is exactly

offset by the counterparty’s RIN revenue, and

the net effect is no impact to the consumer.

Second, the gasoline market is highly competitive and market actors are compelled to

match, or undercut, the wholesale selling

prices of their competitors. Thus, a refiner

who has purchased RINs on the open market

cannot markup the selling price of its gasoline

to recoup RIN expenses if it wishes to remain

competitive with other refiners who profited

from the sale of detached RINs.24

As a result, RFS compliance costs are a large part of

operating costs for small refineries, whereas “compliance costs for the larger refiner [are] a small” or nonexistent “part of overall operating costs.” DOE Study

at 23. Some large refiners make windfall profits from

the RFS25 because they can build or buy blending

capabilities “at a scale well beyond . . . smaller

refiners,” DOE Study at 23, to create excess RINs to

sell on the market. “[O]ver the past couple of years,

compliance strategies for larger companies included

engaging in joint ventures with ethanol producers,

The Renewable Fuel Standard – Implementation Issues

Before Subcomm. on Energy and Power on the Energy and Com.

Comm., 114th Cong. (2016), written witness statement of Bob

Dinneen, Renewable Fuels Association at 5 (June 22, 2016),

https://energycommerce.house.gov/committee-activity/hearings/

hearing-on-the-renewable-fuel-standard-implementation-issues.

See Comments on Proposed Denial of Petitions for

Rulemaking to Change the RFS Point of Obligation at 33–34

(Feb. 22, 2017), Docket ID No. EPA-HQ-OAR-2016-0544-0406,

https://www.regulations.gov/comment/EPA-HQ-OAR-2016-05440406 (discussing blenders boasting to investors in their 10-Ks

about hundreds of millions of dollars in windfall RIN revenues

they earned by selling RINs to obligated parties).

investing in companies in the renewable sector, or

conducting research on renewable fuels.” Id. Small

companies have limited options. Id. “They face a number

of challenges and access to capital is generally limited

or not available.” Id. “RFS compliance exacerbate[s]

already negative financial outlooks that are consistent

with the unique burdens sometimes borne by small

refineries, especially in the short term.” EPA Br. at

54–55; see also id. at 46–47 (discussing how small

refineries’ compliance costs worsened the refineries’

already poor financial outlook). “Even when capital is

available, they may have to choose between making

substantial investments in blending and investing in

other needed facilities to improve operating efficiencies

to remain competitive.” DOE Study at 23. For some

small refineries, the expense of compliance exceeds the

yearly cost of labor, maintenance, and energy.26 For

example, for Sinclair Wyoming Refining, “RFS compliance

costs [in 2019] represented more than one-third of

Sinclair’s net income.” Amicus Brief of Sinclair Wyoming

Refining Co. et al. at 7, RFA, No. 18-9533 (filed Mar.

31, 2020), Doc. #010110327716.

Indeed, since the Tenth Circuit’s decision, at

least three small refineries (including Petitioner

HollyFrontier’s Cheyenne, Wyoming refinery) have

already shut down. Marathon’s Gallup, New Mexico

refinery, also within the Tenth Circuit, has idled operations indefinitely.27 Others likewise face financial

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-credits-addto-refiners-woes.html.

Robert Brelsford, Marathon permanently idles two US

refineries, Oil & Gas J. (Aug. 3, 2020), https://www.ogj.com/ref

iningprocessing/refining/article/14180915/marathon-

distress due to a historic downturn in demand and

historically high RIN prices.28 These are exactly the

circumstances that Congress intended to avoid by allowing small refineries to seek an exemption “at any time”

if complying with the RFS program would impose a

disproportionate economic hardship. The Tenth Circuit’s

interpretation of § 7545(o)(9)(B)(i) would permanently

eliminate that exemption for any small refinery that

has even one decent year.

III. Congress could not have meant what the

Tenth Circuit says it did.

A. Congress did not intend to force small

refineries to comply or go out of

business.

The Tenth Circuit panel turned Congress’s intent on

its head. Relying on a single sentence of unsupported

dicta from a D.C. Circuit opinion, the panel decided

that Congress intended small refineries to either comply

with the RFS without the continued availability of

hardship exemptions or go out of business entirely.

RFA, 948 F.3d at 1247. In fact, all the evidence

indicates that Congress intended the exact opposite.

Congress’s stated intention was “that small refineries

remain both competitive and profitable.”29 Congress

created the small refinery hardship exemption not as

a temporary off-ramp or part of a “funnel” but rather

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-marat

hon-petroleum-to-shut-two-us-refineries-update.

Letter from Brian J. Zolkos et al. to President Donald Trump

(Aug. 24, 2020), https://www.fuelingusjobs.com/library/public/

Letters/SaveSmallRefineries-8-24-2020.pdf.

S. Rep. No. 114-281, at 70–71 (2016).

a vital and permanent safety valve that would be

available whenever hardship occurred. Congress knew

that compliance with the RFS is not permanent when

achieved in a particular year. That is why Congress

explicitly made the exemption from the RFS available

“at any time.” 42 U.S.C. § 7545(o)(9)(B)(i). As Petitioners

point out, Congress knows how to sunset or time limit

regulatory exemptions when appropriate. Br. of Petitioners at 33 (citing 42 U.S.C. § 7411(j)(1)(E) (setting

a maximum number of years beyond which EPA may

not grant a waiver)); see also 42 U.S.C. § 7412(f)(4)

(providing a two-year compliance extension if “such

period is necessary for the installation of controls” for

hazardous air pollutants including benzene). Congress

chose not to sunset the small refinery hardship

exemption.

Congress understood that small refineries’ hardship

would increase over time and that the degree of hardship also depended on changing market conditions. As

the DOE Study explains, small refineries not only face

annual RFS compliance obligations, but also those

obligations substantially increase each year. DOE

Study at 13–17. Moreover, the volatility in the prevailing prices for RINs means compliance in any one year

does not presage compliance in subsequent years. As

such, changing market conditions can create disproportionate economic hardship in some years even where

no such hardship existed before. The DOE created a

scoring matrix to assess the degree of hardship a particular small refinery would experience in a given

calendar year, grounded in the study’s findings. The

structure of the test is evidence that hardship could

potentially wane under certain circumstances but

could also grow worse. For example, the DOE found

that hardship could occur if blending or purchasing

RINs “increases [a small refinery’s] costs of products

relative to competitors to the point that [the small

refinery is] not viable, either due to loss of market

share or lack of working capital to cover the cost[] of”

RINs. DOE Study at vii. Also, hardship occurs if RIN

prices are “substantially higher than their historical

value” or if refineries must buy RINs “that are far more

expensive than those that may be generated through

blending.” Id. at vii, 2. The DOE also mentioned

“[r]efinery specific events []such as a shutdown due to

an accident” that could have “a temporary negative

impact” on a refinery’s ability to comply. Id. at 36; see

also EPA Br. at 45 (Congress did not require RFS

compliance to be the sole cause of economic hardship).

EPA’s history of granting hardship exemptions is

consistent with Congress’s intent to provide a case-bycase safety valve for refineries experiencing disproportionate economic hardship in any given year. See 42

U.S.C. § 7545(o)(9)(B)(i); Regulation of Fuels and Fuel

Additives: 2012 Renewable Fuel Standards, 77 Fed.

Reg. 1320, 1340 (Jan. 9, 2012) (“[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.”). Hardship is not necessarily linear; indeed, the

annual number of hardship exemption applications has

fluctuated since the RFS program began.30 The impact

of RFS compliance, particularly due to unpredictable

increases in RIN prices, can change the economic circumstances facing small refineries, and the overall burden

of RFS compliance on these refineries is increasing.

The annual RFS mandates that Congress prescribed

See U.S. EPA, Overview of RFS Small Refinery Exemptions

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

Feb. 18, 2021) (ranging from 28 to 44 petitions received).

continuously increase, and RIN prices are volatile.

While the economic hardship may not be as severe

when RINs cost a few cents each, the same is not true

in years when the price of RINs surges. The economic

conditions at small refineries are ever-changing, and

Congress would not have limited EPA to a certain

(small, near zero) number of small refinery exemptions every year. See id. “Congress [ ] envisioned a

more programmatic concept of relief that allows EPA

flexibility to grant petitions at its discretion ‘at any

time’ that small refineries experience disproportionate

economic hardship based on changes in the market,

the financial health of individual facilities, and ‘other

economic factors,’ . . . as needed in future compliance

years.” See EPA Br. at 32.

Indeed, Congress has spoken in favor of more hardship relief for small refineries at every opportunity.31

After EPA granted a mere seven hardship petitions in

2015, the Senate issued the agency a stinging rebuke,

stating that such a stringent implementation was

“inconsistent with congressional intent.”32 The Senate

reminded EPA that “Congress explicitly authorized the

Agency to grant small refinery hardship relief to

ensure that small refineries remain both competitive

and profitable.”33 The Senate instructed that “small

entities cannot remain competitive and profitable if

they face disproportionate structural or economic

metrics such as limitations on access to capital, lack of

other business lines, disproportionate production of

diesel fuel, or other site specific factors identified in

Persuasive post-enactment congressional statements are

relevant. United States v. Woods, 571 U.S. 31, 48 (2013).

S. Rep. No. 114-281, at 70.

Id.

[the DOE Study].” Congress reminded the agencies

that RFS compliance “may impose a disproportionate

economic hardship on a small refinery even if the refinery makes enough profit to cover the cost of complying

with the program,” and that “refinery profitability does

not justify a disproportionate regulatory burden where

Congress has explicitly given EPA authority, in consultation with [the DOE], to reduce or eliminate this

burden.”35 Next, in the Joint Explanatory Statement

accompanying the 2016 Consolidated Appropriations

Act (Pub. L. 114-113, 126 Stat. 2241 (Dec. 18, 2015)),

Congress ordered the DOE to recommend that a

refinery that met 50 percent of the requirements for

an exemption receive a 50 percent waiver instead of no

relief. CRS Report at 6. In 2017, Congress ordered

EPA to follow the DOE’s recommendation and to notify

Congress ten days before decision if EPA disagreed

with the DOE’s recommendation. Id. Most recently, in

appropriations language in force until the end of the

current fiscal year, Congress emphasized that EPA

has discretion to provide relief above and beyond the

DOE’s recommendation.36 Congress would not have

made any of these statements if it had intended for

small refinery exemptions to phase out.

Adopting the Tenth Circuit’s decision nationwide

would run counter to Congress’s repeated statements

of intent by effectively eliminating the small refinery

hardship exemption (and most small refineries along

Id. at 70–71.

161 Cong. Rec. H9693, H10105 (daily ed. Dec. 17, 2015).

Explanatory Statement at 93, Dep’t of the Interior and EPA’s

2021 Appropriations Bill, https://www.appropriations.senate.gov/

imo/media/doc/INTRept.pdf (“The Agency is reminded that, regardless of the Department of Energy’s recommendation, additional

relief may be granted if the Agency believes it is warranted.”).

with it). As EPA told the Tenth Circuit, Respondents’

position “upend[s] the will of Congress and nullif[ies]

the statute.” EPA Br. at 2. Under the logic of the panel

decision, only a small number of the nation’s small refineries would even be eligible for future exemptions. At

maximum, only seven small refineries could possibly

have the necessary history of continuous exemptions.

Although the exact number of small refineries that

would remain eligible is unknown, some estimate it is

as low as two.37 “Congress did not intend so narrow a

safeguard.” EPA Br. at 33.

B. Congress intended to keep small

American refineries in business.

The Tenth Circuit’s belief that Congress would have

allowed RFS compliance to shutter small refineries,

RFA, 948 F.3d at 1246–47, is incorrect and at odds

with the statute.

Congress intended that the RFS program promote

American energy independence, id. at 1216–18, and

eliminating the small refinery hardship exemption frustrates that goal. “Every Presidential Administration

dating back to FDR has found that domestic refining

capacity is a critical element to national security

Letter from Senator John Barrasso et al. to President Donald

Trump (Feb. 27, 2020), https://www.fuelingusjobs.com/library/

public/Statements/2-27_Senators-Call-on-President-Trump-to-Fi

ght-for-Small-Refineries.pdf. Moreover, under the Tenth Circuit’s

opinion, only those small refineries in existence in 2011 would

qualify for an exemption. But cf. 42 U.S.C. § 7545(o)(1)(K) (statutory

definition of a small refinery is based on output for that calendar

year, not limited to 2011); see also Br. of Petitioners at 37.

preparedness and planning.”38 Small refineries are

critically important to America’s transportation fuel

industry. Fifty-four of the country’s 135 operating refineries qualify as small refineries under the RFS.39

“[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 States.” CRS Report at 4. As discussed at length

above, both Congress and the DOE Study recognized

that the RFS program would impose substantial and

disproportionate economic hardship on small refineries

throughout the country. See 42 U.S.C. § 7545(o)(9)(A).

Such hardship could in some circumstances be so significant that small refiners would become bankrupt or

be forced to shut down, jeopardizing domestic sources

of transportation fuel. In light of fluctuating market

conditions, nearly all small refineries have gaps in their

exemption histories. Thus, affirming the Tenth Circuit’s

decision would effectively eliminate Congress’s carefully

crafted small refinery exemption program and undermine a central goal of the RFS.

Moreover, eliminating the hardship exemption

would not even further Congress’s goal of promoting

biofuel production. In 2019, total ethanol consumption

and ethanol blend rates were at all-time highs, unhindered by the prior small refinery exemptions of which

Petitioners complain.40 E10, a mixture of 10 percent

Letter from Cdr. Kirk S. Lippold to EPA at 2 (Feb. 8, 2017),

Docket ID No. EPA-HQ-OAR-2016-0544-0143, https://www.regul

ations.gov/document?D=EPA-HQ-OAR-2016-0544-0143.

Data extrapolated from information available in the Refinery

Capacity Report supra n.9.

Science and Technology at the Environmental Protection

Agency Before the H. Comm. on Science, Space, & Technology,

116th Cong. (Sept. 19, 2019) (statement of Andrew R. Wheeler,

ethanol and 90 percent gasoline, would still be blended

even without a mandate.41 E10 is widely available and

cost effective.42 Further, low-level blends of E10 or less

require no special fueling equipment and can be used

in any conventional gasoline vehicle. As shown in the

chart below,43 there is no correlation—much less a

causal relationship—between the number of small

refinery exemptions (which has varied) and ethanol

Administrator of the Envtl. Protection Agency), https://science.

house.gov/hearings/science-and-technology-at-the-environmentalprotection-agency.

Renewable Fuel Standard Program: Standards for 2020 and

Biomass-Based Diesel Volume for 2021, Response to the Remand

of the 2016 Standards, and Other Changes, 84 Fed. Reg. 36,763,

36,763 (July 29, 2019) (“Today, nearly all gasoline used for

transportation purposes contains 10 percent ethanol (E10) . . . .”);

Scott Irwin, Small Refinery Exemptions and Ethanol Demand

Destruction, farmdoc daily (8):170 (Sept. 13, 2018), https://

farmdocdaily.illinois.edu/2018/09/small-refinery-exemptions-andethanol-demand-destruction.html (“The price competitiveness of

ethanol in E10 means that the conventional ethanol mandate is

non-binding up to the E10 blendwall.”).

U.S. Energy Info. Admin., Almost all U.S. gasoline is blended

with 10% ethanol (May 4, 2016), https://www.eia.gov/todayin

energy/detail.php?id=26092 (E10 “account[s] for more than 95%

of the fuel consumed in motor vehicles with gasoline engines”);

Scott Irwin, supra n.41 (“[E]thanol is a [sic] highly price competitive

in the E10 gasoline blend in the U.S. at the present time and the

conventional ethanol mandate up to the E10 blend wall is nonbinding.”).

See Am. Fuel & Petrochemical Mfrs., Strong Domestic

Consumption Contradicts Ethanol “Demand Destruction” Claims

(Nov. 18, 2019), https://www.afpm.org/newsroom/blog/strong-dom

estic-consumption-contradicts-ethanol-demand-destruction-claims

(showing ethanol blend rate for January through August of each

year); Overview of RFS Small Refinery Exemptions, supra n.30

(providing number of small refinery exemptions granted for each

compliance year).

production

steadily).

and

blending (which

has

increased

The federal government agrees that there is no

demand destruction from small refinery exemptions.

The then-EPA Administrator testified to Congress in

late 2019 that “[e]thanol demand has not been impacted

by the small refinery program. . . . and we do not see

any demand disruption from the small refinery

program on ethanol production.”44 The then-Agriculture

Erin Voegele, Wheeler claims ethanol demand not impacted

by SREs, Ethanol Producer (Sept. 23, 2019), http://ethanol

producer.com/articles/16562/wheeler-claims-ethanol-demand-notimp acted-by-sres; see also Final Brief for EPA at 63–68, Growth

Energy v. EPA, No. 19-1023 (D.C. Cir. Mar. 5, 2020), Doc. #1831996;

Renewable Fuel Standard Program: Standards for 2020 and

Biomass-Based Diesel Volume for 2021 and Other Changes, 85

Fed. Reg. 7050, 7051 (Feb. 6, 2020).

Secretary attributed ethanol price declines to “lower

exports, not small refinery waivers.”45

Moreover, despite Congress’s intent to encourage

domestic production, EPA has allowed foreign biofuels

to become an increasingly large percentage of the

renewable fuels used to comply with the RFS program.

Approximately 13 percent of the cellulosic biofuel, 13

percent of the biomass-based diesel, and 50 percent of

the “other advanced” RFS compliance credits generated between 2015 and 2019 were from fuel imported

into the United States.46 American imports of biomassbased diesel increased by more than 2,000 percent

between 2009 and 2018.47

Thus, disqualifying nearly all of the country’s small

refineries from receiving hardship relief will not help

the biofuels industry. All it will do is irreparably harm

small refineries and the communities in which they

operate without achieving any of the RFS program’s

objectives. The Tenth Circuit plainly erred by reading

the statute to reach that absurd and counterproductive

result.

Sonny Perdue, Sec’y of Agric., U.S. Dep’t of Agric. at the Nat’l

Ass’n of Farm Broad. Annual Convention (Nov. 15, 2019).

See U.S. EPA, Spreadsheet of RIN Generation Data for the

Renewable Fuel Standard, https://www.epa.gov/fuels-registrationreporting-and-compliance-help/spreadsheet-rin-generation-data-ren

ewable-fuel (last updated Feb. 18, 2021) (calculated using “RIN

generation data from December 2019 (CVS),” based on a comparison of “Importer”-generated and “Total RINs,” for the D3, D4,

D5, and D7 fuel-types).

U.S. Energy Info. Admin., U.S. Imports of Biomass-Based

Diesel Fuel, https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx

?n=PET&s=M_EPOORDB_IM0_NUS-Z00_MBBL&f=A (last updated

Jan. 29, 2021).

CONCLUSION

The Tenth Circuit’s decision upends Congress’s clear

intent for the small refinery hardship exemption, which

was crafted as a permanent safety valve for small

refineries in the face of increasingly burdensome RFS

compliance obligations. This Court should reverse the

court of appeals’ judgment.

Respectfully submitted,

JONATHAN G. HARDIN

Counsel of Record

PERKINS COIE LLP

700 Thirteenth St., NW

Suite 800

Washington, DC 20005

(202) 654-6297

jhardin@perkinscoie.com

Counsel for Amicus Curiae

Small Refineries Coalition

March 1, 2021

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.