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

No. 20-472

In the Supreme Court of the United States

HOLLYFRONTIER CHEYENNE REFINING, LLC, ET AL.,

PETITIONERS,

v.

RENEWABLE FUELS ASSOCIATION, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

BRIEF FOR NATIONAL BIODIESEL BOARD

AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS

ETHAN G. SHENKMAN

Counsel of Record

JONATHAN S. MARTEL

WILLIAM PERDUE

SALLY L. PEI

ARNOLD & PORTER

KAYE SCHOLER LLP

601 Massachusetts Avenue, NW

Washington, DC 20001

(202) 942-5000

Ethan.Shenkman@arnoldporter.com

TABLE OF CONTENTS

Page

Interest of Amicus Curiae .................................................. 1

Introduction and summary of the argument..................... 2

Argument .............................................................................. 5

I. Expansive small-refinery exemptions

undermine the RFS ...................................................... 5

A. The relatively recent explosion of smallrefinery exemptions has hurt the renewablefuel industry, with severe impacts on

producers of biomass-based diesel ....................... 5

B. Small-refinery exemptions also harm energy

security, the environment, and the rural

economy ................................................................. 10

II. The eventual phase-out of small-refinery

exemptions will not cause the severe harms

Petitioners and their amici claim .............................. 13

A. Refiners can blend renewable fuels ...................... 14

B. Refiners can pass on the costs of RINs and

can take advantage of other compliance

flexibilities .............................................................. 17

Conclusion ........................................................................... 21

(I)

II

TABLE OF AUTHORITIES

Cases

Page(s)

Alon Ref. Krotz Springs, Inc. v. EPA,

936 F.3d 628 (D.C. Cir. 2019) ................................. 7, 8, 18

Am. Fuel & Petrochemical Mfrs. v. EPA,

937 F.3d 559 (D.C. Cir. 2019) ......................................... 18

Am. Petroleum Inst. v. EPA,

706 F.3d 474 (D.C. Cir. 2013) ......................................... 17

Ams. for Clean Energy v. EPA,

864 F.3d 691 (D.C. Cir. 2017) ............................. 3, 4, 6, 17

Statutes, Regulations, and Rules

42 U.S.C.

§ 7545(o)(1)(B) ............................................................. 4, 10

§ 7545(o)(1)(D) ................................................................... 4

§ 7545(o)(1)(E) ................................................................... 4

§ 7545(o)(1)(J) .................................................................... 4

§ 7545(o)(1)(K) ................................................................. 19

§ 7545(o)(2)(B)(i)............................................................ 4, 9

§ 7545(o)(2)(B)(ii)............................................................. 10

§ 7545(o)(5)(D) ................................................................. 18

§ 7545(o)(7) ....................................................................... 19

§ 7545(o)(9) ....................................................... 1, 2, 3, 6, 11

Energy Independence and Security Act of 2007,

Pub. L. No. 110-140, 121 Stat. 1492 ........................... 5, 10

40 C.F.R.

§ 80.1427(a)(5) .................................................................. 18

§ 80.1442(a) ...................................................................... 19

75 Fed. Reg. 17,670 (Mar. 26, 2010) ................................. 14

77 Fed. Reg. 59,458 (Sept. 27, 2012) ................................. 15

80 Fed. Reg. 77,420 (Dec. 14, 2015) .................................. 11

84 Fed. Reg. 36,762 (July 29, 2019) ............................ 14, 19

85 Fed. Reg. 7016 (Feb. 6, 2020) ................................... 9, 18

III

Legislative Materials

Page(s)

S. Rep. No. 65, 110th Cong., 1st Sess. (2007) ............ 10, 11

Regulatory Materials

National Biodiesel Board, Comments on Renewable

Fuel Standard Program: Standards for 2020 and

Biomass-Based Diesel Volume for 2021

(July 29, 2019), EPA-HQ-OAR-2019-0136-0451 ............ 8

Standards for 2017 and Biomass-Based Diesel

Volume for 2018: Hearing on Notice of

Proposed Rulemaking for the Renewable Fuel

Standard (RFS) Program,

EPA-HQ-OAR-2016-0004-3558 (2016) .......................... 12

Standards for 2020 and Biomass-Based Diesel

Volume for 2021, Response to the Remand of

the 2016 Standards, and Other Changes:

Hearing on Notice of Proposed Rulemaking

for the Renewable Fuel Standard Program,

EPA-HQ-OAR-2019-0136-0343 (2019) ............................ 9

Other Authorities

Dallas Burkholder, EPA, Office of Transportation

and Air Quality, A Preliminary Assessment of

RIN Market Dynamics, RIN Prices, and

Their Effects (2015) ........................................................ 17

David W. DeRamus & Collin Cain, Bates White

Econ. Consulting, Biodiesel Distribution in

the U.S. and Implications for RFS2 Volume

Mandates (2016) .............................................................. 14

Donnelle Eller & Barbara Rodriguez, Another

Renewable Fuel Plant Closes as Iowa Leaders

Wait for White House Biofuels Fix,

Des Moines Register (Sept. 24, 2019) ......................... 8, 9

EPA, Public Data for the Renewable Fuel

Standard (last visited Mar. 31, 2021) ............................ 16

IV

Other Authorities—Continued

Page(s)

EPA, RFS Small Refinery Exemptions,

Table 2: Summary of Small Refinery

Exemption Decisions Each Compliance Year

(last visited Mar. 31, 2021) ............................................. 20

Informa Economics, Impact of the U.S. Biodiesel

Industry on the U.S. Soybean Complex and

Livestock (March 2015) .................................................. 13

Jarrett Renshaw & Chris Prentice, Exclusive:

Chevron, Exxon seek “small-refinery” waivers

from U.S. biofuels law, Reuters (April 12, 2018) ......... 19

Kevin Hennessy, Minn. Dep’t of Agric., Report to

the Legislature: Annual Report on Biodiesel

(2016) ................................................................................ 15

LMC Int’l, The Economic Impact of the Biodiesel

Industry on the U.S. Economy (2019) .......................... 12

Margaret Austin, HollyFrontier Seeking Permit,

Public Comment for Pivot to Renewable Diesel,

Wyo. Business Report (Feb. 5, 2021) ............................ 16

Mississippi Energy Plant, 2 Others To

Close After Trump Administration Gives

Waivers to Competitors,

Magnolia State Live (Aug. 16, 2019) ........................... 8, 9

Renewable Energy Group Closing Biodiesel Plant,

Texarkana Gazette (July 24, 2019) .................................. 8

Scott Irwin, Small Refinery Exemptions and

Biomass-Based Diesel Demand Destruction,

farmdoc daily (March 14, 2019) ....................................... 8

Scott Koperski, Beatrice Biodiesel Plant to

Shut Down, Lincoln Journal Star (July 1, 2019) ........... 8

INTEREST OF AMICUS CURIAE1

The National Biodiesel Board (“NBB”) is the trade

association representing America’s first advanced biofuels, biodiesel and renewable diesel. Biodiesel and renewable diesel, collectively referred to as “biomass-based diesel,” are clean-burning alternatives to petroleum diesel

that can be generated from a wide variety of feedstocks,

including soybean oil, canola oil, distiller’s corn oil, waste

cooking oil, and animal fats. NBB’s members include

owners and operators of biomass-based diesel production

facilities, growers and processors of feedstocks, and technology providers. The outcome of this case is vitally important for NBB and its members because the scope of

exemptions authorized under 42 U.S.C. § 7545(o)(9) will

have a significant impact on the future of the biomassbased diesel industry.

Biomass-based diesel has been a major success of the

Renewable Fuel Standard program (RFS). Before the

RFS, there was little commercially produced biomassbased diesel in the United States. The industry had to

make significant investments in infrastructure, technology, and personnel to meet the RFS’s market-forcing

requirements. Just over a decade later, biomass-based

diesel production routinely exceeds the volume of biomass-based diesel required by the RFS and comprises

more than 90 percent of the advanced biofuel produced

each year. In meeting those volumes, biomass-based diesel has enhanced the nation’s energy security, reduced

greenhouse gas emissions, provided high-paying jobs in

rural areas, and supplemented the incomes of farmers.

Pursuant to Rule 37.6 of the Rules of this Court, no counsel for a

party wrote this brief in whole or in part, and no one other than amicus curiae or its counsel contributed money to fund the preparation

or submission of this brief. Counsel for all parties have consented

to the filing of this brief.

1

(1)

2

Unfortunately, EPA halted the growth of biomassbased diesel production when it dramatically expanded

small-refinery exemptions beginning in 2017. As soon as

EPA’s new policy regarding exemptions became public

knowledge, the price of credits for biomass-based diesel

production cratered. That lower price immediately

harmed NBB’s members by lowering demand for their

products. The situation only worsened from there. Because EPA continued to grant expansive exemptions for

2018, the market for biomass-based diesel remained depressed, and it became difficult for biomass-based diesel

producers to sustain their operations. A number of biomass-based diesel producers were forced to shut down or

idle their plants and lay off employees.

The scope of authority for small-refinery exemptions

advocated by Petitioners and their amici would perpetuate the contraction of the biomass-based diesel industry.

It would incentivize more and more refiners to apply for

exemptions, reducing the volumes of renewable fuel required by the RFS even further. Additional refineries

could even game the system by artificially limiting their

output to qualify as “small refineries.”

Affirmance is necessary to respect the appropriate

limits Congress placed on refiners’ eligibility for small-refinery exemptions, and to restore the conditions that allowed biomass-based diesel production to flourish, with all

the attendant environmental, economic, and energy security benefits that Congress intended in enacting the RFS.

INTRODUCTION AND

SUMMARY OF THE ARGUMENT

The Tenth Circuit correctly held that, under 42

U.S.C. § 7545(o)(9), a small refiner may not “extend” an

exemption that the refiner does not currently have. As

Respondents explain, that conclusion is compelled by the

3

statutory text, and this Court should affirm the decision

below.

Petitioners and their amici nevertheless claim that

the decision below will interfere with the purposes of the

RFS. Those policy arguments are inapposite and foreclosed by the plain text of the statute. But even if there

were any ambiguity in § 7545(o)(9), the purposes of the

RFS support the opposite of what Petitioners and their

amici argue. Small-refinery exemptions must be construed narrowly to achieve Congress’s goals.

Congress designed the RFS as a “market forcing policy” to increase production of renewable fuels. Ams. for

Clean Energy v. EPA, 864 F.3d 691, 710 (D.C. Cir. 2017),

which would in turn reduce greenhouse gas emissions, enhance U.S. energy security, and support rural economies.

Expansive small-refinery exemptions directly undermine

these congressional purposes by reducing the amount of

renewable fuels produced each year. And they harm the

small businesses across rural America—including biofuels producers, biotechnology companies, and other businesses that support the industry, as well as retailers of

higher biofuel blends and independent farmers—for

whom proper implementation of the RFS is essential.

The effect of excessive small-refinery exemptions is

particularly severe for the biomass-based diesel industry.

Biomass-based diesel includes biodiesel and renewable

diesel. Both can be made from a variety of renewable

feedstocks, such as vegetable oils, animal fats, and used

cooking oil. Biodiesel is chemically different from petroleum diesel but can nonetheless be used in existing diesel

engines without modifications. Renewable diesel, on the

other hand, is a “drop in” renewable fuel that is chemically

identical to petroleum diesel.

As Respondents explain, Fed. Resp. Br. 4–6; Biofuels

Resp. Br. 6–7, the RFS sets annual targets for the

4

volumes of the four types of renewable fuels to be sold as

transportation fuel in the United States, which are: (i) cellulosic biofuel, (ii) biomass-based diesel, (iii) advanced biofuel, and (iv) total renewable fuel. 42 U.S.C.

§ 7545(o)(2)(B)(i)(I)–(IV). These four categories of fuels

differ with respect to the renewable biomass sources from

which they are produced, as well as their greenhouse-gas

emissions. Id. § 7545(o)(1)(B), (D), (E), (J). Moreover,

“[t]he statutory categories of fuel types are ‘nested,’

meaning that cellulosic biofuel and biomass-based diesel

are kinds of advanced biofuel, and advanced biofuel in

turn is a kind of renewable fuel that may be credited toward the total renewable fuel obligation.” Ams. for Clean

Energy, 864 F.3d at 697–98.

Thus, while biomass-based diesel has its own required volume under the RFS, it is also “nested” within

the advanced biofuel volume because all biomass-based

diesel meets the required 50 percent greenhouse-gas

emissions reduction threshold for advanced biofuel.2 And

the advanced biofuel volume is nested within the total renewable fuel volume. In other words, biomass-based diesel may be used to fulfill RFS obligations under all three

of those volume requirements. Because demand for biomass-based diesel is thus closely tied to all three of those

volumes, the glut of small-refinery exemptions EPA issued between 2016 and 2018 reduced demand for biomassbased diesel by an estimated 2 billion gallons—from about

13 billion gallons to about 11 billion gallons. As a result,

biomass-based diesel’s benefits for energy security, the

environment, and the rural economy—which Congress

sought to drive through the RFS—have been reduced.

Renewable diesel does not meet the specific statutory definition

of “biomass-based diesel” for purposes of the biomass-based diesel

volume, 42 U.S.C. § 7545(o)(1)(D), but it nonetheless qualifies as advanced biofuel.

2

5

Petitioners and their amici claim that the decision below portends disastrous consequences for small refineries. Those consequences are vastly overstated. Refiners—even small ones—have ample ability to comply with

the RFS by blending renewable fuels. Indeed, Petitioner

HollyFrontier itself is in the process of converting one of

the facilities at issue in this case to producing renewable

diesel. And even refineries that have no blending capacity

are able to comply by purchasing credits from others and

passing on the costs of those credits to consumers—indeed, they complied with the RFS before EPA’s exemption spree.

This Court should affirm the decision below to allow

the RFS to work as Congress intended.

ARGUMENT

I.

Expansive Small-Refinery Exemptions Undermine

The RFS

A.

The Relatively Recent Explosion Of SmallRefinery Exemptions Has Hurt The RenewableFuel Industry, With Severe Impacts On Producers

Of Biomass-Based Diesel

One doesn’t have to pore over committee reports or

floor statements to identify the purpose of the RFS. Congress stated its purposes plainly in the text of the law enacting the program—to “increase the production of clean,

renewable fuels.” Energy Independence and Security Act

of 2007 (“EISA”), Pub. L. No. 110-140, 121 Stat. 1492.

And through the promotion of biofuels, Congress sought

to “move the United States toward greater energy independence and security.” Ibid.

To accomplish these important goals, Congress was

not content to rely on the market to develop and support

a domestic biofuels industry of its own accord; rather,

Congress designed the RFS “to force the market to create

ways to produce and use greater and greater volumes of

6

renewable fuel each year.” Ams. for Clean Energy v.

EPA, 864 F.3d 691, 710 (D.C. Cir. 2017).

As Respondents and their amici explain, the text of

§ 7545(o)(9) is clear and defeats Petitioners’ contention

that EPA may exempt small refineries that did not have

extensions when the RFS went into effect or whose prior

exemptions have lapsed. But even if the text were unclear

or ambiguous, the legislative intent underlying the statute

refutes Petitioners’ position.

Accepting Petitioners’ interpretation of § 7545(o)(9)

would create a massive loophole in the RFS. During the

few years while EPA shared Petitioners’ interpretation of

§ 7545(o)(9), the ensuing explosion of small-refinery exemptions reduced the mandated volumes by billions of

gallons and stopped growth of renewable fuel production

dead in its tracks.

In practice, each small refinery exemption EPA

grants reduces the volume of renewable fuel used in the

economy below the volume that the RFS requires for a

given year. That happens because, for each year, EPA

adopts a rule that takes the aggregate volume of renewable fuel Congress mandated in the statute and calculates

a “percentage standard” that each obligated party uses

over the course of the year to determine how much renewable fuel it must blend or credits it must acquire. Because

EPA grants small-refinery exemptions after setting percentage standards, those exemptions effectively eliminate

a portion of the aggregate volume requirement.

Before 2017, the volumes eliminated by small refinery exemptions were relatively insignificant because only

a few refineries continued to receive exemptions. Indeed,

the number of exemptions had been declining since the

RFS’s enactment, just as Congress intended, and renewable fuel producers anticipated that those exemptions

7

would eventually disappear as the remaining small refiners were able to come into compliance with the program.

But beginning in 2017,3 EPA suddenly (and secretly)

began granting exemptions to nearly all refineries that

applied, regardless of whether they had received an exemption in prior years. The total renewable fuel volumes

exempted through small-refinery exemptions exploded to

790 million gallons in 2016, 1.82 billion in 2017, and 1.43

billion in 2018. Those exemptions constituted four, nine,

and seven percent of the aggregate volume requirements

in 2016, 2017, and 2018, respectively. Those lost gallons

had real and devastating impacts on renewable fuel producers, who had made significant investments to expand

production of renewable fuels relying on the statutory

text, as well as EPA’s practice.

The impacts on producers of biomass-based diesel

have been particularly severe. The RFS is the primary

driver behind blending biomass-based diesel with petroleum diesel. (In the gasoline market, by contrast, octane

needs independently incentivize blending gasoline with at

least ten percent ethanol, which increases octane.) Biomass-based diesel demand in the United States depends

on the RFS’s requirements, and demand plummets when

RFS volumes are lowered.

The fact that “biomass-based diesel is a nested subset

of advanced and total renewable fuels,” Alon Ref. Krotz

Springs, Inc. v. EPA, 936 F.3d 628, 665 (D.C. Cir. 2019),

further compounds the loss of demand. To illustrate,

NBB estimates that reductions in the biomass-based diesel volume and the advanced volume as a result of smallrefinery exemptions have combined to cause at least 520

million gallons of lost demand for biomass-based diesel

EPA’s first expanded exemptions were for the 2016 compliance

year, but EPA did not actually grant those exemptions until 2017,

and their existence was not made public until early 2018.

3

8

between 2016 and 2018. National Biodiesel Board, Comments on Renewable Fuel Standard Program: Standards

for 2020 and Biomass-Based Diesel Volume for 2021 (July

29, 2019), https://bit.ly/3frifwL, EPA-HQ-OAR-20190136-0451. But the true impact is dramatically larger,

given that biomass-based diesel demand can also be

driven by the total renewable fuel volume. A University

of Illinois economics professor estimates that, when the

impact of the total renewable fuel volume on biomassbased diesel demand is taken into account, small-refinery

exemptions between 2016 and 2018 caused over 2 billion

gallons of lost demand for biomass-based diesel, including

over 900 million gallons in 2018 alone. Scott Irwin, Small

Refinery Exemptions and Biomass-Based Diesel Demand Destruction, farmdoc daily (March 14, 2019),

https://bit.ly/2O6WEhS.

These are not demand shocks that the industry can

readily absorb. Small-refinery exemptions have contributed to the shut-down or idling of biomass-based diesel

production facilities in recent years. Those facility closings have occurred across the country, including a Renewable Energy Group facility in Texas, an FHR Duonix Beatrice facility in Nebraska, Kolmar facilities in Connecticut and Texas, W2 Fuels facilities in Iowa and Michigan,

and World Energy facilities in Pennsylvania, Mississippi,

and Georgia.4 And some biomass-based diesel producers

See, e.g., Renewable Energy Group Closing Biodiesel Plant, Texarkana Gazette (July 24, 2019), https://bit.ly/2QCBRUf; Scott Koperski, Beatrice Biodiesel Plant to Shut Down, Lincoln Journal

Star (July 1, 2019), https://bit.ly/3cVcmEY; Mississippi Energy

Plant, 2 Others To Close After Trump Administration Gives Waivers to Competitors, Magnolia State Live (Aug. 16, 2019),

https://bit.ly/31bzCtb; Donnelle Eller & Barbara Rodriguez, Another Renewable Fuel Plant Closes as Iowa Leaders Wait for White

House Biofuels Fix, Des Moines Register (Sept. 24, 2019),

https://bit.ly/2NOw64T.

4

9

have predicted that continued small-refinery exemptions

like those in 2016 through 2018 will make it impossible for

them to continue their business. See Standards for 2020

and Biomass-Based Diesel Volume for 2021, Response to

the Remand of the 2016 Standards, and Other Changes:

Hearing on Notice of Proposed Rulemaking for the Renewable Fuel Standard Program, EPA-HQ-OAR-20190136-0343, at 154 (2019) (statement of Roy Strom, President and Chief Executive Officer, W2 Fuel LLC),

https://bit.ly/2QNECCj (“Continued granting of these exemptions could, and likely will, put me out of business.”).

Closing facilities not only harms biomass-based diesel

producers and their employees, it also impedes the industry’s ability to meet Congress’s goal of generating additional renewable fuels going forward. Congress designed

the RFS program to steadily increase the volumes of renewable fuels introduced into domestic commerce, and in

the volumetric tables set by Congress, the annual increases in the minimum volume of total renewable fuel

consists entirely of increases in the minimum volume of

the advanced biofuel category beginning in 2017. See 42

U.S.C. § 7545(o)(2)(B)(i). Small-refinery exemptions have

hindered the ability of the industry to achieve that

growth. Indeed, the market actually contracted in 2017

and 2018 because of the unlawful small refinery exemptions. See 85 Fed. Reg. 7016, 7036 (Feb. 6, 2020).

Because producing and distributing biomass-based

diesel requires substantial investment in infrastructure,

biomass-based diesel producers need clear incentives to

be able to expand production in the future. They will not

have such incentives unless this Court clarifies that smallrefinery exemptions are not an open-ended sink hole in

the RFS that could allow an ever-expanding number of

refiners to skirt the program’s obligations on which the

market for biomass-based diesel depends.

10

B. Small-Refinery Exemptions Also Harm Energy

Security, The Environment, And The Rural

Economy

Promoting renewable fuel use has many beneficial effects. It enhances the nation’s energy security, protects

the environment, reduces greenhouse gas emissions, and

supports the rural economy. See EISA, 121 Stat. 1492 (expressing Congress’s purpose “[t]o move the United States

toward greater energy independence and security”); 42

U.S.C. § 7545(o)(2)(B)(ii) (instructing EPA to determine

volumes of renewable fuel for calendar years after 2022

based on factors including those fuels’ impact on “the environment,” “the energy security of the United States,”

and “rural economic development”); id. § 7545(o)(1)(B),

(D), and (E) (specifying that “advanced biofuel,” “biomass-based diesel,” and “cellulosic biofuel” must have

lower lifecycle greenhouse gas emissions relative to the

petroleum products they replace). Excessive small-refinery exemptions frustrate each of those objectives.

First, small-refinery exemptions harm U.S. energy

security by decreasing the diversity of fuel available in the

United States. Biomass-based diesel is overwhelmingly

produced in the United States from a wide variety of domestically-generated feedstocks, including soybean oil,

distiller’s corn oil, used cooking oil, animal fats, sorghum

oil, camelina sativa oil, pennycress oil, and brassica carinata oil. In contrast, petroleum diesel fuel comes from a

single feedstock—petroleum—whose supply has historically been highly dependent on foreign sources. See S.

Rep. No. 65, 110th Cong., 1st Sess. 2 (2007) (describing

the need for the RFS to remedy “the nation’s reliance on

foreign supplies of petroleum”).

The State Amici supporting Petitioners argue that

requiring refineries to comply with the RFS harms U.S.

11

energy security.5 They contend that applying § 7545(o)(9)

as written will “bar any new small refinery from entering

the market … and force countless others from the market.” Wyoming Br. 13. That contention is unfounded.

New refiners might not be eligible for exemptions, but

they have the same means to comply with the RFS’s requirements as every other refinery—either blending renewable fuel themselves or purchasing credits. See Section II, infra. Section 7545(o)(9) was designed to help

some small refineries transition from the pre-RFS world

to the RFS world; it was never intended to be a permanent

shield from the program’s requirements.

The States’ argument also overlooks the significant

costs of small-refinery exemptions for biomass-based diesel producers, who have no means to make up for lost demand due to small-refinery exemptions. The result is a

reduction in the supply of a fuel that comes from diverse,

domestic feedstocks, thereby making the United States

more susceptible to fluctuations in the price and availability of foreign petroleum. And diversification of fuel

sources to reduce dependence on foreign oil is exactly the

type of energy security Congress sought to achieve

through the RFS. S. Rep. No. 65, 110th Cong., 1st Sess.

4 (2007) (stating that the RFS “is needed to … improve[]

the energy security of the United States and reduc[e] the

nation’s dependence on imported oil”); see also 80 Fed.

Reg. 77,420, 77,421 (Dec. 14, 2015) (acknowledging that

Congress “intended to increase the nation’s energy security” “by aiming to diversify the country’s fuel supply”);

see also Fed. Resp. Br. 4, 25; Biofuels Resp. Br. 44–45.

The State Amici are also incorrect that domestic energy security

is the only “true end” of the RFS, State Br. 11. As noted above, and

as Respondents explain, the RFS mitigates “both national-security

and environmental risks.” Fed. Resp. Br. 25.

5

12

Second, small-refinery exemptions harm the environment by reducing the volume of low-carbon renewable

fuels in the nation’s fuel supply. This is particularly true

for biomass-based diesel and other advanced biofuels,

which have at least 50 percent lower greenhouse gas emissions on a lifecycle basis than petroleum fuels. Lifecycle

emissions from biomass-based diesel are even lower in

practice: on a weighted-average basis, the biomass-based

diesel supplied in the U.S. currently achieves more than

an 80 percent reduction in greenhouse gas emissions compared to petroleum fuels. See Standards for 2017 and Biomass-Based Diesel Volume for 2018: Hearing on Notice

of Proposed Rulemaking for the Renewable Fuel Standard (RFS) Program, EPA-HQ-OAR-2016-0004-3558, at

111 (2016) (statement of Don Scott, Director of Sustainability, Nat’l Biodiesel Bd.), https://bit.ly/3d9UBSs. The

proliferation of small-refinery exemptions since 2017 has

thus increased greenhouse gas emissions in the United

States, undermining Congress’s objective in the RFS.

Third, the shutdown and idling of renewable fuel

plants as a result of small-refinery exemptions costs highpaying jobs and has secondary economic impacts that

harm the rural economy. Biomass-based diesel production currently supports more than 65,000 U.S. jobs

throughout its supply chain. LMC Int’l, The Economic

Impact of the Biodiesel Industry on the U.S. Economy 2

(2019), https://bit.ly/3fshm6S (estimating job creation as

of August 2019). Every 500 million gallons of biomassbased diesel generates a $3.4 billion overall economic impact, including about $500 million in wages paid. Id. at 8–

10. And 500 million gallons is just a quarter of the biomass-based diesel demand that has been destroyed by

small-refinery exemptions between 2016 and 2018, which

means that the two billion-gallon reduction in biomassbased diesel demand as a result of small-refinery

13

exemptions in those years likely caused around $13 billion

in economic impacts and $2 billion in lost wages.

Moreover, unlike petroleum fuels, biomass-based diesel production supports the income of farmers across the

country. That impact is amplified because soybean oil and

other biomass-based diesel feedstocks generally are coproducts—that is, farmers grow crops for one purpose

(like feeding animals) and use the co-product oils for fuel.

As a result, farmers receive more value for their crops,

while simultaneously decreasing the prices of the meal

portion of those crops. For example, because U.S. livestock farmers rely on soybean meal as a key source of animal feed, biomass-based diesel production has saved U.S.

livestock farmers between $5.9 and $11.8 billion from 2006

to 2015. Informa Economics, Impact of the U.S. Biodiesel

Industry on the U.S. Soybean Complex and Livestock 3

(March 2015), https://bit.ly/3u2RrH8. Just like the employment and other economic benefits of biomass-based

diesel, those benefits for farmers have been limited by

small-refinery exemptions.

II. The Eventual Phase-Out Of Small-Refinery

Exemptions Will Not Cause The Severe Harms

Petitioners And Their Amici Claim

Petitioners and their amici claim that they will suffer

“financial ruin” if this Court affirms the decision below.

14

CountryMark Br. 2; see also Pet. Br. 44–46. Those asserted harms are grossly exaggerated.6

Regardless, there are a variety of mechanisms in the

RFS that allow refiners to readily comply with their RFS

obligations without suffering serious financial detriment.

The proof is in the pudding—Petitioners themselves complied with the RFS for years before their 2017 windfall.

A.

Refiners Can Blend Renewable Fuels

Refiners can satisfy their RFS obligations by blending renewable fuels with their products. Amici and Petitioners suggest that they face difficulties doing so because

they are small, but those difficulties are overstated or

simply incorrect. Biomass-based diesel can be blended

using relatively inexpensive equipment or even “splash

blended” directly in trucks transporting fuels. Indeed, a

large portion of biomass-based diesel is blended by truck

stops and other fuel retailers, which are far from highly

capitalized. David W. DeRamus & Collin Cain, Bates

White Econ. Consulting, Biodiesel Distribution in the

U.S. and Implications for RFS2 Volume Mandates 17–19,

23 (2016), https://bit.ly/3fhZwDB.

For example, amicus CountryMark has blended biodiesel since 2006, and indeed, on its own account, “is considered a leader of biodiesel blending in the State of

Before promulgating changes to the RFS program in 2010, see

75 Fed. Reg. 14,670 (Mar. 26, 2010), EPA convened a Small Business Regulatory Enforcement Fairness Act (“SBREFA”) panel

that found that “all directly regulated small entities would have

compliance costs that are less than one percent of their sales over

the life of the program” and that any negative impact would decrease over time. See 84 Fed. Reg. 36,762, 36,807 (July 29, 2019).

Because the actual proposed renewable volume obligations for 2020

are substantially less than the statutory volumes considered by the

SBREFA panel when it reached this conclusion, the compliance

costs for small businesses going forward are necessarily minimal.

6

15

Indiana.” CountryMark Br. 9. CountryMark nevertheless asserts that it is difficult to blend renewable fuel in

sufficient quantities to meet its RFS obligations because

its customers rely largely on diesel fuel and allegedly prefer petroleum diesel to biomass-based diesel. CountryMark Br. 10–11. But that ignores a number of ways in

which biomass-based diesel can be readily absorbed into

the market. Biodiesel legally can be used in any blend

level, from 1 percent to 100 percent, in existing diesel engines. 77 Fed. Reg. 59,458, 59,466 (Sept. 27, 2012). Some

automobile manufacturers only warrant their engines for

certain blends of biodiesel, but more than 90 percent of

manufacturers in the medium- and heavy-duty truck market (which accounts for almost all diesel fuel consumption)

support use of up to 20 percent biodiesel blends. And

truck stops and other fuel retailers around the country

have pumps and other infrastructure to distribute biodiesel blends.

CountryMark’s assertion that it “can only sell approximately 2.5% biodiesel,” CountryMark Br. 11, therefore rings hollow. The only reason CountryMark posits

for why its customers might not accept blend levels warranted for use in the vast majority of diesel engines is that

biodiesel “does not work as well in the winter.” Id. at 10.

CountryMark is regurgitating outdated science. In the

early years of the RFS, some questioned biodiesel’s coldweather performance, but since 2012, technological developments in biodiesel processing have resolved those issues. Public fleets in cold-weather states like Massachusetts and New York now use biodiesel blends year-round,

and a 2016 study on biodiesel use in Minnesota found no

user reports of issues with biodiesel during winter

months. Kevin Hennessy, Minn. Dep’t of Agric., Report

to the Legislature: Annual Report on Biodiesel 8 (2016),

https://bit.ly/2QLBQNS.

16

Moreover, as CountryMark acknowledges, there are

no obstacles to customer acceptance of renewable diesel.

CountryMark Br. 11. Renewable diesel is generated from

renewable feedstocks using a different chemical process

than biodiesel production, and, as a result, it is chemically

indistinguishable from petroleum diesel. Renewable diesel production has grown rapidly in recent years as additional facilities have invested in renewable diesel production infrastructure. See EPA, Public Data for the Renewable Fuel Standard, https://bit.ly/3m6oW8T (last visited

Mar. 31, 2021). CountryMark asserts that retrofitting its

facility to generate renewable diesel would be prohibitively expensive given its financial condition, CountryMark Br. 11–12, but the substantial investments it describes are what would be needed to produce renewable

diesel. Renewable diesel can be blended with petroleum

fuels (which satisfies RFS compliance obligations) using

much less expensive equipment.

And even if it is true that CountryMark lacks the resources to invest in equipment to produce renewable diesel, other small refineries have been able to do so. Notably, Petitioner HollyFrontier recently sought a permit to

convert its Cheyenne refinery—one of the refineries at issue in this case—to produce renewable diesel. Margaret

Austin, HollyFrontier Seeking Permit, Public Comment

for Pivot to Renewable Diesel, Wyo. Business Report

(Feb. 5, 2021), https://bit.ly/3cr43BN. HollyFrontier’s

plans to generate renewable diesel at one of the very facilities at issue here belies its contention that RFS compliance is “too expensive for small refineries to stay in

business.” Pet. Br. 10. Once HollyFrontier is generating

renewable diesel at its Cheyenne facility, it will become a

major beneficiary of the RFS program that is able to supplement its income by selling the credits it generates to

other refiners and importers.

17

To the extent CountryMark’s issue with biomassbased diesel blending is simply its perception of a lack of

consumer demand, CountryMark Br. 10, that is no reason

to excuse CountryMark from compliance with the RFS

program. On the contrary, the RFS was designed to “create demand pressure to increase consumption.” Ams. for

Clean Energy, 864 F.3d at 710 (internal quotation marks

omitted) (emphasis added). The “continued pressure” of

the RFS will “tend to solve” the “want of a market” for

renewable fuels by creating an incentive for blending and

using renewable fuel that the market can then distribute

efficiently. Am. Petroleum Inst. v. EPA, 706 F.3d 474,

481 (D.C. Cir. 2013). Because there are no chemical or

physical obstacles to using biomass-based diesel in existing engines, consumers will use it if refiners blend it.

B. Refiners Can Pass On The Costs Of RINs And Can

Take Advantage Of Other Compliance Flexibilities

Any refiners that are truly unable to blend renewable

fuels have another option: they can purchase credits

known as Renewable Identification Numbers, or “RINs”,

from others who have produced or blended renewable

fuel. Petitioners and their amici claim that purchasing

RINs is a disproportionate financial burden. See, e.g.,

Small Refineries Coalition Br. 13. But refiners can—and

indeed EPA expects them to—pass on the costs of those

credits to their customers. EPA itself has acknowledged

that “[m]erchant refiners, who largely purchase separated RINs to meet their RFS obligations,” are “recovering these costs in the sale price of their products.” Dallas

Burkholder, EPA, Office of Transportation and Air Quality, A Preliminary Assessment of RIN Market Dynamics,

RIN

Prices,

and

Their

Effects

3

(2015),

https://bit.ly/3w9xnEK; see id. at 2 (“In order to recover

the cost of purchasing RINs … obligated parties are expected to increase the selling price of the petroleum

18

products they produce.”); see also 85 Fed. Reg. at 7,067–

68 (reaffirming these findings).

The Small Refineries Coalition argues that market

dynamics prevent small refiners from passing on RIN

costs in practice. Small Refineries Coalition Br. 3, 16–17.

But that argument has been repeatedly rejected by EPA

and courts of appeals. See Alon Ref. Krotz Springs, 936

F.3d at 649; Am. Fuel & Petrochemical Mfrs. v. EPA, 937

F.3d 559, 581 (D.C. Cir. 2019). EPA has appropriately relied on analyses showing a difference between fuel produced for domestic consumption and fuel produced for export that can only be explained by refiners passing on

RIN costs, and thus has concluded that “(obligated) refiners do not pay excess costs.” Alon Ref. Krotz Springs, 936

F.3d at 649. And while the Small Refineries Coalition contends that “large refiners make money from the RFS” because they can blend enough renewable fuel to meet or

exceed their RFS obligations and then can sell excess

RINs on the market, Small Refineries Coalition Br. 16–

17, EPA has accurately observed that integrated refiners

that blend renewable fuels receive no such “windfall”: if

those refiners sell RINs separately from finished fuel, the

market dictates that they sell the RIN-less fuel at a loss.

Alon, 936 F.3d at 649–50.

Moreover, several flexibilities in the statute and

EPA’s implementing regulations facilitate compliance

with the RFS. For example, if refiners do not acquire sufficient RINs to satisfy their obligation in a particular year,

they can carry a deficit as long as they satisfy their obligation the following year. 42 U.S.C. § 7545(o)(5)(D). And

if refiners have excess RINs in a particular year, they can

carry over those credits to the following year and use

them to meet up to 20 percent of the next year’s requirement. 40 C.F.R. § 80.1427(a)(5). Finally, there are several

waiver authorities in the statute that allow EPA to lower

19

volume requirements when required by economic or other

conditions. See 42 U.S.C. § 7545(o)(7).

Tellingly, Petitioners, their amici, and other refiners

like them complied with the RFS for years before EPA

granted additional small-refinery exemptions beginning

in 2017. During those years, they did not go bankrupt, nor

were there any other dire consequences for refiners or local economies. There is thus no reason to believe that

affirmance of the decision below—and the return of smallrefinery exemptions to pre-2017 levels—would have the

severe consequences that Petitioners and their amici

claim.

Finally, it also bears noting that small-refinery exemptions have historically been granted for the benefit of

“small refineries” that are in fact owned by large multinational corporations. See Jarrett Renshaw & Chris Prentice, Exclusive: Chevron, Exxon seek “small-refinery”

waivers from U.S. biofuels law, Reuters (April 12, 2018),

https://reut.rs/31uYwnL. For example, in the Proposed

Rule setting forth renewable fuel volumes for 2020, EPA

indicated that it had identified only 9 entities in the United

States that qualify as “small refiners,”7 and explained that

these entities own a total of 11 refineries subject to the

RFS, all of which are “small refineries” under the statutory definition.8 84 Fed. Reg. at 36,807. But EPA has

EPA regulations provide certain exemptions for “small refiners,”

which are refiners that produced transportation fuel in 2006; employed an average of no more than 1,500 people for all subsidiary

companies, all parent companies, all subsidiaries of the parent companies, and all joint venture partners; and had a corporate-average

crude oil capacity less than or equal to 155,000 barrels per day in

2006. 40 C.F.R. § 80.1442(a).

7

The Clean Air Act defines “small refinery” as “a refinery for

which the average aggregate daily crude oil throughput for a calendar year … does not exceed 75,000 barrels.”

42 U.S.C.

§7545(o)(1)(K).

8

20

granted exemptions to many more than 11 small refineries each year. Specifically, as EPA noted, “[t]o date, EPA

has adjudicated petitions for exemption from 35 small refineries for the 2017 RFS standards ([only] 10 of which are

owned by a small refiner).” Ibid. In fact, EPA granted all

35 of those petitions—and by EPA’s admission 25 of those

petitions relate to refineries that are too large to be considered small refiners. EPA, RFS Small Refinery Exemptions, Table 2: Summary of Small Refinery Exemption Decisions Each Compliance Year, https://bit.ly/3uazBSu (last visited March 31, 2021).

EPA’s continued use of small-refinery exemptions for

the benefit of “small refineries” owned by large multinational corporations harms many more small businesses

than it aids. As detailed above, hundreds of legitimate

small businesses rely on the RFS program to spur demand for domestic biofuels. But granting small-refinery

exemptions without ever requiring the industry to fully

make up exempt volumes dramatically undermines demand for biofuels. And the benefits of the reduction in

demand for renewable fuels caused by extensive small-refinery exemptions inure to the large businesses that received the majority of those exemptions, while its adverse

consequences harm the small businesses that benefit from

the RFS and are an integral component of the biofuels

economy. The Court should affirm the decision below to

bring the RFS program back into balance.

21

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted.

ETHAN G. SHENKMAN

Counsel of Record

JONATHAN S. MARTEL

WILLIAM PERDUE

SALLY L. PEI

ARNOLD & PORTER

KAYE SCHOLER LLP

601 Massachusetts Avenue, NW

Washington, DC 20001

(202) 942-5000

Ethan.Shenkman@arnoldporter.com

MARCH 2021