Reply 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, HOLLYFRONTIER REFINING & MARKETING, LLC, HOLLYFRONTIER WOODS CROSS REFINING, LLC, &

WYNNEWOOD REFINING CO., LLC,

Petitioners,

v.

RENEWABLE FUELS ASSOCIATION, ET AL.,

Respondents.

____________

On Writ of Certiorari

to the United States Court of Appeals

for the Tenth Circuit

____________

REPLY BRIEF

____________

MELISSA M. BUHRIG

CVR ENERGY, INC.

2277 Plaza Drive

Suite 500

Sugar Land, TX 77479

(281) 207-3200

mmbuhrig@cvrenergy.com

Counsel for Wynnewood

Refining Co., LLC

April 15, 2021

PETER D. KEISLER*

RYAN C. MORRIS

ERIC D. MCARTHUR

PETER C. WHITFIELD

CHRISTOPHER S. ROSS

ALICE A. WANG

SIDLEY AUSTIN LLP

1501 K Street, N.W.

Washington, D.C. 20005

(202) 736-8000

pkeisler@sidley.com

Counsel for HollyFrontier

Petitioners

* Counsel of Record

TABLE OF CONTENTS

Page

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

ii

INTRODUCTION .................................................

1

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

3

I. THE STATUTORY TEXT DOES NOT

LIMIT THE HARDSHIP EXEMPTION TO

SMALL REFINERIES THAT HAVE BEEN

CONTINUOUSLY EXEMPT ........................

3

A. EPA May Grant “A Hardship Exemption”

To Any Small Refinery Experiencing Disproportionate Economic Hardship ...........

4

B. Even If The Statute Requires A Temporal

Lengthening Of An Earlier Exemption, It

Does Not Require Continuity ...................

6

C. The Statutory Context Precludes A Continuity Requirement ....................................

10

II. A CONTINUITY REQUIREMENT IS INCONSISTENT WITH THE STATUTE’S DESIGN AND PURPOSE ..................................

12

A. A Continuity Requirement Produces Arbitrary Distinctions ......................................

12

B. A Continuity Requirement Is Not Needed

To Achieve Blending Mandates ................

14

C. No Other Mechanism Exists To Protect

Small Refineries From Disproportionate

Economic Hardship ...................................

17

III. EPA’S 2014 ELIGIBILITY RULE REJECTED A CONTINUITY REQUIREMENT AND

IS OWED DEFERENCE ...............................

21

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

23

(i)

CASES

ii

TABLE OF AUTHORITIES

Page

Bowen v. Georgetown Univ. Hosp., 488 U.S.

204 (1988) ...................................................

22

Ergon-W. Va., Inc. v. EPA, 896 F.3d 600 (4th

Cir. 2018) .................................................. 18, 19

Geo-Energy

Partners-1983

Ltd.

v.

Kempthorne, 551 F. Supp. 2d 1210 (D.

Nev. 2008), aff’d sub nom. Geo-Energy

Partners-1983 Ltd. v. Salazar, 613 F.3d

946 (9th Cir. 2010) .....................................

7

Jennings v. Rodriguez, 138 S. Ct. 830

(2018) ..........................................................

5

Mohamad v. Palestinian Auth., 566 U.S. 449

(2012) ..........................................................

9

Perez v. Mortg. Bankers Ass’n, 135 S. Ct.

1199 (2015) .................................................

22

Pub. Utils. Comm’n v. FERC, 24 F.3d 275

(D.C. Cir. 1994) ..........................................

18

Roberts v. Sea-Land Servs., Inc., 566 U.S. 93

(2012) .......................................................... 5, 13

Sandifer v. U.S. Steel Corp., 571 U.S. 220

(2014) ..........................................................

17

Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S.

560 (2012) ...................................................

9

Tyler v. Cain, 533 U.S. 656 (2001) ................

11

STATUTES AND REGULATIONS

8 U.S.C. §1184(g)(8)(D) .................................

6

10 U.S.C. §2304a(f)........................................

6

15 U.S.C. §78d-5(a)(2) ...................................

6

19 U.S.C. §2432(d)(1) ....................................

7

28 U.S.C. §594(b)(3)(A) .................................

7

42 U.S.C. §7545(o)(3)(C)(ii) ........................... 2, 15

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

20

§7545(o)(9)(A)(i) ............................

4

iii

TABLE OF AUTHORITIES—continued

Page

49 U.S.C. §44506(c)(2)(B) ..............................

7

50 U.S.C. §3024(n)(4)(E)(ii)...........................

7

§3172 .............................................

7

Energy Independence and Security Act of

2007, Pub. L. No. 110-140, 121 Stat.

1492 .......................................................... 16, 21

40 C.F.R. §80.1427(b) ....................................

20

§80.1441(e)(2)(iii) ..........................

21

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

15

79 Fed. Reg. 42,128 (July 18, 2014) ............ 12, 21

77 Fed. Reg. 70,752 (Nov. 27, 2012) .............

19

LEGISLATIVE MATERIALS

S. Rep. No. 108-57 (2003) ..............................

Clean Air Act: Alternative Fuels and Fuel

Additives: Hearing Before the Subcomm.

on Clean Air, Climate Change, & Nuclear

Safety of the S. Comm. on Env’t & Pub.

Works, 108th Cong. (2003) .........................

151 Cong. Rec. H2366 (daily ed. Apr. 20,

2005) ...........................................................

16

16

16

OTHER AUTHORITIES

Dallas Burkholder, Office of Transp. & Air

Quality, EPA, A Preliminary Assessment

of RIN Market Dynamics, RIN Prices, and

Their Effects (May 14, 2015), available at

https://www.grassley.senate.gov/download/

epa-hq-oar-2015-0111-0062burkholderrinanalysis .......................................................

Continuance, MerriamWebster.Com Dictionary, https://www.merriam-webster.com/

dictionary/continuance (last visited Apr.

12, 2021) .....................................................

18

8

iv

TABLE OF AUTHORITIES—continued

Page

Continuation, MerriamWebster.Com Dictionary, https://www.merriam-webster.com/

dictionary/continuation (last visited Apr.

12, 2021) .....................................................

8

EPA, Fuels Registration, Reporting, and

Compliance Help: Annual Compliance

Data for Obligated Parties and Renewable

Fuel Exporters Under the Renewable Fuel

Standard (RFS) Program, https://www.

epa.gov/fuels-registration-reporting-andcompliance-help/annual-compliance-dataobligated-parties-and (last updated Nov.

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

14

Robert S. Pindyck & Daniel L. Rubinfeld,

Microeconomics (9th ed. 2018) ...................

18

Antonin Scalia & Bryan A. Garner, Reading

Law: The Interpretation of Legal Texts

(2012) .......................................................... 5, 11

U.S. Dep’t of Energy, Small Refinery Exemption Study: An Investigation into Disproportionate Economic Hardship (Mar. 2011),

https://www.epa.gov/sites/production/

files/2016-12/documents/small-refineryexempt-study.pdf................................ 13, 17, 18

Hal R. Varian, Intermediate Microeconomics

(8th ed. 2010)..............................................

18

INTRODUCTION

Recognizing that the RFS could impose significant

hardship on small refineries, and that forcing them to

shutter would disserve the statute’s overarching energy-independence objective, Congress both (i) granted

small refineries an initial blanket exemption and (ii)

authorized them to petition for an extension of the exemption at any time based on disproportionate economic hardship. As petitioners showed—and the government previously agreed—the statute “unambiguously does not require continuous receipt of a small refinery exemption since 2006 as a prerequisite for eligibility to receive an exemption in a future year due

merely to the word ‘extension.’” EPA 10th Cir. Br. 19.

Supporting the biofuel respondents, the government

now takes the opposite position, asserting “EPA cannot grant ‘an extension of the’ small-refinery exemption to a refinery that has not previously maintained

its exemption, because in such a circumstance there is

no exemption to extend.” EPA Br. 16. But the government’s about-face—announced in an EPA press release on the day petitioners filed their opening brief—

was ill-considered. The continuity requirement it now

urges this Court to adopt appears nowhere in the statutory text and is incompatible with the statute’s language, structure, and purposes.

As for the text, respondents contend that the word

“extension” must be read in its temporal sense, which

they say inherently requires continuity. Wrong on both

counts. Nothing precludes reading “extension” in its

“make available” sense, and, in any event, a temporal

“extension” need not be continuous. No dictionary definition requires continuity. And Congress has both

used the term “extension” temporally to refer to the re-

2

sumption of a government benefit after a lapse and enacted statutes expressly specifying when an “extension” must be “successive” or “consecutive.” The absence of any such limitation here, together with surrounding terms that contrast an initial “temporary”

exemption with “a hardship exemption” available “at

any time” based on current economic hardship, precludes the Tenth Circuit’s continuity requirement.

Respondents’ attempts to reconcile their reading

with the statute’s overall design likewise fail. Contrary to their central claim, a continuity requirement

is not necessary to achieve Congress’s blending mandates. Congress authorized EPA to “account” for small

refineries that are exempt in setting the annual blending percentage. 42 U.S.C. §7545(o)(3)(C)(ii). And EPA

recently adopted an approach to ensure that overall renewable fuel mandates are achieved regardless of the

extent to which the agency grants hardship exemptions to small refineries.

Moreover, respondents identify no reason to think

that Congress crafted the hardship exemption based

on the assumption that once a small refinery had

achieved compliance for a single year, it could always

achieve compliance in the future, and would thus

never again experience “hardship” from the RFS. The

statute’s escalating compliance burdens, the variability of RIN prices, and small refineries’ vulnerability to

other economic factors beyond their control make such

a conclusion especially implausible. It is equally implausible to believe Congress intended to force from

business those refineries sometimes able to comply

with statutory mandates, while allowing those who

persistently fail to continue operating.

Finally, the Court should disregard the government’s flip-flop. Not only did EPA grant the non-continuous exemptions at issue here to petitioners, but

3

EPA previously recognized that the statute contains

no continuity requirement and embodied that conclusion in regulations specifying the eligibility criteria for

a hardship exemption. It cannot now amend those

rules through a press release.

ARGUMENT

I. THE STATUTORY TEXT DOES NOT LIMIT

THE HARDSHIP EXEMPTION TO SMALL

REFINERIES THAT HAVE BEEN CONTINUOUSLY EXEMPT.

Petitioners showed there are at least two available

readings of “extension” that do not condition the hardship exemption on a small refinery’s receipt of an exemption for every preceding year—an eligibility condition that counterintuitively rewards those who never

meet statutory blending requirements with hardship

exemptions, while denying exemptions to small refineries that can sometimes fulfill the statute’s goals. Br.

of Petitioners (“Br.”) 22–32. Respondents primarily

take aim at the “make available” reading of ‘extension,” but miss the mark. And even if “extension” is

used temporally, respondents have no persuasive response to petitioners’ showing that the term can naturally be used—and is in fact used by Congress—to refer

to the resumption of a government benefit that has

lapsed for a period of time. Ultimately, they offer no

holistic interpretation of the hardship exemption that

accounts for the surrounding terms, critical context

that cannot be reconciled with a continuity requirement without distorting the congressional regime.

4

A. EPA May Grant “A Hardship Exemption”

To Any Small Refinery Experiencing Disproportionate Economic Hardship.

The term “extension,” standing alone, is necessarily

ambiguous because it can mean either an increase in

time or the grant of a benefit. Br. 23–25. Respondents

do not dispute that the “make available” meaning is an

“ordinary” meaning of the term “extension,” frequently

employed by both Congress and this Court. See id.

They contend, however, that the word cannot bear that

meaning in subparagraph (B)(i). They are wrong.

Respondents offer two main reasons for their assertion that “extension” in subparagraph (B)(i) must have

a temporal meaning. First, they emphasize that subparagraph (B)(i) authorizes “an extension of the exemption under subparagraph (A),” and subparagraph

(A) created a “temporary” exemption that expired in

2011 (or whenever extensions based on the DOE study

ended). EPA Br. 19; RFA Br. 21. But subparagraph (B)

does not use the term “temporary”; 1 instead, and in

stark contrast, it says “at any time.” Br. 33–36. Given

that clear temporal decoupling, the reference to “the

exemption under subparagraph (A),” 42 U.S.C

§7545(o)(9)(B)(i), is best understood as a reference to

the substantive relief first described in that subparagraph—namely, an exemption from “[t]he requirements of paragraph (2),” id. §7545(o)(9)(A)(i).

Second, respondents argue that because subparagraph (A)(ii)(II) and other provisions of §7545 use “extension” temporally, it must be used the same way in

subparagraph (B)(i). EPA Br. 20; RFA Br. 29. But the

1 Moreover, “EPA typically grants exemptions for only the identified compliance year, which means the exemptions are temporary in nature.” EPA 10th Cir. Br. 31 n.10.

5

presumption of consistent usage “is particularly defeasible by context.” Antonin Scalia & Bryan A. Garner,

Reading Law: The Interpretation of Legal Texts 171

(2012); see Br. 27. And the context that makes clear

the term elsewhere involves temporality—like subparagraph (A)(ii)(II)’s reference to “a period of not less

than 2 additional years”—is absent in subparagraph

(B). The surrounding terms in subparagraph (B) fit

better with the “make available” meaning. 2

Indeed, respondents fail to explain why, if Congress

had used “extension” temporally in subparagraph

(B)(i), it would have called the relief it authorized “a

hardship exemption” in subparagraph (B)(iii). Respondents assert that the phrase “a hardship exemption” is “shorthand” and cannot “change the meaning

of [subparagraph B(i)].” EPA Br. 33; see RFA Br. 26–

27. But subparagraph (B)(iii) does not change the

meaning of subparagraph (B)(i); it informs it. And the

notion that subparagraph (B)(iii) is mere “shorthand”

is a tacit admission that its language cannot be read

temporally. The “make available” reading, by contrast,

fits with both subparagraphs. Where, as here, Congress used two phrases interchangeably, an interpretation that comports with both phrases’ text should be

preferred. See Roberts v. Sea-Land Servs., Inc., 566

U.S. 93, 100 (2012) (“[O]ur task is to fit, if possible, all

parts into an harmonious whole.”).

2 Similarly, that Congress elsewhere used the synonymous

term “grant” to describe the approval of a request, see EPA Br. 31;

RFA Br. 27, is not especially informative. “[T]here is no ‘canon of

interpretation that forbids interpreting different words used in

different parts of the same statute to mean roughly the same

thing.’” Jennings v. Rodriguez, 138 S. Ct. 830, 845–46 (2018).

6

B. Even If The Statute Requires A Temporal

Lengthening Of An Earlier Exemption, It

Does Not Require Continuity.

Even if, however, subparagraph (B)(i) uses “extension” temporally, a small refinery need not have been

continuously exempt to receive an “extension” of the

exemption under subparagraph (A). Br. 29–31.

On this score, respondents have little to offer. Most

significantly, they have no persuasive answer to the

fact that Congress has used the term “extension” in

precisely the sense petitioners propose—to refer to the

extension of a government benefit for an additional period of time after a lapse. Br. 30 (discussing Section

203, Division N, of the Consolidated Appropriations

Act and Section 2114 of the CARES Act). The government dismisses these statutes because the word “extension” appears in their captions, not their body. EPA

Br. 36 & n.5. But that misses the relevant point—Congress used the term “extension” in a temporally noncontinuous sense. While the government observes that

these laws include specific dates, it does not suggest—

and could not show—that Congress somehow misused

the word “extension” in describing what the laws did.

See id.; see also RFA Br. 32 (conceding “there may be

some instances where Congress intends to authorize

an extension after a lapse”).

Moreover, when Congress intends to require that a

temporal “extension” be continuous, it frequently does

so expressly by including words like “successive” or

“consecutive.” See, e.g., 8 U.S.C. §1184(g)(8)(D) (referring to “5 or more consecutive prior extensions”); 10

U.S.C. §2304a(f) (authorizing agency to “extend the

contract period for one or more successive periods”); 15

U.S.C. §78d-5(a)(2) (authorizing agency to “extend

such deadline as needed for one or more additional suc-

7

cessive 180-day periods”); 19 U.S.C. §2432(d)(1) (authorizing “further extensions of [waiver] authority for

successive 12-month periods”); 28 U.S.C. §594(b)(3)(A)

(“The 1-year period may be extended for successive 6month periods ….”); 49 U.S.C. §44506(c)(2)(B) (authorizing agency to “extend [appointment] authority for

one or more successive one-year periods”); 50 U.S.C.

§3172 (authorizing the President “to extend the period

of a stay … for successive periods of not more than 120

days each”); id. §3024(n)(4)(E)(ii) (providing that authorization “may be extended … for successive periods

of not more than 3 years”); see also Geo-Energy Partners-1983 Ltd. v. Kempthorne, 551 F. Supp. 2d 1210,

1219 (D. Nev. 2008) (“30 U.S.C. §1005(g) provides for

a diligent effort extension and states that such extension must be ‘successive.’”). If “extension” by itself entailed continuity, the limiting words “successive” and

“consecutive” in such statutes would be surplusage.

Thus, in multiple other statutes, Congress has both

used the term “extension” to refer to the non-continuous lengthening of a preexisting benefit that had

lapsed and expressly specified when an “extension”

must be “successive” or “consecutive.” Each of these

regular and natural uses of “extension” is a powerful

strike against respondents’ account of the temporal

meaning of “extension.” Together, they conclusively refutes the notion that the term requires continuity.

Nonetheless, respondents offer three reasons why,

they say, a small refinery may receive an “extension”

of its initial exemption only if it has received successive extensions in each prior year. First, they cite various dictionary definitions. EPA Br. 21; RFA Br. 30.

None requires continuity. The lone dictionary the government cites—apparently a reprint of a law dictionary from 1889—refers to a “continuance,” which does

8

not imply uninterrupted continuation. 3 See EPA Br.

21 (citing William C. Anderson, A Dictionary of Law

437 (1996)). Thus, as the government explained below,

the interpretation it now urges would require the

Court to “endorse a definition of the word ‘extension’

not found in any dictionary: a ‘continuation of an existing period with no intervening lapse.’” EPA 10th

Cir. Br. 29. Indeed, “[e]ven the definition of ‘continuous’ demonstrates that use of the word ‘extension’—

standing alone—is not assumed to mean ‘uninterrupted.’” Id. at 31 (quoting Webster’s Third International Dictionary 493–94 (1986), which defines “continuous” as “characterized by uninterrupted extension

in time or sequence” (emphasis added)). 4

Second, respondents contend that, in common usage,

the term “extension” ordinarily involves continuity.

EPA Br. 21–22, 34–35; RFA Br. 30–31. But however

“ordinary speaker[s]” use the term in various contexts,

EPA Br. 35, Congress has used the term “extension” in

closely analogous contexts to mean the temporal “extension” of a previously lapsed government benefit. Br.

3 Merriam-Webster’s online dictionary provides, as its first defini-

tion of “continuance,” “CONTINUATION.” MerriamWebster.Com

Dictionary, https://www.merriam-webster.com/dictionary/continuance

(last visited Apr. 12, 2021). And it defines “continuation” to include

“resumption after an interruption.” MerriamWebster.Com Dictionary,

https://www.merriam-webster.com/dictionary/continuation (last

visited Apr. 12, 2021).

4 Not even respondents embrace the import of their argument

that the temporal meaning of “extension of the exemption under

subparagraph (A)” requires that the thing extended must currently be “in place.” EPA Br. 18; RFA Br. 17. They concede that a

small refinery can receive multiple extensions indefinitely as long

as the extensions are successive. But after a small refinery receives its first hardship exemption, the relief currently “in place”

would be relief granted not “under subparagraph (A)” but under

subparagraph (B).

9

30. It is not at all unnatural or “idiosyncratic,” EPA Br.

29–30, for example, to say that a person who had previously received pandemic-related unemployment benefits that expired in July applied for an “extension” of

those benefits after Congress extended them in December. Nor does this usage rely on a “definition of a

word that is absent from many dictionaries and is

deemed obsolete in others.” Taniguchi v. Kan Pac Saipan, Ltd., 566 U.S. 560, 569 (2012). After all, respondents’ definition does not appear in any dictionary, and

Congress used the term in this sense in two separate

statutes a few months ago. Whether Congress used the

term the same way here thus depends not on hypotheticals about parking sessions or hotel rooms, EPA Br.

35, but on “statutory context.” Mohamad v. Palestinian Auth., 566 U.S. 449, 455 (2012). 5

Third, respondents again invoke the presumption of

consistent usage, contending that because extensions

under subparagraph (A)(ii)(II) were temporally continuous with the original exemption, any extension under

subparagraph (B) must be temporally continuous.

EPA Br. 22–23; RFA Br. 33–36. The presumption does

not apply here. Petitioners ascribe the same meaning

to “extension” in both subparagraphs—an increase in

length of time, which may or may not be continuous.

While extensions under subparagraph (A)(ii)(II) would

likely have been continuous as a factual matter, that

is a consequence not of the meaning of “extend,” but of

5 Respondents’ examples involving physical “extensions” (e.g.,

extension cords, nail extensions), EPA Br. 21, are especially inapt. The nature of material objects is such that their “extension”

necessarily is physically continuous. Not so with periods of time,

as the government previously recognized. See EPA 10th Cir. Br.

30 n.8 (explaining that examples involving “spatial extension and

not temporal extension” are “inapposite”).

10

the fact that any extensions granted thereunder immediately followed a period in which all small refineries were exempt. Br. 26–27. 6 Subparagraph (B), by

contrast, is available “at any time,” and extensions

thereunder may or may not be continuous with the initial exemption. Subparagraph (B)’s use of the term

“extension” no more imports a continuity requirement

from subparagraph (A)(ii)(II) than it imports that provision’s requirement that extensions be at least two

years. Put simply, when used in a temporal sense, the

word “extension” does not inherently require continuity. Thus, it is used consistently to refer to both continuous and non-continuous extensions. 7

C. The Statutory Context Precludes A Continuity Requirement.

Because there are permissible readings of “extension

of the exemption under subparagraph (A)” that do not

require temporal continuity, the question whether

Congress imposed a continuity requirement must be

answered through statutory context. Br. 32–39. Respondents insist the surrounding terms are all irrelevant because they address the when, who, and why of

the hardship exemption, and “d[o] not speak to what

6 Extensions

under subparagraph (A)(ii)(II), however, would

not necessarily have been continuous. For example, EPA would

have been required to extend the exemption for a small refinery

that (a) DOE in 2008 found would suffer disproportionate economic hardship if required to comply, and (b) lost the exemption

in 2010 because it temporarily grew beyond the definition of

“small refinery,” but regained “small refinery” status in 2011.

7 Nor does §4575(o)(7)(E)(iii), which authorizes EPA to reduce

blending requirements for biomass-based diesel in certain circumstances, “necessarily encompas[s] continuity.” EPA Br. 22.

That provision requires a “continuing” price disruption, but it

does not require that the “additional 60-day period” of relief run

consecutively with the initial 60-day period.

11

such an extension is.” EPA Br. 37. But respondents’

blinkered approach proceeds from the circular premise

that the relevant language has only one possible

meaning. The Court should reject respondents’ invitation to “construe the meaning of statutory terms in a

vacuum.” Tyler v. Cain, 533 U.S. 656, 662 (2001); see

Scalia & Garner, supra, at 167 (“Perhaps no interpretive fault is more common than the failure to follow the

whole-text canon, … in view of its structure and of the

physical and logical relation of its many parts.”).

Respondents’ account of the surrounding terms is

unpersuasive. They advance what the government

previously—and rightly—characterized as “a remarkably narrow reading” of the expansive phrase “at any

time,” contending that “EPA has authority to grant the

petition ‘at any time,’ but only if a small refinery has

been eligible for and received an exemption in all RFS

years prior to the petition.” EPA 10th Cir. Br. 28. Respondents fail to respond to petitioners’ showing that

this is not how Congress ordinarily crafts a sunset provision. Br. 33–34. And they offer no non-circular explanation of why Congress would have defined “small refinery” based on throughput in “a calendar year” if eligibility for the hardship exemption actually turned on

meeting the throughput requirement in every preceding year. EPA 10th Cir. Br. 27 (explaining that if Congress had intended to impose a continuity requirement, “it would have at least required that the

throughput threshold in the definition not be exceeded

for the current and all preceding years or otherwise indicated a date certain”). In each respect, the government was right before, and its current attempt to blind

itself to the interpretive import of these surrounding

terms is misguided.

12

II. A CONTINUITY REQUIREMENT IS INCONSISTENT WITH THE STATUTE’S DESIGN

AND PURPOSE.

The Tenth Circuit’s continuity requirement is also

contrary to the statute’s design and purposes. Br. 39–

46. It would produce arbitrary distinctions between

similarly situated small refineries, penalize those that

intermittently achieve compliance while rewarding

those that never do, and jeopardize the viability of important sources of domestic refining capacity—all

while doing nothing to advance the goal of increasing

renewable-fuel production. Respondents’ counterarguments only underscore the unlikelihood that Congress

would have mandated these irrational results, let

alone by using a term like “extension” that can readily

be understood—and that Congress has elsewhere

used—to authorize non-continuous relief.

A. A Continuity Requirement Produces Arbitrary Distinctions.

A continuity requirement cannot be squared with

any plausible account of congressional intent. It would

mean that small refineries that can never comply with

statutory blending requirements without hardship receive exemptions in perpetuity, while those that can

sometimes comply without an exemption—furthering

both the statute’s energy-independence and blending

goals—lose their exemption eligibility and are driven

from the market. It would also mean that, as EPA explained in 2014, two small refineries facing identical

circumstances would be treated differently merely because one did not receive an exemption “in a single

year as much as 8 years ago.” 79 Fed. Reg. 42,128,

42,152 (July 18, 2014); Br. 43, 47–48. Respondents offer no plausible “reason why Congress would have in-

13

tended, by choosing the wor[d] [“extension”] to differentiate between [small refineries] based on such an arbitrary criterion.” Roberts, 566 U.S. at 106.

These outcomes are especially incongruous under a

statute whose text imposes burdens that will intensify

significantly over time, and in a market where some

small refineries face “inheren[t]” structural limitations. 2011 DOE Study 34. These limitations can prevent small refineries from achieving compliance

through blending, even if they could devote scarce capital to building capabilities for doing so. Br. 9–10, 42–

44. And as DOE explained ten years ago, if small refineries must purchase RINs that substantially exceed

the costs of blending, “this will lead to disproportionate

economic hardship”—and some of the “numerous circumstances” in which that squeeze occurs will arise

“[a]s the RFS mandate increases.” 2011 DOE Study 2–

3, 17–18.

Respondents offer no persuasive answer. The government says the small refineries in the example

above “are not similarly situated” because one “developed a mechanism for compliance … in one year.” EPA

Br. 43 n.7; see also RFA Br. 42 (asserting that a small

refinery must use the initial exemption period to

“figur[e] out how to put itself in a position of annual

compliance” thereafter (quoting App. 68a)). As explained, however, there is no settled state of compliance under this statute. Br. 42–43. Refineries must

demonstrate compliance annually, and each year

poses a different, and usually more demanding, compliance test in varying market conditions. Compliance

in one year does not mean the refinery has acquired a

“mechanism” to comply in every future year. Given the

statute’s escalating burdens, fluctuations in the price

of RINs and gasoline prices, and other circumstances

14

potentially beyond the refinery’s control, past compliance does not confer the ability to achieve future compliance. Br. 44.

EPA nevertheless contends (at 27) that the exemptions were designed for a “transitional” period. But if

that were the statute’s premise, Congress would not

have made the exemptions turn on “hardship” and authorized small refineries to petition for relief “at any

time.” Had Congress intended the hardship exemption

to “taper off” over time in the haphazard way respondents propose, surely it would have provided for this expressly. Br. 33–34. Respondents cite no statutory regime with a “transition period” anything like the novel

one they attempt to manufacture here—where regulatory relief sunsets not on a fixed date or after a defined

number of years, but at different customized dates for

each regulated party based on its first compliant year.

A statute that makes “hardship” the criterion for relief

and imposes escalating burdens would be an especially

unlikely context for the only such example.

B. A Continuity Requirement Is Not Needed

To Achieve Blending Mandates.

Respondents contend that, without a continuity requirement, the RFS’s “aggressive ‘and market-forcing’” blending targets will not be met. EPA Br. 11, 41–

42; RFA Br. 45. That is incorrect.

As RFA acknowledges, most refineries and importers have been able to comply. RFA Br. 16, 48. The

three exemptions here equal only 0.2%, 0.25%, and

0.58% of the nationwide RFS obligation for the applicable years. 8 All small refineries taken together

8 Compare EPA, Fuels Registration, Reporting, and Compliance

Help: Annual Compliance Data for Obligated Parties and Renewable Fuel Exporters Under the Renewable Fuel Standard (RFS)

Program, https://www.epa.gov/fuels-registration-reporting-and-

15

(whether experiencing hardship or not) account for

only 12% of domestic refining capacity. AFPM Br. 18.

More fundamentally, there is no prospect that smallrefinery exemptions will “siphon a significant portion

of renewable fuel blending requirements out of the

RFS program” and create a “renewable fuel shortfall.”

RFA Br. 18, 45–46. Congress gave EPA authority to

ensure that hardship exemptions for small refineries

do not undermine the statute’s “market forcing” renewable fuel production targets: it authorized EPA to

“account” for small refineries that are exempt in establishing the annual percentage obligations. 42 U.S.C.

§7545(o)(3)(C)(ii). And EPA recently adopted an approach in which the agency makes “increases to the

percentage standards” that offset any decrease in the

total fuel estimate from projected hardship exemptions for small refineries. 85 Fed. Reg. 7016, 7019 (Feb.

6, 2020). This approach, by design, produces the same

total blending that would occur without exemptions. 9

That ensures Congress’s volume goals are achieved

regardless of the extent to which hardship exemptions

are granted. And it confirms there is no conflict between Congress’s twin objectives to attain the mandated annual blending and protect small refineries

from disproportionate economic hardship. Conversely,

compliance-help/annual-compliance-data-obligated-parties-and

(last updated Nov. 10, 2020) (listing Total RVO in Table 2), with

RFA 10th Cir. Br. 25 (listing RINs exempted for each refinery).

9 This completely answers the claims that appropriate application of the small-refinery exemption will harm agricultural communities and renewable-fuel producers. See, e.g., Iowa et al. Br.

11–14; Nat’l Biodiesel Bd. Br. 12–13. Even putting aside that

small refineries represent only a modest percentage of industry

capacity, this approach ensures that exemptions will not impact

overall renewable-fuel production.

16

an interpretation that forecloses hardship exemptions—at the very point when the escalating statutory

burdens render them most needed—would undermine

Congress’s overall goal of domestic energy independence and security and its goal of protecting small refineries and the communities that depend on them. It

would reduce domestic refining capacity and damage

local businesses and communities while producing no

increase in the overall blending of renewable fuel.

Respondents incorrectly contend that Congress did

not intend the RFS to promote energy independence

generally, but solely through encouraging renewable

fuels. EPA Br. 41; RFA Br. 44, 48–49. Congress listed

several purposes of the RFS: “To move the United

States toward greater energy independence and security, to increase the production of clean renewable

fuels, to protect consumers, to increase the efficiency

of products,” among others. Energy Independence and

Security Act of 2007, Pub. L. No. 110-140, 121 Stat.

1492, 1492. It nowhere indicated that energy independence and security would be achieved solely

through the production of renewables; it listed them as

independent goals. Preserving domestic refining capacity by protecting small refineries thus furthers the

RFS’s goal of moving the United States toward energy

independence and security. Br. 41.

Respondents also ignore the circumstances leading

to the RFS. The United States had not “built a new

refinery … since 1976.” 151 Cong. Rec. H2366, H2373

(daily ed. Apr. 20, 2005) (Rep. Barton). And there was

concern that U.S. refineries were already at “100 percent refining capacity” and thus any loss of small refineries would increase reliance on imported fuels. See

Hearing Before the Subcomm. on Clean Air, Climate

Change, & Nuclear Safety, 108th Cong. 4 (2003) (Sen.

Inhofe); S. Rep. No. 108-57, at 42 (2003) (Sen. Cornyn);

17

see also Br. 10 & n.3. A continuity requirement is “incompatible with the [statute’s] historical context,”

Sandifer v. U.S. Steel Corp., 571 U.S. 220, 229 (2014),

and its energy-independence purpose.

C. No Other Mechanism Exists To Protect

Small Refineries From Disproportionate

Economic Hardship.

Finally, respondents argue that hardship exemptions are unnecessary because small refineries can

raise their prices to “pass through” compliance costs to

customers. RFA Br. 49–50; EPA Br. 44. RFA (but not

EPA) also contends EPA can address any concerns

through other waiver authorities. RFA Br. 51–52.

Even if these premises were valid, they would not

support a continuity requirement. A refinery that recovers its RFS costs through higher prices or achieves

sufficient relief through other waiver authorities suffers no disproportionate economic hardship. Any petition it filed would thus be denied, whether or not it had

previously received continuous exemptions. Indeed, if

these assertions were valid, Congress need not have

enacted the small-refinery exemption provisions. In

any event, the premises are mistaken.

To begin, respondents’ “pass-through” arguments

are contrary to DOE’s 2011 findings. DOE found that

a small refinery “may face compliance costs that would

significantly impact the operation of the firm, leading

eventually to an inability to increase efficiency to remain competitive, eventually resulting in closure.”

2011 DOE Study 36. In particular, a small refinery

that lacks the capital necessary to invest in blending

infrastructure or faces other structural barriers to

blending can comply with the RFS only by purchasing

RINs, which are a pure regulatory cost. Thus, when

market-rate RINs “are far more expensive than those

18

that may be generated through blending, this will lead

to disproportionate economic hardship.” Id. at 2. DOE

explained that when RIN prices rise, compliance will

be costlier for small refineries that need to purchase

them than for their larger competitors that can blend.

Id. at 3. A firm is unlikely to be able to raise its prices

to recover costs exceeding those borne by its competitors. See also CountryMark Br. 19 (documenting inability to pass through RFS regulatory costs); Small Refineries Coalition Br. 3, 17–18 (same). 10

Respondents’ “pass through” argument also overstates EPA’s prior findings. EPA concluded only that

“obligated parties were generally able to recover [the]

increase in the cost of meeting their RIN obligations”

in the price of their products. Dallas Burkholder, Office

of Transp. & Air Quality, EPA, A Preliminary Assessment of RIN Market Dynamics, RIN Prices, and Their

Effects 29 (May 14, 2015) (emphasis added), available

at https://www.grassley.senate.gov/download/epa-hqoar-2015-0111-0062burkholderrin-analysis; App. 88a.

While even this conclusion is disputed, that dispute is

immaterial here.

The Fourth Circuit explained why in Ergon-West

Virginia, Inc. v. EPA, 896 F.3d 600 (4th Cir. 2018).

10 Basic principles of economics establish that producers in a

competitive market cannot pass through to consumers all taxes

and other regulatory costs. See Pindyck & Rubinfeld, Microeconomics 338–40 (9th ed. 2018) (producers would bear a greater

fraction than consumers of the costs of a gasoline tax and suffer

reduce demand); Varian, Intermediate Microeconomics 288 (8th

ed. 2010) (“In general, a tax will both raise the price paid by consumers and lower the price received by firms.”); Pub. Utils.

Comm’n v. FERC, 24 F.3d 275, 280–81 & n.4 (D.C. Cir. 1994)

(“The more competitive the … market, the more likely the [seller]

will bear the [tax].”).

19

There, EPA defended its denial of a hardship exemption by relying on this same “pass-through” study. The

court of appeals vacated EPA’s action as arbitrary, because EPA’s study “merely determined that the refining industry as a whole is not burdened by rising RIN

prices.” Id. at 613 (emphasis added). EPA could not,

the court held, simply rely on “an industry-wide study

and a nonspecific nationwide trend to find that RIN

prices would not harm” an individual small refinery.

Id. Instead, when acting on a hardship petition, EPA

must examine “evidence of hardship particular to [the]

refinery due to RIN costs.” Id. And in Ergon, the small

refinery had presented “specific evidence” that it “cannot pass the RIN costs on to purchasers.” Id. 11

RFA separately contends that the hardship exemption is unnecessary because “the RFS has other mechanisms that provide EPA with flexibility to address

any ‘negative economic effects.’” RFA Br. 51. Tellingly,

EPA does not make this argument. To the contrary, it

emphasizes that those mechanisms are “limited in

scope.” EPA Br. 25. Most fundamentally, they do not

provide a means to address the concerns underlying

the small-refinery provisions.

For example, EPA may reduce the statutory volume

requirements for a given year if they would “severely

harm the economy or environment of a State, a region,

or the United States.” RFA Br. 51 (citing 42 U.S.C.

§7545(o)(7)(A)(i)). But that authority depends on a

finding of circumstances that broadly affect a State or

region, not circumstances unique to a particular small

refinery. See 77 Fed. Reg. 70,752, 70,756 (Nov. 27,

11 Similar evidence was presented by the exemption petitions

here. See Administrative Record Vol. 2 (10th Cir. filed Mar. 21,

2019), ECF No. 10635063 (“REC2”) at REC2_641, REC2_684 (applicants had zero or negative profit margins after incurring costs

of obtaining RINs).

20

2012). And it authorizes a comparably broad reduction

in the renewable fuel volume requirement. One reason

for the separate small-refinery provisions, by contrast,

is to enable EPA to make narrow, individualized allowances for the industry’s smallest, most vulnerable participants without affecting attainment of the program’s broader goals.

The statutory “safe harbor,” RFA Br. 51, is likewise

irrelevant. It merely allows a refinery to carry a RIN

deficit forward into the next compliance year. In that

carryover year, the refinery must not only satisfy its

(likely increased) RFS obligation for that year, but also

its deficit from the prior year. 42 U.S.C. §7545(o)(5)(D).

And the refinery cannot carry over a deficit if it carried

a deficit in the preceding year. 40 C.F.R. §80.1427(b).

Permitting a refinery to spread its compliance over two

years can provide useful flexibility, but it does not respond to the disproportionate economic hardship that

Congress addressed in the separate small-refinery provisions.

The amicus briefs confirm the real-world consequences of the Tenth Circuit’s decision. Some small refineries face years in which RFS compliance costs will

be orders of magnitude greater than pre-tax income.

See CountryMark Br. 17–19; Wyoming et al. Br. 15–

16. Without hardship exemptions, these conditions

threaten them with “financial ruin.” CountryMark Br.

2. This will severely damage local communities and

State economies. Wyoming et al. Br. 19–25.

While respondents seek to avoid these issues by contending that “pass-through” and other EPA waiver authorities eliminate the prospect of hardship, the court

of appeals was more clear-eyed about the implications

of its decision. It concluded instead that Congress expected small refineries facing hardship after the first

few years of the program to “ponder” whether “it made

21

sense to … remain in the market in light of the statute’s challenging renewable fuels mandate.” App. 70a.

In the Tenth Circuit’s view, Congress preferred for

small refineries facing disproportionate economic

hardship from RFS compliance to be forced from the

market rather than remain eligible for a hardship exemption—but only if they had achieved compliance in

one or more prior years. That is not a plausible understanding of congressional intent, particularly under a

statute whose principal object was “[t]o move the

United States toward greater energy independence

and security.” 121 Stat. at 1492.

III. EPA’S 2014 ELIGIBILITY RULE REJECTED

A CONTINUITY REQUIREMENT AND IS

OWED DEFERENCE.

In 2014, EPA adopted a rule stating the eligibility

requirements for a hardship exemption and rejecting

any continuity limitation. The agency has applied that

understanding across two Administrations. The government now argues (at 45–46) that EPA’s 2014 eligibility rule did not address the continuity requirement

because it focused on the definition of “small refinery.”

See also RFA Br. 55–57. That contention cannot withstand scrutiny. EPA’s 2014 rulemaking expressly rejected the claim that the statute requires continuity

and revised the proposed rule to ensure that the final

rule permitted non-continuous exemptions. 79 Fed.

Reg. at 42,152; 40 C.F.R. §80.1441(e)(2)(iii); Br. 46–50.

Although the government has not owned up here to

that prior agency position, EPA Br. 45–46, it explained

below that the statutory construction it now embraces

“directly seeks to nullify” the 2014 eligibility rule. EPA

10th Cir. Br. 23. Noting that the eligibility conditions

in the rule were comprehensive, the government criticized RFA for seeking to “impose eligibility requirements for small refinery exemption petitions that the

22

EPA rejected as not being required by the CAA during

notice-and-comment rulemaking.” Id. at 19. The government explained that EPA had “proposed to amend

its regulatory definition to require the same requirement [RFA] now seek[s] to impose,” but “ultimately rejected this proposal.” Id. at 23. It repeatedly described

EPA’s regulations as rejecting a continuity requirement, and characterized its rule as imposing a “single

limit on eligibility,” namely, the throughput test. E.g.,

id. at 26. Put differently, the fact that the rule itself

did not “discus[s] what the word ‘extension’ actually

means,” EPA Br. 46 (quoting App. 78a), is irrelevant

because EPA purposely excluded any continuity requirement.

EPA announced its reversal in position through a

press release issued the day petitioners’ brief was filed.

EPA Br. App. 36a. The government contends (at 46–

47) this renders Chevron inapplicable. But a legislative

rule adopted through notice-and-comment rulemaking

cannot be repealed by a press release. See Perez v.

Mortg. Bankers Ass’n, 135 S. Ct. 1199, 1206 (2015).

While EPA can initiate a new rulemaking proposing to

adopt its new position, any resulting rules cannot be

applied retroactively. See Bowen v. Georgetown Univ.

Hosp., 488 U.S. 204, 208–09 (1988). Thus, hardship

petitions that were filed under EPA’s existing

eligibility rule—like those here—must be decided

under that rule’s standards if the rule is lawful. And

under Chevron, the existing rule has the force of law if

it either implements an intepretation compelled by the

statute or reasonably resolves a statutory ambiguity.

Properly construed, the statute does not require

continuity. But assuming arguendo the statute is

ambiguous, EPA reasonably decided in its 2014 rule

that

the

statute

authorizes

non-continuous

exemptions.

23

CONCLUSION

For these reasons, the Court should reverse.

Respectfully submitted,

MELISSA M. BUHRIG

CVR ENERGY, INC.

2277 Plaza Drive

Suite 500

Sugar Land, TX 77479

(281) 207-3200

mmbuhrig@cvrenergy.com

Counsel for Wynnewood

Refining Co., LLC

PETER D. KEISLER*

RYAN C. MORRIS

ERIC D. MCARTHUR

PETER C. WHITFIELD

CHRISTOPHER S. ROSS

ALICE A. WANG

SIDLEY AUSTIN LLP

1501 K Street, N.W.

Washington, D.C. 20005

(202) 736-8000

pkeisler@sidley.com

Counsel for HollyFrontier

Petitioners

April 15, 2021

* Counsel of Record