Oil refiners and biofuels interests squared off in oral arguments before the U.S. Supreme Court Tuesday in a case with large implications for Iowa.
As is usually the case, the justices grilled lawyers from both sides before submitting the case for a decision later, most likely in a couple of months or more. Hollyfrontier Cheyenne Refining LLC v. Renewable Fuels Association addresses questions over whether small refineries can request exemptions to the Renewable Fuel Standard.
The standard sets the amount of biofuels that must be blended into gasoline and diesel. Small refineries are granted hardship exemptions in some cases.
High stakes in Iowa
Iowa is the top producer of ethanol, made with corn, and biodiesel, made with soybeans. Iowa Attorney General Tom Miller and colleagues from seven other states filed a brief with the Supreme Court supporting the Renewable Fuels Association. The association argues that the exemptions should not be granted in cases where they haven’t been in place continuously.
The 10th Circuit Court of Appeals in January 2020 ruled that the U.S. Environmental Protection Agency had issued exemptions to the biofuels mandate to refineries that didn’t qualify. The small refineries have argued they face financial ruin if they are forced to buy ethanol and biodiesel at the levels demanded by Congress.
After indicating he would support farm interests, then-President Donald Trump allowed EPA to approve 85 exemptions that cost the biofuels industry 4 billion gallons in sales. President Joe Biden’s administration supports the 10th Circuit decision.
Peter Keisler, lawyer for the refiners, argued that the federal rules allow an application for a hardship exemption “at any time.”
Keisler said the key is the word “extension,” and justices spent time exploring what Congress meant by its language.
“No dictionary defines ‘extension’ to require continuity,” Keisler told the justices. “Congress has used the term elsewhere when it’s specifically authorizing the resumption of benefits,” Keisler added.
Chief Justice Roberts: Can a new refinery request an ‘extension?’
When Chief Justice John Roberts asked Keisler if a new refinery could apply for an “extension” of the Renewable Fuels Standard exemption, Keisler said yes. “Our key point would be the preferred reading of ‘extension’ does not require continuity,” Keisler said.
Responded Roberts: “I’m not sure that’s the strongest position.”
Later, Justice Sonia Sotomayor noted the use of the word “temporary” in the regulation. “Doesn’t the use of the word ‘temporary’ in the provision at issue suggest the other side’s reading more than yours?” she asked.
Keisler said another part of the regulation suggests an exemption application can come “at any time.”
Christopher Michel, assistant to the solicitor general of the Department of Justice, said Congress’ language was clear, offering an extension to those that already had exemptions. “EPA cannot grant something that does not exist,” Michel said. “That is the ordinary, common sense meaning of the statutory text,” which was meant to promote the biofuels industry while giving small refineries time to comply, he said.
Refineries not ‘doomed to failure’
“Simply put, if Congress wanted to adopt the generally available exemption petitioners advocate, it would not have enacted the scheme it did here,” Michel said. “That scheme does not doom small refineries to failure. The vast majority of small refineries, including the petitioners’, have successfully complied with the RFS in many prior years.”
Roberts suggested the terms in the regulation could be seen as ambiguous. “You’re not arguing that this term is plain or unambiguous, right?” he asked.
Responded Michel: “We’re not arguing that it’s unambiguous, but we do think that this is clearly the more ordinary use of the term in common parlance. The Court’s decisions have said it will apply the ordinary meaning of the statute unless there’s a good reason not to.”
Justice Breyer: Is biofuels group supporting ‘chaos?’
Justice Stephen Breyer addressed the issue from a stance of “marketable rights” and the challenges refineries face when the prices of credits tied to the biofuels standards vary widely.
“And so, from the point of view of a marketable rights program, your interpretation seems to turn it into a kind of chaos,” Breyer said.
Michel said there was “complete clarity” that the blanket exemption would be available for the first five years of the Renewable Fuel Standard, which became effective in 2005 and was amended in 2007. “I don’t think there is chaos here,” he added.
Matthew Morrison, representing the Renewable Fuels Association, argued against the exemptions.
“EPA’s unauthorized carve-outs have resulted in billions of dollars of lost revenue to biofuels producers, devastating the rural economies,” Morrison said.
“Petitioners’ suggestion that there should be a permanent safety value to excuse them from their compliance obligations is belied by the text and the structure of the statute. It is antithetical to Congress’ goal of increasing the volume of renewable fuel in the nation’s transportation system,” Morrison added.
Iowa AG: This case is ‘critical’ to industry
In a news release, Miller, the Iowa attorney general, called the case “critical to Iowa’s renewable fuel industry.”
“We think we have the stronger argument: that Congress intended to advance renewable fuels, and not freely grant exemptions to small refineries. The plain, common sense meaning of the statute language prevails, in our opinion,” he said of the amicus brief from the states.
Miller said the exemption cost the biofuels industry $2 billion in demand.