Oil groups urge Supreme Court to overturn SRE ruling

By Erin Voegele | March 04, 2021

Several groups representing oil refining interests filed amicus briefs with the U.S. Supreme Court in late February and early March urging the court to overturn the Tenth Circuit Court of Appeals January 2020 ruling on small refinery exemptions (SREs).

The Tenth Circuit Court of Appeals on Jan. 24, 2020, issued a ruling that struck down three SREs that the court said were improperly issued by the EPA and held that the agency cannot “extend” exemptions to any small refineries whose earlier, temporary exemptions had lapsed. The court also held that any alleged hardship justifying an SRE must be caused by Renewable Fuel Standard compliance and that the EPA had acted arbitrarily and capriciously by deviating without acknowledgement or stated reason from its prior position that refineries generally do not incur disproportionate economic hardship from purchasing renewable identification numbers (RINs) on the open market because the refineries “pass through most or all of their RIN purchase costs” to their customers.

The ruling stemmed from a May 2018 challenge brought against the EPA by Renewable Fuels Association, the National Corn Growers Association, the American Coalition for Ethanol and the National Farmers Union.

The court’s decision was challenged by affiliates of Wynnewood Refining and HollyFrontier. The refiners in March 2020 requested a rehearing en banc of the Jan. 24 ruling. Those petitions were rejected by the court in April 2020.

The two refining companies escalated their challenge over the court ruling in September 2020 when they filed a petition for a writ of certiorari with the Supreme Court. The U.S. Department of Justice filed documents with the court in December recommending against Supreme Court review of the Tenth Circuit Court’s ruling. Despite that recommendation, however, the Supreme Court on Jan. 8 granted the petition for review filed by Wynnewood and HollyFrontier. The U.S. EPA has since spoken out to announce it has changed its position and now supports the Tenth Circuit Court’s ruling.

An amicus brief is filed by someone who is not party to a case. It, however, offers the court information, expertise or insight regarding the case. The court has discretion whether to consider the information contained in amicus briefs.

Countrymark Refining and Logistics LLC filed an amicus brief on Feb. 26. Three such briefs were also filed on March 1, including one by the Small Refineries Coalition, one by the American Fuel and Petrochemical Manufacturers, and one filed by representatives of Wyoming, Texas, Louisiana, Utah, Oklahoma, West Virginia and Montana.

The brief filed by the seven oil producing states argues that the Tenth Circuit Court’s decision “undermines a core purpose of the Renewable Fuel Standard—namely, to ensure stability in the domestic supply of fuel.” The states also argue that small refineries are not economically viable without the hardship exemption and that volatility in the renewable identification number (RIN) market makes the cost of compliance unsustainable.

The brief filed by the Small Refineries Coalition also cites volatility in the RIN markets, and argues that” changing circumstances mean that even if a small refinery can meet its RFS obligations one year without hardship, it might still need the hardship exemption ‘safety valve’ the next year.”

In its brief, the AFPM calls on the Supreme Court of “apply the traditional tools of statutory construction to hold that the Clean Air Act means what it says: small refineries are eligible for hardship exemptions any time they are disproportionately burdened by the RFS program.” AFMP said this interpretation of the CCA would prevent the destruction of “an entire sector of the refining industry.”

A full copy of each brief can be downloaded from the Supreme Court’s website.