Sidley secured an important U.S. Supreme Court victory on behalf of HollyFrontier Cheyenne Refining, LLC, HollyFrontier Refining & Marketing, LLC, and HollyFrontier Woods Cross Refining, LLC, when the Supreme Court reversed a Tenth Circuit Court decision that had vacated exemptions granted by the Environmental Protection Agency, which temporarily relieved three small refineries from the requirements of the Renewable Fuel Standard (RFS).
The Court’s decision in HollyFrontier Cheyenne Refining, LLC, et al. v. Renewable Fuels Association et al. addressed the question of whether a small refinery (a refinery that produces fewer than 75,000 barrels per day on average) may receive a hardship exemption from the requirements of the Clean Air Act’s controversial RFS even if it saw a lapse in exemption coverage in a previous year. The Court’s decision put a capstone on an issue of statutory interpretation central to determining the contours of the marketplace for renewable fuel credits, known as RINs. Reversing the U.S. Court of Appeals for the Tenth Circuit six to three, the Court held that the hardship exemption does not have a continuity requirement, meaning that a small refinery originally exempt from the RFS may obtain a hardship exemption even if its earlier exemption had lapsed in one or more previous years. The availability of hardship exemptions is vital for small refineries, which often provide critical service to underserved areas but face substantial economic hardship in complying with the RFS.
In reaching its conclusion, the Court refused to adopt the argument, made by both EPA and the trade association respondent, that the RFS’s hardship exemption was designed as a sunset provision that ultimately required all refineries to reach compliance with the RFS. The Court explained that it did not view the exemption as a sunset provision because the RFS permitted EPA to extend the automatic exemption indefinitely and because the exemption provision allowed small refineries to request an exemption “at any time.”
The Court also rejected respondents’ argument that the exemption should be construed narrowly. Instead, the Court reiterated that statutory exemptions are to be interpreted “fairly,” as they are “no less part of Congress’s work than its rules and standards — and all are worthy of the court’s respect” (quoting BP p.l.c. v. Mayor and City Council of Baltimore). The Court explained that the exemption “means exactly what it says: A small refinery can apply for (if not always receive) a hardship extension ‘at any time.’”
HollyFrontier represents a significant victory for small refineries. Given the economic disadvantages most small refineries face, the substantial burdens of the RFS program represent a significant hurdle to ongoing operations. The Court noted in its opinion that small refineries can be a major source of jobs in rural communities and play an important role in the national tapestry of fuel refiners. The Court’s decision does much to protect these important industry participants.
Peter D. Keisler (Washington, D.C.) presented oral argument in the Supreme Court on April 27, 2021. The team also included Ryan C. Morris, Peter Whitfield, Timothy K. Webster, Virginia A. Seitz, C. Frederick Beckner, III, Eric D. McArthur, Christopher S. Ross, and Alice A. Wang (all Washington, D.C.).