SCOTUS Rules in Favor of Refiners
Ruling puts SRE situation in disarray
The U.S. Supreme Court today (June 26) ruled 6-3 in favor of small refineries in their attempt to get exemptions from biofuel blending requirements. The ruling overturned a lower court decision saying EPA could only grant waivers to those that had previously received them. Corn and soyoil futures extended their losses on the news.
This puts the SRE situation in disarray. The Biden administration had come out and backed the 10th Circuit Court decision which now the Supreme Court has overturned.
It also raises several questions, including whether now those prior-year SRE requests are needed since the Supreme Court has ruled the word "extension" does not mean they had to be continuously extended.
In the majority opinion, authored by Justice Neil Gorsuch, considerable attention is focused on the term “extension” as that formed the center of the Tenth Circuit decision—that to get an exemption in future years, refiners had to have had an SRE in all prior years.
“Here, three small refineries initially received an exemption, saw it lapse for a period, and then again petitioned for an exemption,” the decision said. “EPA granted the exemptions, and a group of renewable fuel producers objected. The Tenth Circuit vacated EPA’s decisions, concluding that the small refineries were ineligible for an ‘extension’… because they had allowed previous exemptions to lapse.”
The court did note that the term “extension” is not defined in the RFS, and that it can mean “an increase in time.” The Court said that the Tenth Circuit “erred” when it imposed the definition that the SREs had to have “unbroken continuity.” The top court simply stated, “The plain meaning of ‘extension’ does not require unbroken continuity.”
The ruling further noted, “Dictionary definitions contemplate the possibility of resumption after an interruption. Federal rules permit litigants to seek (and courts to grant) an ‘extension’ of time even after a lapse.”
Gorsuch wrote in the majority opinion that resolving the issue of extension “only takes us to the heart of the dispute. The Tenth Circuit didn’t just hold that an extension means an increase in time—it imposed a continuity requirement.” Gorsuch likened the refiners asking an SRE after their initial one had expired to that of a student handing in a homework assignment late. “Think of the forgetful student who asks for an ‘extension’ for a term paper after the deadline has passed, the tenant who does the same after overstaying his lease, or parties who negotiate an ‘extension’ of a contract after its expiration,” Gorsuch wrote.
He also pointed to the COVID aid package approved earlier this year where Congress extended a previously expired benefit. “As the COVID-19 statutes illustrate, a previously lapsed benefit can and sometimes is ‘extended’ for a new period without any retroactive effect,” Gorsuch wrote.
In conclusion, Gorsuch wrote, “our analysis can be guided only by the statute’s text—and that nowhere commands a continuity requirement.”
In the dissenting opinion, written by Justice Amy Coney Barrett, they noted EPA was given authority to “grant ‘extension[s] of the exemption’ in certain instances.” She also wrote that in siding with refiners, the Court has embraced the definition of extension put forth the refiner HollyFrontier. “… the Court’s position is that HollyFrontier wins because its reading is possible,” Barrett said. She also wrote that the majority’s definition of extension would be equivalent to a hotel guest coming back years after a hotel stay ended and asking to “extend” their stay.
What does that mean for the 2019 and 2020 SRE requests that are pending — 32 for 2019 compliance year and 18 for the 2020 compliance year? Those are now the focus on this issue given that the court has ruled refiners did not have to have waivers from 2011 forward to be able to get SREs now.
This puts the ball back in the court of EPA and Dept. of Energy.
