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SRE Challenges Argued at Supreme Court

LINCOLN, Neb. (DTN) -- The U.S. Supreme Court on Tuesday heard oral arguments in a case that will determine where future lawsuits will be heard in small-refinery exemptions cases.

In recent years, federal appeals courts have been split on which court is the proper venue for continued legal challenges on SREs to the Renewable Fuel Standard.

An attorney for refining interests argued that small refiners should have their appeals to those exemption requests that are denied by the U.S. Environmental Protection Agency heard in federal courts closest to where they do business.

Attorneys representing the EPA, agriculture and biofuels interests, however, made a case for having cases with nationally applicable influence heard by the U.S. Court of Appeals for the District of Columbia Circuit.

Seth P. Waxman, an attorney for biofuels groups Growth Energy and Renewable Fuels Association, told the justices that there needs to be consistent court rulings because the RFS is a national rule.

"The core objective of Section 307B is to avoid inconsistent rules arising from duplicative litigation in the administration of the Clean Air Act," Waxman told the court. "Yet under the ruling below, eight different courts of appeals will be passing on the merits of EPA's standards for eligibility under the small-refinery exemption, producing, as is already evident from the two circuits that have opined, different substantive standards completely the opposite of what Congress manifestly intended."

The U.S. Court of Appeals for the Fifth Circuit determined in November 2023 that it was the proper venue to hear the challenge brought by refiners.

The RFA argued the Fifth Circuit erred in that ruling, instead saying in a petition that the U.S. Court of Appeals for the District of Columbia Circuit had "exclusive venue" on challenges to EPA's April and June 2022 SRE decisions. In its 2023 ruling, the Fifth Circuit had called out the EPA for changing its interpretation of the SRE regulations.

Other small refineries petitioned for review of the 2022 decisions to the Third, Seventh, Ninth, 10th, 11th and D.C. circuits. Each of the circuits either dismissed the petitions without prejudice for improper venue or transferred them to the D.C. circuit.

In a statement following the oral arguments in EPA vs. Calumet Shreveport Refining, LLC, on Tuesday, Growth Energy and the RFA said the case is important to prevent refining companies from shopping for favorable court venues.

"Congress clearly intended to streamline review of SRE decisions to ensure consistency and uniformity for assessing SRE petitions," the groups said.

"Today, the American biofuels industry came together to argue in front of the nation's highest court and to defend farmers and ethanol producers from the oil industry's attempts to create an inefficient and fractured body of law governing the SRE program."

PURSUING CENTRALIZED REVIEW

Malcolm L. Stewart, deputy solicitor general at the U.S. Department of Justice arguing the case for EPA, told the court that sending all the SRE cases to the D.C. Circuit would be one way to have "centralized review" and that "you do not have a lot of courts making the same determination of federal law without some means of bringing harmony to them."

Justice Elena Kagan said each individual refiner that requests an exemption has individual reasons for doing so and perhaps benefits from local courts hearing their appeals.

"Sure, there's always some nationwide determination in the mix but if it's a kind of thing where that nationwide determination applied is going to come out differently on different decisions depending on local conditions, then you don't want it in the DC circuit," Kagan said.

Justice Neil Gorsuch said the current system of filing appeals seems to work as it should even in RFS cases.

"The harmony can also be achieved through appeal, right," Gorsuch said.

"I mean the government's not afraid of litigating in appropriate forms across the country, right?"

If the current split between federal appeals court circuits is allowed to continue, biofuels groups have argued it would allow refiners to essentially venue shop for courts friendly to their cause in RFS cases.

If the Supreme Court resolves the split, it will set a national standard for how future RFS cases are litigated.

In January 2024, the Renewable Fuels Association and Growth Energy asked for a rehearing on a court decision in November 2023 that overturned the EPA's rejection of small-refinery waivers for six oil companies.

When appellate courts are split, the Supreme Court usually steps in on a case.

In 2022, the Biden administration rejected 105 exemptions previously granted to small refineries. Refining companies filed numerous appeals to the Third, Seventh, Ninth, 10th and 11th circuits. All of the courts concluded the D.C. Circuit was the proper venue except for the Fifth Circuit. The Fifth Circuit then issued a ruling overturning EPA's action on six exemptions.