In dispute over renewable fuels, justices unravel “extensions” of “exemptions”

When Congress says that a firm can apply for an “extension” of an exemption, is a firm that has allowed its exemption to lapse eligible to apply for the “extension?” That is the question that divided the Supreme Court justices Friday in HollyFrontier Cheyenne Refining v. Renewable Fuels Association. Six justices said yes, while three justices said no.

The context in which the question arose was the Renewable Fuels Program that Congress established in 2005. The program is intended to increase the use of renewable fuels such as ethanol. To further that purpose, the statute required refiners to blend renewable fuels with the crude oil they refine. The percent of renewable fuels that refineries must blend increases every year.

Congress was concerned that the blending requirement might have disproportionate adverse effects on small refiners, so it included a statutory exemption applicable to small refiners that lasted until 2011. It also instructed the Department of Energy to study whether the blending requirement had a disproportionate adverse effect on small refiners. If the department found a disproportionate adverse effect, the statute directed the Environmental Protection Agency to consider applications from individual small refiners to extend the exemptions for as long as two years at a time. The department did find a disproportionate adverse effect, and the EPA began to consider whether to grant extensions to small refiners who applied for them.

This case involved three small refiners that had obtained exemptions in the past but had allowed them to lapse. Each refiner applied for and was granted an “extension” of its exemption. The Renewable Fuels Association challenged the validity of the EPA decisions to grant the extensions based on its claim that the three refiners were not eligible to apply for the extensions. The RFA argued that “extension” refers only to a refiner that has continuously obtained an exemption and does not refer to a refiner that has allowed its exemption to lapse. In the opinion of the RFA, such a refiner had no exemption that can be extended.

The U.S. Court of Appeals for the 10th Circuit agreed with the RFA’s interpretation of “extension” and held that the EPA decisions to grant the extensions were invalid because the three refiners had no exemptions that the EPA could “extend.” In an opinion by Justice Neil Gorsuch, a majority of the Supreme Court disagreed with the 10th Circuit and held that a refiner that has allowed its prior exemption to lapse can apply for and receive an “extension” of its exemption.

The majority began by noting that the statute does not contain a definition of “extension.” The majority concluded that, while “extension” could bear more than one meaning, its “ordinary” meaning includes the situation in which an applicant has allowed its prior exemption to lapse. The majority referred to many sources to support its conclusion, including dictionary definitions, usage of the term in other statutes, usage of the term in ordinary conversation, and the structure of the statute in which the term appears.