On Friday, June 25, 2021, the U.S. Supreme Court reversed a Tenth Circuit Court decision that had vacated an Environmental Protection Agency (“EPA”) exemption relieving small refineries from the fuel blending requirements of the Renewable Fuel Program (“RFP”), codified by 42 U.S.C. § 7545(o). The decision represents a huge victory for small refineries.
In an effort to reduce greenhouse gas emissions and reduce America’s dependence on imported oil, Congress created the Renewable Fuel Program in 2005, and expanded it in 2007, to require gasoline sold in the United States to contain a certain blend of renewable fuels. However, Congress created a temporary small refinery exemption to avoid disparately impacting small refiners (defining a “small” refiner as one with an average daily crude oil throughput of 75,000 barrels or less). Although the exemption applied through 2011, any small refinery could petition the Department of Energy for a two-year extension of the exemption. After two years, Congress permitted small refineries to petition for additional extensions of the exemption in circumstances of “disproportionate economic hardship,” as determined by the EPA.
The Court’s decision in HollyFrontier Cheyenne Refining, LLC, et al. v. Renewable Fuels Association et al. considered whether the EPA could grant an extension to small refineries that did not continuously receive a hardship exemption each year since 2011. Renewable fuel producers argued that small refineries must have a continuous, unbroken exemption to be eligible for an extension. However, the Court held that the statutory language of the RFP, under 42 U.S.C. § 7545(o), imposed no continuity requirement upon small refineries, confirming that a small refinery that previously received a hardship exemption may obtain an extension even if it did not continuously receive the exemption.
The HollyFrontier decision represents a win, if temporary, for the independent refining industry. Notably, in January 2021, the EPA announced that it would stop granting hardship exemptions to small refineries that had not received continuous exemptions since 2011. It is not clear whether EPA will resume granting hardship exemptions in light of the Court’s decision or withhold hardship exemptions on other grounds.
On Tuesday, June 29, 2021, the Supreme Court decided PennEast Pipeline Co. v. New Jersey, holding that the Federal Government had appropriately delegated to private companies federal eminent domain power to seize State-controlled property. The case represents a win for future pipeline developers wishing to build interstate natural-gas pipelines.
The Natural Gas Act (“NGA”) of 1938 regulates the transportation and sale of natural gas in interstate commerce. It requires a natural gas company wishing to construct an interstate pipeline to obtain from the Federal Energy Regulatory Commission (“FERC”) a certificate reflecting that such construction “is or will be required by the present or future public convenience and necessity.” 15 U.S.C. § 717f(e). Congress amended the NGA in 1947 to authorize certificate holders to exercise federal eminent domain power to obtain property rights to construct a pipeline under § 717f(h).
FERC granted petitioner PennEast Pipeline Co. a certificate of public convenience and necessity to build a 116-mile pipeline from Pennsylvania to New Jersey. PennEast filed various eminent domain lawsuits in Federal District Court in New Jersey, arguing that, under federal law, the certificate granted the authority to obtain rights-of-way along the FERC-approved pipeline route and condemn parcels of land in which New Jersey asserted property interest. New Jersey, which opposed the pipeline, moved to dismiss the complaints on sovereign immunity grounds, arguing that it was immune from the developer’s eminent domain lawsuits under the 11th Amendment. The District Court denied New Jersey’s motion, granting PennEast a condemnation order and preliminary injunctive relief. The Third Circuit then vacated the District Court’s decision, holding that PennEast was not authorized to condemn New Jersey’s property under § 717f(h) because the statute did not clearly delegate to certificate holders the Federal Government’s ability to sue nonconsenting States. The Supreme Court reversed the Third Circuit Court’s decision and remanded for further proceedings.
In his opinion, Chief Justice Roberts wrote, “Although nonconsenting States are generally immune from suit, they surrendered their immunity from the exercise of the federal eminent domain power when they ratified the Constitution. That power carries with it the ability to condemn property in court. Because the Natural Gas Act delegates the federal eminent domain power to private parties, those parties can initiate condemnation proceedings, including against state-owned property.”