Philadelphia Energy Solutions Refining and Marketing, LLC v. United States, 19-510

Background:

PES blended butane with gasoline and, after registering with the IRS in 2012, claimed AFM credits for quarters in 2014–2017, seeking about $550M in refunds.
The AFM credit (26 U.S.C. § 6426(e)) applies to a "mixture" of an "alternative fuel" and a "taxable fuel"; the statutory scheme cross-references excise-tax provisions (26 U.S.C. §§ 4041, 4081, 4083).
Treasury regulations treat butane as a "gasoline blendstock," and § 4083/regs define gasoline (and blendstocks) as taxable under § 4081.
Core dispute: whether butane qualifies as "liquefied petroleum gas" (an "alternative fuel" under § 6426(d)(2)) for the AFM credit or instead is a taxable fuel excluded from that definition.
Congress later amended the statute (Dec. 20, 2019) to exclude LPG and certain gases from the AFM credit prospectively and with limited retroactive effect; PES’s 2017 claims were within the amendment’s reach but the Court resolved the case on statutory interpretation independent of the amendment.
The Court granted the Government’s cross‑motion for summary judgment, holding butane is a taxable fuel (not an "alternative fuel" for § 6426(e)) and denied PES’s motion.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether butane is an "alternative fuel" (i.e., a "liquefied petroleum gas") under § 6426 for the AFM credit	Butane is a liquefied petroleum gas and thus an "alternative fuel," making butane/gasoline mixes eligible for § 6426(e) credits	Butane is a gasoline blendstock taxable under § 4081 and therefore excluded from the definition of "alternative fuel" for § 6426(e)	Butane is taxable (a gasoline blendstock) and cannot be an "alternative fuel" for § 6426(e); PES not entitled to AFM credit
Whether § 6426 should be read in isolation or in the context of related excise‑tax provisions	§ 6426’s plain language is clear and should govern without importing § 4081/§ 4041 definitions	§ 6426 explicitly cross‑references excise provisions; statutory context must inform meaning	Court reads § 6426 in context with §§ 4041/4081/4083; cross‑references control interpretation
Whether butane can be both a taxable fuel and an alternative fuel depending on source (petroleum‑derived vs natural gas‑derived)	Petroleum‑derived butane is taxable but natural gas‑derived butane is not a "petroleum product component," so it can qualify as LPG/alternative fuel	The Code does not treat "petroleum" differently across provisions; if butane is taxable under § 4081 it cannot be an alternative fuel under § 6426	Court rejects bifurcated treatment; butane that functions as a gasoline blendstock is taxable and thus excluded as an alternative fuel
Whether industry/dictionary definitions of "liquefied petroleum gas" control statutory meaning	Industry/dictionary definitions show LPG includes butane, supporting PES	Statutory scheme and established tax/regulatory definitions govern; dictionaries cannot override the interrelated Code provisions	Court declines to rely on glosses where statutory context and cross‑references provide decisive meaning; dictionaries do not change outcome

Key Cases Cited

U.S. Venture, Inc. v. United States, 2 F.4th 1034 (7th Cir.) (interpreting § 6426 in context of excise‑tax scheme and concluding butane is a taxable fuel)
Sunoco, Inc. v. United States, 908 F.3d 710 (Fed. Cir.) (tax credits are legislative grace and taxpayer bears burden to show entitlement)
Williams v. Taylor, 529 U.S. 420 (statutory interpretation begins with text)
Davis v. Michigan Dep’t of Treasury, 489 U.S. 803 (statutory words read in context of overall scheme)
Gustafson v. Alloyd Co., 513 U.S. 561 (interpret statutes to harmonize related provisions)
Whitman v. American Trucking Ass’ns, 531 U.S. 457 (Congress does not hide major changes in ancillary provisions)
Santa Fe Pacific R.R. Co. v. United States, 294 F.3d 1336 (Fed. Cir.) (statutory interpretation on summary judgment appropriate)