Larry Klein & Sierra Club v. U.S. Dep't of Energy & Frontier Renewable Res., LLC

• Decision Date: 21 May 2014
• Docket Number: No. 13–1165.,13–1165.
• Citation: 753 F.3d 576
• Parties: Larry KLEIN and Sierra Club, Plaintiffs–Appellants, v. UNITED STATES DEPARTMENT OF ENERGY and Frontier Renewable Resources, LLC, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

753 F.3d 576

Larry KLEIN and Sierra Club, Plaintiffs–Appellants,

v.UNITED STATES DEPARTMENT OF ENERGY and Frontier Renewable Resources, LLC, Defendants–Appellees.

No. 13–1165.

United States Court of Appeals,Sixth Circuit.

Argued: Jan. 30, 2014.

Decided and Filed: May 21, 2014.

ARGUED:Marianne G. Dugan, Eugene, Oregon, for Appellants.

J. David Gunter II, United States Department of Justice, Washington, D.C., for Federal Appellee. ON BRIEF:Marianne G. Dugan, Eugene, Oregon, for Appellants. J. David Gunter II, United States Department of Justice, Washington, D.C., for Federal Appellee. Daniel P. Ettinger, Gaëtan Gerville–Ráche, Warner Norcross & Judd LLP, Grand Rapids, Michigan for Appellee Frontier Renewable.

BEFORE: MERRITT, SUTTON and STRANCH, Circuit Judges.

SUTTON, J., delivered the opinion of the court, in which MERRITT and STRANCH, JJ., concurred. STRANCH, J. (pp. 585–87), delivered a separate concurrence.

OPINION

SUTTON, Circuit Judge.

In connection with an alternative energy program created by Congress, Frontier Renewable Resources sought funding from the United States Department of Energy to build a plant in the Upper Peninsula of Michigan that would convert lumber into ethanol. The federal program subsidizes renewable energy projects as part of an effort to lessen the country's dependence on fossil fuels. Larry Klein and the Sierra Club sued to stop the project, claiming that the Department of Energy failed to comply with the National Environmental Policy Act when it conducted an assessment of the project and found no significant environmental impact. The district court rejected the claims because the plaintiffs lack standing to bring them and because the Department of Energy at any rate permissibly found no significant impact from the proposed plant. We reverse in part and affirm in part.

I.

The Energy Policy Act of 2005 directs the Department of Energy to fund alternative energy projects—“biorefinery demonstration projects” in the words of the statute. 42 U.S.C. § 16232(d). The idea was to encourage the Department to work with industry to develop ways to convert trees, crops and agricultural waste into energy—to create “technologies capable of making fuels from lignocellulosic feedstocks” in the words of the statute. Id. § 16232(c).

Frontier Renewable Resources applied for a grant to help it construct a proposed plant in Michigan's Upper Peninsula (Kinross Charter Township) that would convert lumber into ethanol. The Frontier plant will use 770 tons of wood chips per day to produce 20 million gallons of ethanol per year. The plant's design would allow a future expansion, one that could double the ethanol produced.

As required by the National Environmental Policy Act, the Department studied the potential environmental impact of the proposed plant before awarding the grant. It first prepared a draft environmental assessment. It then sought comments and questions about the draft. After receiving this input, it issued a final environmental assessment in July 2011 that proposed some changes to the Frontier plant's operations, including the use of a biomass boiler instead of natural gas boilers to generate power to run the plant. Because the environmental assessment showed relatively few environmental impacts from the Frontier plant, the Department issued a finding of “no significant impact” and granted Frontier's funding application. AR at 1957–62, 1970–72. The Department pledged roughly $100 million toward the construction of the plant, about 34% of its total cost.

Larry Klein and the Sierra Club sued the Department and Frontier to halt the project, alleging that the Department did not comply with the National Environmental Policy Act in making the grant. After the parties filed cross-motions for summary judgment, the district court ruled for the Department and Frontier on two grounds: The plaintiffs lacked standing to bring the claims, and the claims failed on the merits anyway.

II.

Before bringing a case in federal court, a plaintiff must establish standing to do so. The requirements of standing are: (1) “an injury in fact”; (2) “a causal connection” between the alleged injury and the defendants' conduct—that “the injury ... [is] fairly traceable to the challenged action ... and not the result of the independent action of some third party not before the court”; and (3) redressability—that the injury will “likely ... be redressed by a favorable decision.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal quotation marks and alterations omitted).

In debating whether standing exists in this case, the parties share considerable common ground. They agree that Klein established an injury in fact. They agree that Klein's injury spares Sierra Club the work of establishing an injury of its own. See Sch. Dist. of City of Pontiac v. Sec'y of U.S. Dep't of Educ., 584 F.3d 253, 261 (6th Cir.2009) (en banc). And they agree that, when it comes to procedural-rights cases like this one, the causation and redressability requirements are relaxed. See Lujan, 504 U.S. at 572 n. 7, 112 S.Ct. 2130 (“The person who has been accorded a procedural right to protect his concrete interest can assert that right without meeting all the normal standards for redressability and immediacy.”); Massachusetts v. EPA, 549 U.S. 497, 517–18, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007) (“When a litigant is vested with a procedural right, that litigant has standing if there is some possibility that the requested relief will prompt the injury-causing party to reconsider the decision that allegedly harmed the litigant.”).

In applying the three requirements of standing, the district court found that the plaintiffs could not establish causation and redressability, issues that it determined—based on its theory of redressability—“boil down to whether the Project could go forward without the DOE's funding.” R.68 at 15. It decided that the record showed the plant would go forward with or without funding and held that the plaintiffs therefore lacked standing. The parties disagree over the district court's theory of redressability and its factual determination.

What principally divides the parties on the question of fact undergirding the district court's application of its understanding of redressability is whether the district court correctly determined that the record shows that Frontier will build the plant no matter what—even if it loses a third of its funding. In our view, the plaintiffs have the better of the argument. The factual record on this score is spare. What we have is a statement, a fact and an inference. The statement appears in the Department's final environmental assessment. It says without explanation or elaboration that “this project could proceed if [the Department] decided not to provide financial assistance.” AR at 1342. The fact appears in the project's funding documents, which show that the Department's funding amounts to 34% of the cost of the plant. The inference is that, even though the project “could” proceed without federal funding, the withdrawal of a 34% subsidy would end the project. That indeed is the inference the Department drew, noting that it “has assumed ... that the project would not proceed without its assistance.” AR at 1342.

At the summary judgment stage, the plaintiffs get the benefit of any reasonable inferences that the facts permit. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). One can reasonably infer that this project would not proceed if more than a third of its funding disappeared, especially since that funding takes the form of a grant rather than a loan. Having pointed to a “specific fact [ ]” that supports their claim that Frontier will not build the plant if the Department pulls its purse string closed, the plaintiffs did all that is needed to avoid summary judgment under the district court's standard. Lujan, 504 U.S. at 561, 112 S.Ct. 2130 (internal quotation marks and citations omitted).

Before turning to the merits, two final points deserve mention. First, because it will resolve this appeal, we have addressed only the factual conclusion that underlies the Government's premise (shared by the district court) that whether or not Frontier would build the plant without federal funding resolves the redressability question. We need not, and thus do not, determine whether that view of redressability is correct.

Second, Klein and the Sierra Club blame the Administrative Procedure Act for the spare record on standing. In one sense, they have a point. The Act governs challenges to agency actions. And it requires courts to “review the whole record” compiled by the agency when evaluating the lawfulness of an agency decision, 5 U.S.C. § 706(2), meaning review of the agency's decision turns on the record before the agency at the time of its decision, not on later evidence developed outside the administrative record, see Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 419–20, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). Yet these truths do not prevent a district court from ascertaining whether Article III standing exists in the case or from developing a record to determine whether standing exists. The Administrative Procedure Act does not suspend the Federal Rules of Civil Procedure. Cf. Lujan, 504 U.S. at 561, 112 S.Ct. 2130 (referring to the normal “stages of the litigation” governed by the civil rules).

III.

As for the merits, the agency's environmental assessment adequately supported its finding that funding the plant would not have a significant impact on the environment.

The National Environmental Policy Act requires federal agencies to study the environmental impacts of “major Federal actions significantly affecting the quality of the human environment.” 42 U.S.C. § 4332(C). Regulations set forth a process for complying with the Act. An agency first prepares a report...