Renewable Fuels Association v. United States Environmental Protection Agency, 012420 FED10, 18-9533

Docket Nº:18-9533
Opinion Judge:BRISCOE, CIRCUIT JUDGE.
Party Name:RENEWABLE FUELS ASSOCIATION; AMERICAN COALITION FOR ETHANOL; NATIONAL CORN GROWERS ASSOCIATION; NATIONAL FARMERS UNION, Petitioners, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent, and HOLLYFRONTIER CHEYENNE REFINING, LLC; HOLLYFRONTIER REFINING AND MARKETING, LLC; HOLLYFRONTIER WOODS CROSS REFINING, LLC; WYNNEWOOD REFINING COMPAN...
Attorney:Matthew W. Morrison (Cynthia Cook Robertson and Bryan M. Stockton, with him on the briefs), Pillsbury Winthrop Shaw Pittman LLP, Washington, DC, appearing for Petitioners. Patrick R. Jacobi, Environmental Defense Section, United States Department of Justice, Denver, Colorado (Jeffrey Bossert Clar...
Judge Panel:Before BRISCOE, KELLY, and LUCERO, Circuit Judges.
Case Date:January 24, 2020
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

RENEWABLE FUELS ASSOCIATION; AMERICAN COALITION FOR ETHANOL; NATIONAL CORN GROWERS ASSOCIATION; NATIONAL FARMERS UNION, Petitioners,

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent,

and

HOLLYFRONTIER CHEYENNE REFINING, LLC; HOLLYFRONTIER REFINING AND MARKETING, LLC; HOLLYFRONTIER WOODS CROSS REFINING, LLC; WYNNEWOOD REFINING COMPANY, LLC, Intervenors - Respondents.

THE AMERICAN FUEL AND PETROCHEMICAL MANUFACTURERS, Amicus Curiae.

No. 18-9533

United States Court of Appeals, Tenth Circuit

January 24, 2020

Petition for Review from an Order of the Environmental Protection Agency (EPA No. 1-3876)

Matthew W. Morrison (Cynthia Cook Robertson and Bryan M. Stockton, with him on the briefs), Pillsbury Winthrop Shaw Pittman LLP, Washington, DC, appearing for Petitioners.

Patrick R. Jacobi, Environmental Defense Section, United States Department of Justice, Denver, Colorado (Jeffrey Bossert Clark, Assistant Attorney General, and Susan Stahle, Office of the General Counsel, United States Environmental Protection Agency, Washington, DC, with him on the briefs), appearing for Respondents.

Peter D. Keisler (C. Fredrick Beckner, III, Ryan C. Morris, and Peter C. Whitfield, with him on the briefs), Sidley Austin, LLP, Washington, DC, appearing for Respondents HollyFrontier Cheyenne Refining, LLC, HollyFrontier Refining & Marketing, LLC, and HollyFrontier Woods Cross Refining, LLC.

Brian H. Potts and Jonathan G. Hardin, Perkins Coie LLP, Madison, Wisconsin, on the briefs for Respondent Wynnewood Refining Company, LLC.

Richard S. Moskowitz, American Fuel & Pertrochemical Manufacturers, Washington, DC, and Robert J. Meyers and Thomas A. Lorenzen, Crowell & Moring, LLP, Washington, DC, filed an Amicus Curiae brief for American Fuel & Petrochemical Manufacturers, in support of Respondent.

Before BRISCOE, KELLY, and LUCERO, Circuit Judges.

BRISCOE, CIRCUIT JUDGE.

I. The Clean Air Act, renewable fuels, and small refineries ................... 7

A. Legislative and executive history ................................................. 7

B. Regulations and post-enactment history .................................. 17

C. The exemption extension petitions ............................................... 30

1. Cheyenne .............................................................................. 32

2. Woods Cross ........................................................................ 35

3. Wynnewood .......................................................................... 37

II. The Biofuels Coalition's standing to sue ............................................... 38

III. Other jurisdictional issues ....................................................................... 58

A. Timeliness ......................................................................................... 58

B. Ripeness ............................................................................................. 61

IV. The Biofuels Coalition's statutory construction challenges .......... 64

A. Extension of exemption .................................................................. 67

1. Textual analysis ................................................................ 69

2. The 2014 Small Refinery Rule ........................................... 79

B. Disproportionate economic hardship .......................................... 84

C. Hardship from compliance ............................................................. 87

V. The Biofuels Coalition's additional challenges .................................. 89

VI. motions ......................................................................................................... 97

VII. Conclusion ................................................................................................... 99

In the mid-2000s, Congress launched an effort to amend the Clean Air Act ("CAA") to try to reduce the nation's dependence on fossil fuels. The resulting legislation set ambitious targets for replacing specified volumes of crude oil fuel with renewable fuels. The legislation created several exemptions from this "biofuels" mandate, including a temporary exemption for small refineries if compliance in a given year would impose disproportionate economic hardship. The United States Environmental Protection Agency ("EPA" or "agency") is charged with implementing the legislation, and the agency has promulgated numerous regulations for that purpose.

At issue here are three EPA orders granting extensions of the small refinery exemption. Those orders were not made available to the public, for reasons later explained. The orders are being challenged by a group of renewable fuels producers who say they found out about the extensions through news articles or public company filings. We refer to these producers collectively as the Biofuels Coalition, and their petition to this court raises several important questions. The EPA opposes the Biofuels Coalition's appeal. So do the three recipients of the small refinery extensions, who have been granted leave to intervene.

As a preliminary matter, we conclude that the Biofuels Coalition has standing to sue. Constituents of the Biofuels Coalition have established an injury in fact in the form of lower prices, lower revenues, or increased competition with respect to the renewable fuels those constituents market and sell. For standing purposes, this injury is fairly traceable to the EPA's decisions to grant extensions of the three small refinery exemptions in question. A favorable judicial decision is likely to redress at least some of this injury, assuming, as we must, that the EPA will continue to follow Congress's directive to implement and flesh out the renewable fuels program.

We also conclude that this court otherwise has jurisdiction over the matter. This case does not involve a challenge to a nationally-applicable agency rule, which challenge could only be heard in the United States Court of Appeals for the District of Columbia Circuit. The Clean Air Act contains a 60-day filing deadline with jurisdictional implications, but that deadline is triggered when final agency action appears in the Federal Register. The EPA never published the extension orders at issue. And although members of the Biofuels Coalition were not invited to participate in the proceedings that generated the orders, the record is sufficient (and the controversy is ripe) for judicial resolution.

On the merits, we agree in part with two of the Biofuels Coalition's three statutory construction arguments. The amended Clean Air Act allows the EPA to grant an "extension" of the small refinery exemption - not a stand-alone "exemption" - in response to a convincing petition. The statute limits exemptions to situations involving "extensions," with the goal of forcing the market to accept escalating amounts of renewable fuels over time. None of the three small refineries here consistently received an exemption in the years preceding its petition. The EPA exceeded its statutory authority in granting those petitions because there was nothing for the agency to "extend." Further, one of the EPA's reasons for granting the petitions was to address disproportionate economic hardship caused by something other than compliance with the renewable fuels mandate. That, too, was beyond the agency's statutory authority. The Biofuels Coalition additionally claims that the EPA read the word "disproportionate" out of the statute, but we reject that argument.

Once we move from the topic of statutory authority, we disagree with almost all of the Biofuels Coalition's assertions that the EPA acted arbitrarily and capriciously in granting the extension petitions. We hold that the agency did abuse its discretion, however, by failing to address the extent to which the three refineries were able to recoup their compliance costs by charging higher prices for the fuels they sell. The EPA has studied and staked out a policy position on this issue. One of the refineries expressly raised the issue in its extension petition. It was not reasonable for the agency to ignore it.

I. The Clean Air Act, renewable fuels, and small refineries

As background for our textual analysis, we briefly summarize the legislative and executive history of the pertinent amendments to the Clean Air Act, along with the law's provisions relating to small refineries. We summarize EPA regulations and post-enactment legislative and executive branch pronouncements concerning these small refinery provisions as well. We then describe the orders issued by the EPA granting the three small refinery extension petitions at the heart of this case.

A. Legislative and executive history

Congress changed the "Renewable Content of Gasoline" when it amended the Clean Air Act through the Energy Policy Act of 2005 ("Energy Policy Act"), Pub. L. No. 109-58, 119 Stat. 594. The Energy Policy Act directed the EPA to promulgate regulations to ensure that gasoline sold or introduced into commerce in the United States included rising amounts of renewable fuel, going from four billion gallons in 2006 to seven and a half billion gallons in 2012. Id. §§ 1501(o)(2)(A)-(B). Renewable fuel targets for 2013 and beyond were to be determined later. Id. § 1501(o)(2)(B)(ii). The statute also created a "Credit Program" under which fuel refiners, blenders, or importers could buy or sell compliance credits. Id. § 1501(o)(5). The Energy Policy Act contained a "Temporary Exemption" until calendar year 2011 for small refineries, defined as those "for which the average aggregate daily crude oil throughput for a calendar year (as determined by dividing the aggregate throughput for the calendar year by the number of days in the calendar year) does not...

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