Suncor Energy (U.S.A.), Inc. v. U.S. Envtl. Prot. Agency
| Docket Number | 19-9612 |
| Decision Date | 17 October 2022 |
| Citation | 50 F.4th 1339 |
| Parties | SUNCOR ENERGY (U.S.A.), INC., Petitioner, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Sean Marotta (Danielle Desaulniers Stempel, with him on the briefs), Hogan Lovells US LLP, Washington, DC, appearing for Petitioner.
Caitlin McCusker, Attorney, Environment and Natural Resources Division, United States Department of Justice, Washington, DC (Todd Kim, Assistant Attorney General, Environment and Natural Resources Division, United States Department of Justice, Washington, DC, and Susan Stahle, Attorney, Office of the General Counsel, United States Environmental Protection Agency, Washington, DC with her on the brief), appearing for Respondent.
Before HOLMES, Chief Judge, BRISCOE and MORITZ, Circuit Judges.
Petitioner Suncor Energy (U.S.A.) Inc. (Suncor) owns and operates two adjacent oil refining operations in Commerce City, Colorado. Those operations are commonly known as the East Refinery and the West Refinery. In December 2018, Suncor filed with the United States Environmental Protection Agency (EPA) two petitions, one for the East Refinery and one for the West Refinery, seeking an extension of a temporary exemption that Congress had granted to "small refineries" from complying with the Clean Air Act's Renewable Fuel Standard Program. The EPA denied the two petitions in a written decision issued on October 25, 2019. Suncor then filed a timely petition for review of the EPA's decision with this court. Exercising jurisdiction pursuant to 42 U.S.C. § 7607(b)(1), we grant Suncor's petition for review, vacate the EPA's decision, and remand to the EPA for further proceedings.
"In 2005, Congress amended the Clean Air Act to establish the Renewable Fuel Standard ... Program" (RFS Program). Growth Energy v. Envtl. Prot. Agency , 5 F.4th 1, 7 (D.C. Cir. 2021) (citing Energy Policy Act of 2005, Pub. L. No. 109–58, 119 Stat. 594 ). The RFS Program, with a goal of "mov[ing] the United States towards greater reliance on clean energy, ... calls for annual increases in the amount of renewable fuel introduced into the U.S. fuel supply." Id . More specifically, the RFS Program calls for increasing annual "applicable volumes" of four categories of renewable fuel for the transportation sector: total renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. 42 U.S.C. § 7545(o)(2)(B)(i)(I)–(IV). The specified applicable volumes for these first three categories are prescribed by statute for each year through 2022, and for biomass-based diesel through 2012.1 Id . For subsequent years, the EPA is directed by statute to determine the applicable volumes. Id . § 7545(o)(2)(B)(ii).
Congress directed the EPA to promulgate regulations "contain[ing] compliance provisions applicable to refineries, blenders, distributors, and importers, as appropriate." Id . § 7545(o)(2)(A)(iii)(I). Although Congress did not define the term "refinery" in the Clean Air Act, the EPA had in place, at the time that Suncor filed its petitions in this case, a regulation that defined "refinery" to mean "any facility, including but not limited to, a plant, tanker truck, or vessel where gasoline or diesel fuel is produced, including any facility at which blendstocks are combined to produce gasoline or diesel fuel, or at which blendstock is added to gasoline or diesel fuel."2 40 C.F.R. § 80.2(h) (2019).
Congress afforded a "temporary exemption" from the RFS Program for "small refineries." 42 U.S.C. § 7545(o)(9)(A) ; see 40 C.F.R. § 80.1441. That "temporary exemption" effectively includes three components. First, Congress granted all small refineries a blanket exemption from the requirements of the RFS Program through 2011. 42 U.S.C. § 7545(o)(1)(K), (o)(9)(A)(i). Second, Congress directed the Department of Energy (DOE) to conduct a study "to determine whether compliance with the requirements of [the RFS Program] would impose a disproportionate economic hardship on small refineries," and it in turn directed the EPA to extend the temporary exemption "for a period of not less than 2 additional years" for any small refineries identified by the DOE.3 Id . § 7545(o)(9)(A)(ii)(I), (II). Third, Congress authorized small refineries "at any time" to "petition the Administrator for an extension of the [temporary statutory] exemption ... for the reason of disproportionate economic hardship." Id . § 7545(o)(9)(B)(i) ; see 40 C.F.R. § 80.1441(e)(2). In HollyFrontier , the Supreme Court interpreted this statutory extension provision to mean that "[a] small refinery can apply for (if not always receive) a hardship extension ‘at any time,’ " even if it saw a lapse in exemption coverage in a previous year. 141 S. Ct. at 2181.
Congress defined the phrase "small refinery" in the Clean Air Act to "mean[ ] a refinery 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 exceed 75,000 barrels." 42 U.S.C. § 7545(o)(1)(K). The EPA's own regulations define the phrase "small refinery" in an identical manner, i.e., to mean "a refinery for which the average aggregate daily crude oil throughput (as determined by dividing the aggregate throughput for the calendar year by the number of days in the calendar year) does not exceed 75,000 barrels." 40 C.F.R. § 80.1401.
Suncor owns and operates what it refers to as the East Refinery and the West Refinery. The East Refinery and the West Refinery are located next to each other in Commerce City, Colorado, which is situated north and east of downtown Denver (the photograph below was taken from the northeast side of Suncor's facilities looking southwest). Suncor purchased the West Refinery facility in 2003 from ConocoPhillips. Suncor purchased the East Refinery facility in 2005 from Valero Energy.
According to Suncor, the East Refinery and the West Refinery separately report their annual crude oil processing throughput data to the Energy Information Administration (EIA). The EPA uses the data reported to the EIA to determine a refinery's crude oil throughput.
On December 28, 2018, Suncor filed with the EPA two petitions for extension of the small refinery exception: one for the East Refinery and another for the West Refinery. The petition for the East Refinery alleged that in 2017 the East Refinery "had an average aggregate daily crude oil throughput of no greater than 75,000 barrels per day (bpd) (34,710 bpd for 2017)," and it projected that the average aggregate daily crude oil throughput for 2018 would "remain[ ] less than 75,000 bpd (32,489 bpd projected for 2018)." JA at 1. Similarly, the petition for the West Refinery alleged that in 2017 the West Refinery "had an average aggregate daily crude oil throughput of no greater than 75,000 barrels per day (bpd) (63,819 bpd for 2017)," and it projected that the average aggregate daily crude oil throughput for 2018 would "remain[ ] less than 75,000 bpd (67,528 bpd projected for 2018)." Id . at 24.
In July 2019, the EPA contacted Suncor and noted that, "[b]ased on the gasoline and diesel production in the RFS [Program] compliance spreadsheet" that Suncor submitted, "it look[ed] like the East and West refineries [we]re probably operating on an integrated basis." Id . at 54. To help it "better understand the level of integration between" the East Refinery and the West Refinery, the EPA asked Suncor to provide the EPA with information "showing the stream flows (including approximate volumetric flowrates) between the East and West refineries." Id . Suncor responded by stating, in pertinent part, that it "respectfully disagree[d] with any attempt to characterize the ... West Refinery and the ... East Refinery as an integrated refinery for purposes of the evaluation of its Petitions." Id . at 56. Suncor in turn asserted that "[t]he legal test for determining whether a refinery qualifies for an extension of its hardship exemption is set forth in 40 C.F.R. § 80.144(e)(2) and § 80.1401," and "is based solely on the daily average crude oil throughput at each refinery during the applicable calendar years." Id . (emphasis in original). "Any other factors," Suncor asserted, such as "the products produced, the precise manner in which they are produced, or arguments about a refinery's level of integration," "are legally irrelevant for determination of whether a refinery qualifies as a ‘small refinery.’ " Id .
Because Suncor did not provide the EPA with any additional information, the EPA "conduct[ed] its own research to understand the present operating configuration of Suncor's Commerce City Refinery." Id . at 75. Thereafter, on October 25, 2019, the EPA sent a letter to Suncor concluding "that the East Refinery and the West Refinery [we]re not eligible to petition for a small refinery exemption." Id . at 73. The EPA began by noting:
The statute does not define the word "refinery" or the phrase "average aggregate daily crude oil throughput" in the "small refinery" definition. EPA has promulgated various definitions of the word "refinery" in its regulations which are informative but not definitive for this evaluation. EPA has not defined the phrase "average aggregate daily crude oil throughput" in its regulations. The statutory and regulatory definitions provide neither guidance nor limits on how EPA must evaluate the words and phrases in the definition when determining whether a refinery meets the "small refinery" definition. EPA therefore has discretion to choose what factors and information it will consider in this evaluation.
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