Wynnewood Refining v. EPA ( 2023 )

Case: 22-60357 Document: 00516976854 Page: 1 Date Filed: 11/22/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
_____________ FILED
November 22, 2023
No. 22-60357
Lyle W. Cayce
consolidated with
Clerk
No. 22-60424
_____________
Wynnewood Refining Company, L.L.C.,
Petitioner,
versus
United States Environmental Protection Agency,
Respondent.
______________________________
Petition for Review of an Action of
the Environmental Protection Agency
Agency Nos. 87 Fed. Reg. 24294,
EPA-420-R-22-012
______________________________
Before Higginbotham, Smith, and Elrod, Circuit Judges.
Jerry E. Smith, Circuit Judge:
Wynnewood Refining Company, L.L.C. (“Wynnewood”), challenges
the EPA’s April ACA—an agency action that created an alternative-
compliance approach for certain small refineries with outstanding Renewable
Fuel Standard program (“RFS”) obligations.1 Under the April ACA, certain
_____________________
1
Notice of April 2022 Alternative Compliance Demonstration Approach for
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small refineries—including Wynnewood—are not required to retire any
Renewable Identification Numbers (“RIN”) to meet their 2018 RFS com-
pliance obligations. Wynnewood contends the April ACA does not go far
enough—in its view, EPA should have provided additional relief in the form
of replacement RINs. We do not resolve the merits of Wynnewood’s claim,
for venue is proper only in the District of Columbia Circuit.
I.
This matter is procedurally coordinated with Calumet Refining Co. v.
EPA, No. 22-60266, __ F.4th __ (5th Cir. 2023), which reviews the relevant
statutory and regulatory background in detail. Because we transfer this case
for improper venue under 42 U.S.C. § 7607(b)(1), that background is unnec-
essary to the disposition of this case, so we proceed directly to the procedural
history.
A. Procedural History
This matter involves the CAA’s subparagraph (B) small refinery
exemption. See id. § 7545(o)(9)(B). In September 2018, Wynnewood filed
its subparagraph (B) exemption petition for RFS compliance year 2018. EPA
granted Wynnewood’s petition in August 2019.2
That exemption petition was subsequently ensnared in proceedings
litigated in the D.C. Circuit. See Renewable Fuels Ass’n v. EPA, No. 19-1220
(D.C. Cir. Oct. 22, 2019). Details concerning the D.C. Circuit proceedings
are mostly unrelated to the dispute at hand—apart from two facts: The first
_____________________
Certain Small Refineries Under the Renewable Fuel Standard Program, 87 Fed. Reg.
24,294 (April 25, 2022).
2
Memorandum Decision on 2018 Small Refinery Exemption Petitions from Anne
Idsal, Acting Asst. Admin’r, Off. of Air and Rad. to Sarah Dunham, Dir., Off. of Transp.
and Air Qual. (Aug. 9, 2019), at 2.
2
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is that among the issues to be decided in those proceedings were challenges
by renewable-fuels interests to the legality of EPA’s grant of the 2018 small
refinery exemptions. The second is that EPA moved for voluntary remand
without vacatur to consider Wynnewood’s petition with regard to the Tenth
Circuit’s “alternate holdings” in Renewable Fuels Ass’n v. EPA (“RFA”).3
The D.C. Circuit granted EPA’s motion on December 8, 2021. 4
On remand, EPA flipped its position on Wynnewood’s 2018 exemp-
tion petition. Applying its new interpretation of the CAA and RIN-
passthrough economic theory, the agency denied Wynnewood’s 2018
exemption petition, along with thirty-five other 2018 compliance year
exemption petitions (“April Denial”).5
Concurrent with the April Denial, EPA published the April ACA in a
“separate and independent” agency action.6 The April ACA addresses the
RFS compliance obligations of the thirty-one small refineries whose 2018
compliance-year petitions had initially been granted in 2019.7 Under the
April ACA, those thirty-one refineries do not have to retire any RINs to meet
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3
948 F.3d 1206 (10th Cir. 2020) (“RFA”), rev’d on other grounds sub nom. Holly-
Frontier Cheyenne Refin., LLC v. Renewable Fuels Ass’n, 141 S. Ct. 2172 (2021)(“HollyFrontier”) and vacated, No. 18-9533, 2021 WL 8269239 (10th Cir. July 27, 2021).
4
Renewable Fuels Ass’n, No. 19-1220, Doc. 1925942, at 3 (D.C. Cir. Dec. 12, 2021).
5
April 2022 Denial of Petitions for Small Refinery Exemptions Under the Renew-
able Fuel Standard Program, 87 Fed. Reg. 24,300 (Apr. 25, 2022).
6
EPA, EPA-420-R-22-012, April 2022 Alternative RFS Compliance Demonstra-
tion Approach for Certain Small Refineries (2022), at 2 (“While the need for the Com-
pliance Action flows from the SRE Denials, and there would be no need for the Compliance
Action without the SRE Denials, the actions are separate and independent from each
other.”).
7
See supra note 5 and accompanying text.
3
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their 2018 RFS compliance obligations.8 Instead, they are required only to
“resubmit their annual compliance reports for 2016, 2017, and/or 2018 and
report their actual gasoline and diesel fuel production, actual annual RVOs,
and zero RIN deficit carryforward into the following compliance year.” 9
II.
Wynnewood does not object to the April ACA’s elimination of the
RIN retirement obligations. Nor does it object to the April ACA’s alternative
reporting requirements. Instead, it complains that the April ACA does not
go far enough.
Wynnewood theorizes that it has been shortchanged by EPA because
it purchased and retired approximately $31 million in RINs while it waited
for EPA to adjudicate its 2018 exemption petition. Once that petition was
granted, however, Wynnewood did not have to retire any RINs. EPA thus
“unretired” and returned those 2018-eligible RINs to Wynnewood.10
But a RIN may be used for compliance only during the calendar year
in which it was generated or the calendar year following. 40 C.F.R.
§ 80.1427(a)(6)(i); see also id. §§ 80.1428(c), 80.1431(a)(iii). So it is impos-
sible for a refinery to use its 2018-eligible RINs to meet its RFS obligations
for compliance years 2020 and beyond. Any 2018-eligible RINs thus lose
_____________________
8
See generally EPA, EPA-420-R-22-012, April 2022 Alternative RFS Compliance
Demonstration Approach for Certain Small Refineries (2022).
9
Id. at 19.
10
That is the position Wynnewood would have been in had EPA not subsequently
denied its 2018 exemption petition in the April Denial. Wynnewood challenges the legality
of that subsequent denial in a separate case. See Calumet, No. 22-60266 (5th Cir. 2023). In
that case, Wynnewood contends EPA’s denial of its 2018 exemption petition was imper-
missibly retroactive, contrary to law, and counter to the evidence.
4
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value over time. That’s why Wynnewood’s 2018-eligible RINs—which it
retired whilst waiting for EPA to adjudicate its exemption petition—had lost
approximately $19 million in value by the time they were unretired and sent
back to the refinery.
Wynnewood therefore claims that it can be made whole only if the
April ACA—in addition to excusing its 2018 RFS compliance obligations—
replaces its 2018-eligible RINs with newly-minted “replacement RINs” that
can be used to meet current RFS compliance obligations.
III.
We should not proceed to the merits before addressing EPA’s motion
to transfer venue to the D.C. Circuit under 42 U.S.C. § 7607(b)(1). The
CAA includes a channeling provision delineating the appropriate venue in
which a petitioner may seek judicial review:
A petition for review of . . . any . . . nationally applicable
regulations promulgated, or final action taken, by the Admin-
istrator under this chapter may be filed only in the United
States Court of Appeals for the District of Columbia. A peti-
tion for review of the Administrator’s action . . . under this
chapter . . . which is locally or regionally applicable may be filed
only in the United States Court of Appeals for the appropriate
circuit. Notwithstanding the preceding sentence a petition for
review of any action referred to in such sentence may be filed
only in the United States Court of Appeals for the District of
Columbia if such action is based on a determination of nation-
wide scope or effect and if in taking such action the Adminis-
trator finds and publishes that such action is based on such a
determination.
42 U.S.C. § 7607(b)(1).
Determining where proper venue lies under § 7607(b)(1) requires us
to conduct a two-step analysis: In the first step, we determine whether the
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challenged agency action is “nationally applicable,” as distinguished from
“locally or regionally applicable.” Id. If nationally applicable, our inquiry
ends because proper venue exists only in the D.C. Circuit. But if the chal-
lenged action is “locally or regionally applicable,” we proceed to step two.
That second step begins with the default presumption that venue is
proper in this circuit. See Texas v. EPA, 829 F.3d 405, 419 (5th Cir. 2016)
(“Texas 2016”). To overcome that presumption, a challenged action must
satisfy two necessary and independent sub-conditions. Namely, we must
determine that (a) it “is based on a determination of nationwide scope or
effect” and (b) the Administrator, in taking that challenged action, “finds
and publishes that such action is based on such a determination.” Only if
both sub-conditions are satisfied is venue proper solely in the D.C. Circuit.
A. Step One
EPA first avers the April ACA is “nationally applicable” agency
action because it “applied a ‘common, nationwide analytical method’ when
issuing the April [ACA].” The agency analogizes the April ACA to the SIP
Calls in Texas v. EPA, where this court reasoned that the agency’s disap-
proval of and call to correct thirteen states’ plans regarding air quality stan-
dards was a “nationally applicable regulation.” No. 10-60961, 2011 WL
710598, at *3 (5th Cir. Feb. 24, 2011) (“Texas 2011”).
As explained in Calumet, No. 22-60266 (5th Cir. 2023), we disagree
with EPA’s contention. In-circuit precedent counsels that it is the legal
effect—and not the practical effect—of an agency action that determines
whether it is “nationally applicable.” See Texas 2016, 829 F.3d at 419. The
April ACA has no legal effect on any small refinery other than the thirty-one
specifically identified in the action. It is therefore not “nationally applicable”
action under § 7607(b)(1).
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B. Step Two
We begin step two with the presumption that venue is proper in this
circuit. That’s because we have already determined, at step one, that the
agency action is “locally or regionally applicable.” See Texas 2016, 829 F.3d
at 419. A challenged action overcomes that presumption if (1) it is based on
a determination of nationwide scope or effect, and (2) the Administrator, in
taking such action, “finds and publishes that such action is based on such a
determination.” 42 U.S.C. § 7607(b)(1). EPA contends the April ACA
meets both sub-conditions.
We begin with the second sub-condition—whether the Administrator
found and published that such an action was based on a determination of
nationwide scope or effect. That is easily met, as no party contests that the
Administrator so found and published in the April ACA.11
Turning to the first sub-condition, both parties agree that we “inde-
pendent[ly] assess[]” whether the action is based on a determination of
nationwide scope or effect. Texas 2016, 829 F.3d at 420 (citation omitted).
Consequently, we do not accord deference to EPA’s determination.
After conducting an independent determination, we agree with EPA
that the April ACA is based on a determination of nationwide scope or effect.
That’s because the April ACA was based on the collective impact flowing from
the April Denial—a separate and independent agency action.
Recall that in the April Denial, EPA denied thirty-six small refineries’
2018 exemption petitions. Small refineries whose petitions were adjudicated
_____________________
11
See 87 Fed. Reg. at 34,874 (“[T]he Administrator is exercising the complete
discretion afforded to him under the CAA to make and publish a finding that this action is
based on a determination of ‘nationwide scope or effect’ within the meaning of CAA
section 307(b)(1).”).
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in the April Denial thus had an immediate obligation to comply with their
2018 RFS obligations by retiring 2018-eligible RINs. That meant they had to
retire a total of 1.4 billion 2018-eligible RINs—320 million of which had to be
“advanced biofuel RINs.”
But EPA found there were not enough 2018-eligible RINs left. At the
time of the April ACA, EPA decided that there were only 55 million unretired
advanced biofuel RINs. It was therefore impossible for all small refineries
impacted by the April Denial to satisfy their 2018 RFS compliance obliga-
tions. Furthermore, EPA found that there were only 1.8 billion unretired
RINs. According to the agency, a 1.4 billion RIN drawdown could “jeopard-
ize compliance for all obligated parties” by eliminating “an important and
necessary programmatic and cost spike buffer,” which could thus potentially
“undermine the proposed standards for 2022 . . . to the point of making them
unachievable.”12 EPA exclusively addressed the continuing viability of the
RFS program as a whole. Consequently, the April ACA is based on a deter-
mination of nationwide scope or effect.
Wynnewood disagrees. It claims the April ACA is not based on a
determination of nationwide scope or effect because “it is predicated on
the 31 individualized hardship adjudications that EPA previously made
regarding those same 31 refineries, all of which were indisputably ‘local or
regional in scope.’”
We agree with EPA. True enough, the April ACA would not exist
without the April Denial.13 Also true, each of the exemption petitions in the
_____________________
12
EPA, EPA-420-R-22-012, April 2022 Alternative RFS Compliance Demonstra-
tion Approach for Certain Small Refineries (2022), at 13–14 (emphasis omitted).
13
Id. at 2 (“[T]he need for the [April ACA] flows from the [April Denial], and
there would be no need for the [April ACA] without the [April Denial] . . . .”).
8
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April Denial was adjudicated based on refinery-specific facts.14 None of that
matters. Both Wynnewood and EPA agree that the April ACA is “separate
and independent” from the April Denial. That means—as Wynnewood’s
own briefing admits—that “the April ACA must independently pass APA
muster.” Accordingly, the April ACA can be “based on a determination of
nationwide scope or effect” even if the adjudications in the April Denials are
based on refinery-specific determinations.
* * * * *
The April ACA was based on the collective effects of the April Denial
on the RFS program as a whole. That is a “determination of nationwide
scope or effect” under § 7607(b)(1). EPA’s motion to transfer venue is
GRANTED, and this matter is TRANSFERRED to the District of Col-
umbia Circuit.
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14
See Calumet, No. 22-60266 (5th Cir. 2023).
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Patrick E. Higginbotham, Circuit Judge, concurring:
I agree that venue is only proper in the D.C. Circuit, but write
separately to express my disagreement with the majority’s reliance on the
“legal effect” theory at step one of its venue analysis. Instead, as I explain in
dissent in Calumet, No. 22-60266, __ F.4th __ (5th Cir. 2023), I would look
to the plain meaning of 42 U.S.C. § 7607(b)(1) to determine proper venue.
10