Court Opinion

ID: 9901956
Source: CourtListenerOpinion
Date Created: 2023-11-22 19:00:32.168257+00
Date Added: 2024-06-11T09:21:42.158037
License: Public Domain

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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                                         22-60357
                                     c/w No. 22-60424

   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.

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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

          _____________________
          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.

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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.

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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] . . . .”).

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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.

          _____________________
          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.

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