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Environmental Protection Agency v. Calumet Shreveport Refining, LLC

Facts of the Case

Provided by Oyez

Congress amended the Clean Air Act to establish the Renewable Fuel Standard (RFS) program, which requires refiners and importers of transportation fuel to blend increasing amounts of renewable fuels into their products each year. To comply, these companies must either blend renewable fuels themselves or purchase credits called Renewable Identification Numbers (RINs) from other companies that do the blending. Recognizing that this might create hardship for small refineries (those processing less than 75,000 barrels of crude oil daily), Congress created three exemptions: an initial blanket exemption through 2011, extensions based on a Department of Energy study, and case-by-case exemptions that small refineries could petition for based on “disproportionate economic hardship.”

In 2022, the EPA issued two decisions denying multiple small refinery exemption petitions. The April 2022 decision denied 36 petitions for the 2018 compliance year (including some that had previously been granted in 2019), and the June 2022 decision denied 69 petitions covering the years 2016 through 2021. These denials were based on EPA’s new interpretation that required hardship to be caused solely by RFS compliance costs and its “RIN passthrough” economic theory. The affected refineries challenged these denials as impermissibly retroactive, contrary to law, and arbitrary and capricious.

The U.S. Court of Appeals for the Fifth Circuit vacated the EPA’s adjudications, denied a change of venue to the U.S. Court of Appeals for the D.C. Circuit, and remanded, based on its conclusion that the denial was (1) impermissibly retroactive; (2) contrary to law; and (3) counter to the record evidence.

Questions

  1. Should challenges by small oil refineries seeking exemptions from the requirements of the Clean Air Act’s Renewable Fuel Standard program be heard exclusively in the U.S. Court of Appeals for the D.C. Circuit because the agency’s denial actions are “nationally applicable” or “based on a determination of nationwide scope or effect”?

Conclusions

  1. EPA’s denials of small refinery exemption petitions from renewable fuel requirements must be challenged in the D.C. Circuit because they are locally applicable actions based on determinations of nationwide scope or effect. Justice Clarence Thomas authored the 7-2 majority opinion of the Court.

    The Clean Air Act establishes a tripartite venue system for reviewing EPA actions. “Nationally applicable” EPA actions must be challenged exclusively in the D.C. Circuit, while “locally or regionally applicable” actions ordinarily belong in regional courts of appeals. However, locally or regionally applicable actions that are “based on a determination of nationwide scope or effect” must be reviewed in the D.C. Circuit if EPA finds and publishes that such basis exists. To identify the relevant “action” for venue purposes, courts must look to the specific statutory authority EPA is exercising rather than how EPA packages its decisions. Each EPA denial of an individual refinery’s exemption petition constitutes its own “action” because the Clean Air Act allows each small refinery to petition EPA separately and requires EPA to act on each petition. An action is “nationally applicable” if it applies on its face throughout the entire country; alternatively, it is “locally or regionally applicable” if it applies only to particular places. EPA’s denial of a single refinery’s exemption petition applies only to that specific refinery in a particular location, making such denials paradigmatically locally or regionally applicable actions.

    The “nationwide scope or effect” exception applies because EPA’s statutory interpretation and economic theory formed the core basis for its denials. A “determination” refers to EPA’s justifications for taking action, and determinations have nationwide “scope” if they apply throughout the country as a legal matter or nationwide “effect” if they apply as a practical matter. An EPA action is “based on” such a determination only if that determination lies at the core of the agency action and forms the primary explanation for EPA’s decision—requiring more than but-for causation. EPA’s interpretation of “disproportionate economic hardship” and its RIN passthrough theory constitute clear determinations of nationwide scope because they apply generically to all refineries regardless of location. These determinations formed the core basis for EPA’s denials because EPA used them to reach a presumptive resolution to deny all petitions, then considered refinery-specific factors only to confirm it had no reason to depart from this presumptive disposition. Where EPA relies on determinations of nationwide scope or effect to reach a presumptive resolution, those determinations qualify as the primary driver of its decision, making EPA’s confirmatory review of refinery-specific facts merely peripheral by comparison.

    Justice Neil Gorsuch authored a dissenting opinion, joined by Chief Justice John Roberts, arguing that the Clean Air Act’s substantive provisions do not call for EPA to make determinations of nationwide scope or effect when acting on individual small refinery hardship petitions, and that the majority’s new test will make simple venue questions unnecessarily difficult and expensive to resolve.