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D.C. Circuit Finds Increase in EPA Renewable Fuel Standard Exemptions Issued Is Not Subject to Judicial Review as a Final Agency Action

D.C. Circuit Finds Increase in EPA Renewable Fuel Standard Exemptions Issued Is Not Subject to Judicial Review as a Final Agency Action
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Beginning in 2016, approvals by the U.S. Environmental Protection Agency (EPA) of small oil refinery exemptions from requirements to incorporate a minimum amount of renewables in transportation fuels increased dramatically—from a low of seven under the prior administration to a high of 35. A trade group representing suppliers of renewable fuels filed a petition challenging the increase itself as a final agency action. The D.C. Circuit Court of Appeals dismissed the petition on the grounds that an evidentiary trend, alone, is not judicially reviewable. Nonetheless, the litigation appears to have, directly and indirectly, caused sufficient public disclosures of the policy changes driving the increase to support a viable action. [Advanced Biofuels Association v. U.S. Environmental Protection Agency, ___F.3d___, Case No. 18-1115 (D.C. Cir. Nov. 12, 2019).]


In 2005 Congress amended the federal Clean Air Act by adopting the Renewable Fuel Program, requiring transportation fuel sold in the United States to meet “annual benchmarks” for the incorporation of renewable fuel. Energy Policy Act of 2005, Pub. L. No. 109-58, § 1501; 42 U.S.C. § 7545(o)(2)(A)(1). From the initial benchmark set, the proportion of renewable fuel required increases each year. 42 U.S.C. § 7545(o)(2)(B)(1). The Program imposes obligations on both fuel importers and domestic refineries. 42 U.S.C. § 7545(o)(3)(B)(ii)(I).

Congress statutorily exempted “small refineries,” defined as those “for which the average aggregate daily crude throughput for a calendar year … does not exceed 75,000 barrels” (42 U.S.C. § 7545(o)(1)(K), from compliance with the Renewable Fuel Program for the first year, and thereafter “established a framework for granting individual exemptions when compliance would impose a ‘disproportionate economic hardship’ on a small refinery.” 42 U.S.C. § 7545(o)(9)(A)(ii).

Implementation of the Renewable Fuel Program is shared among the U.S. Department of Energy (DOE) and the EPA: Energy, specific to the small refinery exemption, is charged with studying whether the benchmarks “impose a disproportionate economic hardship on small refineries” (42 U.S.C. § 7545(o)(9)(A)(ii)(1)), while EPA is charged generally with “ensur[ing]” compliance across the Program, including granting small refinery exemptions. 42 U.S.C. § 7545(o)(2)(A)(i)).

DOE initially “. . .developed two scoring matrices, designed to assess 1) disproportionate structural and economic effects of statutory compliance, and 2) the impact of compliance on a refinery’s viability.”

Using these matrices, EPA granted two-year extensions to 24 refineries, and for subsequent years evaluated extension applications using the Energy matrices “and other economic factors.” 42 U.S.C. § 7545(o)(9)(B)(ii).

Beginning in 2016, “the number of exceptions granted increased dramatically”—from a low of seven granted in 2015 to 35 granted in 2017. This radical increase in the granting of exemptions did not become known, however, until it began to be reported in the media in April 2018, because:

“. . .those extension decisions were neither published nor even publicly acknowledged. Instead, the EPA designated the decisions, in full, as confidential business information. As a result, the identities of the applicants, the decisions, and the decisions’ rationales were kept completely confidential, unless the refinery itself chose to make the decision or conclusions public.”

Petitioner Advanced Biofuels Association, whose members were adversely affected by the granting of exemptions, was therefore “unable to identify, let alone seek judicial review of, the relevant exemption decisions in individual refinery cases. Nor did the EPA issue any public document acknowledging or explaining the sudden uptick in exemptions.

The Advanced Biofuels Association (Association) brought its petition in May 2018, challenging what it described as EPA’s “decision to modify the criteria or lower the threshold by which [it] determines whether to grant small refineries an exemption[.]” On the Association’s motion, EPA “provid[ed] copies of decision documents, issued in 2017 and 2018, under a protective order.” Separately, EPA posted to its website a “dashboard” listing “the total number of [exemption] petitions received, granted, denied, and withdrawn for each compliance year.”

In separate litigation filed by a small refinery whose exemption petition was denied, EPA described its new rule for implementing the exemption:

“In prior decisions, EPA considered that a small refinery could not show disproportionate economic hardship without showing an effect on “viability,” but we are changing our approach. While a showing of a significant impairment of refinery operations may help establish disproportionate economic hardship, compliance with [renewable fuel] obligations may impose a disproportionate economic hardship when it is disproportionately difficult for a refinery to comply with its [renewable fuel] obligations—even if the refinery’s operations are not significantly impaired.”

Lastly, in August 2019 EPA publicly released a formal memorandum documenting its new test for and ultimate rulings addressing forty-two small refinery exemptions for compliance year 2018.” EPA explained that:

“. . .while it ‘[p]reviously. . .considered that [disproportionate economic hardship] exist[ed] only when a small refinery experience[d] both disproportionate impacts and viability impairment,’ the agency had now changed its approach and only requires a refinery to meet one of those prongs.”

The 2019 Memorandum also announced that EPA would henceforth grant only “full waivers,” even where Energy recommended “partial waivers,” as “Congress intended the extension to be a full, and not a partial, exemption.”

The D.C. Circuit’s Decision

EPA moved for dismissal on the basis that no final agency action was identified in the petition, as required under the Clean Air Act. 42 U.S.C. § 7607(b)(1). The final action challenged “must exist at the time the petition is filed.” City of New Orleans v. SEC, 137 F.3d 638, 639 (D.C. Cir. 1998).

Final agency action subject to judicial review can take a variety of forms. The most common are notice and comment rulemaking and case-by-case formal or informal adjudications. 5 U.S.C. §§ 553, 554. Agencies may use informal adjudications “when they are not statutorily required ‘to engage in the notice and comment process’ or to ‘hold proceedings on the record.’ ” Neustar, Inc. v. FCC, 857 F.3d 886, 893 (D.C. Cir. 2017) (quoting Safe Extensions, Inc. v. FAA, 509 F.3d 593, 604 (D.C. Cir. 2007)). Within those adjudications, agencies may announce decisional principles that affect similarly situated non-parties in future adjudications. Conference Group, LLC v. FCC, 720 F.3d 957, 965–966 (D.C. Cir. 2013).

Here, EPA granted exemptions via informal adjudications, so that “[t]he rules of decision governing the grant or denial of exemption extensions were manifested through rulings on individual refineries’ applications.” But the petition challenged neither any particular informal adjudication of an exemption application, nor any “agency action announcing the adoption of a new methodological basis for decisions. Cf. Appalachian Power Co. v. EPA, 208 F.3d 1015, 1022 (D.C. Cir. 2000) (judicially reviewable final action existed where EPA issued a guidance document that reflected ‘the agency’s settled position,’ and that ‘EPA officials in the field [were] bound to apply’).” Rather, the petition challenged the increase in the number of exemptions granted, which it argued “could ‘only be attributable to a decision by EPA to modify the criteria or lower the threshold by which it evaluates and grants exemptions,’” asserting “that perceived trend in agency decisionmaking as itself unlawful.”

No Final Agency Action

The Court of Appeals rejected “identification of a pattern across myriad circumstances” as itself “a final agency action,” while noting that it could be “evidence of a final agency action.” Thus, the petition was dismissed, despite the court noting very serious reservations with EPA’s actions “To be sure, the EPA’s briefing and oral argument paint a troubling picture of intentionally shrouded and hidden agency law that could have left those aggrieved by the agency’s actions without a viable avenue for judicial review.”

In this instance, however, the apparent “ongoing pattern of genuinely secret law” disclosed over the course of this litigation may, as a result of the various disclosures triggered, directly or indirectly, by the petition, may ultimately be subject to judicial review via challenge to “the August 2019 formal and public memorandum announcing the EPA’s new decisional framework and applying it to forty-two refineries.”

Conclusion and Implications

Several years into the transition to a new executive’s administration, the cumulative effects of pressure for public disclosure is providing a clearer and broader picture of where implementation of environmental law has been radically transformed. It remains to be seen whether the administration’s increasingly sophisticated documentation of its processes will withstand substantive scrutiny.

(Deborah Quick)