Take the Fifth

Designated for publication

• Calumet Shreveport Refining, L.L.C v. U.S. Environmental Protection Agency, 22-60266, c/w Wynnewood Refining Co., L.L.C. v. U.S. Environmental Protection Agency, 22-60425, c/w Ergon Refining, Inc. v. U.S. Environmental Protection Agency, 22-60433, c/w Placid Refining Co., L.L.C. v. U.S. Environmental Protection Agency, 22-60434, on petitions for review of EPA actions
  • Smith, J. (Higginbotham, Smith, Elrod), Higginbotham, J., dissenting; Clean Air Act, administrative law, Administrative Procedure Act, venue
  • Vacating EPA decision to deny refineries’ requested exemptions from the Renewable Fuel Standard (“RFS”) program of the Clean Air Act (“CAA”), on basis that the denial was “(1) impermissibly retroactive; (2) contrary to law; and (3) counter to the record evidence”; denying a change of venue; and remanding.
  • The Court first held that venue was proper in this Circuit rather than the D.C. circuit. The Court held that EPA could not overcome the presumption of venue in the local Circuit because EPA’s new approach in the exemption denials at issue were regional or local in scope rather than nationally applicable. “[I]t cannot be said that EPA’s promise to apply its ‘new approach’—as described in the Denial Actions—affects the legal rights, duties, or obligations of any small refinery whose exemption petitions were not the subject of the April Denial or June Denial. The agency’s promise is naked—neither the new interpretation nor the RIN pass through theory binds EPA in any future adjudication.”
  • Under the RFS program, small refineries can be exempt from the requirement imposed by 2005 and 2007 amendments to the CAA to comply with renewable fuel amounts or to purchase renewable fuel credits known as “Renewable Identification Numbers” (“RINs”) pursuant to a petition to the Administrator of the EPA showing a “disproportionate economic hardship” imposed by compliance, which petition must be acted on by the Administrator within 90 days of receipt. On April 7, 2022, EPA issued a denial of 36 petitions from 36 refiners for exemptions for the 2018 compliance year; on June 8, 2022, EPA issued a denial of 69 petitions from 33 refiners for exemptions for the 2016-2021 compliance years. Thirty-one of the 36 petitions at issue in the April denial had initially been granted by EPA, but then vacated and reconsidered; those petitions, along with the petitions at issue in the June denial, were denied under EPA’s revised interpretation of the exemption provision “and RIN-passthrough economic theory.” “EPA’s new interpretation and approach … displaced the adjudicative methodology the agency had relied on for over a decade,” which had applied “DOE’s findings through its application of the DOE scoring matrix. … But, starting with the April Denial, EPA has now completely abandoned the scoring matrix.” The new approach looked to whether “a small refinery’s disproportionate economic hardship [was] caused solely by RFS compliance costs”; and incorporated the “RIN passthrough” theory that RIN costs are the same for all parties whether acquired on the RIN market or acquired through blending of renewable fuels and that compliance costs were passed through in the price of refined products.
  • The Court first held that the EPA’s new approach to exemptions was impermissibly retroactive. It held that the petitioners had a protectable property right in the RFS exemptions because the exemption was an entitlement created expressly by statute, and that the petitioners were entitled to rely on the prior approach under the DOE scoring matrix. “Petitioners justifiably relied on EPA’s past agency practice when applying for the exemptions at issue. EPA—for over a decade—consistently used the 2011 DOE Study and scoring matrix to adjudicate small-refinery exemption petitions. That is exactly the kind of ‘well established’ agency practice that forms the basis for justifiable reliance.”
  • The Court also held that the EPA’s new approach was contrary to law. The Court held that the EPA’s narrow interpretation of “disproportionate economic hardship” to limit that hardship to the sole cause of RFS compliance was foreclosed by the statute in two ways: first, because the statute requires evaluation of hardship under a 2011 DOE study and by “other economic factors”; and second, because the ordinary understanding of the undefined phrase “disproportionate economic hardship” requires a broad examination of economic factors unique to small refiners in order to understand the proportionality of the hardship. The Court did reject several other arguments as to why the EPA decisions were contrary to law, including that EPA could only reject one petition at a time and not multiple petitions simultaneously–“We are textualists, not literalists,” wrote the Court.
  • The Court then held that the EPA’s new approach, relying on the RIN-passthrough theory in contravention of record evidence, was arbitrary and capricious.
  • Judge Higginbotham dissented. He would hold that EPA’s new approach to the RFS exemption process evident in the April and June denials is nationally applicable, such that venue was improper in this Circuit and should instead have been transferred to the D.C. Circuit.

• Wynnewood Refining Co., L.L.C. v. U.S. Environmental Protection Agency, 22-60357, c/w 22-60424, on petition for review of EPA action
  • Smith, J. (Higginbotham, Smith, Elrod), Higginbotham, J., concurring; Clean Air Act, venue
  • Transferring to the D.C. Circuit refiner’s challenge to EPA’s April 2022 Notice of Alternative Compliance Demonstration Approach to determine compliance with the Clean Air Act’s Renewable Fuel Standard program obligations.
  • Concurrent with denying the refinery’s exemption petition (see above decision), EPA also published as a “separate and independent” agency action the alternative compliance approach (“ACA”) notice, which allowed the small refiner’s to not have to retire their Renewable Identification Numbers (“RINs”) to use them as credits toward compliance with the RFS obligations for years before the current or prior year of the reporting. Wynnewood did not object to this non-retirement provision, but objected that it did not go far enough, as the “unretirement” of the older RINs still resulted in the loss of $19 million in RIN value and Wynnewood argued that instead it should have been granted “newly minted” RINs at current value.
  • The Court held that the issue raised by Wynnewood was a nationally applicable issue, and thus fell under the CAA’s mandatory venue provision in the D.C. Circuit.
  • Judge Higginbotham concurred, as he would hold that the majority’s focus on the “legal effect” was an unnecessary step not imposed by the statute, and that both this case and the companion case should have been transferred to the D.C. Circuit under a broader reading of the CAA’s mandatory venue provision.

Unpublished

• U.S. v. Rodriguez-Porro, 20-50093, appeal from W.D. Tex.
  • per curiam (King, Haynes, Graves), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Gonzalez-Hernandez, 22-40816, appeal from S.D. Tex.
  • per curiam (Wiener, Stewart, Douglas), criminal, search and seizure
  • Affirming convictions of possession of a firearm by a felon and illegal reentry, upholding denial of motion to suppress.

• U.S. v. Rios-Rubio, 23-10487, appeal from N.D. Tex.
  • per curiam (Elrod, Oldham, Wilson), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Leal, 23-40119, appeal from S.D. Tex.
  • per curiam (Wiener, Stewart, Douglas), criminal, sentencing
  • Affirming application of abuse-of-trust enhancement in sentencing on conviction of wire fraud.

• U.S. v. Martinez, 23-50229, appeal from W.D. Tex.
  • per curiam (Higginbotham, Stewart, Southwick), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• U.S. v. Paiva, 23-50239, appeal from W.D. Tex.
  • per curiam (Jones, Southwick, Ho), criminal, sentencing
  • Affirming conviction and 180-month sentence for possession of a firearm by a felon.

• Gilliard v. Groesbeck Police Department, 23-50457, appeal from W.D. Tex.
  • per curiam (Stewart, Clement, Engelhardt), § 1983
  • Denying IFP motion and dismissing as frivolous appeal from dismissal of § 1983 false arrest claim.