Court dismisses ABFA’s petition for review of EPA SRE methodology

By Erin Voegele | November 12, 2019

The U.S. Court of Appeals for the D.C. Circuit on Nov. 12 dismissed a petition for review filed by the Advanced Biofuels Association challenging the U.S. EPA’s methodology for granting small refinery exemptions (SREs). The court’s judgement, however, provides a clearer legal pathway for current and future challenges to the EPA’s SRE methodology.

In its challenge, first filed in May 2018, the ABFA argued that the EPA more than doubled the number of approved SREs by illegally changing its review process behind closed doors.

The judgement published by the court on Nov. 12 states ABFA’s petition for review has been dismissed for lack of jurisdiction due to the absence of an identified final agency action at the time the petition was filed.

In the document, the court admitted that the number of small refineries applying for and receiving SREs has significantly increased in recent years and provides examples of the EPA referencing changes it had made to the SRE review process. In one case, document published by the court explain the EPA’s new rule decision was disclosed because a small refinery that was denied an extension filed suit to challenge that decision.

“As the EPA explained its new rule: 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,” The court documents state. “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.”

More recently, the court documents show the EPA publically released a formal memorandum documenting its new test for and ultimate rulings addressing 42 SREs for compliance year 2018. Specifically, the court states that the 2019 memorandum issued by EPA explains that the agency previously considered that disproportionate economic hardship only existed when a small refinery experienced both disproportionate impacts and viability impairment. The agency, however, has changed that approach and now requires a refinery to meet only one of those prongs. The court said the EPA also announced that it was adopting a new practice of granting full waivers in gases where the U.S. Department of Energy had recommended partial waivers. EPA said that change was implemented because “congress intended the extension to be a full, and not partial, exemption.”

The judgement issued by the court explains that the court can only view a “final action” taken by EPA and said that limitation is jurisdictional. “Final action agency action subject to review can take a variety of forms,” the court said. “The most common are notice and comment rulemakings and case-by-case formal or informal adjudications.” The court explained that agencies may use informal adjudications when they are not statutorily required to engage in the notice and comment process or hold proceedings on the record.

“Informal adjudication is the course the EPA chose here,” the court continued. “The rules of decision governing the grant or denial of exemption extensions were manifested through rulings on individual refineries’ applications…The jurisdictional problem for the [ABFA} is that its petition for view did not identify any final agency action for this court to review. The petition does not challenge any notice and comment rulemaking or other agency action announcing the adoption of a new methodological basis for decision…Nor did the petition seek judicial review of any of the EPA’s informal adjudications. Quite the opposite, the [ABFA] has eschewed seeking review of individual exemption grants.”

Instead, the court notes that the petition filed by ABFA asserts that the increased number of exemptions granted could only be attributable to a decision by the EPA to modify the criteria or lower the threshold by which it evaluates and grants exemptions and challenges that perceived trend in EPA decision making as unlawful. “While the petition’s identification of a pattern across myriad circumstances may be evidence of final agency action, it is not itself a final agency action that, without more, can support a petition for review,” the court said. “Yet that pattern is all that the petition points to as the object for this court’s review.”

“To be sure, the EPA’s briefing and oral argument pain 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,” the court said. “But we need not decision in this case whether or how on ongoing patter of genuinely secret law might be challenged because the EPA’s changed rules of decision have been disclosed both through the numerous informal adjudication decisions recently released to the [ABFA] and, of particular import, the August 2019 formal and public memorandum announcing the EPA’s new decisional framework and applying it to [42] refineries. During oral argument, the EPA acknowledged that the August 2019 Memorandum is ‘final agency action’ to which a challenge could be brought if filed within the required limitations period.”

The ABFA issued a statement on Nov. 12 expressing disappointment with the court’s ruling. “The basis for the court’s decision was that at the time ABFA filed its lawsuit in May of 2018 it was unable to provide the court with a concrete agency action to review,” the ABFA said in a statement. “Court acknowledged, however, that ABFA’s inability to provide this proof was the result of EPA’s ‘intentionally shrouded and hidden agency law that could have left those aggrieved by the agency’s actions without a viable avenue for judicial review.’ The court found that proof of EPA’s change in methodology now exists in the form of an EPA Memo from August 2019 through which it granted 31 small refinery exemptions for compliance year 2018.

“While this outcome is disappointing, the lawsuit put significant pressure on EPA to increase transparency, driving the creation of EPA’s Small Refinery Exemption Dashboard,” the ABFA continued. “This decision also establishes a clearer legal pathway for EPA’s change in methodology to once again be challenged in the D.C. Circuit., which several parties have already filed. ABFA will be tracking this case closely as it decides how best to move forward to remedy the harm caused by EPA’s actions.”

A full copy of the court’s judgement can be downloaded from the U.S. court of Appeals for the D.C. Circuit website.