Lion Oil Co. v. Environmental Protection Agency
792 F.3d 978
8th Cir.2015Background
- Lion Oil petitioned EPA for an RFS exemption for 2013; EPA denied; Lion Oil appeals under 42 U.S.C. § 7607(b)(1).
- DOE completed a 2011 study showing disproportionate economic hardship requires two components (high cost relative to industry and impairment of refinery operations) and created a dual-index scoring matrix with viability metrics 3a–3c.
- DOE later added an intermediate score of 5 for metrics 3a and 3b in a May 2014 addendum; Lion Oil’s petition relied on pipeline disruption and its ongoing financial hardship.
- EPA summarized DOE’s analysis as a primary factor and independently analyzed Lion Oil’s pipeline disruption, blending capacity, projected RFS costs, and financial position without re-scoring Doe’s matrix.
- Lion Oil sought confidential treatment for certain numbers; EPA sent its decision to Lion Oil privately, and Lion Oil appealed; the D.C. Circuit’s jurisdictional posture is discussed but this court proceeds because EPA did not publish a nationwide finding.
- The court addresses whether EPA’s denial is locally applicable (and reviewable here) or nationally applicable (exclusive to the D.C. Circuit).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EPA’s action was properly reviewable here or exclusively in D.C. | Lion Oil argues nationwide scope finding not published, so action is locally applicable and properly reviewable here. | EPA contends nationwide-scope finding exists; action should be reviewed in D.C. | Action reviewed here because EPA failed to publish the nationwide finding. |
| Whether EPA arbitrarily relied on DOE’s scoring—specifically metric 3b—to deny the petition | Lion Oil challenges DOE’s scoring as flawed and EPA’s use of it as arbitrarily capricious. | EPA followed DOE’s methodology and independently analyzed effects; scoring was proper. | EPA did not arbitrarily use DOE’s scoring; it appropriately considered viability and pipeline impact. |
| Whether the May 2014 addendum to DOE’s scoring required notice-and-comment rulemaking | Addendum imposed binding policy change necessitating rulemaking. | Addendum is a refinement within existing framework, not a new rule requiring notice-and-comment. | Addendum did not require notice-and-comment rulemaking. |
| Whether EPA reasonably interpreted ‘disproportionate economic hardship’ to focus on long-term viability | Lion Oil contests interpretation as too narrow or contrary to the statute. | EPA’s reading—cost impact on long-term profitability/viability—reasonable and within agency discretion. | EPA’s interpretation is reasonable. |
| Whether any arbitrariness or inconsistency in applying the addendum prejudiced Lion Oil | Inconsistencies in DOE/EPA application could prejudice Lion Oil. | EPA did not rely on DOE’s inconsistent scorings for Lion Oil’s petition; even if it did, prejudice not shown under §706. | No reversible prejudice from addendum application. |
Key Cases Cited
- Alaska Dep’t of Envtl. Conservation v. E.P.A., 540 U.S. 461 (2004) (jurisdiction under § 7607(b)(1) and nationwide scope considerations)
- Whitman v. Am. Trucking Ass’ns, 531 U.S. 457 (2001) (statutory interpretation and scope of review under § 7607(b)(1))
- Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary-and-capricious review standard)
- El Dorado Chem. Co. v. E.P.A., 763 F.3d 950 (8th Cir. 2014) (agency proper use of statutory interpretation and factors for hardship)
- Iowa League of Cities v. E.P.A., 711 F.3d 844 (8th Cir. 2013) (notice-and-comment rulemaking scope for interpretative vs legislative rules)
- United States v. Santos, 553 U.S. 507 (2008) (definition of undefined terms in statutory context)
- Fast v. Applebee’s Int’l, Inc., 638 F.3d 872 (8th Cir. 2011) (agency interpretation under Chevron is permissible)