Valero Energy Corp. v. Envtl. Prot. Agency

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 8, 2018 Decided June 25, 2019

No. 18-1028

VALERO ENERGY CORPORATION,

PETITIONER

v.

ENVIRONMENTAL PROTECTION AGENCY,

RESPONDENT

On Petition for Review of an Action of the

United States Environmental Protection Agency

Samara L. Kline argued the cause for petitioner. On the

briefs were Clara Poffenberger, Lisa M. Jaeger, Brittany M.

Pemberton, Warren W. Harris, Yvonne Y. Ho, and Christopher

L. Dodson. Megan H. Berge, Vincent M. Wagner, and Evan A.

Young entered appearances.

Benjamin R. Carlisle, Attorney, U.S. Department of

Justice, argued the cause for respondent. With him on the brief

were Jeffrey H. Wood, Acting Assistant Attorney General, and

Jonathan D. Brightbill, Deputy Assistant Attorney General.

Before: HENDERSON, ROGERS, and SRINIVASAN, Circuit

Judges.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

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SRINIVASAN, Circuit Judge: The Energy Independence

and Security Act of 2007 contains a citation to nowhere. The

Act requires gasoline sold in the United States to include a

certain amount of renewable fuel, and tasks the Environmental

Protection Agency with conducting periodic reviews to enable

appropriate adjustments to the renewable-fuel requirements. In

setting out EPA’s periodic-review obligation, the statute

directs the agency to examine certain requirements ostensibly

set out in a referenced provision of the Clean Air Act. The cited

provision, though, does not exist.

In an effort to make sense out of nonsense, EPA issued a

document setting forth its interpretation of the periodic-review

provision and explaining why it believes it has complied.

Valero Energy Corporation, a petroleum refiner, took issue

with EPA’s position in the document and filed a petition for

review in this court. We conclude that the EPA document does

not constitute final agency action. We therefore dismiss

Valero’s petition for lack of jurisdiction.

I.

A.

In 2005 and 2007, Congress amended the Clean Air Act to

establish the Renewable Fuel Standards program. See Energy

Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594; Energy

Independence and Security Act of 2007, Pub. L. No. 110-140,

121 Stat. 1492. Congress aimed to “move the United States

toward greater energy independence and security” and to

“increase the production of clean renewable fuels.” 121 Stat.

at 1492. The program charges EPA with requiring “that

gasoline sold . . . in the United States . . . contain[] [a

minimum] volume of renewable fuel.” 42 U.S.C.

§ 7545(o)(2)(A)(i). The statute defines renewable fuel to mean

fuel “produced from renewable biomass.” Id. § 7545(o)(1)(J).

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To ensure that gasoline sold in the United States meets

those standards, EPA requires refiners (and importers) of

gasoline to include a minimum amount of renewable fuel in

their gasoline. The required annual volumes for each

renewable fuel are prescribed in statutory tables. See id.

§ 7545(o)(2)(B). For years not covered by the tables, the

statute calls for EPA to set the required volumes “based on a

review of the implementation of the program . . . and an

analysis of [six factors].” Id. § 7545(o)(2)(B)(ii).

In addition, the statute directs EPA to conduct “periodic

reviews” of the program “[t]o allow for the appropriate

adjustment” of the minimum total volumes for each renewable

fuel. Id. § 7545(o)(11). Specifically, EPA must periodically

review “existing technologies,” “the feasibility of achieving

compliance with the requirements,” and “the impacts of the

requirements described in subsection (a)(2) on each individual

and entity described in paragraph (2).” Id. (emphasis added)

(footnote omitted). The highlighted reference, however, is an

error: there is no “subsection (a)(2).”

B.

In November 2017, EPA published a document entitled

“Periodic Reviews for the Renewable Fuel Standard Program.”

The first of the document’s two parts addresses the agency’s

obligations under the periodic-review provision,

§ 7545(o)(11), including the provision’s reference to the

nonexistent “subsection (a)(2).” See Periodic Review

Document at 3–7, J.A. 5–9. With regard to the intended

meaning of that erroneous reference, EPA opines that there is

“no ‘overwhelming evidence from the structure, language, and

subject matter’ of the statute pointing in a single direction.” Id.

at 4, J.A. 6 (quoting U.S. Nat’l Bank v. Indep. Ins. Agents of

Am., 508 U.S. 439, 462 (1993)). As a result, EPA concludes,

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the reference to “subsection (a)(2)” renders the provision

“unintelligible” and thus partially “inoperative.” Id. at 3–5,

J.A. 5–7.

In the alternative, EPA sets forth its best attempt to give

content to § 7545(o)(11)’s mistaken cross-reference. Because

the reference to “subsection (a)(2)” is ambiguous, EPA

reasons, it can adopt “any reasonable construction.” Id. at 6,

J.A. 8. EPA concludes that, if necessary, it would read

“subsection (a)(2)” to refer to subsection (o)(2)(B)—i.e.,

§ 7545(o)(2)(B). See id. at 5–7, J.A. 7–9. EPA would also

interpret the ensuing reference to “each individual and entity

described in paragraph (2)” to refer to the list of regulated

individuals and entities in § 7545(o)(2)—namely, “refineries,

blenders, distributors, and importers” and “consumers of

transportation fuel.” Id. at 6–7, J.A. 8–9 (citations omitted). In

sum, EPA would interpret the provision to require periodic

review of the impacts of the required annual volumes contained

in § 7545(o)(2)(B) on “refineries, blenders, distributors, and

importers, as well as on consumers of transportation fuel.” Id.

at 7, J.A. 9.

In the second part of the document, EPA explains why,

under either interpretation of the erroneous cross-reference, its

prior actions have fulfilled its statutory obligation to conduct

periodic reviews. See id. at 8–12, J.A. 10–14. As evidence that

it has conducted the required reviews, EPA points to various

analyses it has performed for rulemakings relating to the

Renewable Fuel Standard program and for other occasions.

See id., J.A. 10–14. The document marks the first time those

analyses have been explicitly identified as “periodic reviews.”

See id. at 8, J.A. 10. Nonetheless, EPA concludes that they

suffice to establish compliance with the requirements of

§ 7545(o)(11). That said, a footnote states that “neither [the]

interpretation of the statute nor the description of [EPA’s]

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studies in this document require any party or the agency to do

(or not do) anything beyond what the statute requires.” Id. at 2

n.1, J.A. 4 n.1. The footnote also states: “[O]ur reviews of the

[Renewable Fuel Standard] program occur on a continuing

basis, and are subject to change in both approach and results.

Indeed, we regularly consider new approaches and update our

[Renewable Fuel Standard] technical analysis, and we intend

to continue doing so.” Id.

C.

In January 2017, ten months before publication of the EPA

document, petitioner Valero Energy Corporation sued EPA in

the Northern District of Texas. Among other claims, Valero

contended that § 7545(o)(11) imposes a mandatory duty to

conduct periodic reviews and that EPA had failed to conduct

even a single review. See Valero Energy Corp. v. EPA, No.

7:17-cv-00004-O, 2017 WL 8780888, at *5 (N.D. Tex. Nov.

28, 2017). Valero sought an order compelling EPA to conduct

periodic reviews. Id. The district court dismissed Valero’s

claim, concluding that the statute “does not clearly mandate a

date certain on which [EPA is] required to conduct

[§ 7545(o)(11)] periodic reviews.” Id.

Soon after the district court’s decision, EPA published the

document at issue in this case. Valero filed a timely petition

for review of the document in this court. According to Valero,

EPA’s document incorrectly interprets the periodic-review

provision and erroneously concludes that the agency has

complied with its periodic-review obligations.

II.

We start (and end) with the question of finality. The Clean

Air Act authorizes review only of “final action,” 42 U.S.C.

§ 7607(b)(1), a term synonymous with “final agency action”

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under the APA, see Sierra Club v. EPA, 873 F.3d 946, 951

(D.C. Cir. 2017). Under the Clean Air Act, the requirement of

finality is jurisdictional. See, e.g., Portland Cement Ass’n v.

EPA, 665 F.3d 177, 193 (D.C. Cir. 2011) (per curiam). We

therefore must address at the outset whether the EPA document

is sufficiently final to support our jurisdiction. We conclude

that the document does not constitute “final action,”

§ 7607(b)(1), and we thus have no occasion to reach the merits

of Valero’s petition.

An agency action is final “if two independent conditions

are met: (1) the action marks the consummation of the

agency’s decisionmaking process and is not of a merely

tentative or interlocutory nature; and (2) it is an action by which

rights or obligations have been determined, or from which legal

consequences will flow.” Soundboard Ass’n v. FTC, 888 F.3d

1261, 1267 (D.C. Cir. 2018) (formatting modified) (quoting

Bennett v. Spear, 520 U.S. 154, 177–78 (1997)). Because

“both prongs of Bennett v. Spear must be satisfied

independently,” id. at 1271, the failure to satisfy either prong

means that the challenged action is nonfinal. Here, EPA’s

document does not meet Bennett’s second prong.

That prong looks to the “actual legal effect (or lack

thereof) of the agency action in question on regulated entities.”

Nat’l Mining Ass’n v. McCarthy, 758 F.3d 243, 252 (D.C. Cir.

2014). EPA’s document has no legal consequences for any

regulated party. The document imposes no obligations,

prohibitions, or restrictions; it “compels action by neither the

recipient nor the agency.” Holistic Candlers & Consumers

Ass’n v. FDA, 664 F.3d 940, 944 (D.C. Cir. 2012). Nor does it

affect EPA’s legal obligation to conduct periodic reviews.

Rather, it leaves the world just as it found it. See Indep. Equip.

Dealers Ass’n v. EPA, 372 F.3d 420, 428 (D.C. Cir. 2004). For

instance, the document does not expose any regulated party to

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the possibility of an enforcement action or to enhanced fines or

penalties. See Sackett v. EPA, 566 U.S. 120, 126 (2012). The

document instead only presents EPA’s position on what the law

is and whether it has complied. Absent some identifiable effect

on the regulated community, an agency works no legal effect

“merely by expressing its view of the law.” AT&T Co. v.

EEOC, 270 F.3d 973, 976 (D.C. Cir. 2001).

The agency’s own characterization of its action is to the

same effect. See Nat’l Mining Ass’n, 758 F.3d at 252. EPA

expressly disclaims any legal effect. The document states that

it does not “require any party or the agency to do (or not do)

anything beyond what the statute requires.” Periodic Review

Document at 2 n.1, J.A. 4 n.1. And the document makes clear

that it has no binding effect on how EPA will conduct future

reviews. See id. While disclaimers of that sort can carry little

weight when they are “boilerplate,” Appalachian Power Co. v.

EPA, 208 F.3d 1015, 1023 (D.C. Cir. 2000), we have taken

cognizance of such language when—as here—the rest of “the

document is [similarly] devoid of relevant commands” to

regulated parties. Nat’l Mining Ass’n, 758 F.3d at 253; see also

Gen. Elec. Co. v. EPA, 290 F.3d 377, 383 (D.C. Cir. 2002).

On its own terms, then, the EPA document “do[es] not

purport to carry the force of law.” Ctr. for Auto Safety v. Nat’l

Highway Traffic Safety Admin., 452 F.3d 798, 808 (D.C. Cir.

2006). The EPA accordingly acknowledged at oral argument

that the document has “no legal effect.” Oral Argument at

35:47–35:48. It “has force only to the extent the agency can

persuade a court to the same conclusion,” AT&T Co., 270 F.3d

at 976, which weighs against finding that it qualifies as final

action.

That is dispositive under certain of our precedents, which

instruct that the analysis under Bennett’s second prong focuses

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solely on the agency action’s legal consequences. See Joshi v.

Nat’l Transp. Safety Bd., 791 F.3d 8, 11–12 (D.C. Cir. 2015).

In other decisions, though, we have indicated that the finality

analysis can look to whether the agency action has a practical

effect on regulated parties, even if it has no formal legal force.

E.g., CSI Aviation Servs., Inc. v. U.S. Dep’t of Transp., 637

F.3d 408, 412 (D.C. Cir. 2011) (concluding that agency action

was final because it “imposed an immediate and significant

practical burden”); Nat’l Ass’n of Home Builders v. Norton,

415 F.3d 8, 15 (D.C. Cir. 2005) (“Finality resulting from the

practical effect of an ostensibly non-binding agency

proclamation is a concept we have recognized in the past.”); cf.

U.S. Army Corps of Eng’rs v. Hawkes Co., 136 S. Ct. 1807,

1815 (2016) (endorsing a “pragmatic approach . . . to finality”

(internal quotation marks omitted)).

We need not explore the potential tension between those

lines of decisions because the EPA document is nonfinal even

if we take into account its practical consequences. The

document does not impose an “immediate and significant

practical burden on” regulated parties like Valero. CSI

Aviation Servs., 637 F.3d at 412. It does not, for example, put

Valero to the “painful choice between costly compliance and

the risk of prosecution at an uncertain point in the future.” Id.

Nor does it impose obligations by chicanery—disclaiming

legal force and effect but nonetheless “read[ing] like a ukase.”

Appalachian Power, 208 F.3d at 1023. In short, the EPA

document is nonfinal and therefore unreviewable.

Valero sees things differently. It first contends that the

document “alter[s] the legal regime,” NRDC v. EPA, 643 F.3d

311, 320 (D.C. Cir. 2011), because it “ascrib[es] new meaning

to clear statutory terms,” Valero Reply Br. 6. We have never

held that legal novelty alone establishes finality. In NRDC, we

decided that a guidance document amounted to final agency

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action, not because it presented a novel interpretation of the

Clean Air Act, but because it purported to “bind[] EPA regional

directors” to that interpretation, resulting in legal consequences

for states submitting implementation plans. NRDC, 643 F.3d

at 320. Here, by contrast, the document binds no one and

results in no discernible legal consequences.

Valero contends that legal consequences necessarily flow

from the document’s conclusion that EPA has complied with

§ 7454(o)(11). In support of that view, Valero leans heavily on

Sierra Club v. EPA, 699 F.3d 530 (D.C. Cir. 2012), in which

we concluded that an EPA notice was final because it

“declared, for the first time, that [EPA] ha[d] fully

accomplished the [duties] required by § 112(c)(6)” of the Clean

Air Act. Id. at 534. But in Sierra Club, unlike this case, EPA’s

notice had legal force and effect.

Sierra Club had originally sued EPA to compel the

promulgation of emissions standards for certain hazardous air

pollutants, as required by § 112(c)(6) of the Clean Air Act. See

id. at 532. EPA sought dismissal of that complaint, pledging

that, after it fully complied with its statutory obligation, “it

intended . . . to issue a notice that explains how it has satisfied”

the Act. Id. (internal quotation marks omitted). The district

court “accepted EPA’s view” and dismissed the complaint. Id.

EPA subsequently promulgated the promised notice, which

declared that EPA was in compliance with the Act, and which,

crucially, “bar[red] further demands for additional source-

listing or standard-setting.” Id. at 535. We held that the EPA

notice was final because it “purport[ed] to close off any legal

claim that [EPA] ha[d] fallen short of compliance with [the

Act].” Id. at 534.

Valero asserts that the EPA document in this case likewise

“forecloses interested parties from arguing that EPA has failed

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to conduct periodic reviews”: “Courts can no longer compel

EPA to conduct periodic reviews because the [document]

proclaims that EPA has been doing those reviews all along.”

Valero Reply Br. 8–9. The document, though, does no such

thing. It has no effect whatsoever on Valero’s ability to sue to

compel EPA to conduct periodic reviews. See 42 U.S.C.

§ 7604(a)(2) (authorizing suit “where there is alleged a failure

of the Administrator to perform any act or duty . . . which is not

discretionary”). EPA itself thus has represented that it “has not

and will not argue . . . that the . . . Document ‘close[s] off’ or

has any other legal effect on that claim.” EPA Br. 18.

In fact, Valero and another litigant have already brought

two such cases, arguing (unsuccessfully) that EPA has failed to

comply with its duty under § 7454(o)(11). See EPA Motion to

Dismiss, Small Retailers Coal. v. EPA, No. 7:17-cv-00121-O

(N.D. Tex. Feb. 20, 2018); Valero Energy Corp. v. EPA, No.

7:17-cv-00004-O, 2017 WL 8780888, at *1 (N.D. Tex. Nov.

28, 2017). Tellingly, the EPA document has had no legal effect

on the outcome of either case. Small Retailers Coalition was

decided after the publication of the document, and the court did

not find—and EPA did not argue—that the challenge was

categorically foreclosed by the document.

Instead, the EPA document sets forth a legal position

without imposing any new obligations, prohibitions, or

requirements. As our precedents dictate, such an action fails

the second prong of Bennett v. Spear’s finality test and is

unreviewable. See, e.g., Nat’l Min. Ass’n, 758 F.3d at 252;

Holistic Candlers, 664 F.3d at 944; Indep. Equip. Dealers

Ass’n, 372 F.3d at 427–28; AT&T Co., 270 F.3d at 975–76.

A contrary conclusion would have the undesirable

consequence of discouraging agencies from issuing clarifying

documents like this one. EPA published its interpretation of

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the statute because it wished to “ma[k]e its views public” “as a

matter of good governance and transparency,” EPA Br. 15.

“Treating such [interpretations] as final and judicially

reviewable agency action would discourage their use, ‘quickly

muzzl[ing] [those] informal communications between agencies

and their regulated communities . . . that are vital to the smooth

operation of both government and business.’” Rhea Lana, Inc.

v. Dep’t of Labor, 824 F.3d 1023, 1028 (D.C. Cir. 2016)

(quoting Indep. Equip. Dealers Ass’n, 372 F.3d at 428). Our

finality jurisprudence rightly rejects that unwelcome result.

Finally, to the extent Valero believes that any of the

periodic reviews identified by the EPA document were

themselves arbitrary, capricious, or otherwise contrary to law,

we note that Valero could have directly petitioned for review

of those actions under 42 U.S.C. § 7607. While such petitions

ordinarily need to be filed within sixty days of publication, if a

“petition is based solely on grounds arising after such sixtieth

day, then any petition for review under this subsection shall be

filed within sixty days after such grounds arise.” § 7607(b)(1).

Here, EPA did not identify any of the prior analyses as

“periodic reviews” until it issued its document in November

2017. Valero did not thereafter bring a petition challenging any

of the agency’s prior analyses.

* * * * *

For the foregoing reasons, we dismiss the petition for

review.

So ordered.