Supreme Court sets new rules for Clean Air Act lawsuits

Challenges to “nationally applicable” EPA actions must be heard in the D.C. Circuit. Challenges to “locally or regionally applicable” EPA actions belong in the regional Circuits, unless EPA “finds and publishes” a determination that the action is “based on a determination of nationwide scope or effect,” in which case they are heard in the D.C. Circuit. 42 U.S.C. § 7607(b). Writing for a seven-Justice majority, Justice Thomas held that an action is “based on a determination of nationwide scope or effect” if EPA's primary justification for taking the action applies nationally either as a matter of law or as a matter of its practical effect. In so holding, the Court adopted a broader reading of the “nationwide scope or effect” exception, which could steer more cases to the D.C. Circuit.

But in Oklahoma v. Environmental Protection Agency, issued the same day, the Supreme Court applied the Calumet framework to hold that challenges to EPA's rejection of several States' implementation plans belonged in regional circuits. Writing for a six-Justice majority, Justice Thomas held that EPA's rejections of the state plans were locally or regionally applicable and that the “nationwide scope or effect” exception did not apply.¹ The Court particularly focuses on the extent to which state-specific or local and regional-specific considerations drove EPA's analysis.

Combined, Calumet Shreveport and Oklahoma give companies more certainty on where to file challenges to EPA CAA determinations, avoiding lengthy and expensive satellite litigation over the proper court of appeals to hear a case.

EPA v. Calumet Shreveport Refining, L.L.C.

Background: Six small refineries petitioned EPA for exemptions from the CAA's renewable fuel program based on “disproportionate economic hardship.” Op. 3; 42 U.S.C. § 7545(o)(9)(B)(i). EPA denied those petitions along with 99 others in two omnibus notices based on (1) EPA's interpretation that “disproportionate economic hardship” covers only hardship directly caused by renewable fuel program compliance and (2) EPA's economic theory that small refineries ordinarily do not suffer disproportionate economic hardship from the renewable fuel program because they fully pass costs through to consumers. Op. 4-5. EPA's denial notices asserted that the denials were reviewable only in the D.C. Circuit, either as “nationally applicable” actions or, alternatively, as locally applicable actions “based on a determination of nationwide scope or effect.” Op. 5.

Refineries challenged the denials in multiple circuits. Op. 5. Most circuits dismissed the challenges for improper venue or transferred the petitions to the D.C. Circuit, but the Fifth Circuit retained jurisdiction and ruled for the refineries on the merits. Op. 5–6. On venue, the Fifth Circuit reasoned that EPA's actions were locally applicable because their “legal effect” was limited to the petitioning refineries, and the actions were not based on determinations of nationwide scope or effect because EPA considered refinery-specific facts. Op. 5–6 (emphasis in original).

The majority opinion: The Supreme Court reversed, holding that EPA's denials were locally or regionally applicable actions that fall within the “nationwide scope or effect” exemption, meaning venue lies in the D.C. Circuit.

The Court explained that “Section 7607(b)(1) creates a two-step process for determining venue.” Op. 6. First, courts assess whether, “on its face,” EPA's action “applies throughout the entire country” or only locally or regionally. Op. 6, 8-9. Courts identify the distinct “action” at issue by reference to the substantive authority under which EPA is acting. Op. 7–8. If the action is nationally applicable, it belongs in the D.C. Circuit. But if the action is locally or regionally applicable, and EPA has made the requisite determination, courts proceed to the second step and examine whether the “nationwide scope or effect” exemption applies. Op. 6–7.

Applying the two-step framework, the Court held EPA's denial actions were locally or regionally applicable. Op. 7, 10. First, the Court explained that “[t]he CAA pegs EPA's ‘actions' under the exemption provision by reference to each individual exemption petition.” Op. 10. Thus, “each EPA denial of a refinery's exemption petition” is “its own ‘action' for venue purposes,” even if those denials issued as part of an omnibus decision. Op. 10.”

The Court also rejected EPA's argument that any action that spans more than one circuit is per se “nationally applicable.” Op. 11. But because EPA had conceded that the only way these actions were nationally applicable was if the omnibus denial notices were treated as the relevant actions, the Court declined to decide how to draw the “precise line” between “locally or regionally applicable” and “nationally applicable.” Op. 12.

Finally, the Court rejected intervenors' arguments that the individual denials were nationally applicable because they have downstream effects on the amount of renewable fuel that must be produced and because EPA announced a new standard for adjudicating exemption petitions. Op. 12. Follow-on implications “have no bearing on [a court's] analysis,” and precedential effect cannot make a locally applicable action nationally applicable. Op. 12–13 (quoting Sierra Club, 47 F. 4th at 744).

Second, the Court held EPA's denials were “based on a determination of nationwide scope or effect” that EPA had made and published. Op. 13.

Applying the ordinary meaning, the Court defined “a determination of nationwide scope or effect,” to mean that if EPA's justification for taking the action applies throughout the country as a legal matter or practical matter, then EPA's determination has nationwide scope or effect. Op. 14. And an EPA action is “based on” a “determination” of nationwide scope or effect only if that determination is the most important part of EPA's reasoning—meaning the determination is the 3 sine qua non or the gravamen of the agency's rationale. Op. 15. A determination falls short “if EPA also relied in significant part on other, ‘intensely factual' considerations, or if the key driver of EPA's action is otherwise debatable.” Op. 15. The Court also clarified that this question is reviewed de novo, without deference to EPA's findings. Op. 16.

Applying its framework, the Court found that EPA's exemption denials were based on determinations of nationwide scope or effect. Op. 17–18. EPA's economic pass-through theory and its interpretation of the phrase “disproportionate economic hardship” in the CAA apply to all refineries. Op. 17. Those determinations formed the “basis” of the denials because EPA relied on them to presumptively deny all the exemption petitions. Op. 17–18. Thus, where EPA relies on determinations of nationwide scope or effect to reach a presumptive resolution, those determinations qualify as the primary driver of its decision. EPA's review of refinery-specific facts was “merely peripheral.” Op. 18.

The dissenting opinion: Justice Gorsuch dissented, joined by Chief Justice Roberts. The dissenting Justices agreed with the majority's general framework, but disagreed with its test to decide whether an EPA action was “based on a determination of nationwide scope or effect.” Op. 1. The dissenters would have defined “determination” by reference to the CAA's substantive provisions: If the CAA calls for EPA to make a nationwide determination, then its determination fits the exception.

With respect to the renewable fuel program, however, “the only decisions EPA must make are refinery-specific ones.” Op. 3. Unlike other portions of the CAA, the statute does not “call for a determination of nationwide scope or effect” in this context. Op. 6. EPA's own statements that it would consider each petition individually communicated the same message. Op. 7.

The dissent agreed with the majority that EPA could not create a “nationally applicable action” by “bundling” multiple petitions together. Op. 7–8. But in the dissent's view, the majority veered off course by looking to EPA's decisional document rather than the substantive provision under which it issued and conflating EPA's final “determination” with the reasons supporting it. Op. 10–11. The dissent also criticized the majority for creating a test that requires litigants and courts to sort and weigh EPA's various rationales to decide which is the true driver of the agency's action, which could prove very challenging in practice. Op. 11–12.

Oklahoma v. EPA:

Background: In 2015, EPA revised the national ambient air quality standards (NAAQS) for ozone. Op. 3. Every state submitted a state implementation plan (SIP) explaining how it planned to comply with the CAA's “Good Neighbor” provision, which deals with a State's emissions that interfere with other States' NAAQS compliance. Op. 3.

EPA rejected 21 States' SIPs for failing to comply with the Good Neighbor provisions. Op. 3. Those States had asserted that they did not need to propose new emissions-reduction measures, but after reviewing each State's submission on its own merits, EPA disagreed. Op. 3–4. EPA issued 4 these rejections in one omnibus Federal Register rule. Op. 4. EPA asserted the disapprovals would be reviewable only in the D.C. Circuit as either nationally applicable actions or, alternatively, as locally or regionally applicable actions falling within the “nationwide scope or effect” exception because EPA used “the same, nationally consistent 4-step framework” and evaluated States' alternative approaches “with an eye to ensuring national consistency.” Op. 4.

States and industry petitioners challenged the disapprovals in five regional Circuits anyway. Op. 5. EPA moved to transfer all of the suits to the D.C. Circuit, but four of the five Circuits declined. Op. 5. Only the Tenth Circuit granted EPA's motion to transfer suits by Oklahoma and Utah to the D.C. Circuit., a decision the Supreme Court agreed to review. Op. 5.

The majority opinion: The Supreme Court reversed. Applying Calumet, the Court held that EPA's disapprovals of the Oklahoma and Utah SIPs were locally or regionally applicable actions reviewable only in a regional circuit.

First, the Court held that EPA's SIP disapprovals were not nationally applicable. The Court determined—as in Calumet—that each disapproval was its own action. Op. 6–7. And the CAA specifically lists an individual SIP approval as an example of a locally or regionally applicable action. Op. 7. A SIP disapproval is merely the “opposite side[] of the same coin,” and so is likewise a locally or regionally applicable. Op. 7–8.

Second, the Court held that the “nationwide scope or effect” exception was inapplicable. The Court explained that, as in Calumet, EPA found and published its decision that its actions were based on such a determination. Op. 10. But unlike in Calumet, EPA's SIP disapprovals “were not based on any determination of nationwide scope or effect.” Op. 10. In Calumet, EPA made uniform determinations to reach a presumptive conclusion applicable to all refineries before considering refinery-specific facts to decide whether to deviate from the presumption. In Oklahoma, EPA's SIP denials were “based on ‘a number of intensely factual determinations' particular to the State at issue.” Op. 10. For example, EPA rejected Oklahoma's attempt to avoid responsibility for certain emissions in Texas and faulted the State for providing an insufficient evaluation of additional emissions control opportunities. Op. 10–11. For Utah, EPA took issue with its attempt to discount certain emissions in Colorado as well as other technical and legal flaws in its arguments. Op. 11.

Although EPA did make several “determinations of nationwide scope or effect,” the Court concluded those were “at most heuristics that aided EPA's analysis.” Op. 11–12. In other words, those nationwide determinations were mere threshold decisions; EPA still had to apply those broad rules to each specific State, making those applications the gravamen of EPA's decision.

The concurring opinion: Justice Gorsuch, again joined by Chief Justice Roberts, concurred in the judgment. For the reasons set out in their Calumet dissent, the Justice Gorsuch and the Chief Justice would have arrived at the same conclusion as the majority using their different framework. Op. 1.

Authored by Sean Marotta, Danielle Desaulniers Stempel, and Joseph Liberman.