FILED
                                                                          United States Court of Appeals
                                         PUBLISH                                  Tenth Circuit

                          UNITED STATES COURT OF APPEALS                        October 30, 2017

                                                                              Elisabeth A. Shumaker
                                 FOR THE TENTH CIRCUIT                            Clerk of Court
                             _________________________________

SINCLAIR WYOMING REFINING
COMPANY; SINCLAIR CASPER
REFINING COMPANY,

       Petitioners,

v.                                                           No. 16-9532
                                                  (EPA No. EPA-1:CAA-08-2011-007)
UNITED STATES ENVIRONMENTAL                     (Environmental Protection Administration)
PROTECTION AGENCY,

       Respondent.

------------------------------

STATE OF WYOMING,

       Amicus Curiae.
                             _________________________________

                                          ORDER
                             _________________________________

Before TYMKOVICH, Chief Judge, LUCERO, and MORITZ, Circuit Judges.
                 _________________________________

        This matter comes on for consideration of the Petitioners’ Unopposed Motion to

Clarify the Court’s Opinion. The motion is construed as a petition for rehearing. See Fed.

R. App. P. 2 (“On its own or a party’s motion, a court of appeals may – to expedite its

decision or for other good cause – suspend any provision of these rules in a particular

case and order proceedings as it directs . . . .); 10th Cir. R. 2.1 (The court may suspend
any part of these rules in a particular case on its own or on a party’s motion.”). As so

construed, the motion is granted. The Clerk is directed to accordingly amend the opinion

issued on August 15, 2017.

       This order shall act as a supplement to the mandate issued on October 10, 2017.


                                              Entered for the Court
                                              ELISABETH A. SHUMAKER, Clerk


                                              by: Ellen Rich Reiter
                                                  Jurisdictional Attorney




                                              2
                                                                   FILED
                                                        United States Court of Appeals
                                                                Tenth Circuit

                                                              August 15, 2017
                                        PUBLISH            Elisabeth A. Shumaker
                                                               Clerk of Court
                      UNITED STATES COURT OF APPEALS

                                     TENTH CIRCUIT



 SINCLAIR WYOMING REFINING
 COMPANY, and SINCLAIR CASPER
 REFINING COMPANY,

                Petitioners,
 v.                                                  No. 16-9532
 UNITED STATES
 ENVIRONMENTAL PROTECTION
 AGENCY,

                Respondent.
 ---------------------------------
 STATE OF WYOMING,

                Amicus Curiae.


             PETITION FOR REVIEW OF A FINAL ORDER FROM
                ENVIRONMENTAL PROTECTION AGENCY
                    (D.C. NO. EPA-1:CAA-08-2011-007)


Jeffrey R. Holmstead (Brittany M. Pemberton with him on the briefs) Bracewell
LLP, Washington, D.C., for Petitioners.

Paul Cirino, Environmental Defense Section, Environment and Natural Resources
Division, United States Department of Justice (John C. Cruden, Assistant
Attorney General, Jeffrey H. Wood, Acting Assistant Attorney General, and
Susan Stahle, Of Counsel, United States Environmental Protection Agency, with
him on the briefs) Washington, D.C., for Respondent.

Erik E. Peterson, Senior Assistant Attorney General, Wyoming Office of the
Attorney General, Cheyenne, Wyoming, on briefs for Amicus Curiae.
Before TYMKOVICH, Chief Judge, LUCERO, and MORITZ, Circuit Judges.


TYMKOVICH, Chief Judge.


      In an amendment to the Clean Air Act (CAA), Congress directed the EPA

to operate a Renewable Fuel Standards Program (the RFS Program) to increase oil

refineries’ use of renewable fuels. But for small refineries that would suffer a

“disproportionate economic hardship” in complying with the RFS Program, the

statute required the EPA to grant exemptions on a case-by-case basis.

      We conclude the EPA has exceeded its statutory authority under the CAA

in interpreting the hardship exemption to require a threat to a refinery’s survival

as an ongoing operation. That interpretation is outside the range of permissible

interpretations of the statute and therefore inconsistent with Congress’s statutory

mandate. Because we find that the EPA exceeded its statutory authority, we

vacate the EPA’s decisions and remand to the EPA for further proceedings.

                                 I. Background

      In the Energy Policy Act of 2005, Congress amended the CAA to encourage

the use of renewable fuels. The statute’s RFS program requires oil refineries to

either produce a sufficient proportion of renewable fuels as part of their output or

purchase credits generated by other refineries to meet their increased renewable-

fuel obligations. See 42 U.S.C. § 7545(o); 40 C.F.R. § 80.1429. But Congress

                                         -2-
also directed that small refineries may receive a statutory exemption if

participation in the program would cause them “disproportionate economic

hardship.” 42 U.S.C. § 7545(o)(9)(B).

      A. The Renewable Fuel Standards Program

      Through the RFS Program, Congress prescribed annual target volumes for

renewable fuel sales, which increase each year until reaching a maximum level in

2022. 1 Congress charged the EPA with implementing the RFS Program and

empowered it with authority to alter the statutory volumes of renewable fuel if the

EPA finds that the RFS Program is causing severe economic or environmental

harm or there is an inadequate supply of domestic renewable fuels. The EPA must

also consult with the Department of Energy (DOE) in exercising this power. See

42 U.S.C. § 7545(o)(7). The statute further requires “obligated parties,” including

“refineries, blenders, and importers,” to comply with the RFS Program. 42 U.S.C.

§ 7545(o)(3)(B)(ii).

      Under the EPA’s accompanying regulations, an obligated party must satisfy

its Renewable Volume Obligation each year by holding sufficient credits, known

as Renewable Identification Numbers (RINs), at the end of each compliance year.

A RIN is created when a producer makes a gallon of renewable fuel, blends the

renewable fuel with petroleum-based fuel, and sells the resulting product


      1
        The RFS Program is codified as Clean Air Act § 211(o), 42 U.S.C.
§ 7545(o)(7).

                                         -3-
domestically. 40 C.F.R. § 80.1429. An obligated-party can accumulate RINs to

meet its RFS Program requirement by: (1) blending renewable fuels into

petroleum-based fuel and selling the product domestically; or (2) obtaining RINs

through another source, such as the RIN trading system Congress directed the EPA

to establish. See 42 U.S.C. § 7545(o)(5). Put simply, the program induces

refineries to produce renewable fuel products (e.g., ethanol), and if they cannot, to

purchase biofuel-generated credits from refineries that can.

      B. Small Refinery Exemptions

      Congress was aware the RFS Program might disproportionately impact small

refineries because of the inherent scale advantages of large refineries and therefore

created three classes of exemptions to protect these small refineries.

      First, the statute exempted all small refineries from the RFS Program until

2011. 42 U.S.C. § 7545(o)(9).

      Second, in the meantime, Congress directed DOE to conduct a study “to

determine whether compliance [with the RFS Program] . . . would impose a

disproportionate economic hardship on small refineries” after the program’s

implementation. 42 U.S.C. § 7545(o)(9)(A)(ii)(I). DOE conducted the study in

2011 and determined that a number of small refineries, including Sinclair’s two

Wyoming refineries, would suffer “disproportionate economic hardship” if they




                                         -4-
were required to comply with the RFS Program. 2 Accordingly, the EPA extended

the blanket exemption for two more years.

      Third, after the exemption period expired, Congress provided a process for

small refineries to petition the EPA “at any time” for an extension of the initial

exemption “for reason of disproportionate economic hardship.” 42 U.S.C.

§ 7545(o)(9)(B)(i). In evaluating these petitions, the EPA must consult with DOE

and consider the findings of DOE’s study in addition to “other economic factors.”

42 U.S.C. § 7545(o)(9)(B)(ii).

      This third exemption is at issue in this case.

      C. Sinclair’s Petitions for Small Refinery Exemptions

      Sinclair owns and operates two refineries in Wyoming: one located in

Sinclair, Wyoming, and another in Casper, Wyoming. Both fall within the RFS


      2
         DOE actually completed its first study in 2009, concluding that no small
refineries would suffer “disproportionate economic hardship” if they were
required to comply with the RFS Program. But Congress was unhappy with
DOE’s methodology and directed the Agency to conduct a new study, requiring it
to “seek and invite comment from small refineries on the RFS exemption hardship
question, assess RFS compliance impacts on small refinery utilization rates and
profitability, evaluate the financial health and ability of small refineries to meet
RFS requirements, study small refinery impacts and regional dynamics by PADD,
and reassess the accuracy of small refinery compliance costs through the purchase
of renewable fuel credits.” See S. Rep. No. 111-45, at 109 (2009), 

.

       DOE completed its second study in 2011, concluding that “[i]f certain small
refineries must purchase RINs that are far more expensive than those that may be
generated through blending, this will lead to disproportionate economic hardship
for those effected entities.” J.A. Vol. 1 at 69 (alteration incorporated).

                                         -5-
Program’s definition of “small refinery” and were exempt from the RFS

requirements until 2011. Those exemptions were extended until 2013 after DOE

found Sinclair’s Wyoming refineries to be among the 13 of 59 small refineries that

would continue to face “disproportionate economic hardship” if required to

comply with the RFS Program.

       Sinclair then petitioned the EPA to extend their small-refinery exemptions,

arguing that both refineries would continue to suffer “disproportionate economic

hardship” under the RFS Program. The EPA denied Sinclair’s petitions in two

separate decisions, finding that both refineries appeared to be profitable enough to

pay the cost of the RFS Program. Sinclair filed a timely petition for review with

this court. We grant Sinclair’s petition for review, vacate the EPA’s decisions for

both of Sinclair’s refineries, and remand for further proceedings consistent with

this opinion.

                                     II. Analysis

      We review Sinclair’s petitions under the Administrative Procedure Act

(APA). The APA requires courts to consider agency action in conformity with the

agency’s statutory grant of power, and agency action is unlawful if it is “in excess

of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5

U.S.C. § 706(2)(C). See generally 

(describing additional agency actions

that reviewing courts can hold unlawful and set aside, including arbitrary and

capricious rulings).

                                           -6-
      We review questions of statutory interpretation de novo. EnergySolutions,

LLC v. Utah, 

, 1271 (10th Cir. 2010).

      A. Judicial Review of Agency Action

      When a court reviews an agency’s legal determination, it generally applies

the analysis set out by the Supreme Court in Chevron v. Natural Resources Defense

Council, 

(1984). Under Chevron, reviewing courts apply a two-step

analysis. Chevron step one asks “whether Congress has directly spoken to the

precise question at issue.” 

If Congress’s intent is clear, then both

the court and the agency “must give effect to the unambiguously expressed intent

of Congress.” 

Courts determine Congress’s intent by employing the

traditional tools of statutory interpretation, beginning—as always—with an

examination of the statute’s text. See New Mexico v. Dep’t of Interior, 

, 1223–24 (10th Cir. 2017). But, if Congress has “not directly addressed the

precise question at issue”—if “the statute is silent or ambiguous with respect to the

specific issue”—the court must determine at Chevron step two “whether the

agency’s answer is based on a permissible construction of the statute.” 

–44.

      In some circumstances, however, a court never reaches the Chevron analysis.

In such cases, we do not need to answer the step one or step two questions. As the

Supreme Court explained in United States v. Mead Corp., 

(2001), the

initial step of the Chevron inquiry is actually to determine whether Chevron should

                                          -7-
apply at all. See Cass R. Sunstein, Chevron Step Zero, 

. Rev. 187, 247

(2006) (conceptualizing the inquiry of whether Chevron applies as “Chevron step

zero”); see also Gutierrez-Brizuela v. Lynch, 

, 1157 (10th Cir. 2016)

(Gorsuch, J., concurring) (discussing the step zero inquiry and the confusion

created by Mead). 3

      In Mead, the Court held that Chevron applies only where “it appears that

Congress delegated authority to the agency generally to make rules carrying the

force of law, and that the agency interpretation claiming deference was

promulgated in the exercise of that authority.” 

–27. This

context-driven determination requires us to examine the method by which the

agency exercised its delegated authority. Mead instructs: “It is fair to assume

generally that Congress contemplates administrative action with the effect of law

when it provides for a relatively formal administrative procedure tending to foster

the fairness and deliberation that should underlie a pronouncement of such force.”

Mead thus created, in effect, a “safe harbor of Chevron deference”


       3
         We note that neither party discussed the Supreme Court’s decision in City
of Arlington v. Federal Communications Commission, 

(2013), in
their supplemental briefs. We have not previously addressed the effect—if
any—City of Arlington might have on our application of the Mead inquiry. But
we do note that Justice Scalia, writing for the majority in City of Arlington,
reaffirmed that courts must determine whether Chevron or Mead controls at step
zero. 

(“The dissent is correct that United States v. Mead
requires that, for Chevron deference to apply, the agency must have received
congressional authority to determine the particular matter at issue in the particular
manner adopted. No one disputes that.” (emphasis added)).

                                         -8-
for agency interpretations produced via formal agency action—formal rulemaking

or adjudication—and those produced via informal notice-and-comment rulemaking.

Charles H. Koch, Jr. & Richard Murphy, 3 Admin. L. & Prac. § 10:12 (Feb. 2017

update); see also Richard J. Pierce, Jr., Administrative Law Treatise, § 3.5 (2010)

(“After Mead, it is possible to know only that legislative rules and formal

adjudications are always entitled to Chevron deference, while less formal

pronouncements like interpretative rules and informal adjudications may or may not

be entitled to Chevron deference.”).

      In situations where Chevron does not apply, Mead requires us to examine the

persuasiveness of agency action with no thumb on the scale of judicial deference.

As Mead explained, we follow the analysis set forth in Skidmore v. Swift & Co.,

(1944). In that case, the Court explained that the weight courts

provide an administrative judgment “will depend upon the thoroughness evident in

[the agency’s] consideration, the validity of its reasoning, its consistency with

earlier and later pronouncements, and all those factors which give it power to

persuade, if lacking power to control.” 

      Following Mead, the Court examined agency action that was less formal than

notice-and-comment rulemaking when it reviewed an opinion letter issued by the

Social Security Administration. See Barnhart v. Walton, 

, 221–22

(2002). It found that such informal agency action “does not automatically deprive

that interpretation of the judicial deference otherwise its due,” but rather, whether

                                          -9-
courts provide Chevron deference “depends in significant part upon the interpretive

method used and the nature of the question at issue.” 

the Court

considered included the interstitial nature of the legal question, the related

expertise of the agency, the importance of the question to administration of the

statute, the complexity of that administration, and the careful consideration the

agency had given the question over a long period of time. 

      The question we must answer, then, is whether to apply Chevron or Skidmore

deference to the EPA’s use of informal adjudications to resolve Sinclair’s petitions.

See WildEarth Guardians v. Nat’l Park Serv., 

, 1188 (10th Cir.

2013). Sinclair argues that we should review the EPA’s decisions using only

Skidmore deference, but maintains it would still prevail under a more deferential

Chevron review. Aplt. Supp. Br. at 1–2. The EPA, of course, argues the opposite.

      As a preliminary matter, we acknowledge that the EPA’s decisions resolving

Sinclair’s hardship petitions were conducted via informal adjudication (the same

procedure employed by the U.S. Customs Service in Mead). The parties do not

seriously contest this conclusion. The decisions were adjudications because they

were specific to the parties at issue—in fact, they were specific even to the

individual refineries at issue (the EPA produced separate decisions for the Sinclair,

Wyoming and Casper, Wyoming refineries)—and were resolving petitions for

Sinclair’s exemptions from the RFS Program. The decisions were also informal

because they were resolved on the basis of Sinclair’s submissions and involved no

                                          -10-
oral argument, opportunity for cross-examination, or other “trial-like” procedures

generally required by the APA. See 

, at Vol. 1 § 8.2 (describing the

trial-like procedures the APA requires for formal adjudications); see also J.A. Vol.

1 at 31 (the Casper, Wyoming refinery opinion describing Sinclair’s submission).

      Under Mead, we conclude that Skidmore deference applies to the EPA’s

decision here. First of all, Congress specifically authorized the EPA to promulgate

regulations on aspects of the RFS Program, but not for the small refinery

exemptions. This means the agency did not have the benefit of notice-and-

comment about its interpretation of the term “disproportionate economic hardship.”

See, e.g., 42 U.S.C. § 7545(o)(2)(A)(i) (requiring the EPA to promulgate

regulations to “ensure that gasoline sold or introduced into commerce in the United

States . . . contains the applicable volume of renewable fuel”). Instead, the EPA

conducted its interpretation via informal adjudication. And the fact that the

adjudication was informal is also important—Sinclair’s involvement in the

decision-making was limited to submitting petitions and the EPA did not have the

benefit of hearing expert testimony on the topic. See 

, at Vol. 1 § 8.2

(describing the trial-like procedures required for formal adjudications).

      Additionally, the decisions were not made by the head of the EPA but instead

by a mid-level Agency official. See Aplt. Supp. Br. at 7–8; see also, e.g., Groff v.

United States, 

, 1352 (Fed. Cir. 2000) (one factor in the court’s

conclusion that it should provide Chevron deference to the agency action was that

                                         -11-
the adjudication at issue was “formal and culminate[d] in a formal written decision

by the head of the agency, not a nonbinding disposition by a low-level agency

official”).

       Next, the decisions hold no precedential value for third parties. Indeed, the

decisions have no precedential value even for the refiner, since each petition must

be resolved on a case-by-case basis (again, the EPA produced two decisions, one

for each of Sinclair’s refineries). Nor do third parties have access to the decisions,

since the EPA does not publicly release its decisions because they contain

confidential business information. Aple. Supp. Br. at 8.

       Finally, the EPA’s viability analysis is not a longstanding practice, but is,

instead, only a few years old. 4

       Thus, Mead and Barnhart compel our conclusion that Congress did not

intend the EPA’s interpretation of “disproportionate economic hardship” to have

the “force of law.” We therefore apply Skidmore deference in reviewing the EPA’s

interpretation.

       B. The “Disproportionate Economic Hardship” Exemption

       In analyzing Congress’s grant of power to the EPA to administer the RFS

Program, we begin, as always, with the statutory text. “Unless otherwise defined,


        4
          Although the record does not indicate exactly how long the EPA’s
interpretation of “disproportionate economic hardship” has been in place, as a
matter of logic, the EPA’s interpretation must have been derived in 2011 at the
earliest (the year that DOE released its second study).

                                          -12-
statutory terms are generally interpreted in accordance with their ordinary

meaning.” BP Am. Prod. Co. v. Burton, 

, 91 (2006); see also Engine

Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 

, 252 (2004)

(“Statutory construction must begin with the language employed by Congress and

the assumption that the ordinary meaning of that language accurately expresses the

legislative purpose.”).

             1. The Statutory Requirement

      As previously mentioned, Congress provided that small refineries could

petition the EPA to extend their initial exemption from the RFS Program “for

reason of disproportionate economic hardship.” 42 U.S.C. § 7545(o)(9)(B)(i). The

relevant statutory provision reads in full:

             (B) Petitions based on disproportionate economic
             hardship

                    (i) Extension of exemption
                    A small refinery may at any time petition the [EPA]
                    Administrator for an extension of the exemption
                    under subparagraph (A) for the reason of
                    disproportionate economic hardship.

                    (ii) Evaluation of petitions
                    In evaluating a petition under clause (i), the [EPA]
                    Administrator, in consultation with the Secretary of
                    Energy, shall consider the findings of the study under
                    subparagraph (A)(ii) and other economic factors.

42 U.S.C. § 7545(o)(9) (emphasis added).




                                          -13-
      Although Congress did not define the term “disproportionate economic

hardship” in the statute, the provision makes clear that Congress provided the EPA

with a comprehensive directive in analyzing and evaluating RFS Program

exemptions. The statute prescribes the overall process: (1) when petitions can be

made: “at any time”; (2) the relevant agency actors: the EPA must make decisions

in “consultation with” DOE; (3) the relevant question: whether a refinery will

suffer “disproportionate economic hardship” if it is required to participate in the

RFS Program for a given year; and (4) the methodology the agency is to use: the

EPA must consider the findings of DOE’s 2011 study and “other economic

factors.” 42 U.S.C. § 7545(o)(9)(B).

      With this statutory background, we turn to whether the EPA’s decisions

comport with Congress’s directive to grant exemptions when a small refinery

demonstrates that complying with the RFS Program would cause it to suffer a

“disproportionate economic hardship.”

             2. The EPA’s Decisions

      Prior to considering a refinery’s petition for a hardship exemption, the EPA

receives a recommendation on the petition from DOE. In its 2011 study, DOE

created a scoring matrix for determining its recommendations for granting

exemptions. The first part of the matrix assesses the “disproportionate structural

and economic” impacts of the RFS Program on the refinery, looking both at (1)

“disproportionate structural impact metrics” (a refinery’s percentage of diesel

                                         -14-
production, access to credit, local market acceptance of renewable fuels, etc.) and

(2) “disproportionate economic impact metrics” (the firm’s relative refining

margin, the degree to which the refiner can blend renewable fuels, whether RINs

are a net source of revenue, etc.). J.A. Vol. 1 at 99–102 (DOE’s 2011 Small

Refinery Exemption Study).

      The second part of DOE’s matrix assigns scores for three “viability metrics”:

“(1) whether the cost of compliance ‘would reduce the profitability of the firm

enough to impair future efficiency improvements;’ (2) whether ‘individual special

events’ have had ‘a temporary negative impact on the ability of the refinery to

comply;’ and (3) whether compliance costs are ‘likely to lead to shutdown’ of the

refinery.” Aplt. Br. at 13–14 (quoting J.A. Vol. 1 at 103–04).

      DOE’s interpretation of its methodology does not require that the cost of

compliance threaten a refinery’s long-term viability. Instead, DOE recommends a

50 percent waiver if the ranking meets a certain threshold on either side of the

matrix, although the DOE previously required the ranking meet certain thresholds

on both sides of the matrix. J.A. Vol. 1 at 17. DOE’s scoring change “is due to

language included in an explanatory statement accompanying the 2016

Consolidated Appropriations Act,” which instructed the DOE as follows: “‘If the

Secretary finds that either of these two components exists, the Secretary is directed

to recommend to the EPA Administrator a 50 percent waiver of RFS requirements




                                         -15-
for the petitioner.’” 

Appropriations Act, 2016, Pub. L.

No. 114-113 (2015)).

      Here, DOE applied its matrix methodology and recommended the EPA

provide a 50 percent waiver of the RFS Program’s requirements for both of

Sinclair’s refineries. See J.A. Vol. I at 15–17 (Sinclair, Wyoming refinery

decision); J.A. Vol. I at 35–37 (Casper, Wyoming refinery decision).

      The EPA rejected DOE’s recommendations and denied both petitions.

      In denying Sinclair’s exemption for the Sinclair, Wyoming refinery, the EPA

explained its view that “disproportionate economic hardship” requires a threat to

the “longer term prospects” of a refinery:

             EPA believes viability continues to be an important
             economic factor for determining “disproportionate
             economic hardship.” . . . . We consider whether [the
             Sinclair, Wyoming refinery] will remain a competitive and
             profitable refinery while satisfying its RFS obligations.
             EPA notes that it considers profitability not merely in the
             context of a single year’s financial statements, but also in
             the context of assessing the longer term prospects for the
             refinery. EPA also evaluates viability using metrics
             considered by DOE in its viability index: (a) compliance
             costs eliminate efficiency gains (impairment); (b) individual
             special events; and (c) compliance costs likely to lead to
             shut down. In reaching our conclusion, we consider all of
             this information on viability, and additional relevant
             information as available, to determine whether [the Sinclair,
             Wyoming refinery] faces a “disproportionate economic
             hardship” from compliance, and not merely an economic
             impact.




                                         -16-
J.A. Vol. 1 at 18–19 (quoting DOE 2011 Small Refinery Study) (citations omitted)

(emphasis added in first sentence); see also 

(EPA’s identical analysis

in its denial of Sinclair’s petition for the Casper, Wyoming refinery).

      In applying this long-term viability interpretation, the EPA rejected DOE’s

matrix scores for both Sinclair refineries. The EPA concluded that “viability”

meant only that program costs threatened the “long-term” survival of the refinery,

not a short-term comparison to other industry actors:

             In the discussion that follows, EPA independently reviews
             the information as we consider other economic factors in our
             analysis, including, but not limited to, profitability, net
             income, cash flow and cash balances, gross and net refining
             margins, ability to pay for refinery improvement projects,
             corporate structure, debt and other financial obligations,
             RIN prices, and the cost of compliance through RIN
             purchases. After considering all of this information, EPA
             finds [the Sinclair, Wyoming refinery] will not experience
             “disproportionate economic hardship” from compliance with
             the RFS program.

             As an initial matter, EPA recognizes its decision differs from
             DOE’s recommendation. The CAA requires that EPA act on
             a small refinery’s petition “in consultation with” DOE,
             “consider[ing] the findings of” the DOE Small Refinery
             Study and “other economic factors.” EPA gives weight to
             DOE’s technical evaluation and scoring of the refinery,
             recognizing that DOE has more experience in assessing,
             e.g., the impact of a particular special event, and how to
             balance short-term events with longer term planning and
             concerns over viability. However, EPA has responsibility
             for making the ultimate decision after considering DOE’s
             evaluation and recommendation, and continues to believe
             that the proper interpretation of the statutory
             prerequisite—disproportionate economic hardship—involves
             “examining the impact of compliance costs on a refinery’s

                                         -17-
             ability to maintain profitability and competitiveness—i.e.
             viability—in the long term.”

J.A. Vol. 1 at 17–18 (quoting CAA section 211(o)(9)(B)(ii) and, in last sentence,

Hermes Consol., LLC v. EPA, 

, 575 (D.C. Cir. 2015)) (emphasis

added).

      Thus, according to the EPA, to show “disproportionate economic hardship” a

small refinery must demonstrate an existential threat: it “faces RFS compliance

costs that would ‘significantly impact the operation of the firm, leading eventually

to an inability to increase efficiency to remain competitive, eventually resulting in

closure.’” 5 J.A. Vol. 1 at 19–20 (quoting DOE Small Refinery Study) (emphasis

added); see also 

(EPA’s identical analysis in its denial of Sinclair’s

petition for the Casper, Wyoming refinery).


       5
         The dissent describes this sentence as “regrettably inartful,” claiming that
the EPA did not mean what it said, but rather applied DOE’s viability metrics in a
“nuanced analysis.” Diss. at 1. But, as we have shown above, we do not read this
sentence in isolation. And, in any event, the EPA repeats this language in its
advocacy before us, using it to describe the test it applied in resolving Sinclair’s
petitions.

              “Viability” is a term of art for purposes of EPA’s
              assessment of petitions for small refinery
              exemptions. . . . EPA has also described this factor as
              requiring a small refinery to “show that it faces RFS
              compliance costs that would ‘significantly impact the
              operation of the firm, leading eventually to an inability
              to increase efficiency to remain competitive, eventually
              resulting in closure.’”

Aple. Br. at 40 n.11 (internal citations omitted) (emphasis added).

                                         -18-
       As we discuss next, the EPA’s long-term threat of closure requirement is

inconsistent with the plain meaning of “disproportionate economic hardship.”

              3. The Plain Meaning of “Disproportionate Economic Hardship”

       Sinclair claims the EPA’s position is that “no matter how disproportionate

the economic impact of the RFS Program on other refineries, there can be no

‘disproportionate economic hardship’ unless compliance with the RFS Program is

so costly that it will eventually force a small refinery to shut down,” and argues

that this position is contrary to the plain language of the term “disproportionate

economic hardship.” Aplt. Br. at 34. Sinclair also maintains that the EPA’s

“viability” test not only fails the agency’s statutory duty to compare the refinery at

issue with its competitors, but also requires significantly more “hardship” to the

refinery than the statute instructs. 6

       The statutory text at issue allows a range of linguistic possibilities in

defining “disproportionate economic hardship.” But as we discuss below, the

EPA’s interpretation falls outside the boundaries of permissible choice. It chose a


       6
         We reject the EPA’s argument that Sinclair “waived” its statutory
interpretation argument by failing to raise it during the administrative
proceedings. See Aple. Br. at 32–33. Sinclair fully explained its understanding
of the statutory term as informed by DOE’s exemption study and recommendation
that Sinclair was eligible for a 50 percent exemption. And, in any event, statutory
interpretation is the specialization of the courts, not the agencies. See Frontier
Airlines, Inc. v. Civil Aeronautics Bd., 

, 371 (10th Cir. 1980) (“The
general rule requiring exhaustion of remedies before an administrative agency is
subject to an exception where the question is solely one of statutory
interpretation.”).

                                          -19-
definition of economic hardship plainly at odds with Congress’s statutory command

by reading a “viability” requirement into the statute and the “disproportionate”

requirement out of it.

      We first evaluate Sinclair’s argument that the EPA improperly imported a

condition of future long-term viability into the statutory language. This question is

hardly in dispute, because the EPA admits as much. The EPA concluded its

decision for the Sinclair, Wyoming refinery with the following statement:

             EPA does not doubt that Sinclair incurred costs, both
             planned and unplanned, which affected profitability.
             However, as discussed above, EPA believes that it is
             necessary to show that RFS compliance will have an impact
             on the refinery’s ongoing future viability to be eligible for
             an exemption. After considering the full financial picture of
             [the Sinclair, Wyoming refinery] for 2014 and prior years,
             EPA does not find that compliance with RFS for 2014 would
             threaten [the Sinclair refinery]’s viability. Given [the
             Sinclair refinery]’s situation, we do not believe that an RFS
             exemption for [the Sinclair refinery] is justified under the
             statutory requirement of a disproportionate economic
             hardship.

J.A. Vol. 1 at 20–21 (emphasis added); see also 

(similar language in

the Casper, Wyoming refinery opinion).

      The EPA’s use of the word “necessary” proves Sinclair’s point. If long-term

“viability” was merely one element the EPA considered in its “disproportionate

economic hardship” analysis, that would be a different story. But by stating that

future viability (meaning whether the firm will go out of business) is necessary




                                         -20-
to—in effect, the sine qua non of—its decision, the EPA demonstrates it will not

grant an exemption unless there is a threat to a refinery’s long-term viability.

      The EPA’s interpretation takes the statutory language too far. First, as a

matter of textual exegesis, a “‘hardship’” is something that “makes one’s life hard

or difficult—not just something that makes continued existence impossible.” Aplt.

Br. at 35; see Oxford English Dictionary (2017) (defining “hardship” as

“[s]omething which is hard to bear”); Black’s Law Dictionary (10th ed. 2014)

(defining “hardship” as “[p]rivation; suffering or adversity”); Webster’s Third New

Int’l Dictionary 1033 (1971) (defining “hardship” as “something that causes or

entails suffering or privation”).

      “[V]iability,” on the other hand, is the “ability to continue or be continued;

the state of being financially sustainable.” Oxford English Dictionary (2017); see

also Webster’s Third New Int’l Dictionary 2548 (1971) (defining “viability” as “the

quality or state of being viable,” and defining “viable,” in turn, as “capable of

living”). As a matter of common sense, an experience that causes hardship is less

burdensome than an experience that threatens one’s very existence. Our law clerks,

for example, might say their first year of law school was a “hardship” they

suffered, but they could hardly claim that the experience of learning the law

threatened their very “viability” (we hope).

      The EPA argues that “viability” and “hardship” are the same, since

“hardship” can be defined as “suffering” and “privation.” Aple. Br. at 38. But as

                                          -21-
we just explained, “suffering” and “privation” may be difficult to bear, but they do

not necessarily rise to the level of threatening one’s very existence. And the EPA’s

interpretation of “viability” is akin to a death knell, not simple privation. In any

event, DOE’s matrix analysis supplied three “viability metrics” that collectively

determine hardship: (1) reduced profitability; (2) temporary negative events; and

(3) risk of closure. See J.A. Vol. 1 at 103. The EPA’s interpretation ignores two-

thirds of this analysis and selects only risk of closure as the appropriate measure of

hardship. This is not a reasonable interpretation of the statutory term. In short, the

EPA’s equation of “hardship” and “viability” improperly transforms Congress’s

statutory text into something far beyond what Congress plausibly intended.

      The statute also commands the EPA to consider the disproportionate impact

of the RFS Program, which inherently requires a comparative evaluation. The EPA

must compare the effect of the RFS Program compliance costs on a given refinery

with the economic state of other refineries. The EPA’s viability test involves no

such comparison, but instead looks at each refinery in isolation and asks whether

the cost of long-term compliance with the RFS Program would force the refinery to

shut down. By making long-term viability a necessary factor in its analysis, the

EPA impermissibly reads the word “disproportionate” out of the statute. See Clark

v. Rameker, 

, 2248 (2014) (“a statute should be construed so that

effect is given to all its provisions, so that no part will be inoperative or

superfluous”). The EPA tries to sidestep the comparative nature of the

                                           -22-
“disproportionate economic hardship” by pointing out that the statute requires the

EPA to consider DOE’s study and “other economic factors.” Because viability is

one of the factors considered by DOE, the EPA argues it is also an appropriate

consideration for the EPA. See Reply Br. at 11. But as we explained above, the

statutory requirements for what sources the EPA must consider in evaluating the

petitions are distinct from the overall purpose of the inquiry. In effect, the EPA

takes the holistic evaluation required by Congress and morphs it into a single

question: a threat of closure inquiry.

      The EPA’s narrow viability evaluation is also not supported by contextual

clues in the statutory scheme. Congress, in fact, directed the EPA to apply a

closure test for another part of the CAA involving primary nonferrous smelter

orders. 42 U.S.C. § 7419(d)(2) (requirement to use continuous emission reduction

technology can be waived “upon a showing by the owner or operator of the smelter

that such requirement would be so costly as to necessitate permanent or prolonged

temporary cessation of operations of the smelter.” (emphasis added)). Although

this CAA provision is not part of the RFS Program, it makes the basic point that

Congress knows how to supply a closure test when it intends to do so. See Antonin

Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 170–73

(2012) (discussing the presumption of consistent usage).

      The EPA places significant weight on two recent circuit court decisions

addressing § 7545(o)(9)(B)(ii), which it claims support its interpretation of the

                                         -23-
statute: Hermes Consolidated, LLC v. EPA, 

(D.C. Cir. 2015) and Lion

Oil Company v. EPA, 

(8th Cir. 2015). In Hermes, a refinery

challenged the EPA’s denial of its extension for an economic hardship exemption

from the RFS Program (a denial supported by DOE’s matrix scheme). The court

rejected the refinery’s challenge under Chevron step one, concluding that the

EPA’s reliance on a viability index did not contradict the plain language of

§ 7545(o)(9)(B) because so long as “EPA consults with DOE and considers the

2011 Study and ‘other economic factors,’ EPA retains substantial discretion to

decide how to evaluate hardship petitions.” 

–75 (internal

citation omitted). The D.C. Circuit also rejected the refinery’s Chevron step two

argument, concluding that the EPA’s method of evaluating “‘disproportionate

economic hardship’ is ‘based on a permissible construction of the statute.’” 

(quoting 

). In other words, the court found it

reasonable for the EPA to incorporate the methodology from the 2011 DOE study,

and the viability matrix in particular, because the statute requires the EPA to

consider the findings of the study and “other economic factors” in evaluating

hardship petitions. Thus, the court concluded the EPA’s choice was within its

discretion under Chevron step two. See 

Oil, the Eighth Circuit also rejected the refinery’s Chevron step one

argument. The court stated that since the statute does not define “disproportionate

economic hardship,” and Congress delegated authority to the agency to implement

                                         -24-
an ambiguous statute, the court was “‘required to accept the agency’s statutory

interpretation, so long as it is 

(quoting Fast v.

Applebee’s Int’l, Inc., 

, 876 (8th Cir. 2011). The Eighth Circuit

concluded that the EPA’s choice to measure “hardship” by examining the refinery’s

viability in the long run was within the agency’s discretion, and was thus

reasonable. 

cases are distinguishable. As an initial matter, neither the D.C.

Circuit nor the Eighth Circuit considered whether Mead should control its

interpretation of the statute; instead, both courts assumed that Chevron applied.

Regardless, as we explained above, Mead instructs us that Skidmore deference is

the appropriate standard of review to apply to an informal adjudication that does

not carry “the force of law.”

      The petitioner in Hermes argued that mere “[c]onsideration of a viability

index” was “inconsistent with [the EPA’s] statutory 

. In

other words, the EPA could not consider a refinery’s viability at all, even if

viability was considered along with a host of other economic factors. The D.C.

Circuit properly rejected that argument. The statutory scheme does not prohibit the

EPA from considering viability as a factor. But as we explained above, when the

EPA makes long-term viability the necessary, if not the sole, factor—refusing to

grant an exemption unless there is a threat to a refinery’s long-term viability—it

renders an interpretation outside the bounds of permissible statutory choice.

                                         -25-
      As for Lion Oil, the Eighth Circuit’s decision does not make clear whether

the petitioner argued it was impermissible for the EPA to consider viability as a

factor in its analysis (as in Hermes) or as the sole factor in its analysis (as in this

case). 

. Either way, we are unpersuaded. If the former, our

analysis of Hermes applies. If the latter, Lion Oil improperly interpreted Hermes as

rejecting the EPA’s use of viability as the sole factor in its “disproportionate

economic hardship” analysis before relying entirely on the D.C. Circuit’s

reasoning. See 

are unpersuaded by the court’s analysis in

Lion Oil.

      Mead instructs us to defer to agency interpretations of a statute only to the

extent those decisions have the “power to 

. Since our

textual and contextual analyses demonstrate that the EPA’s interpretation of

§ 7545(o)(9)(B) is contrary to the meaning and purpose of the statute, the EPA has

failed to persuade us here.

                                   III. Conclusion

      By reading a necessary “viability” requirement into its statutory directive to

evaluate a refinery’s petition for exemption from the RFS program based on

“disproportionate economic hardship,” the EPA exceeded its statutory authority.

We therefore GRANT Sinclair’s petition for review, VACATE the EPA’s decisions

for Sinclair’s two Wyoming refineries, and REMAND for further proceedings

consistent with this opinion.

                                           -26-
      Sinclair’s June 24, 2016 motion to seal the docketing statement and agency

decision documents and its September 9, 2016 motion to seal all the briefs and the

joint deferred appendix are GRANTED.




                                        -27-