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United States v. NGL Crude Logistics, LLC

United States District Court, N.D. Iowa, Eastern Division

May 24, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
NGL CRUDE LOGISTICS, LLC f/k/a Gavilon, LLC, Defendant.

          ORDER

          LINDA R. READE, JUDGE.

         TABLE OF CONTENTS

         I. INTRODUCTION ....................................... 2

         II. RELEVANT PROCEDURAL HISTORY ........................ 2

         III. FACTUAL BACKGROUND ................................ 3

         A. Parties .......................................... 3

         B. Renewable Fuel Program ............................. 3

         C. 2011 Transactions .................................. 5

         D. Alleged Violations .................................. 6

         IV. LEGAL STANDARD ..................................... 8

         V. ANALYSIS ........................................... 8

         A. Scope of Regulations ................................ 9

         B. Count 7 ........................................ 14

         1. Causation ..................................14

         2. Prohibited acts ...............................15

         C. Count 8 ........................................17

         D. Count 1 ........................................17

         E. Injunctive Relief ..................................20

         VI. CONCLUSION ....................................... 25

         I. INTRODUCTION

         The matter before the court is Defendant NGL Crude Logistics, LLC's (“NGL”) “Rule 12(b)(6) Motion to Dismiss Plaintiff's Amended Complaint” (“Motion”) (docket no. 25).

         II. RELEVANT PROCEDURAL HISTORY

         On January 9, 2017, Plaintiff United States of America (“the government”) filed an Amended Complaint (docket no. 21) against Defendants NGL and Western Dubuque Biodiesel, LLC (“Western Dubuque”). The Amended Complaint alleges violations of the Clean Air Act and related regulations, and seeks civil penalties and injunctive relief. See generally Amended Complaint. Specifically, the government alleges that: (1) NGL failed to retire Renewable Identification Numbers (“RINs”) associated with a quantity of biodiesel, in violation of 40 C.F.R. § 80.1429(f) (2011);[1] (2) Western Dubuque generated RINs using a non-qualifying feedstock, in violation of 40 C.F.R. §§ 80.1426(c)(6)(i) & 80.1460(a); (3) Western Dubuque generated RINs using a non-qualifying process, in violation of 40 C.F.R. §§ 80.1426(c)(6)(i) & 80.1460(a); (4) Western Dubuque used a feedstock and/or process that was not registered with the Environmental Protection Agency (“EPA”) to use, in violation of 40 C.F.R. § 80.1460(b)(5); (5) Western Dubuque improperly identified RINs in the EPA's reporting system, in violation of 40 C.F.R. §§ 80.1452(b)(2), (4) & 80.1460(f); (6) Western Dubuque created and transferred invalid RINs, in violation of 40 C.F.R. § 80.1460(b)(2); (7) NGL caused Western Dubuque to commit prohibited acts, in violation of 40 C.F.R. § 80.1460(e); and (8) NGL transferred invalid RINs, in violation of 40 C.F.R. § 80.1460(b)(2). See Id. ¶¶ 72-125. On April 11, 2017, the court approved an amended consent decree (docket no. 48), which resulted in the settlement of the government's claims against Western Dubuque.

         On January 23, 2017, NGL filed the Motion. On February 17, 2017, the government filed a Resistance (docket no. 46). On March 2, 2017, NGL filed a Reply (docket no. 45). On Monday, May 22, 2017, the court heard oral argument from the parties regarding the issues raised in the Motion. See May 22, 2017 Minute Entry (docket no. 51). The matter is fully submitted and ready for decision.

         III. FACTUAL BACKGROUND

         Accepting all factual allegations in the Amended Complaint as true, and drawing all reasonable inferences in favor of the government, the facts are as follows.

         A. Parties

         The government brings the instant action on behalf of the EPA.

         NGL is a “midstream energy provider that transports crude oil, and markets and supplies refined product, natural gas liquids, and other products.” Amended Complaint ¶ 7. During the times relevant to the events alleged in the Amended Complaint, NGL was known as Gavilon, LLC.

         Western Dubuque owns and operates a biodiesel plant in Farley, Iowa. Id. ¶ 9.

         B. ...


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