Court upholds EPA’s 2013 RFS rule

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, May 7, 2014

A federal court yesterday upheld U.S. EPA’s 2013 renewable fuel standard rule against a challenge from a refinery owned by Delta Air Lines Inc.

The U.S. Court of Appeals for the District of Columbia Circuit said in a ruling  that EPA issued a reasonable rule setting the targets for renewable fuel use last year. The agency also adequately took into account the ability of refiners to purchase credits to meet the standards, Judge Judith Rogers wrote in an opinion.”EPA’s decision to preserve the 2013 fuel standards … was reasonable,” Rogers wrote.The court did not, however, rule on challenges brought by oil industry trade groups. The court decided to sever those challenges from the refiner’s lawsuit and potentially consider them at a later date.

EPA in August issued a renewable fuel standard that required refiners to blend 16.55 billion ethanol-equivalent gallons of renewable fuel in the 2013 compliance year. Of that total, 13.8 billion gallons was to be conventional ethanol and 2.75 billion gallons advanced biofuel not made from corn. The agency did not use waiver authorities given to it by statute to reduce the overall renewable fuel target.

Monroe Energy LLC, Delta’s refinery, had asked the court to vacate EPA’s rule on the grounds that the agency acted arbitrarily when it did not reduce refiners’ requirements for blending renewable fuels.

The refinery said that EPA’s decision imposed disproportionate burdens on merchant refiners like itself that do not blend their own ethanol and must meet their RFS obligations solely by purchasing credits known as Renewable Identification Numbers (RINs). Monroe argued that other refineries hoarded credits during 2013, driving up its compliance costs (Greenwire, April 7).

But the court today found that EPA correctly determined that the total renewable fuel volume mandate could be met and took into account the blend wall, the term given to the practical limit to the amount of ethanol that can be blended in today’s fueling infrastructure.

Although “EPA’s analysis was not as robust” as it might have been, the agency also adequately weighed the amount of credits available in the market for refiners to meet the standard, taking into account credits that may be banked for use in future compliance years, Rogers said.

EPA recognized that refiners have available “various alternative methods to comply” with the targets, Rogers said. The agency also postponed the compliance deadline to help refiners, despite issuing the final rule eight months beyond the statutory deadline, the judge noted.

“EPA acknowledged the lateness of the final rule and considered various ways to minimize the hardship caused to obligated parties,” Rogers wrote, “ultimately concluding that the best way to balance obligated parties’ interest in regulatory certainty with EPA’s statutory obligation to ensure the renewable fuel volumes are annually met was to extend the compliance demonstration deadline by four months.”

The opinion did not address challenges brought against the 2013 RFS standards by the American Petroleum Institute and American Fuel & Petrochemical Manufacturers.

In a lawsuit that was combined with Monroe’s challenges, the oil trade groups argued that EPA released its final rule eight months late and made changes that caught refiners by surprise and increased their compliance burdens.

They also argued that EPA overshot its estimation of how much cellulosic biofuel — an advanced biofuel made from agricultural residue, grasses and other plant materials — would be produced.

The court severed the cellulosic challenge from the lawsuit earlier this year after EPA said it would reconsider the standard on its own. The ruling today says that the court has also decided to remove the other challenges and hold them in abeyance.

EPA released a much lower cellulosic standard in late April; it’s unclear yet whether the oil trade groups will continue to challenge it and the other aspects of the 2013 rule in court (E&ENews PM, April 22).