D.C. Circuit judges appear moved by Valero claims against EPA

Source: Marc Heller, E&E News reporter • Posted: Tuesday, November 13, 2018

A lawyer for the Trump administration faced a flurry of questions yesterday in the latest legal challenge to the federal renewable fuel standard.

A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit appeared at times sympathetic to an argument by Valero Energy Corp. that EPA hasn’t met a requirement for periodic reviews of the renewable fuel law’s impact on refiners — and isn’t giving them ample opportunity to challenge the agency’s moves.

In the case, Valero Energy Corp. v. EPA, the energy company argues the agency failed to conduct the “periodic reviews” required by the RFS law, first enacted in 2005 and updated in 2007, despite a declaration in 2017 that it has been reviewing impacts in the course of implementing the program. The RFS requires the blending of ethanol into the nation’s fuel supply.

In addition, Valero, one of the nation’s biggest petroleum refiners, contends that the law mandates reviews of the impact on individual entities that have to comply with ethanol blending requirements, rather than broader “class level” analyses.

The company has asked the court to throw out the agency’s 2017 determination and force a more formal review with a public comment period.

The case centers on finer legal points of a highly contentious program that pits oil and gas companies against the ethanol industry.

EPA, through Justice Department lawyer Ben Carlisle, countered that the agency’s determination in 2017 — which wasn’t published in the Federal Register — only clarified the agency’s position and wasn’t the sort of administrative action that would be open to a court challenge.

“Valero is in exactly the same boat it was in before EPA issued this document,” Carlisle said.

A victory for Valero could open the way to further EPA reviews, which critics of the RFS say would show the ethanol mandate is hurting their industry and that mandated volumes should be lowered.

The case touches on one of several issues related to the RFS that Valero opposes. It and other refiners are looking to repeal or revamp the program through legislation, as well.

Two panelists — Judges Sri Srinivasan and Judith W. Rogers — appeared at times to struggle with the idea that Valero, or any challenger, wouldn’t be able to fight such a declaration. A company might believe a proper periodic review hadn’t been conducted but still had to comply with climbing ethanol volume requirements, Rogers said.

“So, if I represent Valero, what do I do?” Rogers asked Carlisle.

Valero still has the right to challenge renewable fuel volumes that EPA proposed every year, Carlisle answered. Those announcements, made through formal rulemaking, are the place to lodge objections, he said.

But EPA also has decided that refiners don’t have a right to individual reviews — just the “class level” analysis the agency has said it conducts, Rogers countered.

Peppered with questions by the two judges, Carlisle acknowledged that Valero doesn’t have much legal remedy if it disagrees with EPA’s position that past agency actions constituted the periodic reviews required in the law.

And he said the narrow issue before the court is whether EPA’s declaration changed Valero’s ability to get an individual review of the RFS’s impacts.

“It’s always been zero, this document is zero, so it stays at zero,” Srinivasan said.

Judges had questions for Valero, as well, asking a lawyer for the company, Samara Kline, to explain why the firm wouldn’t be able to argue for periodic reviews in challenging the annual volume requirements, for instance.

But Rogers also appeared to be reaching for ideas about how Valero or others could force the issue legally, since EPA’s 2017 decision wasn’t technically a final administrative action.

In Valero’s view, Kline said, EPA should have published a notice about its 2017 determination and taken public comment — but didn’t in order to avert legal challenge. “This is the only opportunity we have to enforce the statute,” she said.