DC Circ. Skeptical Of EPA’s High-Ethanol Fuel Rule

Source: By Law360 • Posted: Wednesday, April 14, 2021

Law360 (April 13, 2021, 10:42 PM EDT) — The D.C. Circuit appeared hesitant Tuesday to keep afloat a U.S. Environmental Protection Agencyrule allowing year-round use of gasoline made with 15% ethanol, with two judges expressly asserting that the agency cannot make such a change through administrative rulemaking.

U.S. Circuit Judges Robert L. Wilkins and Judith Rogers told a government attorney that the EPA seemed to have flouted the clear language of the Clean Air Act when it finalized the rule in May 2019 to allow blended gasoline with 15% ethanol, known as E15, to be sold throughout the year. During the roughly two-and-a-half-hour remote hearing, both judges endorsed arguments brought by the American Fuel & Petrochemical Manufacturers and other industry groups that the CAA limits the waiver to gasoline with just 10% ethanol, or E10, which previously was the limit on ethanol that could be sold in the summer.

Covington & Burling LLP partner Kevin F. King, who argued for the petroleum industry groups, said the rule should be vacated because it’s not in line with the CAA’s text, structure and history. He asserted the statute’s language, “containing gasoline and 10% … ethanol,” sets a level, not a ceiling for the amount of ethanol that should be blended into the gasoline.

Perry M. Rosen of the U.S. Department of Justice insisted that the CAA’s ethanol allowance provision is “ambiguous” and the EPA’s reinterpretation is correct. Because Congress does not want to limit the use of ethanol, he argued, the agency acted to allow E15 to be sold all year. It was previously banned for sale during the summer over concerns it contributes to smog.

“We’re talking about just 5% additional ethanol,” Rosen told the panel. “It serves the purpose and intent of the statute, which is to provide a special allowance for ethanol, to support the agricultural industry, energy security and the other reasons set forth in the statute.”

But Judges Wilkins and Rogers said the administrative action doesn’t seem legally sound because it undercuts the fuel volatility restrictions required by the CAA and that changes must be made by Congress.

Judge Wilkins hypothetically asked the attorney whether it would be appropriate to file a 10-page supplemental brief even though the circuit court said arguments should be limited to five pages.

The attorney replied, no.

“In my prior life, … I studied chemical engineering,” the judge later said. “When something says it contains a specific percent, especially when you’re dealing with chemicals, it means specifically that amount. I don’t see any ambiguity here. Why am I wrong?”

Rosen told the panel that the lack of modifiers in the phrase “fuel blends containing gasoline and ten percent ethanol” rendered the CAA provision in dispute sufficiently ambiguous, so the statute could be reinterpreted as a floor on the minimum ethanol content.

But Judith Rogers shut down that argument, saying this has not been the EPA’s longstanding interpretation of the ethanol allowance provision.

The judge also stated Tuesday the CAA’s legislative history indicates that Congress intended to apply the waiver to gasoline containing 9% to 10% ethanol by volume.

“My concern is simply that how are courts, much less the agency, to know what words mean if Congress says 10 but the agency said, ‘Don’t worry about it, 15 is OK,'” Judge Rogers said. “I just wonder the principles we’re laying down.”

“Words either mean something or they don’t, even if the agency wants to achieve a wonderful result,” the judge added.

U.S. Circuit Judge Cornelia T.L. Pillard, who also sat on the panel, expressed some skepticism about Rosen’s arguments, too.

The judge said that while the rule supports congressional efforts to increase the share of motor vehicle fuel supplied by ethanol and addresses federal lawmakers’ concerns about fuel volatility, it would actually cause an increase in emissions that contribute to air pollution.

Rosen said there’ll only be “small increases” in some greenhouse gas emissions, but that E15 would also significantly slash ozone-generating pollutants like carbon dioxide.

The EPA applied a CAA waiver to E15 — a move that fulfilled then-President Donald Trump’s mandate that was supported by U.S. senators from corn-producing states. Ethanol in the U.S. is largely derived from corn.

The agency reinterpreted a section of the CAA, which deals with the so-called 1-pound-per-square-inch Reid vapor pressure, or RVP, waiver. In higher-RVP fuels, emissions from cars can worsen ozone problems, the EPA said. Previously, the waiver only applied to E10.

U.S. Circuit Judges Judith Rogers, Cornelia T.L. Pillard and Robert L. Wilkins sat on the panel for the D.C. Circuit.

The petroleum groups are collectively represented by Thomas A. Lorenzen, Robert J. Meyers and Elizabeth B. Dawson of Crowell & Moring LLP, Robert A. Long Jr., Kevin F. King, Thomas R. Brugato and Carlton Forbes of Covington & Burling LLP, John Wagner and Maryam Hatcher of the American Petroleum Institute and Richard S. Moskowitz and Tyler J. Kubik of the American Fuel & Petrochemical Manufacturers.

The Urban Air Initiative and other agricultural groups are represented by C. Boyden Gray, Jonathan Berry and James R. Conde of Boyden Gray & Associates.

The Small Fuel Retailers Coalition is represented by Suzanne B. Murray and Michael J. Scanlon of Haynes and Boone LLP.

The lead case is American Fuel & Petrochemical Manufacturers et al. v. U.S. Environmental Protection Agency, case number 19-1124, in the U.S. Court of Appeals for the District of Columbia Circuit.

–Additional reporting by Michael Phillis and Keith Goldberg. Editing by Michael Watanabe.