DC Circ. Upholds EPA’s 2013 Renewable Fuel Standards

Source: By Sean McLernon, LAW 360 • Posted: Monday, May 12, 2014

Law360, New York (May 06, 2014, 3:59 PM ET) — The D.C. Circuit on Tuesday rejected an energy industry challenge to the U.S. Environmental Protection Agency‘s renewable fuel standards, ruling that the agency acted within its broad discretion when it determined the amount of renewable fuels that must be added to the nation’s fuel supply.

A small oil refiner and two petroleum industry groups said the EPA should have reduced the volume of total renewable fuel required to be sold or introduced to the market for 2013, but the unanimous appeals court panel found the EPA acted reasonably when it decided that the advanced biofuel quote could be achieved and did not need to be reduced.“This conclusion was supported by substantial evidence, including production estimates for biomass-based diesel, consideration of incentives produced by the reinstatement of the biodiesel tax credit, and an analysis of sugarcane ethanol trade with Brazil,” the decision said.

The appeals court also agreed to put on hold remaining challenges to the rule based on the EPA’s updated estimate of 2013 gasoline usage and an adjustment to the standard based on a small refinery exemption, granting a joint motion from petitioners American Petroleum Institute and American Fuel & Petrochemical Manufacturers and the EPA.

While agreeing to hold those claims in abeyance as the EPA reconsiders the issues, the panel rejected the other arguments raised by the petitioners Monroe Energy LLC.

The panel noted that the EPA identified several ways in which maintaining the renewable fuel volume would create demand pressure to increase consumption of high-ethanol gasoline blends and raise the so-called ethanol blendwall.

“Even assuming that the E10 blendwall imposes a firm cap on ethanol consumption, maintaining the statutory requirement for total renewable fuel would promote the use of nonethanol-renewable fuels such as biodiesel,” the decision said.

Monroe Energy also claimed the rule should be vacated because the EPA missed its November 2012 deadline by several months and had no authority to retroactively apply the standards to the entire compliance year, but the D.C. Circuit said the EPA did not lose its power to act just because it issued the standards late.

API senior counsel Erik C. Baptist said the group was pleased that the court put its claims on hold while the EPA reconsiders.

“This decision will give EPA an opportunity to correct its mistake in increasing RFS requirements on obligated parties almost nine months into the compliance year — without any notice,” Baptist said. “The refining industry needs regulatory certainty to plan for compliance with this regulation, make investments and produce the billions of gallons of fuels that Americans use each year.”

AFPM attorney Richard S. Moskowitz expressed similar concerns about the EPA’s tardiness.

“My sense of frustration is growing,” Moskowitz said. “EPA is repeatedly ignoring this aspect of the RFS. This is a black and white statutory deadline to provide regulatory certainty, in advance of the compliance years. The whole idea of coming out with it in November is to allow refiners to prepare.”

Representatives for Monroe Energy and the EPA were not immediately available for comment Thursday.

The EPA increased the total amount of renewable fuels that must be added to the U.S. fuel supply in 2013 under its Renewable Fuels Standard program, known as RFS2, by 1.35 billion gallons to 16.55 billion gallons. Most of the renewable fuel blended into gasoline comes from corn-based ethanol.

The agency gave refiners an additional four months to comply with the new requirements and and reduced the amount of required cellulosic biofuels to 6 million gallons, after it had originally proposed 14 million gallons.

Judges Judith W. Rogers, Thomas B. Griffith and Cornelia T.L. Pillard sat on the panel for the D.C. Circuit.

Monroe Energy is represented by David W. DeBruin, Marc A. Goldman and Matthew E. Price of Jenner & Block LLP.

API and AFPM are represented by Robert A. Long Jr. and Kristen E. Eichensehr of Covington & Burling LLP; Chet M. Thompson of Crowell & Moring LLP; Richard S. Moskowitz of AFPM; and Harry Ng of API.

The EPA is represented by U.S. Department of Justice attorneys Lisa M. Bell and Brian H. Lynk and acting Assistant Attorney General Robert G. Dreher.

The case is Monroe Energy LLC v. EPA, case number 13-1265, in the U.S. Court of Appeals for the District of Columbia Circuit.