EPA, oil industry to square off in court over 2013 RFS

Source: Amanda Peterka, E&E reporter • Posted: Monday, April 7, 2014

U.S. EPA will defend its 2013 targets for renewable fuels in court Monday against oil industry trade groups and a refinery owned by Delta Air Lines Inc.At issue in the case that combines all the oil industry challenges: Did EPA overshoot the targets, requiring refiners to breach the “blend wall”?The challenge also accuses EPA of breaking the law by releasing a final 2013 renewable fuel standard (RFS) more than eight months after its statutory deadline.

A three-judge panel of the U.S. Court of Appeals for the District of Columbia will hear oral arguments Monday morning. Several biofuel trade groups have intervened in the lawsuit on behalf of EPA, while PBF Holding Co. LLC has intervened for the oil industry.

Finalized last August, EPA’s rule requires refiners to blend 16.55 billion ethanol-equivalent gallons of renewable fuel in 2013. Of that total, 13.8 billion gallons was to be conventional ethanol and 2.75 billion gallons advanced biofuel not made from corn.

The RFS targets were written into statute by the 2007 Energy Independence and Security Act. But the law gave EPA authority to waive targets in a given year.

In the lawsuit filed last October, Delta’s Monroe Energy LLC called EPA’s 2013 mandate “absurd” because it requires the nation to blend more ethanol than the market can handle. Monroe, which does not blend its own ethanol, said refiners would hoard the credits known as renewable identification numbers, limiting its own ability to meet the requirements and increasing its compliance costs (Greenwire, Oct. 16, 2013).

In a recent filing with the Securities and Exchange Commission, Monroe said it spent $64 million last year on costs related to RINs.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers also sued EPA over the 2013 RFS but focused on the tardiness of the final rule.

The law requires EPA to finalize targets by Nov. 30 of the previous year. EPA failed to finalize the 2013 proposal until last August. The oil trade groups say the delay caused uncertainty and made it more difficult for refiners to comply.

EPA’s strongest argument is likely to be that the oil industry did not meet the targets, but rather exceeded them, banking credits that can be used in the 2014 compliance year.

In court documents, EPA also argues that it considered appropriate market data, including the blend wall, in setting the 2013 requirement.

“The agency thoroughly explained its reasoning and carefully addressed all of the issues raised in public comments, ultimately concluding that obligated parties can and should comply with the standards,” EPA said in a court brief (Greenwire, Feb. 5).

EPA will also likely point out that it extended the compliance deadline to June 2014 and that courts have previously upheld rules that have been promulgated after statutory deadlines.

Of the panel that will hear the arguments Monday, two judges are Democratic appointees: Judith Rogers, a veteran of environmental cases, and Cornelia “Nina” Pillard. This will be one of the first EPA cases for Pillard, an Obama appointee only recently confirmed to the D.C. Circuit. Judge Thomas Griffith, a GOP appointee, will round out the panel.

The case comes at a crucial time for the future of the renewable fuel standard, as EPA is weighing whether to use its authority to lower the standard for this year based on blend wall concerns. The agency proposed an unprecedented lowering of all the targets for this year, setting off a firestorm of criticism among biofuel interests (E&ENews PM, Nov. 15, 2013).

Monroe has asked for an expedited decision on the 2013 case; it is likely that the case will be decided before EPA comes to a final decision on its 2014 target.

The original lawsuit filed by the oil industry trade groups also took issue with EPA’s 2013 cellulosic standard, a subset of the advanced biofuels target that mandates the blending of fuels made from plant-based materials like agricultural residues and grasses.

But EPA earlier this year said it would reconsider the standard on its own after receiving petitions from the oil groups (Greenwire, Jan. 23). The court removed the cellulosic challenge from the lawsuit and put it on hold until the agency reissues the standard.