Federal court slams ethanol and EPA in one ruling

Source: By JOHN SICILIANO , Washington Examiner • Posted: Thursday, July 16, 2015

A federal appeals court slammed the ethanol industry on Tuesday for suing the Environmental Protection Agency, and then slammed the EPA’s defense even though the agency won the case.

The D.C. Circuit Court of Appeals threw out a lawsuit brought against the EPA a year ago for not including 30 percent ethanol fuel blends (E30) as a test fuel in the agency’s landmark Tier 3 clean fuel and vehicle rules. The test fuel is used for setting baseline emissions for vehicles that the EPA regulates. Changing the fuel could change the stringency of emission reductions.

The three-judge panel ruled that because E30 ethanol fuels are not commercial, it had only one choice — to “disagree” and “therefore deny the petition,” according to the opinion written by Judge Brett Kavanaugh.

The lawsuit has been seen as an attempt by renewable fuel advocates — including the Energy Futures Coalition — to get automakers to build cars that can handle higher blends of ethanol, which the oil industry argues would result in engine damage.

But the decision is as much a repudiation of the EPA’s arguments in the case, as it is a denial of the green fuel industry’s attempt to get the agency to approve E30.

Kavanaugh’s opinion briefly touches on the decision against the industry, before launching into why most of the EPA’s key arguments against the petitioners were wrong.

“Before reaching the merits” of the industry’s arguments, Kavanaugh writes, “we address several threshold arguments raised by EPA regarding the court’s authority to decide the case. We reject each of those arguments.”

The bulk of Kavanaugh’s opinion is directed at why the EPA is wrong. First, he writes that the agency argued that petitioners do not have article III standing — a legal threshold for the court to take up a case based on the merits — but the ethanol proponents do.

“According to petitioners, the EPA’s test fuel regulation prohibits the use of E30 as a test fuel. As a direct result of that regulation, petitioners claim that they face a regulatory impediment (what they view as an illegal regulatory impediment) that prevents their product from being used as a test fuel. That qualifies as an injury in fact,” Kavanaugh writes.

The ethanol industry had proposed using a higher blend of ethanol for the engine test fuel the EPA uses in setting pollution regulations for vehicles. But the EPA decided not to change the blend.

“Petitioners want EPA to approve E30, which is a fuel that contains about 30 percent ethanol, for use as a test fuel. But according to petitioners, E30 is not yet ‘commercially available,’ as required by EPA’s test fuel regulation,” and is why the court denied the suit, Kavanaugh writes.

Many of the industry’s other arguments would have been deemed “ripe” by the court if the fuel were commercially available.

The EPA’s arguments, on the other hand, were all wrong. “EPA points out that the test fuel regulation is technically directed at vehicle manufacturers, not biofuel producers. But that does not undermine petitioners’ standing,” Kavanaugh continues. “The standing question in this case is straightforward: If the government prohibits or impedes Company A from using Company B’s product, does Company B have standing to sue?” Under the law, the answer is “yes” they do, he adds.

“In such cases, both Company A and Company B are ‘an object of the action (or forgone action) at issue,’ so ‘there is ordinarily little question’ that they have standing,” Kavanaugh writes.

Petitioners also passed another hurdle in showing causation. “Petitioners have also demonstrated causation and redressability. Petitioners contend that the ‘commercially available’ requirement is a direct regulatory impediment that prevents their product from being used as a test fuel. That suffices to show causation,” Kavanaugh writes.

“Put simply, petitioners have standing to challenge the legality of the test fuel regulation,” Kavanaugh adds in admonishing the EPA, calling the petitioners’ arguments “ripe” and “timely.”

He reiterated that the only impediment to the industry’s arguments is that the EPA’s decision not to include the E30 test fuel is not arbitrary nor capricious.

The Clean Air Act “provides that EPA’s test fuel regulations must ‘reflect the actual current driving conditions under which motor vehicles are used, including conditions relating to fuel.’ It is not arbitrary and capricious for EPA to fulfill that statutory mandate by requiring that test fuels be ‘commercially available.'”

Refiners, which oppose the use of higher blends beyond 10 percent ethanol as a test fuel, applauded the court’s action.

“We are pleased that the court recognized the undeniable market reality that E30 gasoline is not commercially available, as is required by law to be used as a test fuel, and therefore denied the petition,” said American Fuel and Petrochemical Manufacturers President Chet Thompson.

“Today’s decision underscores the fact that the market is void of E30 for one glaring reason; consumers are not demanding fuels with higher concentrations of ethanol,” Thompson added.

“We hope EPA will also heed that important distinction as it works to finalize its proposal for implementing the federal biofuel mandate,” he said.