In court document, ethanol producers argue EPA sulfur rule hurts renewable fuels industry

Source: Amanda Peterka, E&E reporter • Posted: Saturday, October 11, 2014

U.S. EPA’s final rule for curbing sulfur in gasoline stymies the renewable fuels market, a group of ethanol producers argued this week in an opening court brief.

The producers say EPA ignored a “catch-22” inherent in its final Tier III rule: EPA seeks higher blends of alternative fuels to be used in the market while at the same time restricting the test fuels that new cars are required to use for certification to lower blends.

They are asking the U.S. Court of Appeals for the District of Columbia Circuit to vacate the part of EPA’s Tier III rule that requires test fuels used for certification of new cars be “readily available” in the market.

“EPA’s criteria for approving alternative test fuels, and the agency’s decision to retain those criteria and to interpret them unreasonably in the Tier 3 Rule, are arbitrary and capricious agency actions,” Wednesday’s brief says.

The petitioners are the Energy Future Coalition and eight ethanol producers. They filed the lawsuit against EPA over the rule in June.

Before a carmaker can introduce a new vehicle in the market, it must obtain a certificate from EPA certifying that the new vehicle complies with emissions standards.

In its proposed Tier III rules, EPA initially required that automakers use a blend of gasoline containing 15 percent ethanol, or E15. But the agency backed off E15 in the rules finalized last March, requiring automakers to use E10, the more common blend of gasoline containing 10 percent ethanol.

In crafting the final rule, EPA determined that a new alternative fuel should be “commercially available” or “readily available nationwide.” The switch from E15 to E10 was made, the agency said, because E15 proliferation has been “minimal” and E10 is “almost universal.”

“In this regulatory environment, the ethanol industry’s share of the national motor vehicle fuel market is artificially capped at roughly 10 percent, because E10 is the test fuel on which new vehicles certify,” the ethanol petitioners wrote in their court brief.

EPA has approved E15 for use in vehicles model year 2001 and newer, but the rollout has been slow so far; ethanol producers had been hoping for the market boost that would have been provided with EPA’s approval of a higher blend of ethanol as the test fuel.

In their brief, the producers say that EPA’s rule exacerbates the “chicken-or-egg problem” that alternative fuels already face in the market and noted that automakers had requested a midlevel ethanol blend be used as the test fuel in public comments on the rule.

“The rule EPA invoked puts auto manufacturers in an impossible bind: It conditions approval of an alternative test fuel on that fuel’s commercial availability,” the brief says. “But market availability is forever out of reach, because it is against the law to sell fuel that is not ‘substantially similar’ to an existing test fuel.”

Oral arguments have not yet been scheduled in the case. American Fuel & Petrochemical Manufacturers and the American Petroleum Institute have intervened on behalf of EPA.