Kavanaugh nomination revives RFS blending battle

Source: Marc Heller, E&E News reporter • Posted: Monday, July 16, 2018

A fight over one word in the nation’s biofuel blending law may be getting new life — and Supreme Court nominee Brett Kavanaugh can take some of the credit.

Kavanaugh, a judge on the U.S. Court of Appeals for the District of Columbia Circuit, wrote the opinion last year for a three-judge panel that found EPA misinterpreted the word “supply” in waiving certain biofuel volume requirements between 2014 and 2016.

The biofuel and petroleum industries are still waiting for EPA to act on the ruling as Kavanaugh and the other judges directed.

A biofuel industry source told E&E News today that a resolution is long overdue — especially in light of quicker EPA actions last year on a case forcing the agency to broaden its definition of small refiners that qualify for “hardship” exemptions from the RFS. That ruling benefited refiners.

At issue is EPA’s authority to waive congressional biofuel blending targets when officials decide domestic supplies aren’t adequate to meet them. That’s what the agency did in setting volumes for 2014 to 2016, in a proposal that was delayed for three years under the Obama administration.

Some 500 million gallons of renewable fuel credits are in question, as the EPA waiver reduced biofuel volumes by that amount, according to the Renewable Fuels Association.

Kavanaugh made comments during oral arguments that appeared sympathetic to EPA and RFS critics, although he found EPA had overstepped its authority, as ethanol groups said (E&E News PM, April 24, 2017).

Saying he was “completely sympathetic” to EPA’s difficulties in issuing the yearly biofuel standards, he added, “It’s crazy, I’m with you on that.”

If the RFS is “totally screwed up,” Kavanaugh said, “then Congress should fix it.”

In the case, EPA cited relatively low demand at the consumer level, but in Americans for Clean Energy v. EPA, the court sided with ethanol advocates who argued that the law requires the agency to examine supplies available at the production level. Kavanaugh and the other judges told EPA to revoke the waiver and re-craft the rule to take into account the court’s finding.

EPA hasn’t indicated how it will sort out the issue but said in January that officials believe “it would be appropriate” for renewable fuel credits for the current year, or those carried over from a prior year, to be used to meet obligations resulting from the court decision.

The agency also briefly referenced it in the agency’s proposed biofuel volume requirements for 2019.

“EPA is currently considering a number of issues raised by the need to respond to the court’s remand in a separate process from this annual rulemaking,” the agency said, adding it isn’t requesting public comment at the moment. “EPA understands that there is a compelling need to respond to the remand and intends to expeditiously move ahead with a separate rule to resolve this matter.”

EPA’s use of waivers, both general and specifically for small refiners, has become one of the biggest points of contention with the RFS, enacted in 2005 and updated two years later. The Renewable Fuels Association said its latest analysis indicates biofuel volumes reached 13.9 billion gallons in 2017 and 14.2 billion gallons in 2016, both below the federal mandate of 15 billion gallons.

The petroleum industry counters that waivers are required by law in certain circumstances, such as when small refiners face compliance costs significantly greater than the industry average.

Waiver issues are likely to arise as Congress weighs legislation to revamp — or possibly sunset — the renewable fuel standard after 2022. That’s the year when congressionally set volume levels expire, and EPA gains authority to set levels on its own.

Sen. John Cornyn (R-Texas) and Rep. John Shimkus (R-Ill.) are working on a legislative proposal, which has yet to be released.