Producers tell judges that EPA rule is ‘impossible’ 

Source: Amanda Peterka, E&E reporter • Posted: Saturday, March 21, 2015

A coalition of ethanol producers today sought to convince a federal appeals court that U.S. EPA’s rules for curbing sulfur in gasoline are “logically impossible to satisfy.”

The Energy Future Coalition and eight ethanol producers say the rules create a Catch-22: 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.

At oral arguments today, a three-judge panel in the U.S. Court of Appeals for the District of Columbia Circuit raised questions about EPA’s contention that the ethanol producers lacked legal standing to bring the lawsuit.

The judges also questioned whether EPA’s requirement would actually alter long-standing practices at the agency and appeared to side with the agency that it had the discretionary authority to consider commercial availability when approving test fuels.

Judge Brett Kavanaugh, a Republican appointee, called EPA’s requirement “seemingly common-sensical” reasoning. “You’d want to test it based on what’s actually going to be used in the real world,” he said.

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. The case centers around the type of fuel that EPA requires cars manufacturers to use for testing their vehicles.

In its final Tier III rules, EPA said that it preferred that automakers use E10, the more common blend of gasoline containing 10 percent ethanol. EPA said it would allow vehicle makers to test with other fuels, but it determined that a new alternative fuel should be “commercially available” or “readily available nationwide.”

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. They argue that the rules would make it difficult to comply with the renewable fuel standard, which mandates that refiners blend increasing amounts of biofuels into petroleum fuel.

In the lawsuit filed last June, the Energy Future Coalition asked the court to vacate the part of EPA’s rule that requires test fuels used for certification of new cars be readily available in the market.

EPA has challenged the ethanol producers’ legal standing in the case, arguing that the regulations are aimed at vehicle makers, not fuel producers. Adam Gustafson, an attorney representing the Energy Future Coalition, today countered that the producers had legal standing because EPA’s regulation was hurting the value of their operations.

At today’s session, the judges raised arguments for and against accepting EPA’s standing challenge.

Kavanaugh suggested that he believed the producers had standing, arguing that it was a “raw materials” case. As an example, he said that if the government put a restriction on soda, sugar manufacturers would have standing to challenge it.

“That’s this case,” he said.

Judge David Tatel, however, questioned whether a favorable ruling would actually help correct ethanol producers’ injury, as is required in showing legal standing. He noted that there were market obstacles beyond the regulations that are impeding the introduction of higher blends of ethanol.

The judges had several questions for both the ethanol producers and EPA on the substance of the case.

Judge Cornelia Pillard, who was appointed by President Obama, focused on whether the regulation would actually halt EPA from approving alternative fuels for testing and use in the marketplace. She said it felt “quite premature and speculative” to assume that EPA would ignore promising alternative fuel technologies because of the rule.

“EPA is very much behind developing new technologies consistent with Clean Air Act requirements,” she said.

She suggested that EPA was simply codifying its existing practice of considering the commercial availability of test fuels and that Gustafson was asking the court “to privilege your clients’ fuel and to sort of become a push agent in the market.”

Gustafson countered that the Energy Future Coalition was asking for all fuels to be treated equally under the regulations.

Michael Augustini, an attorney with the Justice Department, repeatedly told the judges that the rule was not meant to foreclose vehicle manufacturers from coming up with alternative technologies.

“This rule will not alter our practices,” he said.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers have intervened in the lawsuit on behalf of EPA.