American Petroleum Institute v. U.S. EPA

Jan 25: In the U.S. Court of Appeals, D.C. Circuit, Case No. 12-1139. The Appeals Court explains that, "This case arises out of Congress's command that the Environmental Protection Agency make predictions about a promising technology. While the program as a whole is plainly intended to promote that technology, we are not convinced that Congress meant for EPA to let that intent color its work as a predictor, to let the wish be father to the thought."

 

    Further the Appeals Court indicates that in 2005 and again in 2007, Congress amended the Clean Air Act (Act) to establish a renewable fuel standard (RFS) program, now codified at 42 U.S.C. § 7545(o). See Energy Policy Act of 2005, Pub. L. No. 109-58; Energy Independence and Security Act of 2007, Pub. L. No. 110-140. Under the RFS program, EPA must promulgate regulations to ensure that transportation fuel sold or introduced into commerce (hereafter collectively, sold) in the 48 contiguous U.S. states contains an increasing measure of renewable fuel through 2022. See generally 42 U.S.C. § 7545(o)(2). The Act enumerates yearly "applicable volume" requirements not only for renewable fuel but also for a subclass known as "advanced biofuels," which produce lower greenhouse gas emissions than conventional renewable fuels such as corn-based ethanol. Id. §§ 7545(o)(1)(B) (definition of advanced biofuel), 7545(o)(2)(B) (applicable volumes). The "applicable volume" for a particular fuel (a phrase used repeatedly in the statute and thus in this opinion) determines how much of that fuel refiners, importers and blenders must purchase each year in order to comply with the RFS program. Id. § 7545(o)(3)(B).

 

    The Act requires that more than three quarters of advanced biofuel sold in the United States after January 1, 2022 be cellulosic biofuel. When Congress introduced the cellulosic biofuel requirement in 2007, there was no commercial-scale production at all. Yet Congress mandated cellulosic biofuel sales in the U.S. of 100 million gallons in 2010, 250 million in 2011, and half a billion in 2012. However, Congress provided an escape valve in case those levels could not be reached and called for a determination by EPA of the "projected volume of cellulosic biofuel production" for each calendar year. The Administrator "may also reduce the applicable volume of renewable fuel and advanced biofuels" required for that year.

 

    The Appeals Court indicates, "In a January 2012 Final Rule (the 2012 RFS rule), EPA projected that 8.65 million gallons of cellulosic biofuel (10.45 million ethanol-equivalent gallons) would be produced in 2012, well short of the 500 million ethanol-equivalent gallons mandated by the Act for that year. . . In the same rule, EPA considered but rejected a reduction in the volume of total advanced biofuels required for 2012, stating that other kinds of advanced biofuels could make up for the shortfall...

 

    "Petitioner American Petroleum Institute (API) objects both to EPA's 2012 projection for cellulosic biofuel and to its refusal to reduce the applicable advanced biofuels volume for 2012. We reject API's argument that EPA failed to justify its determination not to reduce the applicable advanced biofuels volume for 2012. But we agree with API that because EPA's methodology for making its cellulosic biofuel projection did not take neutral aim at accuracy, it was an unreasonable exercise of agency discretion. . . We accordingly vacate that aspect of the 2012 RFS rule and remand for further proceedings consistent with this opinion."

 

    The Appeals Court noted further that, "The agency adequately grounded its determination in historical data on sugarcane ethanol imports and biodiesel production, as well as governmental and non-governmental projections for future production of those fuels. See 77 Fed. Reg. at 1,331-37. We find especially relevant EIA's projection of 300 million gallons of sugarcane ethanol imports for 2012 and EPA's estimation of 2.4 billion gallons in U.S. biodiesel production capacity. See id. at 1,332, 1,334. These data plausibly suggest that some combination of the two sources of advanced biofuels will be available to make up for the shortfall in cellulosic biofuel. Moreover, in sharp distinction with cellulosic biofuel, there appears to be no great obstacle to the production of advanced biofuel generally; to the extent that estimates in the record are relatively low, that seems to be based on want of a market, which of course continued pressure will tend to solve."

 

        In a release from API on the decision, Group Downstream Director Bob Greco said, "We are glad the court has put a stop to EPA's pattern of setting impossible mandates for a biofuel that does not even exist. This absurd mandate acts as a stealth tax on gasoline with no environmental benefit that could have ultimately burdened consumers. This decision relieves refiners of complying with the unachievable 2012 mandate and forces EPA to adopt a more realistic approach for setting future cellulosic biofuel mandates. The court has provided yet another confirmation that EPA's renewable fuels program is unworkable and must be scrapped."

    Greco said API continues to recommend that "EPA base its prediction on the previous year of actual cellulosic biofuel production in the current year when establishing the mandated volumes for the following year. This approach would provide a more realistic assessment of potential future production rather than simply relying on the assertions of companies whose ability to produce the cellulosic biofuel volumes EPA hopes for is questionable."

 

    Access the complete opinion (click here). Access a release from API (click here). [#Energy/RFS, #Energy/Biofuel, #CADC]

 

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