The Environmental Protection Agency must take a close look at the effects on endangered species of its 2018 rule setting renewable fuel targets, the D.C. Circuit Court of Appeals ruled Friday in a decision that was a victory for environmental groups.

The court kept the rule in place but remanded it to EPA in order to determine effects on threatened and endangered species. “EPA concluded that it is impossible to know whether the 2018 rule will affect listed species or critical habitat,” the court said. “That is not the same as determining that the 2018 Rule ‘will not’ affect them.”

Sierra Club and the Gulf Restoration Network advanced the Endangered Species Act claim.

The court otherwise rejected arguments by the petroleum industry and renewable fuel groups that volumes set in 2018 rule were either too high or too low. The agency’s decisionmaking process was well within the bounds of the law, the court said.

The American Fuel & Petrochemical Manufacturers, a national trade association of U.S. refineries and petrochemical manufacturers, and Valero Energy Corporation contended EPA did not correct what they called “chronic errors” in liquid cellulosic biofuel projections.

The court, however, said “the record reveals just the opposite.” EPA recognized that in previous years, its estimates for liquid cellulosic biofuel exceeded actual production volumes, and so it lowered its production projections.

The National Biodiesel Board argued that EPA improperly took “cost considerations” into account when reducing the target for advanced biofuels by 6.71 billion gallons.

“To the contrary, in calculating the reasonably attainable volume of advanced biofuels, the EPA analyzed many factors, all of which justified a 6.6-billion-gallon reduction — and only then did it rely on cost considerations to support an additional 110-million-gallon decrease,” the court said.

“EPA’s decision to consider costs fell well within its discretion,” the court said.

AFPM and Valero challenged the volumes on the grounds that they would cause “severe economic harm.” But the court said it could not “fault the EPA for declining to reduce applicable volumes below statutory levels absent some clearly and causally demonstrable harm.”

Besides, said the court, “EPA did, in fact, address this purported evidence of economic harm. As to threatened refinery closures, the EPA noted that the commenting refineries lacked ‘any concrete evidence that their financial difficulties are caused primarily or even significantly by the RFS program.’ ”

The court did not consider the National Biodiesel Board’s argument that EPA “should have accounted for retroactively granted small refinery exemptions in calculating percentage standards” of different renewable fuels because, it said, NBB had not legally preserved its argument.

Also regarding small-refinery exemptions, the court said “EPA has no mechanism to adjust renewable fuel obligations to account for exemptions granted after each year’s percentage standards are finalized. As a result, because the EPA cannot ensure that non-exempt obligated parties compensate for the renewable-fuel shortfall created by belated exemptions, those gallons of renewable fuel simply go unproduced.”

The decision follows by a few days another D.C. Circuit opinion that upheld EPA’s setting of biodiesel volumes for 2019 in the 2018 rule. Because of that ruling, the court said it did not need to consider NBB's challenge to that aspect of the rule.

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