A federal appeals court has upheld the Environmental Protection Agency’s 2019 renewable fuel volumes in the face of challenges from both the biofuels and oil industries but also ordered EPA to reexamine the impacts of the program on the environment, particularly endangered species.
Biofuel companies argued the volumes were too low, while refiners argued they were too high. However, the D.C. Circuit Court of Appeals, in some cases reinforcing findings it had already made in previous decisions on the Renewable Fuel Standard program, rejected arguments from both sides. The case was argued in September.
But in claims brought by the National Wildlife Federation and other environmental groups, the court said EPA needs to take another look at the effects of the program on federally listed species. It remanded the 2019 rule to EPA without vacating it.
The agency’s own 2018 triennial report on the RFS “undermines the determination that there is no relationship between the renewable fuel standards program, biofuel feedstock production, and land use changes that may harm listed species or critical habitat,” the court said, taking note of substantial increases in corn and soybean production.
Although environmental groups asked for a specific order that the EPA engage in Endangered Species Act consultation with federal wildlife agencies on the program's impacts, the court declined to do so. It cited its 2019 decision in American Fuel and Petrochemical Manufacturers v. EPA in saying it preferred "to allow the EPA to develop the record and then decide the issue in the first instance.”
The court also said EPA had failed to evaluate whether it should have lowered fuel volumes “to prevent severe environmental harm,” as allowed under the RFS.
Because EPA’s “effects determination” on endangered species is “defective,” the court said the agency’s decision on severe environmental harm, “which rests on the same faulty analysis, is also arbitrary and capricious.” It ordered EPA to “revisit its decision not to exercise the waiver for severe environmental harm.”
David DeGennaro, policy specialist for climate and biofuels at the National Wildlife Federation, said the decision "states clearly what [NWF] and others have been saying for years: that EPA and proponents within the biofuel industry have been ignoring the scientific record and even basic logic in continuing to claim that the Renewable Fuel Standard has had no effect on land use or wildlife habitat. The court also finds that the agency has ignored its own statutory duties under the Endangered Species Act in order to perpetuate this falsehood. The EPA can, and must, do better."
Emily Skor, CEO of Growth Energy, one of the "renewable" parties in the case, said that while the group is “disappointed the D.C. Circuit’s ruling fails to make up for the 4.3 billion gallons of biofuel demand lost from past [small refinery exemptions], we were pleased to see the courts reject the oil companies’ flawed arguments about economic harm and inadequate supply. The RFS has and continues to call for increased biofuel blending. It is long past time for refiners to move ahead with higher biofuel blends.”
The court upheld EPA’s general practice of issuing retroactive exemptions from RFS volume targets to small refineries, noting that “since first exempting small refineries from their renewable fuel obligations in 2011, EPA has consistently declined to adjust the percentage standards to account for exemptions it may grant after the standards are finalized.”
The Clean Air Act, however, requires lawsuits to be filed within 60 days, so the renewable producers’ challenge to EPA’s approach to retroactive exemptions came at least seven years late, the court said. The court also said it was “not unreasonable” for EPA to decline to revisit the policy in its 2019 RFS rule.
In a challenge by RFS Power to EPA’s decision to exclude electricity generated from renewable biomass from its cellulosic biofuel projection, the court sided with EPA.
“EPA was not writing on a blank slate when it excluded electricity fuel from its 2019 cellulosic biofuel projection,” the court said. “It had discussed the technical and regulatory barriers facing the renewable electricity industry at length in 2016, … and it declined to include electricity fuel in its cellulosic biofuel projection in both 2017 and 2018. Under the circumstances, EPA’s explanation for its 2019 cellulosic biofuel projection was adequate.”
Refineries also lost their challenges. They had argued that EPA had not adequately considered whether the 2019 volumes would cause “severe economic harm,” a conclusion that would have allowed EPA to lower the volumes,
But the court said EPA “reasonably concluded that obligated parties had failed to make the strong causal showing required to trigger the [severe economic harm] waiver.” In comments on the proposed volumes, the agency said they “‘did not provide any concrete evidence that their financial difficulties are caused primarily or even significantly by the RFS program,’ rather than by other factors,” the court said.
The court also rejected refiners’ contention that EPA should not have considered the benefits of the program. But the court accepted EPA’s argument “that it would have declined to exercise the severe economic harm waiver even if it did not take the benefits of the RFS Program into consideration.”
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The refiners fared no better in their argument that EPA failed to consider adequately whether there was enough domestic supply to meet the 2019 statutory volume requirements for advanced biofuel. “EPA reinforced its decision against exercising the inadequate domestic supply waiver by explaining that, even if domestic supply were inadequate, it would not exercise its discretion to further reduce the RFS volumes,” the court said.
The refiners also argued that EPA should have “separately estimated how much gasoline, E15, and E85 the market could produce,” the court said, but noted had “rejected precisely the same argument” in its 2019 AFPM decision.
The court also upheld EPA’s determination of the amount of sugarcane ethanol available to meet advanced biofuel volumes. Refiners contended that had EPA correctly estimated the amounts, it might have found that advanced biofuel volumes were not “reasonably attainable” and used the discretionary cellulosic waiver to reduce volumes.
“EPA did not act arbitrarily and capriciously in estimating that 100 million gallons of sugarcane ethanol was ‘reasonably attainable’ for 2019,” the court said. “It acknowledged the factual uncertainties and adequately explained its conclusion.”
The refiners failed again to persuade a court that EPA needs to consider including blenders in the point of obligation for the program, noting that EPA had in 2017 rejected petitions to change it.
The biofuels industry has faced several court decisions in recent weeks that haven’t gone in its favor. In June, the Supreme Court threw out a 10th Circuit decision dictating the need for continuous awarding of SREs; the next week, a federal court overturned a Trump administration regulatory effort to allow summertime sales of E15. Lawmakers are now seeking to codify the E15 language into law.
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