WASHINGTON, June 3, 2015 – It’s important to remember that the 2015 and 2016 numbers are just proposals for now, and ethanol advocates are encouraging supporters to attend a public hearing in Kansas City on June 21. EPA could raise or lower the targets before they are made final, and the agency could face court fights no matter what it ultimately does. The oil industry has repeatedly sued the agency over its management of the RFS, but the ethanol industry might want to make a case that EPA exceeded its authority in lowering the targets for corn ethanol.

If EPA doesn’t increase the targets in the final rule, “biofuel advocates could challenge the reduced volumes, regardless of the methodology or waiver authorities the agency cited,” ClearView said in a note to clients. “Similarly, we expect obligated parties (mostly refiners) to challenge any volumes that breach the blend wall.”

It is clear from the proposed rule that EPA struggled to justify its legal authority to lower the mandates. Under the 2007 law, EPA can waive mandates for ethanol or advanced biofuels such as biodiesel if there is an “inadequate domestic supply” or the targets threaten severe economic or environmental harm.

Congress considered, but ultimately did not include, language in the law that also would have specially allowed EPA to lower the mandates based on “inadequate distribution capacity.” Still, EPA argues in the proposed rule that the term "inadequate domestic supply" authorizes the agency “to consider the full range of constraints” in the biofuels market, “including legal, fuel infrastructure and other constraints, that could result in an inadequate supply of renewable fuels to consumers.”

But Eric Washburn, an energy lobbyist for Bracewell and Giulian, thinks the courts are ultimately likely to defer to EPA’s judgment in reducing the annual mandates because of the blend wall. “I would think that any judge would give EPA a lot of deference in how it applies the waiver authority,” he said.


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