US Court Set to Weigh Biofuel Blend Mandates

November 01, 2024

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by Cole Martin and Matthew Cope (Argus Media) A US court on Friday (November 1, 2024) will weigh some novel issues that could affect enforcement of the Renewable Fuel Standard (RFS), the federal program that sets minimum biofuel blending levels for domestic motor fuel supplies.

The Environmental Protection Agency (EPA) in last year's RFS regulation required refiners and importers to blend increasing volumes of renewable fuel from 2023-2025. But the rule differed from past obligations in a crucial way. While the RFS law set annual volume targets of cellulosic, advanced and conventional biofuels through 2022, it tasked EPA with setting volumes in subsequent years by balancing factors such as the environmental impacts of biofuels, energy security, expected production and consumer costs.

In a consolidated case to be heard Friday by the US Court of Appeals for the District of Columbia Circuit, environmental groups and oil refiners are separately challenging aspects of how the EPA applied those factors in setting 2023-25 volumes. The court has previously affirmed the legality of many RFS rules.

"Past cases always give you some perspective on how the DC court might see it," said Susan Lafferty, a partner at law firm Holland & Knight. "But the DC court could also say, ‘not relevant anymore because this is a different part of the statute that we are working with.'"

Refiners say EPA misapplied the criteria, upping compliance costs more than necessary by setting targets for cellulosic and conventional biofuels too high and targets for advanced biofuels too low. They also challenge EPA's balancing of potential impacts, noting that the agency assumed that all parties can easily pass the costs of compliance on to consumers. In a separate case this year, the DC Circuit discarded EPA rejections of program waiver petitions, in part because judges disagreed that refiners can easily pass on the cost of Renewable Identification Number (RIN) credits used to show compliance with the RFS program.

EPA used this pass-through theory in the 2023-2025 rule "like a magic wand, waving it around to dismiss any argument that the rule will cause harm", the American Fuel and Petrochemical Manufacturers and small refineries said in a case filing.

Lafferty expects the judges at Friday's hearing to probe the extent to which EPA's volumes relied on this pass-through theory, "a policy that now this very court has gutted."

Environmentalists have similarly targeted EPA's cost analysis, arguing that the agency downplayed the environmental drawbacks of growing crops for energy. The Center for Biological Diversity and the National Wildlife Federation argue that EPA has legal discretion to set post-2022 volumes for corn- and soybean-derived biofuels as low as zero.

EPA counters that the court owes the agency deference in evaluating scientific data and making predictive judgments. And biofuel groups that have intervened argue that the program is designed to require more biofuel production even if there are no formal volume requirements in law anymore.

While EPA's post-2022 authority to set blend mandates is a new issue, the DC Circuit has handled various cases about EPA's implementation and has generally been deferential to the agency's volume decisions. The court this year upheld 2020-2022 targets. In a 2019 decision, the court kept volumes in place, despite telling EPA to more deeply weigh endangered species impacts. While the court might take issue with some aspects of EPA's latest rule, including the agency's lateness in finalizing volumes, judges could again be reluctant to upend fuel markets if they find only small oversights.

Depending on how skeptical judges appear about EPA's arguments on Friday, the case could cause concern for biorefineries. A decision is expected next year, meaning any order for EPA to better justify its decisions or go back to the drawing board would likely fall to the next president's administration.

On the panel for Friday's hearing are two judges familiar with the program: Democratic appointee Cornelia Pillard, who wrote the opinion this year upholding 2020-2022 blend mandates, and Republican appointee Gregory Katsas, who dissented and said those volumes were excessive. The third judge on the panel is Democratic appointee J. Michelle Childs.

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Excerpt from Courthouse News Service: A D.C. Circuit panel on Friday expressed skepticism about a federal renewable-biofuel program, raising concerns over land usage and resulting impacts on the environment, wildlife and climate during nearly three hours of arguments.

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Enter the Center for Biological Diversity and the National Wildlife Federation, two environmental groups that have challenged the EPA’s new rules for 2023-2025. Those rules would continue to increase production of biofuels, from 0.84 billion gallons in 2023 to 1.38 billion by 2025.

Because of this increase, the groups challenged the government’s determination that the new volume was unlikely to adversely affect the environment. They've urged the panel to vacate the EPA’s rule, forcing the agency to make a new determination on corn and soy volumes.

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... EPA concluded the rule would “not injure a single individual of any listed species.”

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The three-judge panel, made up of U.S. Circuit judges Cornelia Pillard, Michelle Childs and Gregory Katsas — two Barack Obama appointees and a Donald Trump appointee, respectively — seemed receptive to (Margaret) Coulter’s argument.

Justice Department attorney Alexander Purpuro, who represented the EPA in defending the new rule, asserting that the rule’s impact on water pollution would be marginal and outweighed by future benefits.

Pupuro said that the agency’s analysis showed that in one example, at the mouth of the Mississippi, the rule would lead to a mere 1% estimated increase in pollution and would have no detectable impact on any species there.

Still, the judges were skeptical. “I’m having a hard time seeing that as not just sweeping under the rug,” Pillard said.

Purpuro pushed back. The National Marine Fisheries Service determined that any potential downstream effects would be diluted as that pollution made its way to larger bodies of water, he argued.

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Carrie Apfel, deputy managing attorney at Earthjustice, represented the National Wildlife Federation on Friday. She argued that the EPA’s environmental analysis was flawed in several ways.

The core issue, she said, was a failure to consider the opportunity cost of using farmland to grow corn and soy rather than putting it to alternative uses that could better combat climate change.

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Using the land for biofuel production leads to land-clearing elsewhere for food production, she added — a further environmental impact that she said the government had ignored.

In his arguments, Purpuro said that the EPA had conducted an adequate opportunity cost analysis and found that the new rule would create economic benefits, such as job creation and lowered greenhouse gas emissions when compared to petroleum fuel production.

Pillard pressed Apfel and asked what else the EPA could have done in its analysis. The judge highlighted the agency’s review of scientific studies on the emissions from corn ethanol and soy diesel, which she said showed biofuels ultimately produce less emissions than petroleum.

But Apfel argue the EPA should have independently analyzed the underlying data from those studies, rather than accept them at face value. READ MORE