Petroleum Opposes Biofuels RFS Remand

OMAHA (DTN) -- As biofuel producers attempt to force EPA to restore 500 million gallons that a court found were improperly waived from the Renewable Fuel Standard in 2016, a petroleum interest group is arguing those groups have no right to have the gallons remanded.

In 2017, the U.S. Court of Appeals for the District of Columbia Circuit ruled the EPA had illegally waived the gallons from the 2016 RFS renewable volume obligations and required the agency to restore them, which the EPA has not yet done.

A coalition of agriculture and biofuel groups asked a federal appeals court to order the EPA to restore those waived gallons.

The American Fuel and Petrochemical Manufacturers said in a motion filed with the court this week that the EPA should be allowed additional time to decide how to handle the court's original order.

"EPA has not unreasonably delayed action on remand as it is actively considering how to respond to the remand and the complexity of the task warrants careful and balanced consideration to all parties involved," AFPM said in its motion.

The motion argues the court's original ruling in 2017 does not "mandate a particular outcome" by EPA on remand.

In EPA's 2020 RFS volume rule, the agency proposed a response to the court's mandate in the 2017 case.

"In the final 2020 RFS rule, EPA declined to finalize that proposed response to the remand, specifically stating that 'In light of the many comments received, we are still actively considering this issue,'" AFPM said

"EPA indicated it would proceed in 'a separate action,' neither initiating a separate action nor continuing to work through the issue divests EPA of discretion to address the remand in the first instance."

The coalition appealing to the court in recent weeks includes Growth Energy, Renewable Fuels Association, National Biodiesel Board, American Coalition for Ethanol, National Corn Growers Association, National Farmers Union and National Sorghum Producers.

The groups asked the court to require EPA to act within six months after a court order and to require obligated parties to show compliance within three months after EPA would issue a curative obligation.

"Given the myriad interests affected by EPA's decision, the public interest would be better served through notice and comment rulemaking, whether through annual rulemaking or a separate proceeding," AFPM said in its motion.

The group said the biofuel and ag groups' claim of harm in their lawsuit is "speculative."

"Alternatively, even if EPA had set a higher required volume for 2016, that volume may not have been achieved because of the ethanol 'blend wall' or other factors," AFPM argued.

"Moreover, once a compliance year has come and gone, nothing EPA does can incentivize renewable fuel production for that past compliance year, as EPA recognized."

In addition, AFPM said the current market for renewable identification numbers, or RINs, has been "extremely volatile" and EPA's decision could "further increase" volatility.

"Imposing a 500-million-gallon obligation could undermine RIN market liquidity and cause additional undue costs on obligated parties during the global pandemic in which demand for shutdowns of refinery capacity planned for 2020-2021 amount to 1.7 million barrels per day," the group argued in its motion.

AFPM suggested the EPA could decide to waive the 500 million gallons or spread the obligation across multiple years to "reduce burdens" on obligated parties and consumers.

In the July 2017 ruling in Americans for Clean Energy v. EPA, the court invalidated the EPA's improper waiver of 500 million gallons in the 2016 RVO and ordered EPA to revisit the rule.

In its ruling, the court held EPA's interpretation of an inadequate-domestic-supply waiver provision "runs contrary to how the Renewable Fuel Program is supposed to work." So far, the EPA has not acted to restore 500 million gallons in lost renewable identification numbers, or RINs.

A few months after the court's 2017 decision, the ag and biofuels lawsuit said, EPA acknowledged the "importance of implementing the court's mandate."

EPA's 2018 RVO rule stated there was "considerable uncertainty" about the number of available RINs because of "the possible impact of an action to address the remand in ACE."

One month later, EPA issued a notice acknowledging "some uncertainty" about available RINs "in light of the fact that the EPA has not yet indicated its intentions with respect to responding to the remand," according to the lawsuit.

In 2019, the groups urged EPA to "immediately address the D.C. Circuit's vacatur of EPA's general waiver of the 2016 total volume requirement," pointing out the agency could "easily remedy the vacatur by adding the 500 million RINs covered by the vacated general waiver to the total 2019 volume requirement."

Todd Neeley can be reached at todd.neeley@dtn.com

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