Ethanol Blog

A federal appeals court on Friday dismissed a legal challenge by the National Biodiesel Board on the biomass-based diesel volumes set by EPA in 2017, in an opinion handed down by the U.S. Court of Appeals for the District of Columbia Circuit.

The NBB asked for a review of the EPA action in 2017, alleging the agency has no statutory authority to control or limit the growth of biofuels markets.

Although the biodiesel industry was poised to produce about 2.6 billion gallons in 2016, the EPA went with its original proposal of 2 billion gallons for biomass-based biodiesel in 2017 and 2.1 billion gallons in 2018.

In its opinion, the court dismissed the industry's claims.

"NBB's objections rest on a policy disagreement: NBB urges that, instead of setting a level that would support continued investment in the biomass-based diesel industry while also encouraging producers of other types of advanced biofuel to compete to satisfy the 2018 advanced biofuel applicable volume at lower cost, EPA should have reserved to biomass-based diesel alone a volume nearer to that industry's maximum production potential," the court said.

"But NBB's proposed 'simple solution' that EPA should have 'set a meaningful biomass-based diesel volume' while planning to 'increase the 2018 advanced-biofuel volume to provide room for the production of other advanced biofuels when it set that volume a year later,' describes what EPA actually did. A mere disagreement with the particular calibration of a line drawn in the exercise of an agency's reasonable judgment is no basis to invalidate a rule."

In addition, the court rejected refiners' claims that the EPA set volumes too high in 2017 and should have used additional waiver authority. The court also rejected claims by refiners that EPA should change the point of obligation in the RFS because the industry is burdened by costs of compliance.

"At the root of petitioners' claim is a single premise: that the current point of obligation misaligns incentives by requiring those who refine fossil fuel, but not those who blend it, to meet the RFS program's annual standards," the court said.

"In petitioners' view, this misalignment forces refiners to purchase RINs (renewable identification numbers) to satisfy their RFS obligations, jacking up their costs, while giving windfall profits to blenders, who produce (but don't consume) RINs. The problem with this argument, however, is that EPA reasonably explained why, in its view, there is no misalignment in the RFS program. According to EPA, refiners 'recover the cost of the RINs they purchase' by passing that cost along in the form of 'higher prices for the petroleum based fuels they produce.'"

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

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