EPA Responds

OMAHA (DTN) - In a point-by-point answer to a number of plaintiffs who filed suit challenging how the Renewable Fuel Standard is implemented, attorneys for the U.S. Environmental Protection Agency contend in a legal brief filed on Tuesday the agency followed the law.

Ahead of oral arguments scheduled for April 24 in the U.S. Court of Appeals for the District of Columbia Circuit, the 165-page brief outlines the agency's defense on a number of fronts. That defense includes the agency's reasoning for denying a petition to change the point of obligation in the RFS, the setting of advanced biofuels volumes for 2017-18, and a number of issues raised by biofuels, agriculture and petroleum interest groups alike.

The agency said in its brief the annual consideration of the point of obligation would be "inconsistent" with the structure of the RFS program.

"Moreover, the (Clean Air Act) act must be read in light of the entire text, structure, and purpose of the statute. Here, to read the act in a manner that requires annual reconsideration of the point of obligation would undermine regulatory certainty and impair the objectives of the RFS program," EPA said.

"As EPA has explained time and again in its annual renewable fuel standard rulemakings, this increased use of renewable fuels over time requires private parties to invest in production facilities and infrastructure to accommodate such fuels. Annual reconsideration of the definition of obligated parties would reduce the regulatory certainty required for private parties to plan for growth."

EPA said it has discretion to "determine when and how" to designate obligated parties.

In recent months, EPA rejected a petition from a number of petroleum interests to change the point of obligation in the RFS from refiners and importers of gasoline and diesel, to ethanol blenders.

The claim is that obligating blenders would spread compliance costs throughout the renewable identification number, or RIN, market. EPA opposed the switch because the agency claims it would make the law more complex by expanding the number of companies required to comply from hundreds to thousands.

The agency pointed to a previous decision by the DC court to reject a point-of-obligation challenge in 2013.

Though Congress may at some point consider changing the RFS, the lawsuit originally filed by Americans for Clean Energy attempts to force the agency to apply the law as the groups believe it was intended.

The group argued in a brief filed at the end of January that the EPA has no statutory basis to control or limit the growth of biofuels. Joining the group is the American Coalition for Ethanol, Biotechnology Innovation Organization, Growth Energy, National Corn Growers Association, National Sorghum Producers, Renewable Fuels Association and the National Farmers Union.

The EPA has faced a wide array of criticism for missing statutory deadlines and about the methods used in setting biofuel volumes.

Monroe Energy LLC, an obligated party in the RFS, in two separate briefs challenged EPA's methods for determining renewable volume obligations on cellulosic ethanol and biomass-based diesel. In addition, Monroe argues the agency did not follow the law by rejecting a petition to change the point of obligation in the RFS. Monroe asks the court to essentially wipe out renewable volume obligations set for a number of years from 2014 to 2017.

CELLULOSIC ETHANOL

In a separate brief filed in January, the petroleum groups challenge EPA's methodology for determining cellulosic biofuel and biomass-based diesel volumes, in particular focusing on 2016.

That brief said EPA has "consistently overestimated" cellulosic production. In 2016, in particular, the agency estimated liquid-cellulosic production would be 10 times greater than in previous years.

In its reply filed this week, EPA said it used cellulosic ethanol companies' own anticipated start-up dates as one element of setting the volumes. This was done, the agency said, to "derive the high end of the production range for facilities expected to generate RINs in 2016 that had not yet achieved consistent commercial-scale production."

However, the agency said this week it also considered the "low-end of the ranges (which were sometimes zero). EPA said those ranges were then aggregated with the ranges of similar facilities.

"Petitioners seem to suggest that EPA should assume that no new liquid biofuel facility will start up in 2016, despite ... evidence that the industry is growing," EPA said this week. "This would improperly produce a significant under-estimation rather than an outcome-neutral projection."

BIOMASS BIODIESEL

The National Biodiesel Board has challenged EPA's method used in setting biomass-based biodiesel volumes in 2017 and 2018.

Although the 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 the brief this week, the agency said it followed the statute.

"Despite this robust and reasonable analysis, NBB challenges EPA's decision to lower the volumes of advanced biofuel under the cellulosic waiver provision," EPA said in its brief this week.

"In essence, NBB's challenge to EPA's use of the cellulosic waiver provision is grounded in the false premise that EPA's exercise of its discretion is constrained by other waiver provisions in the statute or limited in other specific ways ... NBB's argument that EPA's discretion is constrained in particular ways is foreclosed by clear precedent."

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

Follow him on Twitter @toddneeleyDTN

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