EPA Criticized in RFS Case

Federal Appeals Court Considers Oral Arguments on Biofuels Standard

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A federal court in Washington heard oral arguments Monday on the Renewable Fuel Standard. (DTN file photo)

WASHINGTON (DTN) -- Attorneys representing the renewable fuels and petroleum industries argued in federal appeals court Monday on the role the U.S. Environmental Protection Agency has in implementing the Renewable Fuel Standard.

In oral arguments before a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit in Washington, attorneys defending the EPA made the case that the agency has to consider a number of factors when setting renewable volume obligations.

Attorneys for a variety of biofuels interest groups argued the agency has not done in its job of setting biofuels volumes high enough according to the statute.

Seth Waxman, an attorney for Americans for Clean Energy, told the court EPA's limited role is to set biofuels volumes.

Between 2014 and 2016, EPA set volumes below statute for many biofuels categories, prompting a number of biofuels groups and obligated parties in the RFS to sue the agency.

Part of EPA's decision to set volumes lower was based on what the agency said was inadequate supply of biofuels.

The biofuels industry has maintained the RFS obligations can be met through the sale and purchase of renewable identification numbers, or RINs, as well as actual biofuels gallons.

"Congress' clear judgement was that so long as renewable fuels are available, requirements must be met," Waxman said.

"EPA ended mandates. Now EPA says it's not Congress that decides how much renewable fuel is supplied, but [it is] based on what EPA thinks how much will be consumed. EPA misunderstood its authority under the statute. EPA agrees there is plenty of renewable fuel available."

Waxman pointed to EPA's proposed rule for 2014 to show the agency knows there is adequate supply to meet RFS demands.

For example, in that rule the agency said there is the capacity for about 1 billion gallons of E85 to be consumed. Still, the EPA estimated in its rule the amount would be closer to 200 million gallons.

"Nobody disputes there is more than enough renewable fuels to blend into transportation fuel," Waxman said.

Though the EPA has maintained there is insufficient infrastructure to meet the RFS, he said the agency is required to enforce a statute designed to spark investments in expanded infrastructure downstream.

Attorneys representing the Trump administration made the case Monday that, even if there is a "glut" of fuel blended with ethanol and other biofuels, it is not considered renewable fuel until it is used by the consumer. In addition, the agency has argued some biofuels volumes were set lower because gasoline demand was down in the years in question.

The agency used that justification in drawing back on the RFS in recent years, arguing insufficient infrastructure made it more difficult to get biofuel-blended fuels to market, even if volumes were produced to match the mandate.

A number of groups including the petroleum industry have challenged EPA's implementation of the RFS.

One of those groups, the National Biodiesel Board, argued in court Monday the agency had no reason to waive the advanced biofuels portion of the statute because of biomass-based biodiesel production.

Although the biodiesel industry was poised to produce about 2.6 billion gallons this year, the agency set the advanced biofuels volume at 2.1 billion.

David Salmons, an attorney for the National Biodiesel Board, told the court the agency's recent decision to lower the advanced biofuel mandate using the cellulosic waiver is something new.

"This is the first time EPA reduced volumes based on inadequate supply," he told the court.

"A decision to reduce volumes is not required."

In particular, Salmons said the agency is required to see if there is enough of a variety of fuels to meet the mandate. For advanced biofuels that can include liquid and compressed natural gas.

"EPA's reading (of the law) is too inconsistent with the fundamentals of the act," he said.

"Congress wanted EPA to ensure the volumes were met."

In a combined statement to DTN on Monday, the American Coalition for Ethanol, BIO, Growth Energy, National Corn Growers Association, National Sorghum Producers and Renewable Fuels Association said the agency dropped the ball on how it implements the RFS.

"Today's proceedings reinforced our view that the Environmental Protection Agency's renewable fuel targets for 2014 through 2016 were legally and factually indefensible, as well as wholly inconsistent with Congressional intent behind the Renewable Fuel Standard program," the groups said.

"That program was designed to transform the fuel market and force the oil industry to change the status quo -- not to perpetuate it, as EPA has done through its annual rulemakings. The statutory basis for granting a waiver based on an 'inadequate domestic supply' of 'renewable fuels' does not allow EPA to take into account 'factors that affect the consumption of renewable fuels,' as the agency has suggested.

"Moreover, since the RFS program allows obligated parties to use carryover renewable identification numbers to demonstrate compliance with the annual volume obligations, it would be hypocritical for the agency to exclude such carryover RIN credits when determining whether the amount of available renewable fuel is adequate to achieve compliance."

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

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Todd Neeley