Court Battle Rages on 2020-22 RFS Rule

LINCOLN, Neb. (DTN) -- All sides continue to fight in an ongoing Renewable Fuel Standard lawsuit that could require the EPA to make changes to its 2020-2022 finalized rule.

Back in 2022, Growth Energy struck a settlement with EPA to require the agency to finalize RFS volumes for 2021 and 2022 by June 3, 2022. In addition, the EPA finalized a proposal to reset already-finalized RFS volumes for 2020.

Once RFS volumes were finalized, a number of refining companies and biofuels interests filed lawsuits against the agency on a number of fronts.

As is the case with nearly every RFS rule EPA has finalized in the more than 15-year history of the program, the legal questions raised in various recent lawsuits are numerous, multifaceted and complicated.

A group of petroleum refining companies alleged in a complaint filed in the U.S. Court of Appeals for the District of Columbia Circuit that the EPA acted arbitrarily and capriciously in setting what they called a "unprecedently high 2022 standard."

In the RFS proposal at the time the EPA used projections of how much biofuels volumes would likely be exempted from the RFS. The refiners, in their court brief, say that's illegal.

In addition, the refiners challenged whether the agency acted unlawfully when it reinstated 250 million gallons illegally waived previously, in the 2022 volumes. A court found EPA illegally waived 500 million gallons in 2016.

"EPA's 2022 standard, reallocation rule and 'supplemental' standard are unlawful," the refiners said in their original complaint.

"This court should vacate the 2022 standard and remand with instructions to set standards reflecting actual consumption; vacate EPA's reallocation formula; and vacate the supplemental standard."

COMPETING BRIEFS FILED

This month, both biofuels and refining interests filed competing briefs in the case.

The biofuels interests led by the Renewable Fuels Association and Growth Energy addressed the refiners' claims that the 2022 volumes were illegal.

"EPA validly exercised its standard-setting authority," the biofuels groups said in an Aug. 11 intervenors brief.

"The RFS' nested structure necessarily creates 'implied' volume requirements. Because the only shortfall that triggered EPA's reset and waiver authorities was in cellulosic biofuel, EPA's sole task was to modify the statutory volumes for that type of biofuel, leaving the statutorily implied requirements untouched."

In responding to the biofuels petitioners' brief, the refiners led by Sinclair Wyoming Refining Company said in an Aug. 11 brief: "The biofuels petitioners raise two challenges that depend on a single, overarching contention: EPA must account for carryover cellulosic RINs (renewable identification numbers) when it calculates the 'projected volume available.'

"That argument disregards the text and structure of the statute; threatens the vitality of the RIN bank, the 'critical importance' of which this court has acknowledged; and ignores the history of the RFS program, which reflects Congress' concern with cellulosic biofuel production shortfalls."

Biofuels interests challenged EPA's projection of volumes of available cellulosic biofuel, as well as EPA's application of its separate and independent reset authority to calculate and establish these same volumes for 2020, 2021 and 2022.

EPA RESPONSE

In July, the EPA filed a brief in response to the issues raised by refiners and biofuels interests. EPA asked the appeals court to reject the petitions.

"Biofuels producers' argument rests on a misunderstanding of the scope of the reset authority, which they erroneously contend is identical to that of the cellulosic waiver authority," EPA said in its reply.

"Their arguments that EPA acted unreasonably similarly miss the mark. Likewise, refiners' arguments amount to nothing more than their assertion that EPA should have balanced the statutory reset factors differently to advance refiners' own policy objectives over all other policy objectives protected by those factors. Because EPA reasonably balanced all statutory factors and fully explained its analysis, refiners' arguments are unavailing."

The agency said it "reasonably modified" its percentage-standards formula to account for all gasoline and diesel "likely to be produced by exempted small refineries, rather than considering only that fuel that had been exempted as of the date of the issuance of each annual rule.

"Congress mandated that EPA set its percentage standards formula to 'ensure' the volume requirements would be met each year, and EPA's action best effectuates that obligation by projecting the total amount of fuel likely to be exempted."

In the RFS 2020-2022 rule, the agency attempted to project the volume of renewable fuel like to be exempted through the small-refinery exemptions process.

Though refiners claim in their lawsuit the agency illegally restored 250 million of 500 million gallons of biofuels found by a court to have been illegally waived from the RFS, the agency said it was justified.

"EPA reasonably addressed the ACE remand by establishing a supplemental percentage standard, consistent with its obligation to ensure that the applicable volumes are met unless lawfully waived," the agency said.

"EPA's approach restores the volumes that the court determined were unlawfully waived while implementing measures to mitigate burdens on obligated parties."

Read more on DTN: "EPA Proposes Corn-Ethanol Cuts to RFS," https://www.dtnpf.com/…

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

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