Authored by: Amanda Biediger, Research Fellow

A petroleum refining industry group, a biodiesel association, and environmental groups challenged Environmental Protection Agency’s (“EPA”) rulemaking on the Renewable Fuel Standards (“RFS”) program in American Fuel & Petrochemical Manufacturers v. EPA, No. 17-1258 (D.C. Cir. 2019).

The RFS program was initially signed into law in 2005, requiring refineries to blend increasing volumes of biofuels into their fuel each year to encourage the development of renewable fuels. The RFS program established overall targets for renewable fuels in the transportation fuel market and imposed individual compliance obligations on refineries and importers. The RFS program tries to replace or reduce the quantity of petroleum-based transportation fuel, heating oil, or jet fuel.

Under the Clean Air Act (“CAA”), RFS program establishes minimum volume requirements for renewable fuels consisting of biomass-based diesel, advanced biofuels, total renewable fuels, and cellulosic biofuel (e.g., ethanol from plants, trees, agricultural residues, animal wastes). The CAA provides EPA authority to adjust cellulosic, advanced, and total volumes set by Congress as part of the annual rule process. Every year EPA sets renewable fuel projections that establish the volumes that refiners, importers, and blenders must use.

On a September 6th opinion, the D.C. Circuit Court of Appeals ruled on challenges from refiners and biofuels groups to various aspects of EPA’s RFS volumes rule for 2018.

The American Fuel & Petrochemical Manufacturers, a national trade association of U.S. refineries and petrochemical manufacturers, claimed the 2018 Rule for the RFS program set volumes and percentage standards too high. While on the other side, the National Biodiesel Board (“NBB”), a biodiesel industry trade association, argued that EPA set the standards for advanced biofuels and biomass-based diesel volumes too low. NBB also argued against EPA’s policy for failing to account for small refiner waivers when setting percentages that ensure aggregate volumes are met.

The D.C. Circuit Court of Appeals rejected both arguments by the petroleum manufactures and the biodiesel industry that the 2018 Rule was too high or too low. The court also found NBB had failed to raise its arguments during proposed rulemaking on the 2018 RFS rule, and therefore, EPA’s method was justified. However, the court upheld other aspects of the 2018 standards, including the applicable volumes, restrictions on the use of Renewable Identification Numbers for fuel exported, and EPA’s accounting for small refinery exemptions. EPA remanded the standards but did not vacate the rule.

Environmental groups, Sierra Club and Gulf Restoration Networks, argued that EPA disregarded to make an effects determination as to whether the 2018 RFS Rule may affect listed species and critical habitat under the Endangered Species Act (“ESA”).

The ESA was enacted by Congress in 1973 to provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved and to provide for the conservation of such endangered species and threatened species.

The ESA is administered by two federal agencies, the National Marine Fisheries Service and the Fish and Wildlife Service (the “Services”). The ESA favors the protection of species, and it requires agencies to undergo an effect determination to assess whether specific proposed actions may affect endangered and threatened species, known as “listed species,” and their critical habitat.

EPA argued that the environmental group’s challenge was procedurally improper and failed on the merits because EPA determined that the rule did not affect listed species or critical habitat. For those reasons, EPA argued it did not have to consult with the Services.

The D.C. Circuit Court of Appeals agreed with the environmental groups that EPA failed to consult with the Services as to whether the RFS would affect listed species. The court said that when EPA establishes the volume for biomass-based diesel, EPA must consider six factors, one of which allows the EPA to modify the volumes based on environmental considerations, such as concerns about wetland conversion, wildlife habitat, and water quality. Ultimately, the court held that that EPA failed to comply with the requirements of the ESA and remanded the 2018 RFS Rule back to EPA to make an appropriate effects determination.

 

To read the court opinion in American Fuel & Petrochemicals Manufacturers v. EPA, click here.

To learn more about Renewable Energy, click here.

To learn more about the Clean Air Act, click here.

To learn more about the Endangered Species Act, click here.