US Court of Appeals dismisses National Chicken Council challenge to EPA’s rulemaking on GHG reduction compliance for certain ethanol plants

23 July 2012

The US Court of Appeals for the District of Columbia Circuit rejected a petition (Case Nº 10-1107) by the National Chicken Council, National Meat Association, and National Turkey Federation challenging the Environmental Protection Agency’s (EPA) rulemaking on the RFS2. The specific issue was EPA’s interpretation of the Energy Independence and Security Act of 2007 (EISA) language deeming any ethanol plant built in 2008 and 2009 and fired with natural gas, biomass, or any combination thereof to be in compliance with the required 20% reduction in greenhouse gas emissions for the ethanol to be considered “renewable”.

Background. EISA directed EPA to promulgate regulations ensuring that transportation fuel sold in the United States contains certain minimum levels of “renewable fuel” on an average annual basis.

To fulfill that mandate, EPA modified its existing trading program, under which producers generated Renewable Identification Numbers (RINs) for each gallon of renewable fuel. EPA required refiners and importers of transportation fuel to purchase the number of RINs needed to satisfy their proportional share of the EISA’s annual targets.

When produced from a plant than commenced construction after 19 December 2007, ethanol counts as a renewable fuel if it achieves at least a 20% reduction in lifecycle greenhouse gas emissions” in comparison to fossil fuels. However, ethanol from plants built before then is grandfathered in—i.e., it counts as renewable fuel whether it reduces emissions or not.

As another wrinkle, the statute states that for “calendar years 2008 and 2009, any ethanol plant that is fired with natural gas, biomass, or any combination thereof is deemed to be in compliance...with the 20 percent reduction requirement.” EPA read the provision to mean that ethanol plants fired with natural gas and/or biomass that commenced construction in 2008 or 2009 are deemed compliant with the 20% greenhouse gas reduction requirement “indefinitely.”

The petition. “Functionally,” wrote Judge Janice Brown in the decision, “that meant qualifying ethanol plants could generate RINs indefinitely without having to ensure that their ethanol met the emissions-reduction requirement.”

To challenge the interpretation, the petitioners—all of whom represent represent members of the meat industry who purchase corn to use as animal feed—have to show injury traceable to the interpretation. Their claim of injury rested on three claims:

1. by permitting qualifying ethanol plants to generate RINs indefinitely without having to meet the emissions-reduction requirement, EPA’s interpretation of the provision will lead qualifying ethanol plants to produce more ethanol than they otherwise would have;

2. this increase in ethanol production by qualifying ethanol plants will lead to an increase in the overall demand for corn; and

3. this increase in overall corn demand will lead to an increase in the price of corn.

In the decision, Judge Brown wrote that:

...the petitioners have fallen short. If we were to vacate EPA’s interpretation, the only consequence for qualifying ethanol plants is that they would no longer be able to generate RINs without complying with the EISA’s emissions-reduction requirement. The petitioners fail to show a “substantial probability” that qualifying ethanol plants would reduce their ethanol production as a result of that change. True, EPA claimed in the Final Rule that “many of the current technology corn ethanol plants may find it difficult if not impossible to retrofit existing plants to comply with the 20 percent [greenhouse gas] reduction threshold,” and that “[g]iven the difficulty of meeting such threshold, owners of such facilities could decide to shut down the plant.”...But that statement referred to all grandfathered plants, not just the qualifying ethanol plants, and there are good reasons to think the qualifying ethanol plants will find it much easier than the other, older grandfathered plants to meet the emissions-reduction requirement should they have to.

...We should not be understood to foreclose any challenge to EPA’s interpretation of the provision; a different petition, properly supported, could allow us to address the merits of EPA’s reading. But the petitioners here have failed to establish their standing, and their petition for review is accordingly dismissed.