The United States Court of Appeals for the District of Columbia ruled this week in a case (#12-1139) brought by the American Petroleum Institute (API) against the US Environmental Protection Agency (EPA) (earlier post), and vacated the 2012 cellulosic biofuel RFS standard while affirming the 2012 advanced biofuel standard.
API had filed the lawsuit with the DC Circuit Court challenging the Environmental Protection Agency (EPA) for what API called “unachievable” requirements for use of cellulosic biofuels in the 2012 Renewable Fuel Standard (RFS). EPA’s 2012 rule requires that refiners and importers of gasoline and diesel must use 8.65 million gallons of cellulosic biofuels despite a lack of commercial supply of the fuel—a requirement that the API at the time called “divorced from reality.”
In the opinion for the court, Senior Circuit Judge Stephen Williams wrote:
This case arises out of Congress’s command that the Environmental Protection Agency make predictions about a promising technology. While the program as a whole is plainly intended to promote that technology, we are not convinced that Congress meant for EPA to let that intent color its work as a predictor, to let the wish be father to the thought.
...EPA applies the pressure to one industry (the refiners)...yet it is another (the producers of cellulosic biofuel) that enjoys the requisite expertise, plant, capital and ultimate opportunity for profit. Apart from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry. “Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers.” Given this asymmetry in incentives, EPA’s projection is not “technology-forcing” in the same sense as other innovation-minded regulations that we have upheld.
Congress made commercial production of cellulosic biofuel central to the RFS program, established in 2005 and modified in 2007. The act requires that more than three quarters of advanced biofuel sold in the United States after 1 January 2022 be cellulosic biofuel.
When Congress introduced the cellulosic biofuel requirement in 2007, there was no commercial-scale production; nevertheless, Congress mandated cellulosic biofuel sales in the US. of 100 million gallons in 2010, 250 million in 2011, and half a billion in 2012 (all in ethanol-equivalent gallons).
Aware that actual production could fall short of the stated requirements, the law calls for the EPA to determine the projected volume of cellulosic biofuel production for each calendar year, based on an estimate of the Energy Information Administration (EIA). Should that projection be less than the mandated volume, the Administrator of the EPA is to reduce volume to the projected volume. Should that happen, the Administrator may also reduce the applicable volume of renewable fuel and advanced biofuels required for that year.
In 2012 RFS rule, EPA projected that 8.65 million gallons of cellulosic biofuel (10.45 million ethanol-equivalent gallons) would be produced in 2012, well short of the 500 million ethanol-equivalent gallons mandated by the Act for that year. In the same rule, EPA considered but rejected a reduction in the volume of total advanced biofuels required for 2012, stating that other kinds of advanced biofuels could make up for the shortfall.
|Cellulosic biofuel production, 2010-2012|
(millions of gallons)
API objected both to EPA’s 2012 projection for cellulosic biofuel and to its refusal to reduce the applicable advanced biofuels volume for 2012.
We reject API’s argument that EPA failed to justify its determination not to reduce the applicable advanced biofuels volume for 2012. But we agree with API that because EPA’s methodology for making its cellulosic biofuel projection did not take neutral aim at accuracy, it was an unreasonable exercise of agency discretion.—Opinion of the Court
Reacting to that decision, leading organizations representing biofuel producers noted that although the court vacated the cellulosic standard, it also rejected API’s argument that EPA was required to follow the US Energy Information Administration’s projections in setting its own. Similarly, the court rejected API’s argument that EPA was not entitled to consider information from cellulosic biofuel producers in setting its projection, finding that cellulosic producers were, of course, an “almost inevitable source of information” for EPA. According to the biofuel organizations, these were important decisions that give EPA flexibility in setting cellulosic biofuel volumes in the future.
The biofuels organizations strongly disagree with the court’s characterization of what EPA did in setting the volumes—EPA did not determine a reasonably achievable volume and then inflate it, the organization argue. Rather, it set the volume based on the best information available to it at the time.
Regardless, the organizations note, under the DC Circuit’s decision, EPA is free to reinstate the volumes that it had established, as long as the information available at the time would support the agency’s conclusion that those volumes were reasonably achievable.
In a joint statement, the biofuel organization stated that “although we disagree with the court’s decision vacating the 2012 cellulosic volumes, today’s decision once again rejects broad-brushed attempts to effectively roll back the federal Renewable Fuel Standard.”
The biofuel organizations include the Advanced Biofuels Association (ABFA), Advanced Ethanol Council (AEC), American Coalition for Ethanol (ACE), Biotechnology Industry Organization (BIO), Growth Energy, and Renewable Fuels Association (RFA). They are reviewing the court’s decision and assessing next steps in the matter.
For its part, the API welcomed the decision.
This decision relieves refiners of complying with the unachievable 2012 mandate and forces EPA to adopt a more realistic approach for setting future cellulosic biofuel mandates.—API Group Downstream Director Bob Greco
Greco said API continues to recommend that EPA base its prediction on the previous year of actual cellulosic biofuel production in the current year when establishing the mandated volumes for the following year. This approach would provide a more realistic assessment of potential future production, API says.