Americans for Clean Energy v. Envtl. Prot. Agency

• Citation: 864 F.3d 691
• Decision Date: 28 July 2017
• Docket Number: 16-1047,No. 16-1005,16-1049,16-1056,16-1053,16-1054,C/w 16-1044,16-1050,16-1005
• Parties: AMERICANS FOR CLEAN ENERGY, et al., Petitioners v. ENVIRONMENTAL PROTECTION AGENCY and E. Scott Pruitt, Administrator, Respondents E.I. du Pont de Nemours and Company, et al., Intervenors
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

864 F.3d 691

AMERICANS FOR CLEAN ENERGY, et al., Petitioners

v. ENVIRONMENTAL PROTECTION AGENCY and E. Scott Pruitt, Administrator, RespondentsE.I. du Pont de Nemours and Company, et al., Intervenors

No. 16-1005

C/w 16-1044

16-1047

16-1049

16-1050

16-1053

16-1054

16-1056

United States Court of Appeals, District of Columbia Circuit.

Argued April 24, 2017

Decided July 28, 2017

Seth P. Waxman argued the cause for petitioners Americans for Clean Energy, et al. With him on the briefs were Edward N. Siskel, David M. Lehn, Saurabh Sanghvi, Andrew R. Varcoe, Gary H. Baise, and Matthew W. Morrison, Washington, DC. Mark C. Kalpin, Boston, MA, and Robert J. McKeehan, Washington, DC, entered appearances.

David B. Salmons argued the cause for petitioner National Biodiesel Board. With him on the briefs were Bryan M. Killian, Washington, DC, and Sandra P. Franco.

Jerome C. Muys, Jr., Washington, DC, was on the brief for amici curiae American Soybean Association, et al., in support of petitioners Americans for Clean Energy, et al., and National Biodiesel Board.

Robert A. Long, Jr., New York, NY, argued the cause for Obligated Party Petitioners on the cellulosic biofuel and biomass-based diesel issues. With him on the briefs were Kevin F. King, Stacy R. Linden, Thomas A. Lorenzen, Robert J. Meyers, David Y. Chung, Richard S. Moskowitz, Thomas J. Perrelli, David W. DeBruin, and Matthew E. Price, Washington, DC.

Samara L. Kline, Dallas, TX, argued the cause for Obligated Party Petitioners on the point of obligation issue. With her on the briefs were Evan A. Young, Shane Pennington, Lisa M. Jaeger, Richard Alonso, LeAnn M. Johnson, Albert Ferlo, Thomas J. Perrelli, David W. DeBruin, Matthew E . Price, Richard S. Moskowitz, and Thomas A. Lorenzen, Washington, DC. Krista Hughes and Clara G. Poffenberger entered appearances.

Suzanne Murray, Jeremy Kernodle, and Alec Zacaroli, Washington, DC, were on the brief for amicus curiae Small Retailers Coalition in support of Obligated Party Petitioners on the point of obligation issue.

Lee M. Smithyman, Overland Park, KS, was on the brief for amicus curiae CVR Energy, Inc., in support of Obligated Party Petitioners on the point of obligation issue.

Samara M. Spence, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were John C. Cruden, Assistant Attorney General at the time the brief was filed, and Lisa M. Bell, Attorney.

Thomas A. Lorenzen argued the cause for Obligated Party Respondent-Intervenors. With him on the brief were Robert J. Meyers, David Y. Chung, Richard S. Moskowitz, Robert A. Long, Jr., Kevin F. King, Stacy R. Linden, Samara L. Kline, Evan A. Young, Shane Pennington, Lisa M. Jaeger, Richard Alonso, David W. DeBruin, Thomas J. Perrelli, and Matthew E. Price, Washington, DC.

Seth P. Waxman argued the cause for Respondent-Intervenors Americans for Clean Energy, et al. With him on the brief were Edward N. Siskel, David M. Lehn, Saurabh Sanghvi, Andrew R. Varcoe, Gary H. Baise, and Matthew W. Morrison, Washington, DC.

Bryan M. Killian, Sandra P. Franco, and Daniel C. Taylor were on the brief for intervenors E.I. du Pont de Nemours and Company and National Biodiesel Board in support of respondent. David B. Salmons, Washington, DC, entered an appearance.

Before: Brown, Kavanaugh, and Millett, Circuit Judges.

Kavanaugh, Circuit Judge:

The Clean Air Act's Renewable Fuel Program requires an increasing amount of renewable fuel to be introduced into the Nation's transportation fuel supply each year. See 42 U.S.C. § 7545(o ). By mandating the replacement—at least to a certain degree—of fossil fuel with renewable fuel, Congress intended the Renewable Fuel Program to move the United States toward greater energy independence and to reduce greenhouse gas emissions.

EPA is the federal agency primarily responsible for implementing the Renewable Fuel Program's requirements. Congress has directed EPA to annually publish renewable fuel requirements that apply to certain participants in the transportation fuel market. In 2015, EPA promulgated a Final Rule setting several renewable fuel requirements for the years 2014 through 2017. In this set of consolidated petitions, various organizations, companies, and interest groups challenge that EPA Final Rule on a number of grounds. Some argue that EPA set the renewable fuel requirements too high. Others argue that EPA set the renewable fuel requirements too low.

We reject all of those challenges, except for one: We agree with Americans for Clean Energy and its aligned petitioners (collectively referred to as "Americans for Clean Energy") that EPA erred in how it interpreted the "inadequate domestic supply" waiver provision. We hold that the "inadequate domestic supply" provision authorizes EPA to consider supply-side factors affecting the volume of renewable fuel that is available to refiners , blenders , and importers to meet the statutory volume requirements. It does not allow EPA to consider the volume of renewable fuel that is available to ultimate consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers. We therefore grant Americans for Clean Energy's petition for review of the 2015 Final Rule, vacate EPA's decision to reduce the total renewable fuel volume requirements for 2016 through use of its "inadequate domestic supply" waiver authority, and remand the rule to EPA for further consideration in light of our decision. We otherwise deny the petitions for review.

I

A

In 2005, Congress passed and President George W. Bush signed the Energy Policy Act. Pub. L. No. 109-58, 119 Stat. 594 (2005). Among other things, that Act established the Clean Air Act's Renewable Fuel Program. Id. § 1501, 119 Stat. at 1067-76 (codified as amended at 42 U.S.C. § 7545(o ) ). In 2007, Congress and President Bush amended the Renewable Fuel Program as part of the Energy Independence and Security Act. See Pub. L. No. 110-140, §§ 201-202, 121 Stat. 1492, 1519-28 (2007) (codified at 42 U.S.C. § 7545(o ) ). As amended, the Renewable Fuel Program requires that increasing volumes of renewable fuel be introduced into the Nation's supply of transportation fuel each year. Congress enacted those requirements in order to "move the United States toward greater energy independence and security" and "increase the production of clean renewable fuels." Id. preamble, 121 Stat. at 1492. Congress has vested EPA with primary responsibility for administering the Renewable Fuel Program.

As relevant here (and at the risk of oversimplification), there are six categories of actors in the renewable fuel market: (i) refiners, who manufacture conventional gasoline and diesel; (ii) renewable fuel producers, who produce fuels generated from renewable biomass; (iii) importers, who import conventional gasoline, diesel, and renewable fuels; (iv) blenders, who mix renewable fuels with conventional gasoline and diesel to create blends of more energy-efficient transportation fuel for use in vehicles; (v) retailers, who purchase the blended transportation fuel and sell it to consumers at gas stations; and (vi) consumers, who purchase transportation fuel for their vehicles at gas stations. Some actors in the market are vertically integrated, meaning that a refiner, for example, may also operate blending facilities or fueling stations. Many market actors are not vertically integrated, however.

The Renewable Fuel Program statute contemplates that certain participants in the transportation fuel market—namely, "refineries," "blenders," and "importers"—will be required to satisfy annual "renewable fuel obligation [s]." 42 U.S.C. § 7545(o )(3)(B)(ii). To date, however, EPA has applied the renewable fuel obligations only to refiners and importers—not to blenders. See 40 C.F.R. § 80.1406(a)(1). When we refer to "obligated parties" in this opinion, we are referring to refiners and importers. To satisfy the renewable fuel obligations, each refiner and importer must ensure that a certain amount of renewable fuel is introduced into the Nation's transportation fuel supply. Each refiner and importer's renewable fuel obligation varies depending on how much fossil-based gasoline or diesel fuel it produces or imports.

The renewable fuel obligations applicable to refiners and importers mandate the introduction of four categories of renewable fuel into the transportation fuel supply. Those categories are: (i) cellulosic biofuel; (ii) biomass-based diesel; (iii) advanced biofuel; and (iv) total renewable fuel. 42 U.S.C. § 7545(o )(2)(B)(i)(I)-(IV). Those four fuel categories vary with respect to the renewable biomass sources from which they are derived and their greenhouse gas emissions. See id. § 7545(o )(1)(B), (D), (E), (J) (defining "advanced biofuel," "biomass-based diesel," "cellulosic biofuel," and "renewable fuel"). The statutory categories of fuel types are "nested," meaning that cellulosic biofuel and biomass-based diesel are kinds of advanced biofuel, and advanced biofuel in turn is a kind of renewable fuel that may be credited toward the total renewable fuel obligation. For example, if one million gallons of cellulosic biofuel are blended into the fuel supply, the statute allows those one million gallons to be credited toward the advanced biofuel and total renewable fuel obligations in addition to the cellulosic biofuel obligation. See Monroe Energy, LLC v. EPA , 750 F.3d 909, 912 (D.C. Cir. 2014).

EPA has the responsibility to promulgate rules informing obligated parties (refiners and importers) of their annual renewable fuel obligations. See 42 U.S.C. § 7545(o )(3)(B)(i)-(ii). To do so, EPA first determines the annual volume requirement—also known as the "applicable volume"—for each category of renewable fuel. Id. § 7545(o )(2)(B). The annual volume requirement represents the total volume of renewable fuel that must be sold or introduced into the Nation's transportation fuel supply in a given year. See Monroe Energy , 750 F.3d at 912.

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