Alon Ref. Krotz Springs, Inc. v. Envtl. Prot. Agency, 16-1052

• Decision Date: 30 August 2019
• Docket Number: 17-1259,17-1049,17-1047,17-1052,17-1051,17-1255,18-1029,C/w 16-1055,18-1021,18-1025,18-1024,C/w 17-1045,No. 16-1052,No. 17-1044,16-1052,17-1044
• Citation: 936 F.3d 628
• Parties: ALON REFINING KROTZ SPRINGS, INC., Petitioner v. ENVIRONMENTAL PROTECTION AGENCY, Respondent Monroe Energy, LLC, et al., Intervenors Coffeyville Resources Refining & Marketing, LLC and Wynnewood Refining Company, LLC, Petitioners v. Environmental Protection Agency, Respondent Alon Refining Krotz Springs, Inc., et al., Intervenors
• Court: U.S. Court of Appeals — District of Columbia Circuit

936 F.3d 628

ALON REFINING KROTZ SPRINGS, INC., Petitioner

v.ENVIRONMENTAL PROTECTION AGENCY, Respondent Monroe Energy, LLC, et al., Intervenors

Coffeyville Resources Refining & Marketing, LLC and Wynnewood Refining Company, LLC, Petitioners

v.Environmental Protection Agency, Respondent

Alon Refining Krotz Springs, Inc., et al., Intervenors

No. 16-1052

C/w 16-1055

17-1255

17-1259

18-1021

18-1024

18-1025

18-1029

No. 17-1044

C/w 17-1045

17-1047

17-1049

17-1051

17-1052

United States Court of Appeals, District of Columbia Circuit.

Argued October 5, 2018

Decided August 30, 2019

TABLE OF CONTENTS

I. Introduction...634

II. Background...635

A. Legal Background...635

B. Procedural Background...638

1. 2007, 2010, and 2017 Point of Obligation Proceedings...638

2. 2017 Annual Volumetric Proceedings...640

III. Standard of Review...640

IV. 2010 Point of Obligation Rule...641

A. Jurisdiction...641

1. Final Agency Action Under Section 7607(b)(1)...642

2. After-Arising Grounds Under Section 7607(b)(1)...646

3. Mandatory Reconsideration Under Section 7607(d)(7)(B)...647

B. Merits of Challenges to EPA's Refusal to Revise the 2010 Point of Obligation Rule...648

V. 2017 Annual Volumetric Rule...653

A. Point of Obligation...653

1. Jurisdiction...653

2. Merits...654

B. Cellulosic Biofuel Projection...659

C. Cellulosic Waiver...662

VI. 2018 Volume for Biomass-Based Diesel...664

A. NBB's Standing...664

B. Merits of NBB's Challenges...665

VII. Conclusion...668

I. Introduction

The Clean Air Act requires EPA to publish "renewable fuel standards," ultimately expressed as "applicable percentages," each year to ensure that the total supply of transportation fuel sold or imported into the United States contains specified proportions of each of four categories of renewable fuels. Congress intended the Renewable Fuel Standards (RFS) program to "move the United States toward greater energy independence and security" and "increase the production of clean renewable fuels." See Energy Independence and Security Act of 2007 (EISA), Pub. L. No. 110-140, preamble, 121 Stat. 1492 (2007) (codified at 42 U.S.C. § 7545(o ) ).

In these related cases, Alon Refining Krotz Springs, together with other petroleum refineries and their trade associations—the "Alon Petitioners"—seek review of EPA's decision not to revise its 2010 point of obligation regulation requiring refineries and importers, but not blenders, to bear the direct compliance obligation of ensuring that transportation fuels sold or introduced into the U.S. market include the requisite percentages of renewables. Coffeyville Resources Refining & Marketing and another group of refineries and trade associations—the "Coffeyville Petitioners"—challenge EPA's refusal to reassess the appropriateness of the point of obligation in the context of its 2017 annual volumetric rule, which set the 2017 applicable percentages for all four categories of renewable fuel and the 2018 applicable volume for one subset of such fuel, biomass-based diesel. See 81 Fed. Reg. 89,746 (Dec. 12, 2016) (2017 Rule). The Coffeyville Petitioners also contend that EPA arbitrarily set the 2017 percentage standards too high. The National Biodiesel Board (NBB)—a biomass-based diesel industry trade association—separately contends that EPA set the 2018 applicable volume for biomass-based diesel too low. Various trade associations representing refineries and producers of renewable fuels have intervened in support of EPA. For the reasons that follow, we deny each of the petitions for review, many of which recycle arguments raised and rejected in prior challenges.

II. Background

A. Legal Background

Congress established the RFS program in 2005 as part of the Energy Policy Act, Pub. L. No. 109-58, 119 Stat. 594 (2005) (as amended at 42 U.S.C. § 7545(o ) ). The statute mandates the gradual introduction of four nested categories of renewable fuels into the United States' supply of gasoline, diesel, and other transportation fuels. See 42 U.S.C. § 7545(o )(2)(B). These categories include: (1) total renewable fuel; (2) advanced biofuel; (3) cellulosic biofuel; and (4) biomass-based diesel. Id. § 7545(o )(2)(A)(i), (B). The umbrella category, total renewable fuel, covers the three other categories plus any conventional renewable fuels, such as corn-based ethanol. See id. § 7545(o )(1)(F), (J), (2)(A)(i). The advanced biofuel subset includes any renewable fuel (except ethanol from cornstarch) that has at least 50% lower lifecycle greenhouse gas emissions than fossil fuels. Id. § 7545(o )(1)(B). The statute further specifies two nonexclusive subsets of advanced biofuels: cellulosic biofuel (a renewable fuel derived from cellulose materials such as corn stalks and husks) and biomass-based diesel (a diesel fuel substitute made from feedstocks such as animal fats). Id. § 7545(o )(1)(B), (D), (E) ; EPA Coffeyville Br. 4–5. The following figure depicts the nested nature of the four fuel categories.

Four tables in the statute set forth gradually increasing annual "applicable volume" requirements for each category of renewable fuel. See 42 U.S.C. § 7545(o )(2)(B)(i). The statute sets applicable volumes for biomass-based diesel through 2012, id . § 7545(o )(2)(B)(i)(IV), and applicable volumes for the other three categories through 2022, id. § 7545(o )(2)(B)(i)(I)–(III). Under those tables, as the total quantities of renewable fuel rise over time, the ratio of advanced biofuels relative to conventional renewable fuel gradually increases. Id. For compliance years (which match calendar years) after those specified in the tables, the statute requires EPA, in coordination with the Secretaries of Energy and Agriculture, to set the annual applicable volumes based on a review of the implementation of the program plus an analysis of six listed factors. Id. § 7545(o )(2)(B)(ii). For years not specified in the table, EPA must publish the applicable volumes fourteen months before the year in which they will apply—volumes that, shortly before the start of the compliance year, EPA translates into percentage standards. Id.

Various "waiver" provisions require or permit EPA to lower the annual applicable volumes. Two are relevant for the purposes of this case. First, under the "cellulosic waiver provision," EPA must make its own projection of the volume of cellulosic biofuel that will be produced in the following year. Id. § 7545(o )(7)(D)(i). If that projection is less than the statutory figure, the agency must use its own projection as the applicable volume of cellulosic biofuel. Id. ; see Am. Petroleum Inst. v. EPA , 706 F.3d 474, 477–80 (D.C. Cir. 2013) ( API ). The same cellulosic waiver provision authorizes (but does not require) EPA to also reduce the advanced biofuel and total renewable biofuel volume requirements "by the same or a lesser volume" as the cellulosic biofuel reduction, 42 U.S.C. § 7545(o )(7)(D)(i), and EPA has "broad discretion" regarding whether and how to do that, Monroe Energy, LLC v. EPA , 750 F.3d 909, 915 (D.C. Cir. 2014). Separately, under the "general waiver provision," EPA may reduce any of the statutory applicable volumes if it determines "that implementation ... would severely harm the economy or environment," or "that there is an inadequate domestic supply." 42 U.S.C. § 7545(o )(7)(A) ; see Ams. for Clean Energy v. EPA , 864 F.3d 691, 707–13 (D.C. Cir. 2017) ( ACE ).

After EPA determines the waiver-adjusted applicable volumes, it must translate those volumes into "renewable volume obligation[s]" for each category of renewable fuel for the upcoming compliance year. 42 U.S.C. § 7545(o )(3)(B)(i). The volume obligation for each category of renewable fuel is expressed as an "applicable percentage," also known as a "percentage standard," calculated by dividing the adjusted applicable volume for that category of fuel by the total anticipated volume of non-renewable transportation fuel that will be introduced into commerce (which EPA derives based on an estimate provided by the Energy Information Administration) in the coming compliance year. Id. § 7545(o )(3)(A), (B)(ii)(II) ; 40 C.F.R. § 80.1405(c). The statute calls on EPA to publish the percentage standards not later than November 30—a month before the start of the compliance year. 42 U.S.C. § 7545(o )(3)(B)(i).

EPA must place the renewable volume obligations on "refineries, blenders, and importers, as appropriate." 42 U.S.C. § 7545(o )(3)(B)(ii)(I) ; see also id. § 7545(o )(2)(A) (requiring EPA to promulgate implementing regulations, including "compliance provisions applicable to refineries, blenders, distributors, and importers, as appropriate," designed to ensure that transportation fuel sold or introduced into the United States "contains at least" the required annual applicable volumes). The entities that EPA designates to meet the volume obligations are known as "obligated parties." Monroe Energy , 750 F.3d at 912. Each obligated party must ensure that the volume of non-renewable fuel it sells or introduces into U.S. commerce is matched by selling or introducing a corresponding volume of each category of renewable fuel at the level EPA's percentage standard requires for that category. See ACE , 864 F.3d at 699. The percentage standards are set in the anticipation that, if each obligated party meets them and EPA's projection regarding the country's total transportation fuel supply bears out, the amount of each category of renewable fuel introduced into the economy in the upcoming compliance year will equal the applicable volumes for that year. Id. Obligated parties bear no direct responsibility for any shortfalls in the applicable volumes so long as they comply with the percentage standards.

EPA assigns a set of "renewable identification numbers" (RINs) to each batch of renewable fuel that is produced or imported for use in the United States. 40 C.F.R. § 80.1426 ; see 42 U.S.C. § 7545(o )(5) ; Monroe Energy , 750 F.3d at 913. The number of RINs assigned to each batch corresponds to the amount of ethanol-equivalent energy per...