Monroe Energy, LLC v. Envtl. Prot. Agency

• Decision Date: 06 May 2014
• Docket Number: Nos. 13–1265,13–1268.,13–1267,s. 13–1265
• Citation: 750 F.3d 909
• Parties: MONROE ENERGY, LLC, Petitioner v. ENVIRONMENTAL PROTECTION AGENCY, Respondent PBF Holding Company LLC, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

750 F.3d 909

MONROE ENERGY, LLC, Petitioner

v. ENVIRONMENTAL PROTECTION AGENCY, RespondentPBF Holding Company LLC, et al., Intervenors.

Nos. 13–1265, 13–1267, 13–1268.

United States Court of Appeals, District of Columbia Circuit.

Argued April 7, 2014.

Decided May 6, 2014.

On Petitions for Review of Final Agency Action of the United States Environmental Protection Agency.

David W. DeBruin argued the cause for petitioner Monroe Energy, LLC. With him on the briefs were Marc A. Goldman and Matthew E. Price.

Robert A. Long Jr. argued the cause for petitioners American Petroleum Institute and American Fuel & Petrochemical Manufacturers. With him on the briefs were Kristen E. Eichensehr, Harry M. Ng, Chet M. Thompson, Robert Meyers, David Y. Chung, and Richard Moskowitz.

Bart E. Cassidy, Katherine L. Vaccaro, and Bryan P. Franny were on the brief for petitioner-intervenor PBF Holding Company LLC in support of petitioner.

Lisa M. Bell and Brian H. Lynk, Attorneys, U.S. Department of Justice, argued the causes for respondent. With them on the brief was Robert G. Dreher, Acting Assistant Attorney General. Jessica O'Donnell, Attorney, entered an appearance.

David B. Salmons argued the cause for respondent-intervenors. With him on the brief were John C. O'Quinn, William H. Burgess, Sandra P. Franco, and Bryan M. Killian.

Before ROGERS, GRIFFITH and PILLARD, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

The petition for review challenges the 2013 Renewable Fuel Standards issued pursuant to section 211( o ) of the Clean Air Act, 42 U.S.C. § 7545( o ). See Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards, 78 Fed.Reg. 49,794 (Aug. 15, 2013) (“Final Rule”). These standards are part of Congress' effort “[t]o move the United States toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the Federal Government.” Energy Independence and Security Act of 2007, Pub.L. No. 110–140, 121 Stat. 1492 (2007); see also Am. Petroleum Inst. v. EPA, 706 F.3d 474, 479 (D.C.Cir.2013). Monroe Energy LLC, joined by intervenor PBF Holding Company LLC, another independent petroleum refiner, contends that the rule must be vacated because EPA declined to reduce the total renewable fuel volume, failed to address a malfunction of the credit system, and failed to promulgate the standards until more than eight months after the statutory deadline had passed. For the following reasons, we deny the petition for review.¹

I.

The Renewable Fuel Standards (“RFS”) program was established by Congress in the Energy Policy Act of 2005, Pub.L. No. 109–58, 119 Stat. 594 (2005). It mandates the gradual introduction of renewable fuels into the U.S. supply of gasoline, diesel, and other transportation fuels. As amended in the Energy Independence and Security Act of 2007, Pub.L. No. 110–140, 121 Stat. 1492 (2007), the program requires an “applicable volume” of total renewable fuel to be sold or introduced into U.S. commerce each year. See42 U.S.C. § 7545( o )(2)(B)(i). The volumes increase progressively through 2022; thereafter, EPA, rather than Congress, will set the applicable volumes. See id. § 7545( o )(2)(A)(i), 7545( o )(2)(B)(i). From each year's applicable volume of total renewable fuel, a certain volume must consist of “advanced biofuel,” see id. § 7545( o )(1)(B), 7545( o )(2)(B)(i)(II), and this advanced biofuel quota must be met using specified minimum volumes of “cellulosic biofuel” and “biomass-based diesel” from among the various types of advanced biofuels, see id. § 7545( o )(1)(D)-(E), 7545( o )(2)(B)(i)(III)-(IV). Annual “applicable volumes” are prescribed for four categories of fuel: total renewable fuel, advanced biofuel, biomass-based diesel, and cellulosic biofuel. See id. § 7545( o )(2)(A)(i). These categories are “nested”: biomass-based diesel and cellulosic biofuel count toward the applicable volume for advanced biofuel, and advanced biofuel counts toward the applicable volume for total renewable fuel.

The obligation to meet the applicable volumes falls collectively to “refineries, blenders, and importers, as appropriate.” 42 U.S.C. § 7545( o ) (3)(B)(ii)(I). EPA determined in 2007, and reaffirmed in 2010, that blenders “who only blend[] renewable fuels downstream from the refinery or importer” are exempt from the requirements, leaving refiners and importers as the primary obligated parties under the RFS program. See Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program, 72 Fed.Reg. 23,900, 23,924 (May 1, 2007) (“2007 RFS”); Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program, 75 Fed.Reg. 14,670, 14,722 (Mar. 26, 2010) (“2010 RFS”). Pursuant to EPA regulations, refiners and importers must demonstrate that they have introduced into U.S. commerce an amount of renewable fuel that is proportional to their import or production of conventional fuel. See40 C.F.R. § 80.1405(c). EPA determines the required proportion on an annual basis by dividing the statutory applicable volumes by the country's projected nonrenewable gasoline and diesel use in the compliance year. See id. The result is a percentage standard informing each obligated party how much of its fuel production must consist of renewable fuels. For example, if the projected non-renewable gasoline and diesel use for a given year is 100 billion gallons and the applicable volume of renewable fuel is 15 billion gallons, the percentage standard will be 15 percent; a refiner that will produce 20 billion gallons of non-renewable fuel must ensure it also introduces an additional 15 percent of that amount (3 billion gallons) of renewable fuel into U.S. commerce.

To afford obligated parties a degree of compliance flexibility, Congress also required a credit trading program be established whereby a party that produces more than the required quantity of renewable fuels can generate credits for the excess and use them, or transfer all or a part to another person, for purposes of compliance. See42 U.S.C. § 7545( o )(5). The credits are valid to show compliance for “the 12 months as of the date of generation.” Id. § 7545( o )(5)(C). Under the regulations, see40 C.F.R. § 80.1415, 80.1426(e), each batch of renewable fuel that is produced or imported for use in the U.S. is assigned a set of “Renewable Identification Numbers” (“RINs”) that correspond to the volume of ethanol-equivalent fuel gallons in that batch. (The per-gallon energy content varies among different types of fuels; all fuel volumes in this opinion are denoted in ethanol-equivalent gallons.) When a blender or obligated party blends renewable fuel into conventional fuel, the RINs from the blended renewable batch are deemed “separated” and may be traded in the market. See id. § 80.1426(e), 80.1429(b). Obligated parties must demonstrate their compliance with the renewable fuel standards by “retiring” RINs in an annual compliance demonstration. See id. § 80.1427(a). Prior to this demonstration, parties that have accumulated excess RINs may sell theirs to other parties, while obligated parties that have not generated sufficient RINs through their own activities may seek to purchase them. See id.§ 80.1425–29. A party may also “bank” some of its RINs for use in the subsequent compliance year; up to 20 percent of a party's annual compliance obligation may be satisfied using such “carryover” RINs. See id. § 80.1427(a)(1), 80.1427(a)(5). Carryover RINs that are not so used will expire and become useless. See id. § 80.1427(a)(6).

In addition to allowing a deficit to be carried forward for one year under certain circumstances, see42 U.S.C. § 7545( o )(5)(D), and addressing effects of seasonal variation, see id. § 7545( o )(6), Congress authorized EPA to waive the applicable volumes, in consultation with the Secretaries of Agriculture and Energy, after notice and comment, when “implementation of the requirement would severely harm the economy or environment,” id. § 7545( o ) (7)(A)(i), or “there is an inadequate domestic supply,” id. § 7545( o ) (7)(A)(ii). Of particular relevance here, when the actual production of cellulosic biofuel will fall short of the statutory quota, EPA is required to adjust the applicable volume of cellulosic biofuel to the “projected volume available during that calendar year.” Id. § 7545( o )(7)(D)(i). If EPA reduces the applicable volume of cellulosic biofuel, then it “ may also reduce” the required amounts of advanced biofuel and total renewable fuel “by the same or a lesser volume,” but is not required to do so. Id. (emphasis added). Because the cellulosic biofuel industry has not developed as rapidly as Congress expected, EPA had to reduce the cellulosic biofuel quota in 2010, 2011, and 2012; EPA did not, however, exercise its discretion to reduce the advanced biofuel and total renewable fuel quotas in those years. See generally 2010 RFS, 75 Fed.Reg. 14,670;Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards, 75 Fed.Reg. 76,790 (Dec. 9, 2010) (“2011 RFS”); Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards, 77 Fed.Reg. 1320 (Jan. 9, 2012) (“2012 RFS”).

In the proposed rule for 2013, EPA stated its intent to reduce the applicable volume of cellulosic biofuel from 1 billion gallons to 14 million gallons due to low anticipated production, but not to reduce the advanced biofuel and total renewable fuel quotas. See Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards, 78 Fed.Reg. 9282, 9285, 9295, 9301 (Feb. 7, 2013) (“NPRM”). Recognizing, however, that there were “various uncertainties” in its projections and estimations, EPA requested comment on “whether and to what extent a reduction is warranted” and “whether...