Wynnewood Ref. Co. v. Envtl. Prot. Agency
| Docket Number | 22-1015,Consolidated with 22-1051,Consolidated with 22-1053 |
| Decision Date | 18 July 2023 |
| Citation | 77 F.4th 767 |
| Parties | WYNNEWOOD REFINING COMPANY, LLC and Coffeyville Resources Refining & Marketing, LLC, Petitioners v. ENVIRONMENTAL PROTECTION AGENCY, Respondent |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of a Final Action of the Environmental Protection Agency.
Michael R. Huston argued the cause for petitioners. On the briefs were Ian S. Shelton, Jonathan G. Hardin, Alexandra Magill Bromer, Eric B. Wolff, and Karl J. Worsham.
Jeffrey Hughes, Attorney, U.S. Department of Justice, argued the cause for respondent.
With him on the brief was Todd Kim, Assistant Attorney General.
Before: Srinivasan, Chief Judge, Pillard, Circuit Judge, and Randolph, Senior Circuit Judge.
The Renewable Fuel Standard Program codified in the Clean Air Act requires all transportation fuel sold in the United States to contain an annually determined volume of renewable fuel. As part of its role in implementing the Program, the Environmental Protection Agency (EPA) issues renewable fuel standards announcing the annual quantity of renewables that must be sold into United States commerce. The standards apply to the businesses—refiners and importers—that introduce transportation fuels into the United States economy. To ensure timely promulgation, Congress set annual deadlines in the Act for the agency's publication of those standards.
EPA has not always met those deadlines. We have already considered challenges to EPA's belated issuance of renewable fuel standards on three other occasions. In each case we upheld EPA's authority, provided that the agency reasonably mitigated delay-related harm to obligated parties. Extending obligated parties' compliance deadlines has been a typical, approved form of mitigation.
EPA failed to meet its deadlines to publish the 2020-2022 renewable fuel standards. As part of its mitigation, EPA issued a rule extending the corresponding compliance reporting deadlines. The leeway provided in that Extension Rule ensures that obligated parties will not have to file compliance reports for 2020-2022 until after EPA has published the standards for those years. To get the Program back on track, the Rule compresses the intervals between the 2020, 2021, and 2022 compliance deadlines, leaving obligated parties less time between compliance filings than they have had in the past. The Rule also establishes a new compliance schedule for 2023 and later years. In these consolidated petitions, a group of fuel refineries (the Refineries) challenge the Extension Rule. They argue that the Rule violates the Clean Air Act, or is at least arbitrary and capricious, insofar as it provides obligated parties less than 13 months' compliance lead time (i.e., time from EPA's announcement of the relevant standard to the reporting deadline), and compliance intervals (i.e., time between reporting deadlines for successive compliance years) shorter than 12 months.
We deny the petitions for review. When EPA fails to timely issue renewable fuel standards, the Clean Air Act does not bind the agency to provide obligated parties a minimum of 13 months' compliance lead time, nor does it require compliance intervals of at least 12 months. We likewise reject the Refineries' claim that EPA acted arbitrarily and capriciously in setting the compliance schedule in the Rule. Rather, the agency reasonably exercised its authority to establish the compliance timeframe for the Renewable Fuel Standard Program under the circumstances.
Congress established the Renewable Fuel Standard Program (RFS Program or Program) in 2005 as part of a suite of changes to the Clean Air Act (CAA or Act). Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594; Energy Independence and Security Act of 2007, Pub. L. No. 110-140, §§ 201-202, 121 Stat. 1492, 1519-28 (codified at 42 U.S.C. § 7545(o)) ( the RFS Program provisions). The Program sets requirements for the volume of renewable fuel that our domestic transportation fuel supply must contain each year. See 42 U.S.C. § 7545(o)(2)(A), (B). In enacting the Program, Congress sought "[t]o move the United States toward greater energy independence and security" and "increase the production of clean renewable fuels" by imposing a volume requirement to stimulate demand for the renewables. Energy Independence and Security Act, preamble, 121 Stat. at 1492.
The Act vests EPA with primary responsibility for implementing the Program. It charges EPA with issuing regulations "to ensure that transportation fuel sold or introduced into commerce in the United States," excluding the noncontiguous states and territories, contains at least a specified volume of renewable fuel for each year. 42 U.S.C. § 7545(o)(2)(A)(i). The Act prescribes annual volumes for four categories of fuel: total renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. Id. § 7545(o)(2)(A)(i). For the years 2005 through 2022, Congress set forth the "applicable volume" (i.e., the minimum volume) of total renewable fuel, advanced biofuel, and cellulosic biofuel; for the years after 2022, the Act requires EPA to set those volumes by rule. See id. § 7545(o)(2)(B)(i), (B)(ii). As for biomass-based diesel, Congress prescribed the applicable volumes for 2005 through 2012 and instructed EPA to set the annual applicable volume by rule for 2013 and beyond. See id.
To ensure the Program's renewable fuel volume requirements are met, EPA translates the applicable volumes for each category of fuel for a given year into standards that regulated parties must meet. Id.
§ 7545(o)(3)(B). EPA calculates those standards by dividing the applicable volume for each renewable fuel type by an estimate of the national volume of gasoline and diesel that the U.S. market will consume that year, subject to certain adjustments. See id. § 7545(o)(3)(A), (B)(i); 40 C.F.R. § 80.1405(c). The resulting percentages inform obligated parties how much of their fuel production must consist of renewable fuels. See Monroe Energy, LLC v. EPA, 750 F.3d 909, 912 (D.C. Cir. 2014) (citing 40 C.F.R. § 80.1405(c)). To use a simple example, if the applicable volume for a year is 15 billion gallons, and EPA estimates that the national volume of transportation fuel consumption for the year is 100 billion gallons, the applicable percentage will be 15 percent. Id. In that year, obligated parties must ensure that, for every gallon of nonrenewable fuel they produce or import, they introduce an additional 15 percent of that amount (0.15 gallons) of renewable fuel into the United States' fuel supply. See id.
The Act establishes an annual deadline by which EPA must publish the percentage standards for the upcoming year through 2022. For the renewable fuel categories relevant here, EPA must publish them by November 30 of the preceding calendar year—i.e., one month before the year in which the standards will apply. 42 U.S.C. § 7545(o)(3)(B)(i). After 2022, the Act prescribes no deadline for when EPA must publish the percentage standards. Id. § 7545(o)(2)(B)(i), (ii). Instead, for 2023 and later years, the statute sets an annual deadline for EPA to publish the applicable volumes of renewable fuel (as distinct from the percentage standards). Id. § 7545(o)(2)(B)(ii). For those years, the Act directs EPA to publish the applicable volumes "no later than 14 months before the first year for which such applicable volume will apply." Id.
The Act does not set compliance deadlines. Instead, the CAA empowers EPA to promulgate regulations that "contain compliance provisions" to "ensure" the annual renewable fuel volumes are met. Id. § 7545(o)(2)(A)(iii). Existing EPA rules require obligated parties to submit compliance reports on an annual basis demonstrating that they have met a given year's standards. 40 C.F.R. § 80.1451(f)(1).
Two components of the compliance framework established by EPA bear particular relevance here. First, what we call "compliance lead time" is the period between EPA's announcement of a renewable fuel standard and the relevant compliance reporting deadline. So, if EPA were to announce the 2020 renewable fuel standards on November 30, 2019, and require obligated parties to submit their compliance reports for that year on January 1, 2021, that schedule would provide obligated parties with roughly 13 months' compliance lead time. Second, what we refer to as "compliance intervals" are the periods between the reporting deadlines for consecutive compliance years. For instance, if EPA were to set the reporting deadlines for the 2020-2022 compliance years as January 1 of 2021, 2022, and 2023, respectively, that compliance schedule would provide obligated parties with 12-month compliance intervals. The lead times and compliance intervals set by EPA directly affect obligated parties' compliance burdens: The former governs how much notice obligated parties receive in preparing to meet their renewable fuel obligations for a given year, and the latter determines how long obligated parties have between reporting deadlines to take the steps necessary to satisfy their obligations across successive compliance years.
As for how obligated parties demonstrate compliance, the Act establishes a market-based program through which parties can purchase and trade credits. 42 U.S.C. § 7545(o)(5). The credits in this system are known as "Renewable Identification Numbers" or "RINs." See 40 C.F.R. § 80.1425. RINs are unique numbers that represent a given volume of renewable fuel. Id. § 80.1401; see Monroe Energy, 750 F.3d at 913. In effect, RINs serve as the currency of the RFS Program. Parties acquire RINs and then demonstrate compliance with their renewable fuel obligations for the year by "retir[ing]" (i.e., submitting) them to EPA by the compliance filing deadline. Id. § 80.1427(a)...
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