937 F.3d 559
D.C. Cir.2019Background
- The Clean Air Act’s Renewable Fuel Standard (RFS or RFS Program) sets statutory annual applicable volumes for nested fuel categories (renewable fuel, advanced biofuel, cellulosic biofuel, biomass-based diesel) and directs EPA to promulgate annual percentage standards and assign compliance to obligated parties (refiners and importers).
- EPA’s 2018 Rule reduced the cellulosic statutory volume to EPA’s projection (288 million gallons) and exercised the discretionary cellulosic waiver to reduce advanced and total renewable volumes proportionally (advanced: 4.29 BGal; total renewable: 19.29 BGal). EPA declined to use the general waiver for severe economic harm or inadequate domestic supply.
- Key contested agency choices: (1) methodology and reasonableness of EPA’s liquid cellulosic projection; (2) whether EPA permissibly used cost considerations in exercising the cellulosic waiver and abandoning full backfill by non-cellulosic advanced fuels; (3) EPA’s interpretation and application of the general waiver (sequencing, severe economic harm, and definition of “domestic supply”); (4) scope/timeliness of challenges to RIN-export policy, the definition of “obligated parties,” and EPA’s treatment of small-refinery exemptions when setting percentage standards.
- Multiple parties petitioned the D.C. Circuit: industry (AFPM, Valero) arguing rule is too strict; biodiesel industry (National Biodiesel Board) arguing rule is too lax on some volumes; environmental groups (Sierra Club and Gulf Restoration Network) alleging EPA violated the Endangered Species Act (ESA) by failing to evaluate/consult; Small Retailers Coalition raising Regulatory Flexibility Act concerns.
- The court upheld EPA on all challenges except the ESA claim: it remanded the 2018 Rule (without vacatur) because EPA failed to make an adequate effects determination or consult under the ESA before finalizing the Rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| EPA’s liquid cellulosic projection methodology | Obligated parties: projection method is chronically overoptimistic and EPA failed to correct it | EPA adjusted percentile inputs downward (10th & 12th percentiles) and used a reasoned methodology | Court: projection was reasonable and adequately explained; upheld EPA estimate |
| Use of cellulosic waiver / cost consideration and backfill | NBB: EPA impermissibly prioritized costs and abandoned prior practice of requiring non-cellulosic backfill without adequate justification | EPA: statute permits broad discretion; considered many factors and reasonably relied on cost for marginal 110 MGal | Court: EPA’s consideration of costs and change in approach was permissible and sufficiently justified |
| General waiver (sequencing; severe economic harm; inadequate domestic supply) | Obligated parties: EPA should assess general waiver against statutory volumes (pre-cellulosic reduction); EPA set too strict causation standard and misinterpreted "domestic supply" (should exclude imports) | EPA: reasonable to treat cellulosic reduction as baseline; high causation threshold permissible; analyzed both imports-inclusive and production-only scenarios and reasonably declined waiver | Court: EPA’s sequencing and interpretations are reasonable; its analyses of economic harm and domestic supply were not arbitrary or capricious |
| ESA consultation (failure to make effects determination) | Environmental Petitioners: EPA failed to determine whether 2018 Rule may affect listed species/critical habitat and thus failed to consult | EPA: argued action was non-discretionary or amounted to a "no effect" finding because harms could not be attributed with reasonable certainty | Court: EPA did not make a proper effects determination; remanded for ESA compliance (remand without vacatur) |
Key Cases Cited
- Americans for Clean Energy v. EPA, 864 F.3d 691 (D.C. Cir. 2017) (discusses RFS market-forcing purpose and agency discretion)
- Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C. Cir. 2014) (agency’s consideration of factors in RFS waiver context)
- Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984) (agency statutory-interpretation deference framework)
- Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (1983) (arbitrary-and-capricious review standards)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (requirements for reasoned explanation when agency changes position)
- Whitman v. American Trucking Ass’ns, 531 U.S. 457 (2001) (intelligible principle and nondelegation discussion)
- Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644 (2007) (ESA consultation applies only to discretionary actions)
- Center for Biological Diversity v. EPA, 861 F.3d 174 (D.C. Cir. 2017) (procedural-ESA standing and remand without vacatur)
- Am. Petroleum Inst. v. EPA, 706 F.3d 474 (D.C. Cir. 2013) (reasonableness of EPA projections and need for quantitative specificity)
- Util. Air Regulatory Grp. v. EPA, 573 U.S. 302 (2014) (court’s deference boundary to agency interpretations)