D.C. Circuit to EPA: Rules Must be Neutral, Not Aspirational

biofuel

Cross-posted at WLF’s Forbes.com contributor page

We aren’t convinced Congress meant for the EPA to  . . . let the wish be the father of the thought“.

With that wonderful turn of a phrase, Senior Judge Stephen Williams began another U.S. Court of Appeals for the D.C. Circuit opinion reminding the Environmental Protection Agency that Congress and its statutes place firm limits on EPA’s discretion and actions.

American Petroleum Institute v. EPA, released last Friday, arose from a “renewable fuel standard” (RFS) program under the Clean Air Act.We’ve commented on this program previously here at The Legal Pulse. Under the mandate, refiners would have to use an increasing amount of biofuels or face fines. Congress’ overarching purpose was to reduce greenhouse gas emissions, and broadly encourage biofuel technology. It singled out “cellulosic biofuel,” which, in 2007 when Congress adopted the program, was barely available on a commercial basis. Congress, the court noted in APA v. EPA, “assumed significant innovation,” but in the event that innovation didn’t occur, lawmakers tasked EPA with the job of projecting what would be available and adjusting the percentage requirement down based on that projection.

Congress, it seems, was far too optimistic about cellulosic fuel. EPA’s estimate for 2011 was around 9 million gallons, 491 million gallons short of Congress’s RFS mandate. API argued that EPA overestimated the available cellulosic fuel; the actual amount was zero. Despite the obvious shortfall in cellulosic fuel, EPA refused to reduce the total volume of biofuels required. API sued under the Administrative Procedures Act to have EPA’s determination vacated.

The court held that while EPA’s decision to not reduce the biofuel mandate amount merits judicial deference, its methodology “did not take neutral aim at accuracy,” and was thus an unreasonable use of its discretion.

EPA’s downfall was its eagerness to be a player in the Obama Administration’s alternative fuels promotion agenda. It tilted the estimation with an eye, in EPA’s own words, “with the objective of promoting growth in the industry.” EPA was worried that setting the production figures “at the low end of the proposed range, or some lower volume, could potentially result in a depressed market for cellulosic biofuel.”

Such an aspirational prediction, aimed at pumping up the biofuel market, the court said, went well beyond what Congress wanted: “a prediction of what will actually happen.” Senior Judge Williams went on to say,

Although an agency may flesh out the interstices of a technical regime, that discretion does not entitle the agency to arrogate to itself purposes outside the statutory provision it is applying.”

This certainly wouldn’t be the first time EPA has done that.

The court also noted that the RFS program would punish not the biofuel industry, but the refiners for the biofuels production shortfall. The situation for them, the court wrote, was basically, “Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers.”

EPA, and its regulatory targets, sure have kept the D.C. Circuit busy over the past several years. Does anyone doubt that will hold true for the foreseeable future?

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