The Environmental
Protection Agency’s
Authority to Amend the
Renewable Fuel
Standard
Lisa M. Jaeger & Sandra Y. Snyder
Bracewell & Giuliani LLP
March 2014
DISCLAIMER
Bracewell & Giuliani LLP prepared this paper at the request of the
Bipartisan Policy Center (BPC). BPC is releasing this paper as it was
presented to us. The findings and opinions expressed in this paper
are solely those of the authors. BPC takes no position on the findings
nor conclusions developed in this paper, and this paper does not
necessarily represent the views of the Bipartisan Policy Center, BPC
staff, its founders, its board of directors, or the RFS advisory group.
The document does not represent the views of Bracewell & Giuliani
LLP or of its clients.
ABOUT BPC
Founded in 2007 by former Senate Majority Leaders Howard Baker,
Tom Daschle, Bob Dole and George Mitchell, the Bipartisan Policy
Center is a non-profit organization that drives principled solutions
through rigorous analysis, reasoned negotiation and respectful
dialogue. With projects in multiple issue areas, BPC combines
politically balanced policymaking with strong, proactive advocacy
and outreach.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
2
Substantial changes in energy markets, persistent challenges in courts, and difficulties in
the implementation of relevant enacting laws have kept the Renewable Fuel Standard (RFS)
at the forefront of energy policy discussions. There are both strong advocates in support of
holding firm on the existing requirements and calls for outright repeal. But there also exists
an active middle ground focusing on reforming, not repealing, the RFS.
The Bipartisan Policy Center (BPC) is undertaking a yearlong effort aimed at fostering
constructive dialogue and action on reforming the RFS. To do this, BPC is convening a
diverse RFS advisory group to discuss opportunities for reform, hosting public workshops to
solicit broad input, and ultimately publishing viable policy options based, in part, on the
advisory group’s deliberations.
As part of this effort, BPC has commissioned a series of background papers on various RFS
topics. These papers are targeted at a broad audience that includes not only BPC’s advisory
group, but also policymakers, industry, and the public, with the intention of educating and
informing the wider debate surrounding this issue. Given a topic as complex as the RFS,
these papers cover multiple issues, providing a focused view from the perspectives of
technology, infrastructure, policy, and law. The first three background papers listed will be
released in early February. The remaining two, which are two separate law firms’
perspectives on the same topic, will be released by the end of February.
1. Technical Barriers to the Consumption of Higher Blends of Ethanol
The International Council on Clean Transportation
2. Petroleum and Renewable Fuels Supply Chain
Stillwater Associates LLC
3. Inventory of Federal Regulations Affecting Biofuels other than the
Renewable Fuel Standard
Van Ness Feldman
4. The Environmental Protection Agency’s Authority to Amend the Renewable
Fuel Standard
Sutherland Asbill & Brennan LLP
5. The Environmental Protection Agency’s Authority to Amend the Renewable
Fuel Standard
Bracewell & Giuliani LLP
BPC is releasing these papers as they were presented to us. The findings and opinions
expressed in these background papers are solely those of the author(s). BPC takes no
position on the findings nor conclusions developed in these papers, and they do not
necessarily represent the views of BPC staff or the RFS advisory group.
To read other background papers in the series or for additional information about this effort,
please visit http://bipartisanpolicy.org/projects/energy/renewable-fuel.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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Table of Contents
Introduction and Overview of RFS Program
Elements ........................................................................... 5 Specific Issues Arising from the RFS Program ............... 7 Setting and Adjusting the Annual Standards .............................................................. 7 Setting Annual Volumes ...................................................................................... 8 Waiver of Annual Volumes ................................................................................... 9 Consideration of Import and Export Implications ................................................... 12 Long-Term Adjustments Beginning in 2016 .......................................................... 14 Definition of Biofuel and Subcategories ................................................................... 16 Adjustment of Required Greenhouse Gas Reductions ................................................. 17 Renewable Identification Numbers (RINs) ................................................................ 20 Trading RINs.................................................................................................... 20 Treatment of Invalid RINs .................................................................................. 21 RIN Pricing ...................................................................................................... 24 RIN Equivalence Values ..................................................................................... 25 Redefining Obligated Parties or Reassigning Obligations............................................. 27 Technology Pathways ........................................................................................... 28 Fuel Certification .................................................................................................. 30 Liability Issues ..................................................................................................... 31 Conclusion ..................................................................... 34 Attachments .................................................................. 35 Attachment 1: Record of Annual Volumes ................................................................ 35 Attachment 2: Record of Volumes, Modifications, and Legal Challenges ....................... 37 Attachment 3: Record of EPA’s Issuance of the Annual RFS ........................................ 43 Attachment 4: Litigation Associated with Setting and Adjusting Annual Volumes ........... 44 Attachment 5: Clean Air Act Key Fuels Definitions ..................................................... 48 Attachment 6: Record of Petitions Filed Requesting Waivers ....................................... 50 Attachment 7: Proposed RIN Quality Assurance Program ........................................... 53 Attachment 8: 40 C.F.R. § 79.11 ............................................................................ 56 Attachment 9: Summary of Major MTBE Liability Events ............................................ 58 Endnotes ........................................................................ 61
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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Introduction and
Overview of RFS Program
Elements
The Energy Policy Act of 20051 (EPAct) established a renewable fuel standard (RFS),
mandating the use of biofuels in the nation’s transportation fuel supply and the reduction of
greenhouse gases (GHGs) in renewable fuels produced at new facilities. Congress
significantly expanded this mandate and amended its provisions in the Energy
Independence and Security Act of 2007 (EISA).2 Congress established the RFS program
within the Clean Air Act (CAA), giving the U.S. Environmental Protection Agency (EPA) the
primary role in its implementation.3 EPA has interpreted the statutory RFS provisions issued
in a series of implementing regulations and other agency actions. Federal courts have issued
decisions in cases challenging several aspects of EPA’s regulations and other cases are
pending. Thus, there is a growing body of administrative interpretation and case law that
continues to define EPA’s authority to interpret the statutory provisions and its own
regulations.
As the RFS program matures, EPA has been called on to revise some of its key elements
through regulatory changes and its enforcement policies. Any reform must begin with
understanding the extent of EPA’s legal authority as to that element within the RFS
program.
This paper will address the extent of EPA’s authority under the CAA to amend the RFS
program to address certain concerns regarding its implementation. The topics selected for
coverage are among the most fundamental and strongly contested of the program but they
are not comprehensive of all of the RFS program elements that interested parties may be
discussing as means for reform. This paper will set out some key program elements to
orient the discussion of specific reform topics. For each reform topic, a brief description of
the issue and law is followed by a discussion of the extent of EPA’s authority to amend the
RFS program to address the concern. Additional background and summary information for
some topics are provided in the Attachments to this paper.
Overview Of RFS Program Elements
The CAA, as amended by EPAct and EISA, sets minimum volumes of renewable fuels that
must be blended into the nation’s transportation fuel supply. The CAA directs EPA to
implement the RFS through compliance obligations applicable to refineries, blenders,
distributors, and importers.4 With this direction, EPA developed the term “obligated party”
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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to describe parties who must meet an annual Renewable Volume Obligation (RVO). The RVO
is set based on a formula that allocates to each party its proportionate share of the overall
RFS.
Fuels must meet certain standards to qualify as “renewable” and only fuels identified as
such by statute or regulation may be used by an obligated party to meet an RVO. Each
gallon of renewable fuel—including producer-generated as well as imported gasoline or
diesel fuel—is assigned a Renewable Identification Number (RIN).5 RINs act as markers to
track the amount and type of renewable fuels being produced in, imported to, or exported
from the United States.6 To demonstrate compliance with its RVO, an obligated party must
document that it has obtained a sufficient number of RINs to satisfy the RVO for a
compliance year.7 The party must report its ownership of RINs on a quarterly and annual
basis to certify satisfaction of its RVO requirements.8 Pursuant to the CAA,9 a trading
program has been established to allow obligated parties to trade excess RINs and purchase
additional RINs as an alternative means to comply with the annual RVO requirements.10
As further directed by the CAA,11 EPA has established a trading program to allow an
obligated party to sell its excess RINs and purchase additional RINs as an alternative means
to comply with its annual RVO.12
The CAA requires EPA to coordinate with the U.S. Department of Energy (DOE) and the U.S.
Department of Agriculture (USDA) when making many RFS decisions. EPA is thereby
required to take into account the effects on the agriculture and energy sectors in making
RFS program decisions.
Finally, it bears repeating that Congress made clear that the RFS program was intended to
increase biofuel consumption, lower GHG emissions, and provide mechanisms for increased
biofuel production,13 as well as to achieve those goals at least in part through a marketbased program. Its current structure requires EPA to consider market signals when making
renewable volume decisions14 and obligated parties have market-based compliance
options.15 The program is intended to adapt to advancements in technology, as seen
through the establishment of mechanisms that permit biofuel producers to obtain approval
for emerging biofuel production technologies.16 The production of renewable fuels is also
supported by multiple federal incentives, among which are production tax credits, grants,
loan guarantee programs, national lab research funding, and university research funding.
Innumerable competing interests make decision-making under the RFS highly consequential
and inescapably controversial.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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Specific Issues Arising
from the RFS Program
Setting and Adjusting the Annual Standards
Congress set statutory renewable fuel volumes for renewable fuel for 2006–2022, advanced
biofuel for 2009–2022, cellulosic biofuel for 2010–2022, and biomass-based diesel for
2009–2012.17 For each year through 2022, EPA must implement these volumes through
regulation, “to ensure that the transportation fuel sold or introduced into commerce in the
United States (except in noncontiguous States or territories), on an annual average basis,
contains at least the applicable volume of renewable fuel, advanced biofuel, cellulosic
biofuel, and biomass-based diesel, determined in accordance with [CAA § 211(o)(2)(B)].”18
Each year by October 31, the U.S. Energy Information Administration (EIA) must provide to
EPA an estimate of the volumes of transportation fuel, biomass-based diesel, and cellulosic
biofuel projected to be sold into commerce in the United States.19 Then, by November 30
and based on the EIA estimates, EPA must determine for the following year, the renewable
fuel obligation that applies to obligated parties, expressed as a percent volume of the
transportation fuel sold into commerce.20 EPA has met the November 30 deadline twice.21
The RFS volume mandates are “nested”22—meaning that cellulosic and biomass-based diesel
are separate sub-categories that are nested or contained within the larger advanced biofuel
category.23 Therefore, both cellulosic and biomass-based diesel fuels are counted toward the
advanced biofuel volume requirement. In turn, the advanced biofuel category is nested
within the total renewable fuel mandate such that fuel that qualifies as advanced biofuel
also counts toward the total renewable fuel volume requirement.24
For biomass-based diesel, the statutory minimum volume for 2013 and beyond is at least
the volume adopted for 2012.25 For other fuel categories for years beyond 2022, the
volumes are not set by statute.26 Congress specified criteria for EPA to use when setting
future volumes beyond 2022.27 EPA must set later annual volumes, in coordination with DOE
and USDA, based on a review of the program over the prior years and an analysis of six
factors:
(1) environmental impacts;
(2) U.S. energy security;
(3) expected annual rate of future commercial production of each biofuel category;
(4) impacts on U.S. infrastructure for goods other than renewable fuels and sufficiency
of infrastructure for renewables;
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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(5) consumer cost of transportation fuels and transport of goods; and
(6) other factors including jobs, crop supply and price, rural economic development, and
food prices.28
Congress directed EPA to diverge from the statutory volumes under certain circumstances
and gave EPA discretion to diverge from them in other circumstances.
The statutory volumes and EPA’s modifications to those statutory volumes are summarized
in Tables 1–4 in Attachment 1. The bases for the EPA modifications are discussed in further
detail throughout this paper. For a comprehensive overview of the statutory volumes,
modifications made by EPA, and subsequent legal challenges, refer to Attachment 2.
Setting Annual Volumes
Description of Issue / Law
Congress directed that EPA, when setting the annual volumes, “shall make adjustments”
under CAA § 211(o)(3)(C) to the statutory volumes in certain situations: first, EPA must
adjust the statutory volume “(i) to prevent the imposition of redundant obligations.”29 EPA
has never issued regulations that address its obligation to avoid redundant obligation.
Second, EPA must adjust the statutory volume and “(ii) to account for the use of renewable
fuel during the previous calendar year by small refineries that are exempt under [CAA
§ 211(o)(9)].”30 Small refineries31 were automatically exempt from the RFS volumes until
2011 under CAA § 211(o)(9) and EPA’s implementing regulations.32
Congress provided that the temporary, small refinery exemption could be extended under
two circumstances: (1) if DOE determines that compliance with the RFS would subject small
refiners to a disproportionate economic hardship, or (2) upon a small refinery’s petition to
the administrator based upon economic hardship.33 EPA extended these same requirements
to small refiners if they sought to extend the temporary exemption.34 EPA must consider
any petition for an extension of the exemption in consultation with DOE35 and must act on a
petition for a hardship exemption within 90 days.36
EPA implemented small refinery exemption at 40 C.F.R. § 80.1441 and 40 C.F.R. § 80.1442.
EPA Authority / Obligations
EPA appears to have some latitude to adjust the annual volume to “avoid redundant
obligations.” Congress did not provide limits on how EPA should make such adjustments.
EPA has not interpreted this phrase and it is unclear under what circumstances EPA would
conclude obligations are redundant.
Volume adjustments based on fuel use by small refiners and small refineries are slightly
more developed legally. For the years 2012 and beyond, the CAA allows EPA to adjust the
volumes on this basis only after consulting with DOE and granting a small refiner or refinery
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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exemption based on economic hardship.37 EPA has granted exemptions under its regulations
interpreting key terms and thereby narrowing its discretion somewhat.
EPA is also bound by administrative rulemaking procedures when making volume
adjustments. Two trade associations allege38 that EPA did not abide by those requirements
when EPA exercised its authority under 42 U.S.C. § 7545(o)(3) to extend an exemption to a
small refiner in 2013.39 The trade associations argue that the exemption was not part of the
proposed rule for 2013 and, therefore, affected parties whose RVOs were increased were
deprived of notice and an opportunity to comment on EPA’s decision to grant the
exemption.40
Waiver of Annual Volumes
Description of Issue / Law
In addition to adjustments to annual volumes based on CAA § 211(o)(3)(C), EPA has
authority to waive renewable fuel volumes under CAA § 211(o)(7).41 A waiver is a formal
rulemaking, requiring notice and comment on a proposed rule.42 EPA must grant or deny a
waiver petition in 90 days.43 Waivers last for one year but may be renewed by EPA after
consultation with DOE and USDA.44
The criteria for granting a waiver differ, depending on the type of renewable fuel for which a
waiver is sought and the year in which it is sought. Under general waiver authority, EPA
may waive requirements for any renewable fuel category. EPA also has waiver authority
specific to cellulosic biofuel and biomass-based diesel.45 Under those provisions, EPA must
grant waivers if EPA makes certain statutory determinations.46 EPA has not issued
regulations elaborating on the statutory criteria for granting waivers.47 However, in
response to waiver requests filed by states and trade associations, EPA has interpreted
several statutory terms and decided whether the threshold requirements have been met for
granting waivers for the various fuel categories.48 In addition, courts have ruled on several
challenges to EPA’s waiver decisions. Other cases are pending in court as of January 2014.
With each EPA decision and court decision, a path of precedent is being laid that EPA should
consider in making its future volume decisions. To be upheld, each decision must be
consistent with prior waiver decisions49 or otherwise be adequately supported by a record
showing why departure from prior decisions is rational. Given the strong competing
interests at stake in waiving annual volume requirements, judicial challenges of each of
EPA’s decisions are highly likely.
General Waiver Authority for All Renewable Fuel Categories. When exercising its
general waiver authority, EPA may fully or partially waive any of the statutory renewable
fuel volumes, in whole or in part, if EPA determines the requirement would (1) “severely
harm” the economy or environment of a region, state, or the nation or (2) there is
“inadequate domestic supply.”50 Waivers of the overall RFS volumes may be sought by
states or any person subject to the requirements or can be initiated by EPA.51
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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EPA considered and denied petitions for waivers under the “severe harm to the economy”
criterion of its general waiver authority in both the 2013 RFS52 and the 2009 RFS.53 Those
waivers sought reduction of volumes of various fuel categories.
EPA has proposed a partial waiver of the 2014 statutory RFS volumes based on the
“inadequate domestic supply” criterion of the general waiver authority.54 For the 2014 RFS,
EPA has proposed a 16 percent reduction in the total renewable fuel volume55 and a 41
percent reduction in the advanced biofuel volume.56 Other parties separately sought waivers
of the 2014 statutory volumes of total renewable and advanced biofuel.
American Fuel & Petrochemical Manufacturers (AFPM) and American Petroleum Institute
(API) submitted a petition for a partial waiver57 as have several refineries and other
groups.58 Attachment 3 provides more detailed information regarding these requests.
EPA addressed this waiver provision in the context of addressing supply concerns associated
with the ethanol blendwall.59
Cellulosic Biofuel. EPA may use general waiver authority to reduce the cellulosic biofuel
volume. There is additional authority specific to cellulosic biofuel under which EPA must
reduce the annual volume to respond to production volume. If EPA determines that “the
projected volume of cellulosic biofuel production is less than the minimum applicable
volume.” EPA “shall reduce the applicable volume to the projected volume available during
that calendar year.”60 If EPA reduces the cellulosic biofuel volume the statute allows that
EPA may also reduce the total renewable and advanced biofuel volumes by the same or a
lesser amount.61 Because cellulosic biofuel is nested within the advanced biofuel category,62
any shortfall in the cellulosic volume must be made with other advanced biofuels so that the
advanced biofuel volume is still met.63 EPA must initiate the specific waiver process under
the stated conditions,64 whereas the general waiver provision is available to states, persons
subject to the requirements, and to EPA.65
EPA has made major adjustments to the cellulosic biofuel volumes from 2010–2013.66 EPA
lowered the cellulosic volume in 201067 and 2011 based on lack of production capacity.68 For
2012, EPA lowered the cellulosic volume from the statutory volume of 500 million gallons,
determining 8.65 million gallons to be the projected volume of production, based on EIA
data.69 In justifying its projection, EPA made clear that while its projection was “within the
range” of the amount that domestic and imported fuel could satisfy, its intention was
“promoting growth in the industry” and the level it projected would “provide the appropriate
economic conditions for the cellulosic biofuel industry to grow.”70 Industry challenged the
validity of this approach, and the D.C. Circuit found EPA’s approach unreasonable, vacating
the 2012 cellulosic biofuel volume.71 The court recognized that although EPA intended to
support Congress’s goal of encouraging domestic production, EPA could not “arrogate to
itself purposes outside the statutory provision it is applying.”72 The court also made the
point that the structure of the RFS, unlike other CAA programs, is not technology-forcing
and EPA may not make determinations to achieve particular technological outcomes.73
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The court also took issue with EPA’s projected cellulosic production calculation. As the court
explained, in recognition of the technical challenges to developing renewable fuels,
“Congress provided for the possibility that actual production would fall short of the stated
requirements,” and in those instances, EPA must “reduce the applicable volume of cellulosic
biofuel … to the projected volume.’”74 The court concluded that EPA’s production number
“did not take a neutral aim at accuracy.”75
This decision on the 2012 RFS opens the door to greater judicial scrutiny of EPA’s projection
of production and volume-setting. In addition, it pushes EPA toward more careful
documentation of its projections and less reliance on broader CAA policy goals of
encouraging advanced biofuel production as justification for its decisions. This may be
particularly true where the CAA directs EPA to rest its decision on a quantitative factor such
as production volume for the cellulosic-specific waiver, as opposed to more qualitative
factors.
In January 2014, EPA granted the petitions for reconsideration filed by API and AFPM based
on the information and methodology EPA used to set the 2013 cellulosic biofuel volume.76
EPA determined that reconsideration of the 2013 cellulosic volume was appropriate because
the petitions raised new information of central relevance to the rule, which became available
after the comment period closed but within the time period allowed for judicial review.77 In
particular, the reduced cellulosic production estimates for 2013 from KiOR provided a basis
for reconsideration.78 EPA will be initiating new notice and comment rulemaking to consider
this information.79
Biomass-based Diesel. EPA may use general waiver authority to reduce the biomassbased diesel volume. EPA has additional authority specific to biomass-based diesel, under
which EPA must issue an order to reduce the biomass-based diesel volume to respond to
significant price increases.80 Under that provision, EPA, DOE, and USDA must “periodically
evaluate the impact of the biomass-based diesel requirements” on the market,81 and if EPA
determines “that there is a significant renewable feedstock disruption or other market
circumstances that would make the price of biomass-based diesel fuel increase
significantly,” EPA must issue an order to reduce the volume by an appropriate amount but
not more than a 15 percent reduction of the statutory volume requirement.82 That order
shall then be in effect for up to 60 days and is renewable for another 60 days.83 EPA must
initiate the specific waiver process under the stated conditions,84 whereas the general
waiver provision is available to states, persons subject to the requirements, and to EPA.85
If EPA utilizes this authority to temporarily reduce the biomass-based diesel volume, it may
also reduce the renewable and advanced biofuels volumes by the same or a lesser
amount.86 Because the biomass-based diesel is nested in the advanced biofuel category, if
EPA does not also lower the renewable fuel and advanced biofuels volumes, then any
shortfall caused by the waiver would need to be made up with other advanced biofuels.
EPA has never temporarily waived the biomass-based diesel requirements. For years 2009–
2012, EPA set volumes unchanged from the statutory volumes. For 2013, EPA finalized a
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volume of 1.28 billion gallons, 0.28 billion gallons higher than the CAA minimum volume.87
In setting that standard, EPA analyzed the six factors under CAA § 211(o)(B)(2)(ii) that EPA
must consider when setting the volumes for years after the calendar years specified in the
CAA.88
After EPA issued the final 2013 volume, two trade associations asked EPA to reconsider the
rule,89 citing the effects of the 2012 drought, feedstock availability, cost, fraudulent RINs,
and inadequate assessment of impacts by EPA. EPA denied the petitions for
reconsideration.90 In its response, EPA explained that it had considered the 2012 drought
and the RIN fraud issue when it set the 2013 standard.91 EPA took the position that nothing
in the six-factor analysis required by CAA § 211(o)(B)(2)(ii) “indicates that an ‘increase in
diesel fuel costs’ should prevent increases in the 1.0 bill gal biomass-based diesel
requirement.”92 EPA’s view is that it must consider not only the cost of transportation fuel
and shipment of goods, but also the other statutory factors of CAA § 211(o)(2)(B)(ii)93—
environmental impacts, energy security, expected rate of future commercial renewable fuel
production, domestic infrastructure impact, and other factors such as agricultural
commodity supply and cost, food prices, and jobs.94
In its analysis, EPA assumed that most of the additional 280 million gallons of biomassbased diesel would be produced from soybean oil feedstock and considered whether it would
increase the price of soybean oil.95 EPA ultimately concluded that “sufficient feedstock will
be available, and that the infrastructure will be able to accommodate these higher
volumes.”96 Furthermore, EPA indicated its belief “that it is appropriate to consider biomassbased diesel as playing an increasing role in supplying advanced biofuels to the market
between 2012 and 2022.”97 EPA also concluded that raising the volume would improve U.S.
energy security by diversifying U.S. liquid fuel supplies and helping to buffer any sudden
disruption of petroleum imports that could arise.98
For 2014 and 2015, EPA has again proposed an increase of 0.28 billion gallons over the CAA
minimum of 1.0 billion gallons.99 Public comments on the proposal reflect widely divergent
views as to the appropriateness of the proposal. As of January 2014, EPA has yet to issue
final volumes for 2014 or 2015 for biomass-based diesel.
Consideration of Import and Export Implications
Description of Issue / Law
The renewable fuels market is interrelated to a multitude of trade-related variables
including: gasoline pricing and consumption; agricultural commodity pricing and
consumption (especially corn, sugar cane, and other biofuel feedstock crops); and biofuel
policies in Brazil, the European Union, and other nations that consume or export biofuels.
One of the most conspicuous consequences of market forces on the RFS program is the
import of sugar cane ethanol from Brazil to meet the advanced biofuel volume. By setting
annual volumes, EPA can incentivize or discourage biofuel production and directly influence
whether RVOs are met with imported biofuels.
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The CAA does not expressly include import and export effects among the criteria on which
EPA must base its RFS volume adjustment decisions. However, Congress clearly intended
that the expanded RFS under EISA would increase biofuel production in the United States.
In addition, some statutory criteria that EPA must apply in setting volumes may implicate
import and export considerations.100 For example, EPA’s consideration of “energy security”
under CAA§ 211(o)(2)(B)(ii) volume setting could have market ramifications. When setting
RFS volumes, EPA must analyze the impact on the renewable fuels market, respond to
significant public comments, and explain its reasoning in the administrative record.101
Courts will ultimately decide whether and to what extent the CAA permits EPA to do more
than explain the impacts and actually set volumes in order to avoid or achieve certain
renewable fuel imports and export outcomes.102
The issue is presented each time EPA reduces the cellulosic or biomass-based diesel
volumes without a corresponding reduction of the total renewable and advanced biofuel
volumes. Because the fuel categories are nested, each of those categories partially satisfies
the total renewable and advanced biofuel volumes; reducing cellulosic or biomass-based
diesel volumes means other advanced biofuels will be used to replace those volumes. A
common outcome is that obligated parties satisfy the advanced biofuel volume with
imported sugarcane ethanol.103 This outcome has strong critics in some sectors who assert
that EPA should set volumes at levels that will discourage importing sugarcane ethanol to
meet the advanced biofuel requirement in order to avoid undermining Congress’s objective
of securing a market for domestically produced renewable fuel.104
EPA Authority / Obligations
EPA has used waivers to reduce cellulosic volumes, while not reducing renewable and
advanced volumes. Through rulemakings and court decisions and pending cases, several
points have emerged that describe the present understanding of this authority.
EPA will reduce the renewable and advanced biofuel volumes together or not at
all. EPA has interpreted the statutory provision allowing waiver of the renewable and
advanced volumes when the cellulosic volume has been waived105 to require EPA to adjust
either both or neither of the renewable and advanced volumes. EPA reasons that the
provision describes the two categories in the conjunctive—“renewable fuel and advanced
biofuels”—indicating a congressional intention that EPA may reduce both the total renewable
and advanced biofuel volume together, not one or the other.106 EPA further explained that it
would be inappropriate to lower one but not the other because that “would allow
conventional biofuels to effectively be used to meet the standards that Congress specifically
set for advanced biofuels.”107
Upon reduction of the cellulosic volume, reduction of renewable and advanced
biofuels is discretionary. For the 2012 volumes, EPA reduced the cellulosic volume but
did not reduce the advanced biofuel volume.108 Industry challenged EPA’s decision. The D.C.
Circuit confirmed that when EPA reduced the 2012 cellulosic biofuel volume, EPA was not
also required to modify the advanced biofuel volume.109 The court deferred to EPA’s
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conclusion that other sources of advanced biofuels could make up any shortfall from the
reduced cellulosic volume.110
The CAA does not require EPA to provide specific numerical projections of the
advanced biofuels that will replace the cellulosic shortfall to support a decision not
to reduce the advanced biofuels volume. In their challenge to the 2012 RFS, parties
argued that EPA should have precisely projected the volume of production of the fuels that
would replace the cellulosic shortfall. The D.C. Circuit rejected that argument, holding that
the statute does not impose such a requirement.111 The court found EPA’s approach rational,
based on past sugarcane ethanol import and biodiesel production data, and supported by
EIA data indicating that those fuel categories would fill the gap from the cellulosic
category.112 The court also noted that the advanced category did not suffer from lack of
production.113
Pending issue: whether EPA may rely on factors other than projected volumes of
replacement fuel to support its decision not to reduce the advanced biofuel
volume. For the 2013 RFS, EPA again reduced the cellulosic volume, without reducing the
advanced biofuel volume,114 concluding that there would be sufficient volumes of imported
sugarcane- and biomass-based diesel available to make up for the shortage of cellulosic
biofuel.115 In its legal challenge to the 2013 RFS, at least one refiner alleges that EPA
impermissibly relied on criteria other than the projected volume of advanced biofuels
available in 2013 to support its decision.116 Specifically, the petitioner argues that EPA
followed the proper framework for the 2012 rule, but for the 2013 rule, after concluding
that there would be a production shortfall, EPA considered whether carryover 2012 RINs
could make up for that shortfall.117 The petitioner claims that the CAA does not allow EPA to
consider whether carryover RINs can make up the shortfall in lieu of sufficient advanced
biofuel production and its analysis must be based solely on production.118 The court will
decide this issue of first impression later in 2014.
Long-Term Adjustments Beginning in 2016
Description of Issue / Law
Congress recognized that technology might not develop as quickly as it initially anticipated
when passing EPAct and EISA and setting the statutory volumes. Thus, if EPA has reduced
statutory volumes significantly prior to 2016, EPA may be required to reduce volumes for
subsequent years after 2016.119 Specifically, under CAA § 211(o)(7)(F), EPA must modify
the statutory volumes for an individual fuel if EPA waived (1) at least 20 percent of the
statutory requirement for that fuel for two consecutive years or (2) at least 50 percent of
the statutory volume requirement for that fuel for a single year.120 This authority requires
EPA to modify the statutory volumes for any fuel that meets one of the foregoing criteria,
“for all years following the final year to which the waiver applies.”121 Although these criteria
could be triggered in any of the years for which Congress specified a statutory volume in
CAA § 211(o)(2)(B)(i),122 EPA cannot use this authority to adjust the statutory volumes for
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
14
any year before 2016.123 If EPA must make long-term adjustments, EPA must use the same
process that governs setting volumes beyond 2022: in coordination with DOE and USDA,
based on a review of the program over the prior years and the six-factor analysis.124
EPA Authority / Obligations
Renewable Fuel Standard. As of the final volumes issued for 2013, EPA has never
adjusted the total renewable fuel standard.125 However, EPA has proposed a 16 percent
reduction from the statutory volume in the 2014 total renewable fuel standard.126 Because
this one-time downward adjustment does not exceed 50 percent, EPA would not be required
to adjust the renewable fuel standards for 2016 and beyond.127 Thus, unless EPA—during
the period 2015 to 2022—makes one significant reduction (50 percent or more) or two
smaller consecutive reductions (20 percent or more), the long-term adjustment requirement
will not be triggered for the total renewable volume.
Cellulosic Biofuel. EPA has made major adjustments to the cellulosic biofuel volumes in
2010–2013.128 These major adjustments to the statutory volumes satisfy both criteria that
require EPA to make a long-term adjustment: the cellulosic biofuel volumes have been
reduced by more than 50 percent in a single year and also by more than 20 percent for two
consecutive years.129 Therefore, EPA must modify the volumes long-term for cellulosic
biofuel for the years 2016–2022. Unlike the cellulosic-specific one-year waiver, long-term
volume adjustments are made on an individual fuel basis.130 Thus, EPA always has the
option to modify the annual volumes for advanced and total renewable fuels, where
appropriate, but it is not statutorily required to make long-term adjustments to the
advanced biofuel and total renewable volumes for 2016–2022 when it makes a long-term
adjustment to the cellulosic biofuels volumes.131
Advanced Biofuel Standard. EPA has never reduced the advanced biofuel standard, but
EPA has proposed reducing this volume by 41 percent for 2014.132 If EPA finalizes this
reduction for 2014, that alone would not trigger an adjustment for advanced biofuel for
2016 and beyond.133 However, if EPA reduces the 2015 advanced biofuel standard by at
least 20 percent, EPA would be required to adjust the volume for 2016 and each year
beyond. Also, one significant reduction (50 percent or more) or two smaller consecutive
reductions (20 percent) between 2016 and 2022 would trigger a long-term adjustment.
Biomass-based Diesel Standard. The CAA specifies volumes for biomass-based diesel
only through 2012.134 Because Congress did not set statutory volumes for biomass-based
diesel through 2022 in the tables of CAA § 211(o)(2)(B), the long-term adjustment
authority provisions do not apply to biomass-based diesel.135
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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Definition of Biofuel and Subcategories
Description of Issue / Law
EISA structured the mandated increase in renewable fuel volumes to push fuel suppliers to
develop “advanced” “renewable” fuels.136 The statute includes thorough definitions of each
of the four renewable categories—renewable, advanced, cellulosic biofuel, and biomassbased diesel—and precisely defines each of these categories.137 The statutory definitions
reflect Congress’s policy choices, including for example, requiring that biomass be
“renewable,”138 discouraging the conversion of land for production of crops for renewable
fuel production139 and permitting a wide range of materials to qualify as renewable.140
EPA has refined these definitions through regulations and a Question and Answer Web page
where EPA provides regulatory interpretations of fact-specific circumstances.141
For example, EPA has defined “separated yard waste” as yard waste kept separate from
other waste materials since its generation.142 It is deemed to be composed entirely of
cellulosic materials.143 “Separated food waste” consists of food waste kept separate from
other waste materials since its generation and includes food and beverage production waste
and post-consumer food and beverage waste.144 It is also deemed to be composed entirely
of non-cellulosic materials, unless a party demonstrates that a portion of the feedstock is
cellulosic through approval of its facility registration. Separated municipal solid waste
(MSW) is material remaining after separation actions have been taken to remove recyclable
paper, cardboard, plastics, rubber, textiles, metals, and glass from municipal solid waste,
and is composed of both cellulosic and non-cellulosic materials.145
EPA has given significant additional meaning to the term “renewable biomass.” Per EPA
regulation, it includes “any incidental, de minimis contaminants that are impractical to
remove and are related to customary feedstock production and transport.”146
The CAA requires that agricultural land be cleared or cultivated prior to December 19, 2007,
and actively managed or fallow and nonforested.147 EPA has permitted that land that met
this definition on December 19, 2007, “will continue to meet the definition indefinitely,
regardless of whether it is reforested and subsequently deforested in the future.”148 EPA
explained that the provision protected against converting untilled lands to cropland for the
sake of biofuels feedstock production and potentially releasing large amounts of GHGs
stored in the soil.149
Substances such as woody residues from saw and paper mills can meet the renewable
biomass definition, but only the biogenically derived portion of the renewable fuel that can
be traced back to feedstocks meeting the definition of renewable biomass can qualify for
generating RINs.150 In other words, such residues cannot constitute renewable biomass if it
is mixed with residue from trees that do not originate in tree plantations.151 “If the tree
residues are mixed with chemicals … producers may only generate RINs for the portion of
the mixture that is actually derived from planted trees.”152
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In order to qualify as renewable biomass, renewable fuel producers must comply with
certain record-keeping requirements.153 For example, producers that use animal wastes as
feedstocks must obtain documents from their feedstock supplier, and maintain copies of
those documents in their records, certifying that the feedstock meets the definition of
renewable biomass, describing the feedstock, and identifying the process used to generate
the feedstock.154
Feedstocks from planted crops or crop residue from existing agricultural land in the United
States are subject to less stringent record-keeping requirements than foreign feedstocks. If
a producer uses domestic feedstock from planted crops or crop residue from existing
agricultural land, the producer need not maintain records for that feedstock “unless EPA
makes a finding that the 2007 baseline amount of US agricultural land has been
exceeded.”155 In contrast, a producer or importer that seeks to generate RINs from
feedstocks from foreign agricultural land must maintain records establishing the type and
source of the feedstock for all the fuel produced156 and submit quarterly reports to EPA
providing the source of the feedstocks.157
EPA Authority / Obligations
Although changing the core definitions of these terms would require a legislative
amendment, there are several words or phrases within each definition that are open to
regulatory interpretation by EPA. Thus far, EPA’s interpretations indicate a strong
commitment to the somewhat competing statutory goals of defining fuels as renewable as
expansively as possible while not sacrificing the GHG reduction goals of the statute.
Furthermore, these definitions appear to be broad enough to accommodate drop-in fuels,
which are viewed as the next step in the RFS landscape. “Drop-in biofuels are hydrocarbon
fuels substantially similar to gasoline, diesel, or jet fuels.”158 “These fuels can be made from
a variety of biomass feedstocks including crop residues, woody biomass, dedicated energy
crops, and algae.”159 As their name implies, drop-in fuels can be used in existing
infrastructure, machines, and vehicles without any modification.160
Adjustment of Required Greenhouse Gas Reductions
Description of Issue / Law
For fuels produced at new facilities to qualify as renewable, they must have lower lifetime
GHG emissions than the 2005 gasoline or diesel they replace.161 These GHG emission
reductions are indicated in the statute as percent reductions from 2005 fuel emissions. The
CAA also provides that EPA “may” adjust the statutory GHG reductions to a lower
percentage;162 however, Congress constrained EPA’s discretion by permitting a maximum
overall downward adjustment of 10 percent from the statutory baseline emission
reduction.163 In addition, EPA must make “the minimum possible adjustment, and the
adjusted greenhouse gas reduction shall be established by the Administrator at the
maximum achievable level.”164 If EPA adjusts downward the required GHG emission
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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reduction, any subsequent upward adjustment cannot require greater GHG reductions than
the original statutory reduction—that is, 20, 50, or 60 percent as applicable, from the
baseline.165
The table below shows the statutorily required GHG emission reductions and the emissions
reductions that would result if EPA made the minimum possible adjustments of 10
percent.166
Type Of Fuel
Statutory % Reduction
From Baseline
Minimum % Reduction
From Baseline (If EPA
Adjusts Statutory %
Reduction)
Renewable Fuel
20
10
Advanced Biofuel
50
40
Biomass-based Diesel
50
40
Cellulosic Biofuel
60
50
Other statutory factors guide EPA adjustments to the statutory GHG reductions. EPA is
permitted to adopt regulations that adjust the advanced biofuel, biomass-based diesel, and
cellulosic biofuel statutory GHG reductions only if the administrator “determines that
generally such reduction is not commercially feasible for fuels made using a variety of
feedstocks, technologies, and processes to meet the applicable reduction.”167 EPA has never
exercised this authority.168 If EPA were to make an adjustment to the GHG emission
reductions for any of the fuel categories, EPA must also consider cost, “allowing for the use
of a variety of technologies and processes.”169
EPA has finalized a regulatory method for calculating lifetime GHG emissions.170 Accordingly
EPA can now make further adjustments in two situations: (1) where the administrator
“determines that there has been a significant change in the analytical methodology used for
determining the lifecycle greenhouse gas emissions,”171 or (2) after undertaking the
mandatory five-year review of the criteria and standards used to make the initial
adjustment.172 If the administrator makes a determination “that there has been a significant
change in the analytical methodology used for determining the lifecycle greenhouse gas
emissions,” those subsequent adjustments must go through formal rulemaking.173 This
subsequent adjustment can either be upward174 or downward,175 but any upward
adjustment may not raise the percentage reduction to a value higher than the statutory
amounts176 and any downward adjustment is constrained by the minimum percent reduction
noted above.
EPA Authority / Obligations
If EPA adjusts or revises any GHG reduction percentages “or makes a change in the
analytical methodology used for determining the lifecycle greenhouse gas emissions, such
adjustment, revision, or change (or any combination thereof) shall only apply to renewable
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
18
fuel from new facilities that commence construction after the effective date of such
adjustment, revision, or change.”177 Overall, the CAA significantly constrains EPA’s ability to
create flexibility in qualifying fuels under these provisions requiring lifetime GHG reductions.
Exemption for Grandfathered Facilities. Any adjustments to the GHG reduction
percentages would not apply to grandfathered-in facilities.178 Grandfathered facilities are
renewable fuel facilities that “commenced construction prior to December 19, 2007,” and
ethanol plants that use natural gas or biodiesel for process heat and that commenced
construction after December 17, 2007, but on or before December 31, 2009.179 When EPA
conducted its regulatory impact analysis, it anticipated that 203 natural gas and/or
biomass-fired plants would be grandfathered, in addition to 23 coal-fired plants that were
online or that had commenced construction prior to December 19, 2007.180 The
grandfathering exemption for these ethanol plants was granted “indefinitely, provided the
facility continues to use natural gas and/or biofuel.”181 As to renewable fuel facilities
constructed prior to December 19, 2007, “only the baseline volume of renewable fuel is
exempted.”182 Similarly, the exemption applies only to the baseline volume for ethanol
facilities that commenced construction on or between December 9, 2007, and December 31,
2009.183
During the rulemaking process, EPA decided not to require grandfathered ethanol facilities
that were constructed on or between December 19, 2007, and December 31, 2009, to
undergo an evaluation of the GHG reduction if they switched to a different feedstock or
production process—as long as the ethanol facility still uses natural gas, biomass, or a
combination.184 The volume of renewable fuel produced at such facilities is grandfathered up
to 105 percent of the maximum volumetric capacity allowed under any applicable state air
permit or Federal Title V operating permit held by the facility.185 If the air permit does not
stipulate the capacity of the facility the grandfathered volume is 105 percent of the
maximum annual volume produced for any of the last five calendar years prior to 2008.186
Expansions after December 19, 2007 that increase the facility’s production volume to above
105 percent of the grandfathered volume must meet the GHG reduction requirement for
that excess volume.187
A renewable fuel facility that has been grandfathered has an “indefinite exemption from the
20 percent GHG threshold” but must comply with all other applicable RFS2 requirements.188
Ethanol facilities that have been grandfathered have been “‘deemed compliant’ with the 20
percent GHG threshold,” but must also comply with other applicable RFS requirements.189
For instance, “[e]ven if a facility is exempt from the 20% GHG reduction requirement, in
order to generate RINs, the facility is still required to use feedstocks that meet the definition
of renewable biomass.”190 In other words, in order to generate renewable fuel RINs, the
facility must produce a fuel that otherwise comports with the definition of renewable fuel in
40 C.F.R. § 80.1401.191 Moreover, if the facility wished to generate RINs that count as
advanced fuel, cellulosic fuel, or biomass-based diesel, the fuel would need to meet all of
the regulatory criteria for that type of fuel, including the applicable GHG reduction
requirement.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
19
Renewable Identification Numbers (RINs)
Congress mandated that EPA establish a credit program to account for the generation of
fuels under the RFS program.192 These credits are known as RINs. “Each RIN is a 38
character alphanumeric code assigned to each gallon of renewable fuel that is produced or
imported into the United States.”193 The producer or importer of a batch of renewable fuel
must generate a batch-RIN for each batch of renewable fuel produced or imported in the
contiguous 48 states of the United States.194 An obligated party must possess or purchase
sufficient RINs on an annual basis (or use carryover RINs) to meet its RVO.195 Companies
are prohibited from carrying over more than 20 percent of their annual RVO to the next year
for compliance purposes.196
According to the statute, each RIN that is generated is “valid to show compliance for the 12
months as of the date of generation.”197 Thus a given RIN can be used to show compliance
in the calendar year in which the RIN was generated or the following compliance year.198
If an entity is unable to generate or purchase sufficient credits to meet that year’s
compliance obligation, it may “carry forward a renewable fuel deficit” to the following
year,199 as long as that deficit is fulfilled that next year.200 The statute expressly prohibits
EPA from adopting regulations that allow companies to continue to carry over a deficit
repeatedly from year to year.201 Rather, the obligated party must fulfill the deficit that next
year and must also meet the RVO for that year into which a deficit was carried over.202
Each RIN can be used to demonstrate compliance only once. If a RIN has been used to
demonstrate compliance in one year, that same RIN “cannot be used to demonstrate
compliance in any other year.”203
Trading RINs
Description of Issue / Law
Congress mandated that EPA establish a credit program to account for the generation of
fuels under the RFS program.204 These credits are known as RINs. Under the CAA, EPA was
obligated to establish regulations that would allow companies to trade RINs.205 Under the
statute, each RIN that is generated is “valid to show compliance for the 12 months as of the
date of generation.”206 The statute does not limit the RIN to being valid to show compliance
only for those 12 months. Perhaps capitalizing on that flexibility, the regulations imply that
a RIN may be valid for up to two years from generation. In particular, the regulations state
that “RINs may only be used to demonstrate compliance with the [renewable volume
obligation (RVO)] for the calendar year in which they were generated or the following
calendar year.”207 Companies are, however, prohibited from carrying over more than 20
percent of their annual RVO to the next calendar year for compliance purposes.208
Under the CAA, EPA was obligated to establish regulations that would allow companies to
trade RINs.209 The renewable fuel regulations prohibit certain actions associated with
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
20
trading. For example, a party may not transfer a RIN that is not properly identified as
required under the regulations or transfer a RIN with a K code of 1 without transferring the
“appropriate volume of renewable fuel to the same person on the same day.”210 On the
other hand, the regulations do not, expressly prohibit re-trading a RIN that was purchased
on the open market.211 At the same time, the statute does state that a “person that
generates credits under subparagraph (A) may use the credits, or transfer all or a portion of
the credits to another person for the purpose of [compliance].”212 Subparagraph A of 42
U.S.C. § 7545(o)(5) does not include purchasing credits on the open market as a method
for generating RINs.213 Therefore, because the entity that purchases a RIN did not
“generate” the RIN, whether that RIN can be resold to another party is not expressly
answered by the statute. EPA has not issued any guidance on this issue. However, as noted
above, the regulations do allow companies with excess RINs to carryover up to 20 percent
into the next compliance year.214
EPA Authority / Obligations
A recent lawsuit has indirectly questioned whether EPA has authority to require companies
to trade their excess RINs to help others meet their annual RVOs.215 This issue arises in the
context of the challenge to the 2013 RFS where petitioners have challenged the total
renewable standard that EPA issued216 because the 2013 volume is “1.4 bill[ion] gal[lons]
above the E10 blendwall.”217 EPA justified this volume by rationalizing that the use of at
least 1.4 billion of the 2.6 billion 2012 carryover RINs would “permit” compliance with the
2013 standard.218 However, as petitioners acknowledge, at least three billion of the 2013
RINs can permissibly be carried over by companies for compliance in 2014.219 Nothing in the
CAA precludes companies from banking RINs rather than selling them in the marketplace in
order to help other obligated parties comply with their RVOs. EPA even acknowledged this
fact in the 2013 rule, stating that it had received “indications from some stakeholders that
those who own carryover RINs may opt not to sell them, instead carrying them over to help
assure compliance with their own obligations in a future year.”220 Yet despite not knowing
whether companies will sell or hold their 2013 RINs and not knowing whether 2012
carryover RINs would be available to companies that need them,221 EPA concluded that
“there will be sufficient RINs available to obligated parties to satisfy their … obligations in
2013 despite the challenge represented by the blendwall.”222 This decision may not
ultimately be upheld by the D.C. Circuit, which has previously concluded that EPA cannot
place obligated parties “in an impossible position, or at least a highly punitive one.”223
Treatment of Invalid RINs
Description of Issue / Law
As discussed above, the CAA provides that RINs can be traded among companies.224
However, the statute does not address what EPA must do if a company determines that it
has purchased invalid RINs from another company. EPA regulations address the treatment
of invalid RINs.225 The RFS regulations prohibit the creation or transfer of an invalid RIN.226
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
21
EPA describes the RIN market as operating under a “buyer beware” principle.227 In the
preamble to the regulations, EPA expressly states that “invalid RINs do not satisfy the RVO
regardless of the party’s good faith belief that the RINs were valid at the time they were
acquired.”228 In the preamble to the 2010 final RFS rule, EPA explained further that an
obligated party using invalid RINs to demonstrate compliance would be required to remedy
the compliance gap and could be fined.229 Preserving all of its options, EPA also indicated it
would “normally look first to the generator or seller of the invalid RINs both for payment of
penalty and to procure sufficient valid RINs to offset the invalid RINs.”230
In 2011 and 2012, EPA was confronted with fraudulent RIN transfers that tested the
workability of these provisions. Obligated parties who were otherwise fully compliant with
the RFS requirements unknowingly purchased fraudulent RINs and used them to meet their
renewable volume obligations. EPA issued notices of violations (NOVs) to obligated parties
that used invalid RINs for compliance.231 EPA adopted an interim enforcement policy shortly
after it issued the NOVs.232 The policy included pre-set penalty caps and injunctive relief.
That policy “provided obligated parties who unknowingly used invalid RINs with the
opportunity to resolve their civil violations by replacing invalid RINs with valid RINs and
paying model civil penalties.233 For 2012 and 2013 RINs, EPA allowed obligated parties to
use an affirmative defense (now proposed as an amendment to the RIN regulations) to
demonstrate they acted in compliance with the Act.234
EPA’s response reflected an enforcement view that the obligated party bears the full risk of
acquiring invalid RINs and should exercise due diligence in advance of RIN purchases. EPA
indicated that it “may consider the level of due diligence” in assessing penalties for
violations.235 The interim enforcement policy, as EPA described it, gave the parties the
“opportunity to resolve their civil violations by replacing invalid RINs with valid RINs and
paying modest civil penalties.”236
Companies in receipt of the NOVs viewed the policy as deficient for several reasons. They
did not view as “modest” penalties of approximately $300,000 assessed on many
companies, nor the penalty cap of $700,000.237 In addition to the penalties, companies were
required to replace fraudulent RINs with valid RINs, costing millions of dollars in some
cases, and with no showing that EPA had first sought replacement from fraudulent
generators. Finally, from their perspective, the penalties did not appropriately reflect the
fact that no reasonable due diligence would have exposed the fraud in advance of
purchasing the RINs; EPA established the fraud through search warrants and inspection
authorities unavailable to private parties.
EPA Authority / Obligations
EPA has the authority to modify the enforcement risk associated with purchasing RINs in
several ways. For example, EPA could alter its interpretation of what constitutes a violation,
create an affirmative defense, modify penalties for violations based on different criteria, or
adopt enforcement policies that do not undermine the market for RINs.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
22
In 2013, EPA proposed a solution: the establishment of a voluntary quality-assurance
program (QAP) to have third-parties certify RINs that are registered with EPA.238 Under this
proposed rule, three types of RINs would be available in the RFS program:
1. RINs verified by a third-party auditor, which the auditor would be responsible for
replacing in the event they were invalidly generated (A-RINs);
2. RINs verified by a third-party auditor, which the obligated party would remain liable
for replacing (B-RINs); and
3. Unverified RINs (retention of the status quo/buyer beware), which the obligated
party would remain liable for replacing.239
RINs that are verified under one of the QAP options (either A-RINs or B-RINs) would be
marked as such in the EPA-Moderated Transaction System (EMTS).240 However, obligated
parties would not be required to purchase verified RINs, and RIN generators would not be
obligated to have their RINs verified under an approved QAP.241
Affirmative Defenses Under the Proposed QAP. Under the proposed QAP, unverified
RINs would not qualify for an affirmative defense, regardless of the purchaser’s good faith
or independent due diligence prior to purchase.242 In contrast, an affirmative defense would
be available for QAP A-RINs and B-RINs243 against civil penalties associated with the use or
transfer of invalidly generated RINs.244 A-RINs and B-RINs differ based on whether invalidly
generated RINs can be used by the obligated party to demonstrate compliance even if they
are found to be fraudulent later and on who would be responsible for replacing those
invalidly generated RINs.245 Further information regarding the differences between A-RINs
and B-RINs, as well as the criteria for establishing an affirmative defense are summarized in
Attachment 7.
Enforcement Discretion. EPA has broad enforcement discretion. In the recent fraudulent
RIN scenario, EPA could have taken the approach reserved in the 2010 RFS2 rule and
charged the fraudulent generator with procuring valid replacement RINs. For the near
future, EPA has indicated that it does not intend to initiate enforcement actions against
entities that transfer or use invalid 2013 A-RINs or B-RINs that were verified prior to the
publication of the final QAP rule, as long as certain conditions are met and remedial actions
are taken in a timely manner.246 This approach would have an effect similar to the proposed
QAP, but implemented through enforcement discretion policies.
Allowing the Use of Invalid RINs for Compliance. As an alternative to adopting the
QAP, some have suggested that EPA could “[e]stablish a system where all certified RINs are
valid for RFS compliance regardless of subsequent determination that they are fraudulent or
otherwise deficient.”247 Some suggest this as a means to place responsibility on EPA to
oversee and regulate RIN producers. EPA could take other proactive measures to reduce the
chances of fraud. For example, EPA could immediately share information with the RIN
marketplace regarding the possible presence of fraudulent RINs. EPA could also consider
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
23
requiring that the producer of RINs validate its production and provide oversight of such
operations, including inspections of RIN producers.
Redefine What Constitutes a Violation. EPA could propose regulatory revisions to avoid
what EPA views as a necessary interpretive consequence that innocent purchasers of
fraudulent RINs are charged with violating the CAA where even through due diligence they
could not have discovered the fraud. In the fraudulent RIN enforcement action, EPA
interpreted two regulations: 40 C.F.R. § 80.1460(c)(1) and § 80.1431(b)(2). Section
80.1460(c)(1) makes it a violation to fail to acquire sufficient RINs or to use invalid RINs to
meet an RVO. Section 80.1431(b)(2) states that “[i]nvalid RINs cannot be used to achieve
compliance with the Renewable Volume Obligations of an obligated party or exporter,
regardless of the party’s good faith belief that the RINs were valid at the time they were
acquired.” EPA could propose to consider parties’ due diligence in defining whether a
fraudulent transaction constitutes a violation. This would provide greater certainty than the
present approach, under which EPA “may” consider the level of diligence when assessing
penalties.248
RIN Pricing
Description of Issue / Law
RIN prices increased “from approximately 5¢/RIN in early January 2013 to approximately
70¢/RIN by March 2013”249 and these prices “continued to rise after the [proposed 2013
RFS] comment period … closed.”250 According to EPA, “the primary driver for these price
increases” was “the approaching E10 blendwall and the related anticipation of future
scarcity of RINs.”251 The RIN price fluctuations could also be attributable to other factors
beyond the “primary driver” cited by EPA.
Congress did not prohibit EPA from influencing RIN prices, but it did explain that EPAct was
intended to allow “the Nation’s refiners to buy credits from refiners that use ethanol in other
States to meet the requirement, ensuring additional refiner flexibility to use ethanol where it
is most efficient and economical.”252
EPA Authority / Obligations
EPA has generally rejected suggestions made during the public notice and comment period
advocating that EPA establish a cap or ceiling on the price of RINs to avoid overly high RIN
prices from negatively impacting the program.253 EPA explained that “[t]he RIN concept was
developed as a market based system where RIN price has the potential to drive desirable
outcome through the economic incentives associated with supply and demand. That is, a
higher RIN price would foster development of the renewable product that is associated with
that RIN.”254 Despite receiving numerous objections to the mandate to submit pricing
information, EPA retained the requirement to submit RIN price data, concluding that “price
information has great programmatic value because it will help [EPA] anticipate and
appropriately react to market disruptions and other compliance challenges, asses and
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
24
develop responses to potential waivers, and assist in setting future renewable standards.”255
EPA left the door open to revisit whether the RIN market is working: “Should we determine
that the RIN market is not operating as intended, driving up prices for obligated parties and
fuel prices for consumers, we will consider revisiting [the issue of modifying who are
obligated parties under the RFS] in future regulatory efforts.”256
EPA could be asked to reconsider this issue as part of the 2013 RFS litigation because the
D.C. Circuit has previously held that it is arbitrary and capricious for EPA “to impose costly
obligations on regulated entities without regard to the Clean Air Act’s purpose.”257
Petitioners have argued in their briefs that mandating that obligated parties purchase
banked 2012 RINs to achieve compliance in 2013 does not further any of the objectives of
the RFS program, such as reducing GHG emissions or improving energy security.258 One
petitioner argues that high RIN prices can incentivize integrated companies to bank their
extra RINs to hedge against regulatory uncertainty and volatile prices259 (as opposed to
fostering development of more renewable fuels or meeting congressional objectives).
Another petitioner characterizes EPA’s recommendation that companies purchase 2012
carryover RINs to achieve compliance in 2013 as “a massive transfer of wealth to those
holding RINs from those required by EPA to purchase them on the secondary market”—a
result that does not displace fossil fuel use in 2013 and that “is not a goal of the statute.”260
In a decision that supports this position, the U.S. Supreme Court rejected agencies
interpretations of statutes where “none of Congress’ enumerated purposes would be
served.”261
Historically, EPA has not tried to directly influence the price of RINs, but EPA has proposed
amendments to the regulations that would likely impact RIN prices. As explained above, EPA
has proposed a QAP to address concerns regarding invalid RINs. One of the anticipated side
effects of the QAP is that by verifying the validity of the RINs, small producers will more
readily be able to sell RINs.262 EPA reasons that if the QAP is adopted as proposed, the
prices for RINs charged by smaller producers may rise and align with the RIN prices offered
by larger producers, who have historically been able to charge higher prices than small
producers, because RINs from large producers are generally viewed as having a lower risk
of being invalid.263 Because of their differences, A-RINs and B-RINs would likely have
different prices in the marketplace.264 However, it is unclear what impact the adoption of a
QAP would have on RIN prices overall.
RIN Equivalence Values
Description of Issue / Law
EPAct established that “1 gallon of cellulosic biomass ethanol or waste derived ethanol shall
be considered to be the equivalent of 2.5 gallons of renewable fuel.”265 However, EPAct did
“not stipulate similar values for other renewable fuels.”266 Based on this provision, as well as
other statements in EPAct, EPA interpreted CAA § 211(o) as providing EPA discretion to
establish “Equivalence Values” “representing the number of gallons that can be claimed for
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
25
compliance purposes for every physical gallon of renewable fuel.”267 In particular, EPA noted
that its authority to establish Equivalence Values additionally arose from the requirement in
EPAct for EPA “to establish an ‘appropriate amount of credits’ for biodiesel, and to provide
for ‘an appropriate amount of credit’ for using more renewable fuels than are required to
meet your obligation.”268 Furthermore, EPAct required EPA “to determine the ‘renewable fuel
portion’ of a blending component derived from a renewable fuel.”269
Thus, when EPA first established Equivalence Values in 2007, EPA required “that the
‘Equivalence Values’ for renewable fuels other than those for which specific values are set
forth in the Act be based on their energy content in comparison with the energy content of
ethanol, adjusted as necessary for their renewable content.”270 As a result, EPA adopted “an
Equivalence Value for corn ethanol of 1.0, for biobutanol of 1.3, for biodiesel (mono alkyl
ester) of 1.5, and for non-ester renewable diesel of 1.7.”271
However, with the passage of EISA, Congress “eliminated the 2.5-to-1 credit for cellulosic
biomass ethanol and waste-derived ethanol and replaced this provision with large mandated
volumes of cellulosic biofuel and advanced biofuels.”272 During the rulemaking process, EPA
considered eliminating Equivalence Values altogether, but EPA ultimately retained the use of
energy-based Equivalence Values (the same basis as had been used in RFS1), in part
because “a large number of companies [had] already made investments based on the
decisions made for RFS1, and using energy-based Equivalence Values [in RFS2 would]
maintain consistency with RFS1 and ease the transition into RFS2.”273 EPA further explained
that “the use of Equivalence Values based on energy content was an appropriate measure of
the extent to which a renewable fuel would replace or reduce the quantity of petroleum or
other fossil fuel present in a fuel mixture.”274 EPA also believed that an energy-based
standard was appropriate because “it provides a level playing field for the development of
different fuels that can displace the use of fossil fuels, and that this approach therefore
furthers the energy independence goals of EISA.”275
EPA Authority / Obligations
Overall, EPA has concluded “that Congress did not intend to restrict EPA discretion in
implementing the program to utilizing a straight volume measurement of gallons.”276
Therefore, EPA adopted the provisions in 40 C.F.R. § 80.1415(b) to assign Equivalence
Values for certain renewable fuels.277
Producers and importers of other renewable fuels that have not been assigned an
Equivalence Value must submit an application to EPA to be assigned an Equivalence
Value.278 The Equivalence Value for any such fuel is then determined based on the
calculation provided by EPA in 40 C.F.R. § 80.1415(c).279 Refiners and importers can also
use this calculation (and corresponding laboratory documentation) as the basis for
requesting a different Equivalence Value other than the one that has been assigned by EPA
in 40 C.F.R. § 80.1415(b).280
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
26
Redefining Obligated Parties or Reassigning
Obligations
Description of Issue / Law
The CAA requires EPA to establish regulations implementing the RFS through the
development of “compliance provisions applicable to refineries, blenders, distributors, and
importers, as appropriate” to ensure that the RFS requirements are met.281 The phrase “as
appropriate,” as used in this provision, indicates Congress’s intent to allow EPA to use its
discretion when assigning responsibilities among the various parties for the purpose of
ensuring that the requirements of the RFS program are met.
Under the regulations adopted by EPA, an “obligated party” is defined as “any refiner that
produces gasoline or diesel fuel within the 48 contiguous states or Hawaii, or any importer
that imports gasoline or diesel fuel into the 48 contiguous states or Hawaii during a
compliance period.”282 “A party that simply blends renewable fuel into gasoline or diesel
fuel, as defined in § 80.1407(c) or (e), is not an obligated party.”283
A few parties are exempted from RIN generation regulatory requirements. For example,
renewable fuel producers that produce fewer than 10,000 gallons a year of renewable fuel,
importers that import fewer than 10,000 gallons a year of renewable fuel, and new
renewable fuel producers that produce fewer than 125,000 gallons of renewable fuel a year
are not required to generate and assign RINs to batches of renewable fuel to satisfy RVO
requirements.284 Additionally, renewable fuel blenders who handle and blend fewer than
125,000 gallons of renewable fuel per year, and who do not have RVOs, are permitted to
delegate their RIN-related responsibilities to the party directly upstream of them who
supplied the renewable fuel for blending.285 Small-volume blenders also have the option of
generating RINs themselves, but then they become subject to RFS standards and reporting
requirements.286
The question of whether obligations may be shifted to other parties arises in two notable
situations. First, some critics of the current structure, namely merchant refiners and refiners
who produce more ethanol than they have the capacity to blend, are troubled by the
definition of “obligated parties” that EPA has adopted, arguing that it selectively burdens
their particular business structures while benefiting other entities. This particular issue
raises the question of whether EPA has the authority to amend the definition of “obligated
party” to ease (real or perceived) disproportionate burdens placed on parties by the current
definition or to address future inequities that may arise.
EPA Authority / Obligations
There is no statutory barrier to EPA modifying the regulatory term “obligated parties” at a
later date. In addition, under governing case law, an administrative agency “must be given
ample latitude” to “‘adapt [its] rules and policies to the demands of changing
circumstances,’” but the agency must provide a rational explanation for doing so.287 Thus,
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
27
so long as EPA’s decision is rational, as demonstrated by an administrative record change to
the regulatory term “obligated parties,” it is at least theoretically possible.
EPA has considered and rejected modifying this term in the past, and documented in the
final EISA implementing rules, the lack of consensus among affected parties for changing
the definition. Thus, although EPA has the interpretive authority to change the definition,
EPA would need a rational basis to overcome the apparent resistance to the change.
Transfer of Obligations under the Proposed QAP. Neither the CAA nor EPA regulations
provide a mechanism that expressly allows obligated parties to shift their responsibilities to
a third party. Similarly, neither the statute nor the regulations imposes a barrier to such
responsibility shifting. The regulations do, however, apportion responsibility for compliance
with the RVO, ensuring that responsible parties meet the requirements of the RFS
program.288
In the preamble to the 2010 RFS2 rule, EPA stated that it “will continue to evaluate the
functionality of the RIN market. Should we determine that the RIN market is not operating
as intended, driving up prices for obligated parties and fuel prices for consumers, we will
consider revisiting this provision in future regulatory efforts.”289 Although EPA has expressed
its openness to amending the responsibilities placed on obligated parties in the event that
the RIN market operates ineffectively, the CAA also does not bind EPA or create a
mechanism for shifting obligated party responsibilities to third parties.
As discussed above, EPA has proposed new regulations that would allow an obligated party
to shift its responsibility to replace invalid RINs to the third-party that generated the
fraudulent RINs or, in some cases, a third-party auditor if the RINs are later found to be
fraudulent.290 Regardless of whether an obligated party purchases unverified RINs, A-RINs,
or B-RINs, under the proposed rule, the entity that fraudulently generated those RINs would
be the initial party responsible for replacing the RINs.291 If the generator of those invalid
RINs does not replace them, then under the proposed rule, responsibility for replacing the
RINs would either shift to the obligated party or the third-party auditor, depending on the
type of RINs that were found to be invalid.292 Thus, if the proposed QAP rule is finalized,
obligated parties could shift the responsibility to replace invalid RINs to another party (e.g.,
the third-party auditor).
Technology Pathways
Description of Issue / Law
As of July 1, 2010, under the RFS2 regulations, fuel producers (whose facilities are not
grandfathered) can generate RINs only through already approved pathways identified in
Table 1 to 40 C.F.R. § 80.1426 or separately approved by EPA through a petition process.293
A “pathway” is constituted by the fuel type, feedstock, and fuel production process.294 EPA
analyzes these three elements to determine the lifecycle GHG emissions of the pathway as
compared with the lifecycle GHG emissions of the gasoline or diesel fuel being replaced. The
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
28
pathway must meet a minimum GHG emissions reduction under EISA: 20 percent reduction
for renewable fuel,295 50 percent reduction for biomass-based diesel or advanced biofuel,
and 60 percent reduction for cellulosic biofuel.296 EISA requires that the “lifecycle GHG
emissions” calculation account for “direct emissions and significant indirect emissions such
as significant emissions from land use changes.”297 EPA regulations establish how lifecycle
emissions are calculated.298
New pathways are generally subject to notice and comment rulemaking.299 Based on EPA’s
GHG lifecycle emissions determination, EPA determines the applicable D code for the new
pathway.300 Whenever EPA approves a new pathway, it updates the summary of approved
pathways in Table 1 of 40 C.F.R. § 80.1426(f) and relies on prior approvals when
considering subsequent petitions.301
EPA Authority / Obligations
RFS proponents encourage EPA approval of a broader range of technology pathways to
increase the volume of renewables and especially advanced biofuels in the market.
Examples of pathways EPA has approved include camelina oil302 and the clarification issued
in March 2013 that the definition of “non-ester renewable diesel” explicitly includes jet
fuel.303 This clarification offers additional market certainty and opportunity for renewable
diesel producers.
Approval of pathways gives EPA significant discretion to expand the number of qualifying
fuels and thereby the volume of renewable fuel under the RFS. The lifecycle emissions
analysis portion of the pathway analysis may give EPA the best opportunity to approve more
RFS fuel pathways. The statute itself gives EPA some flexibility in its terminology, requiring
EPA to consider “significant” indirect emissions in its analysis.304 EPA has developed through
regulation a methodology for assessing direct and indirect emissions. Amendments and
interpretations of EPA’s own regulations, if legally and factually supported, are possible.
During the rulemaking development of the lifecycle GHG analysis, EPA changed its lifecycle
methodology based on feedback from stakeholders.305 Those changes made a significant
difference for some of the emissions estimates and resulted in more fuel pathways
qualifying for RFS status.306 The lifecycle GHG emission calculation incorporates data from a
broad range of sources, including “models that take into account energy and emissions
inputs for fuel and feedstock production, distribution, and use, as well as economic models
that predict changes in agricultural markets.”307 With its reliance on models, varied inputs,
emerging scientific analysis, and market data, the lifecycle GHG emission analysis is
dynamic and dependent on the judgment of the analyst. In the RFS2 final rule, EPA left
itself a wide berth for accommodating developments over time: “lifecycle GHG assessment
of biofuels is an evolving discipline and [we] will continue to revisit our lifecycle analyses in
the future as new information becomes available.”308
The potential for EPA to effectuate change in the RFS program through technology pathway
approval, or through modifications to the methodology for lifecycle analysis, can be better
appreciated when contrasted with the far more limited discretion EPA has to adjust the
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
29
required GHG emission reductions for the fuel categories.309 As previously discussed, EPA
can make only minor adjustments to the statutory values,310 and the advanced biofuel,
biomass-based diesel, and cellulosic biofuel thresholds may be adjusted only if EPA
determines that the threshold “is not commercially feasible for fuels made using a variety of
feedstocks, technologies, and processes to meet the applicable reduction.”311
In the RFS2 rule, EPA “identified a range of fuel pathways that are capable of complying
with the GHG performance thresholds for each of these separate fuel standards. Thus, we
have determined that the GHG thresholds in Table II.B.2–1 should not be adjusted.”312
Having concluded in 2010 that enough feedstocks, technologies, and processes made the
existing GHG reduction thresholds “commercially feasible,” it could be difficult for EPA to
reverse that conclusion in later years, particularly if the number of technology pathways
increases. In addition, now that EPA has promulgated the method of determining lifecycle
greenhouse gas emissions, EPA can adjust the GHG reduction levels for particular pathways
only if the administrator “determines that there has been a significant change in the analytic
methodology used for determining the lifecycle GHG emissions.”313
Fuel Certification
Description of Issue / Law
Independently of, and prior to establishment of the RFS program,314 Congress directed the
administrator to require fuel manufacturers to register any fuel before it may be sold,
offered for sale, or introduced into commerce.315 The goal of this registration requirement is
to assess “the impact on public health and welfare from exposure to automotive
emissions.”316
The CAA also makes it unlawful for the manufacturer to introduce any new fuel into
commerce if that fuel or its emission products will cause or contribute to a failure of any
emission-control device or system.317 Thus, companies must apply for a waiver from EPA to
introduce a new fuel into commerce that is not substantially similar to those fuels that were
in use when the CAA and CAA 1990 Amendments were adopted, so that EPA has assurance
that the fuel is safe to use in engines and vehicles on the roadways.318 EPA’s analysis
focuses on four major areas: (1) exhaust emissions, both immediate and long-term
(durability); (2) evaporative emissions, both immediate and long-term; (3) materials
compatibility; and (4) driveability and operability.”319 EPA must grant or deny applications
for a waiver within 270 days of receipt by EPA.320
To carry out these directives, EPA adopted the regulations in 40 C.F.R. Part 79, Subpart B,
which provides the procedures for registering new fuels. Under these regulations, a fuel
manufacturer must submit a registration letter and any required application.321 The
application must provide all of the information specified in 40 C.F.R. § 79.11.322
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
30
EPA Authority / Obligations
When a producer wants to introduce a new fuel into commerce, it needs to first obtain a
waiver from EPA.323 There is some delay inherent in the agency review of a waiver
application and public participation in the process can cause significant delays, as
demonstrated by the approval process of E15.324 To approve E15, EPA needed to wait for
test results from DOE before it could conduct its analysis.325 DOE began emissions durability
testing in 2008, but it was not completed until September 2010.326 The application for a
waiver was submitted on March 6, 2009.327 The waiver process was more significantly
delayed by extensions to the public comment period and EPA’s handling of divided public
opinion of the application.328 In addition, engine manufacturers and others raised concerns
about the impacts of E15 on motor vehicle engines and fuel efficiency, and its use voiding
manufacturers’ warranties; thus, EPA proceeded more cautiously than would be the case for
other fuels.329 The standard 30-day public comment period was also extended to 90 days.330
After nearly one year and eight months, EPA issued the waiver for E15,331 within two
months of DOE concluding its study.332
The high degree of public disagreement and liability concerns over this particular fuel
resulted in the fuel approval being delayed. The potential introduction of E15 into the
marketplace drew forceful advocacy for and against approval among industry sectors and
triggered congressional involvement. As a practical matter, although the CAA requires EPA
to approve or deny a waiver in 270 days, pressures beyond EPA’s control can result in long
delays for fuel approvals.
Looking ahead, the fastest path for certifications and approvals from EPA might be through
production of drop-in fuels. These fuels, which are currently in the research and
development phase with pilot plants and demonstration plants under construction, are
intended to “meet existing diesel, gasoline, and jet fuel quality specifications and be ready
to ‘drop-in’ to existing infrastructure.”333 Because these fuels are substantially similar to
diesel, jet fuel, and gasoline, they are expected to have minimal compatibility issues with
existing infrastructure and engines—which were problems during the certification process
for lower-level ethanol and biodiesel blends and still pose challenges at higher blending
rations.334
Liability Issues
Description of Issue / Law
Although RFS-related liability concerns can arise in an almost endless range of scenarios, for
the RFS program, two general categories of liability are of the greatest concern: (1) Clean
Air Act compliance, and (2) third-party claims regarding the product.335
Regarding CAA compliance, the CAA imposes very prescriptive requirements and strict
liability on regulated parties. A party failing to meet the requirements is responsible for
having violated the Act and for potentially severe penalties. Violations may be managed
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
31
administratively by EPA or as civil or criminal violations by the Department of Justice.336
Certain claims of statutory or regulatory violations may also be brought by third parties
under the citizen suit provisions.337
Unlike CAA compliance liability, which is expressly defined and limited by the CAA or
implementing regulations, product liability arises under state or local law. Product claims
may be brought against any party in the renewable fuel supply chain from production
through retail sale, including persons and entities not governed by the CAA.
The CAA does not provide a general shield from either compliance or product liability for
participants in the RFS program.338 EPA has administrative authority to address some
liability concerns but full protection from product liability must be accomplished through
legislation.
EPA Authority / Obligations
Liability for Fraudulent RINs. The 2011/2012 fraudulent RIN sales demonstrate the type
of potential liability faced by RFS participants, as previously discussed.
EPA used enforcement discretion to craft an ad hoc response that included punitive
measures and defensive options for parties to somewhat mitigate their damages. In that
instance, EPA was responding to the sale of fraudulent RINs to innocent purchasers. In
another case in the future, EPA will need to respond to some other exigency with similarly
significant compliance consequences for RFS program participants. EPA clearly has authority
to fashion ad hoc enforcement-based responses, but such measures do not assure
prospective liability avoidance for RIN market participants and obligated parties. EPA has a
fair amount of discretion to provide greater prospective compliance planning through
regulations and enforcement discretion. EPA’s proposed QAP and affirmative defense, if
finalized and assuming they withstand any legal challenges, would mitigate the damages
associated with future instances of noncompliance. EPA has authority to develop regulatory
approaches that would go further to limit compliance liability.
EPA could also use its enforcement authority more prospectively, with formal enforcement
notices to define the circumstances under which EPA will enforce its regulations, deemphasize the importance of certain types of actions, describe how EPA enforcement
authorities will interpret any inconsistency, or signal to regulated entities certain situations
that could trigger liability. EPA may also, as part of its overall enforcement strategy, decide
to allocate resources to pursue vigorously certain types of violations.
Product liability. The CAA does not provide liability protections for parties that produce
fuels to meet the federal RFS mandate.339 Unless Congress clearly shields a party from
liability in the federal statute, parties must defend against any claims filed in any court
alleging any claim.
Ethanol has been the subject of at least two major class action product liability cases,
seeking to hold refiners liable for damage to boat engines from E10. One case filed in
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
32
California was dismissed on summary judgment. Because California law specifically
mandated the use of ethanol, the product liability claims were preempted by state statute
and dismissed.340 The other case was brought in Florida, where the law mandates the use of
renewable fuel rather than a specific product, making preemption of the claims less likely.
In that case, the court denied class certification and the parties settled the lawsuit.341
EPA’s approval of E15342 only for later-model light-duty vehicles, has heightened liability
concerns of those in the fuel supply chain and others who manufacture consumer products
that could be damaged by E15. These manufacturers and suppliers assert that E15 can
damage earlier model car engines; non-automotive engines in boats, planes, and small
engines; components of the fuel delivery system; and other systems. Other possible liability
could arise from the potential negative downstream impacts of these and other renewable
fuels.
The recent history of the fuel oxygenate methyl tertiary butyl ether (MTBE) demonstrates
the extent of potential liability for fuels, even where federal law mandates that an EPAapproved additive be used in the fuel supply. Prior to 2005, the CAA mandated blending of
an “oxygenate,” which in theory could be met with MTBE, ethanol, or any other fuel additive
that could achieve the 2 percent oxygen by weight standard, provided that the oxygenate
was approved by EPA. EPA published a list of oxygenates that were approved for use; the
list included MTBE and other fuel additives. At the time, only MTBE was available in supplies
large enough to meet the mandate.343 Gasoline containing MTBE leaked out of underground
storage tanks, and some of it reached groundwater. More than 150 lawsuits were filed
against refiners, retailers, and others in the distribution chain, advancing theories of
defective product and failure to warn about environmental characteristics, alleging water
contamination, and potential health effects from MTBE. The cases generally have resulted in
large verdicts or settlements for plaintiffs, or otherwise required parties to mount expensive
defenses to the claims.344
Ethanol and other renewable fuels now dominating the market appear to share the same
potential liabilities faced by MTBE, as well as liability associated with E15 in particular. As in
the MTBE experience, parties named in lawsuits would assert some defenses to these
claims. For example, they would argue that the federal government comprehensively
regulates the field of renewable fuels and mandates their use, and the CAA preempts any
claims brought under state law that conflict with the federal mandate to blend
renewables.345 EPA, with the cooperation of the Department of Justice, could support a
preemption argument by joining third-party lawsuits and making those assertions on behalf
of the federal government. The federal government has so far declined to participate in
MTBE litigation and the federal preemption defense has never been successful in an MTBE
case. Only legislation could fully address liability concerns; Congress has considered several
proposals to provide liability protection for the use of E15.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
33
Conclusion
The RFS program implements Congress’s decision to decrease the nation’s reliance on
foreign fuels and incentivize the development of more advanced renewable transportation
fuels. EPA has the significant responsibility of adjusting the RFS regulatory program as
required by events well beyond its control.
EPA has CAA and administrative legal authority to address many or most issues with the
current implementation of the RFS and employs the full range of interpretive tools, including
formal notice, comment rulemaking, and enforcement authority. Some problems with the
RFS are simply beyond EPA’s authority to rectify and would require Congress to act.
As the RFS program evolves and the statutory provisions and EPA regulatory decisions are
challenged in court, EPA’s interpretive authority is increasingly dependent on precedents
being established in rules and judicial review of those rules. Major RFS topics, including
some of those covered in this paper, are currently under review by courts and by EPA in
pending rulemakings. The analysis presented in this paper therefore reflects the current
status of the law and the RFS program and will necessitate appropriate updating to reflect
any future modifications.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
34
Attachments
Attachment 1: Record of Annual Volumes346
Table 1
RENEWABLE FUEL STANDARD
Year
Statutory Volume in
Volume Set by EPA in Billions of
Billions of Gallons
Gallons (ethanol equivalent)
% Reduction
2006
4.0
4.0
0%
2007
4.7
4.7
0%
2008
9.0
9.0
0%
2009
11.1
11.1
0%
2010
12.95
12.95
0%
2011
13.95
13.95
0%
2012
15.2
15.2
0%
2013
16.55
16.55
0%
2014
18.15
15.21 (proposed)
16%
Statutory Volume
Volume Set by EPA in Millions of
% Reduction
in Billions of Gallons
Gallons (in ethanol equivalent)
0.1 (100 MM gal)
6.5
Table 2
CELLULOSIC BIOFUEL STANDARD
Year
2010
94%
347
2011
0.25 (250 MM gal)
6.0
2012
0.5 (500 MM gal)
10.45
98%
98%
[vacated and reduced to 0 gal by D.C.
Circuit]
2013
1.0
6
99%
2014
1.75
17 (proposed)
99%
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
35
Table 3
ADVANCED BIOFUEL STANDARD
Year
Statutory Volume
Volume Set by EPA in Millions of
in Billions of Gallons
Gallons (in ethanol equivalent)
% Reduction
2009
0.6
0.6
0%
2010
0.95
0.95
0%
2011
1.35
1.35
0%
2012
2.0
2.0
0%
2013
2.75
2.75
0%
2014
3.75
2.20 (proposed)
41%
Table 4
BIOMASS-BASED DIESEL STANDARD
Year
2009
Statutory Volume
Volume Set by EPA in Millions of
in Billions of Gallons
Gallons (actual volume)
0.50
1.15
% Reduction
0%
348
2010
0.65
2011
0.8
0.8
0%
2012
1.0
1.0
0%
2013
≥1.0
1.28
+28%
2014
≥1.0
1.28 (proposed)
+28%
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
36
Attachment 2: Record of Volumes, Modifications, and Legal Challenges
2014 Renewable Fuel Standard
RULE
ACTION/
BACKGROUND
VOLUME STANDARDS
STATUTORY
VOLUMES IN
CAA1
Proposed Rule:
EPA proposed
78 Fed. Reg.
adjusting the statutory
71,732 (Nov.
volumes.
Cellulosic
1.75
EPA BASIS FOR DECISION
COURT
REVIEW?
EPA proposed using a
N/A
REGULATORY
VOLUMES1
% CHANGE
0.017
-99%
combination of the cellulosic
(proposed)
(proposed)
and general waiver
29, 2013).
authorities under CAA
Aug. 2013: API and
Notice of
AFPM submitted a joint
Petitions for
petition requesting a
Waiver of the
partial waiver of the
RFS 2014
national volume of
volumes (filed
total renewable fuel
with EPA on
and advanced biofuel.
Aug. 13, 2013).
Individual petitions
§ 211(o)(7)(D)(i) and §
Biomassbased Diesel
Advanced
Biofuel
>1.03
3.75
1.283
+28%
(proposed)
(proposed)
2.20
-41%
(proposed)
(proposed)
15.21
-16%
(proposed)
(proposed)
211(o)(7)(A) to address
supply concerns associated
with the ethanol blendwall.
were filed by Delek,
PBF Holding Company,
HollyFrontier, Tesoro,
ExxonMobil, Marathon,
Phillips 66, Lion Oil,
Renewable
Renewable Fuel
Fuel
18.15
Association, and
National Cooperative
Refinery Association.2
1
In billions of gallons, ethanol equivalent.
2
Copies of these petitions for waiver are available in Docket EPA–HQ–OAR–2013–0747.
3
Volume listed is actual volume, not ethanol-equivalent.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
37
2013 Renewable Fuel Standard
Proposed Rule: 78
Fed. Reg. 9,282
(Feb. 7, 2013).
EPA finalized adjustments to the
statutory volumes.
Final Rule: 78 Fed.
Reg. 49,794 (Aug.
15, 2013).
Waiver of RFS
Notice of Decision
Regarding Requests
for a Waiver of the
2013 RFS
77 Fed. Reg. 70,752
(Nov. 27, 2012).
Denial of Petitions
for Reconsideration
of Regulation of
Fuels and Fuel
Additives, 2013
Biomass-Based
Diesel Volume: 78
Fed. Reg. 49,411
(Aug. 14, 2013).
Aug. 2012: Governors of several
States (AR, NC, NM, GA, TX, VA,
MD, DE, UT, and WY) requested
volume waivers. For example,
Arkansas requested a temporary
waiver of the ethanol quotas in the
RFP. North Carolina requested a
waiver of the total renewable fuel
volume.
Oct. 2013: API and AFPM filed
petitions for reconsideration of the
cellulosic biofuel standard for 2013.
% CHANGE
ACTION/BACKGROUND
REGULATORY
VOL.1
RULE
STATUTORY
VOL. IN CAA1
VOLUME STANDARDS
Cellulosic
1.0
0.006
-99%
Biomassbased
Diesel
>1.03
1.283
+28%
Advanced
Biofuel
2.75
2.75
0%
Jan. 2014: EPA granted the
petitions for reconsideration of the
cellulosic biofuel standard based on
new information from KiOR
regarding reduced anticipated
production.
Nov. 2012: Petitions for
Reconsideration were individually
filed by API and AFPM requesting
reconsideration of the biomassbased diesel volume requirement of
1.28 billion gallons for 2013
because of the 2012 drought,
fraudulent RINs, and adequacy of
EPA’s assessment of impacts.
Renewable
Fuel
16.55
16.55
0%
EPA BASIS FOR DECISION
The final cellulosic biofuel
volume was reduced from the
statutory volume based on EPA’s
assessment of the availability
cellulosic biofuel.
11-27-12: EPA denied the
requests made by States to
waive the total renewable fuel
volume requirement for 20122013 because the evidence and
information did not support a
determination that the
implementation during that
period would severely harm the
economy of a state, region, or
the US.
EPA set the biomass-based
diesel over 1.0 billion gallons
because the statute specifies
that the 2013 volume cannot be
less than the applicable volume
for 2012, which was 1.0 billion
gallons.
8-14-13: EPA denied the
petitions for reconsideration filed
by API and AFPM, because they
each failed to meet the criteria
for reconsideration.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
38
COURT
REVIEW?
Yes.
Monroe
Energy LLC
v. EPA, No.
13-1265
(D.C. Cir.,
filed Oct.
4, 2013).
2012 Renewable Fuel Standard
RULE
ACTION/
BACKGROUND
VOLUME STANDARDS
EPA BASIS FOR
DECISION
COURT REVIEW?
EPA lowered
Yes. API v. EPA,
cellulosic volume
No. 12-1139, 706
from the statutory
F.3d 474 (D.C.
standard based on
Cir. Jan. 25,
Final Rule: 77 Fed.
research of potential
2013) (vacating
Reg. 1,320 (Jan. 9,
production sources
the 2012
by company and
cellulosic biofuel
facility, funding,
standards and
Final Rule. Biomass-
technology, and
upholding the
Based Diesel
progress toward
decision to not
construction and
modify the
production goals.
advanced biofuel
STATUTORY
VOL. IN
CAA1
Proposed Rule: 76
EPA finalized
Fed. Reg. 38,844
adjustments to the
Cellulosic
(July 1, 2011).
statutory volumes.
Biofuel
2012).
Volume: 77 Fed.
Reg. 59,458 (Sept.
Biomassbased Diesel
Advanced
Biofuel
0.5
1.03
2.0
REGULATORY
VOL.1
0.01045
1.03
2.0
% CHANGE
-98%
0%
0%
27, 2012).
volume).
Renewable
Fuel
15.2
15.2
0%
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
39
2011 Renewable Fuel Standard
RULE
ACTION/
BACKGROUND
VOLUME STANDARDS
STATUTORY
VOL. IN
CAA1
Proposed Rule: 75
EPA finalized
Fed. Reg. 42,238
adjustments to the
Cellulosic
(July 20, 2010).
statutory volumes.
Biofuel
REGULATORY
VOL.1
EPA BASIS FOR DECISION
% CHANGE
EPA lowered the cellulosic
0.25
0.006
-98%
volume from the statutory
volume based on EIA
projections and assessments
Final Rule: 75 Fed.
Reg. 76,790 (Dec. 9,
2010).
COURT
REVIEW?
of production capability from
Biomassbased Diesel
0.802
0.802
0%
industry.
This final 2011 cellulosic
biofuel standard has been
Advanced
Biofuel
proposed for rescission. EPA
1.35
1.35
0%
proposed rescission because
the 2011 standard used the
same methodology that was
used to set the 2012
cellulosic standards, which
was since vacated by the
court. The practical
Renewable
Fuel
implications of this
13.95
13.95
0%
rescission, if finalized, are
unclear. (The proposed
rescission was included in
the 2014 RFS, which was not
finalized as of February 3,
2014.)
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
40
---
2010 Renewable Fuel Standard
RULE
ACTION/
BACKGROUND
VOLUME STANDARDS
STATUTORY
VOL. IN CAA1
Final Rule: 75 Fed.
EPA finalized
Reg. 14,670 (Mar.
adjustments to the
Cellulosic
26, 2010).
statutory volumes.
Biofuel
REGULATORY
VOL.1
EPA BASIS FOR
DECISION
% CHANGE
EPA adjusted the
0.1
0.0065
-94%
cellulosic volume from
the statutory volume
based on lack of
production capacity.
Biomass-based
Diesel
Advanced
Biofuel
Renewable
Fuel
4
1.15
0.653
3, 4
(2009/2010)
0%
0.95
0.95
0%
12.95
12.95
0%
EPA adopted a combined 2009/2010 biomass-based diesel requirement of 1.15 billion gallons to be completed by the end of 2010.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
41
COURT
REVIEW?
2009 Renewable Fuel Standard
RULE
ACTION/
BACKGROUND
VOLUME STANDARDS
STATUTORY
VOL. IN
CAA1
REGULATORY
VOL.1
EPA BASIS FOR DECISION
COURT
REVIEW?
The 2009 RFS did not
Yes. NPRA
include a cellulosic
v. EPA,
biofuel standard.
630 F.3d
% CHANGE
Notice: 73 Fed. Reg.
EPA finalized
70,643 (Nov. 21,
adjustments to the
Cellulosic
2008).
statutory volumes.
Biofuel
Notice: Decision
Apr. 2008: State of
Aug. 2008: EPA denied
Cir. 2010)
Regarding the State
Texas filed a waiver
Texas’s waiver request
(upholding
of TX Request for a
request of 50% of
because the evidence
EPA’s
Waiver of a Portion
the mandate for
did not support a
decision to
of the 2009 RFS, 73
production of
determination that
issue a
Fed. Reg. 47,168
ethanol derived from
implementation of the
combined
(Aug. 13, 2008).
grain from Sept. 1,
RFS mandate during
2009 and
the requested time
2010
period would severely
biomass-
harm the economy of a
based
state, a region, or the
diesel
United States.
volume
----
----
----
145 (D.C.
2008 to August 31,
Biomassbased Diesel
Advanced
Biofuel
0.502
---5
0.60
0.60
---5
0%
2009.
Renewable
Fuel
11.1
5
11.1
0%
requiremen
t).
5
The EISA increased the total 2009 renewable fuel volume to 11.1 billion gallons, up from the 6.1 billion gallons that EPAct would have mandated for 2009.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
42
Attachment 3: Record of EPA’s Issuance of the
Annual RFS
Table 5
COMPLIANCE
YEAR
STATUTORY DEADLINE FOR
FINAL RULE
PUBLICATION OF FINAL RULE
2006
11/30/05
12/30/05 (direct final rule)
2007
11/30/06
5/1/07
2008
11/30/07
11/27/07
2009
11/30/08
11/21/08
2010
11/30/09
3/26/10
2011
11/30/10
12/9/12
2012
11/30/11
1/9/12
2013
11/30/12
8/15/13
2014
11/30/13
11/29/13 (proposed)
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
43
Attachment 4: Litigation Associated with Setting and
Adjusting Annual Volumes
The D.C. Circuit Court of Appeals has considered several cases challenging aspects of EPA’s
decisions setting annual volumes. Some cases are still pending. Challenges to EPA volume
decisions include these types of arguments: EPA lacks authority under the CAA for its
decision; the administrative record omits key information, does not support the decision, or
is otherwise faulty; EPA failed to meet administrative procedural requirements in conducting
the rulemaking; and EPA’s decision was unreasonable or irrational.
Some specific issues that have been or will be decided in cases challenging volume setting
by the court are summarized below.
EPA Volumes May Diverge from EIA Projections. The D.C. Circuit has upheld EPA’s
authority to adjust the annual volumes from the estimates provided by the EIA, concluding
that the CAA first called “for EIA to supply an estimate” of the fuels to be sold and “then for
EPA to ‘determine’ the obligation ‘based on’ that estimate.”349 The court concluded that
“Congress didn’t contemplate slavish adherence by EPA to the EIA estimate; had it so
intended, it could have skipped the EPA ‘determination’ altogether.”350
Revised EIA Estimate of Projected Volume of Fuel Placed into Commerce. Whether
EPA may adjust the statutory volumes based on an updated estimate from EIA—that is, an
estimate developed after EPA has published its proposed rule—is an issue currently before
the D.C. Circuit.351 Two trade associations have challenged EPA’s authority to base the 2013
RFS on a revised estimate provided by the EIA in May 2013, instead of basing the adjusted
volumes on the October 31, 2012, EIA estimate required by statute used in the proposed
rule.352 In addition, the petitioners also state that the RFS for 2013 increased when EPA
used the revised EIA estimate.353 For example, the total renewable fuel standard for 2013
increased from 9.63 percent in the proposed rule to 9.74 percent in the final rule.354
Petitioners contend that they had no notice that EPA would not base the final 2013 RFS
volumes on the October 31 EIA estimate.355 Prior to the 2013 RFS, EPA had never requested
a revised estimate from EIA.356 Petitioners also point to a draft of the proposed rule that had
been reviewed by the White House Office of Management and Budget, which deleted the
statement that “EPA intends to use updated EIA projections of gasoline and diesel
consumption in 2013 in calculating the final percentage standards.”357 Petitioners contend
that this deletion indicates that EPA, in drafting its proposed rule, initially considered but
rejected the idea of obtaining updated EIA data upon which to base the 2013 volumes.358
This case is at least procedurally problematic for EPA because the public has a right to
notice and comment on the information upon which EPA bases its rule. For the rule to be
upheld, EPA will need to establish that the final rule was a logical outgrowth of the proposed
rule.359 Under controlling case law, a final rule is not a logical outgrowth of the proposed
rule “where interested parties would have had to divine [the agency’s] unspoken
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
44
thoughts.”360 On the issue of EPA’s authority to use the revised EIA estimate, the rule could
be upheld, if the court reads the statute broadly rather than literally, to permit EPA to rely
on updated EIA data.
EPA Retains Authority to Set Volumes even if EPA Misses the CAA Deadline for
Setting Annual Volumes. The D.C. Circuit has concluded that EPA is not deprived of its
authority to issue the RFS volume standards if EPA misses the November 30 statutory
deadline.361 As the court explained, “Congress did not state in the EISA what would happen
if EPA failed to meet the statutory deadline for promulgating the revised renewable fuel
volume requirements.”362
This same issue has arisen in litigation challenging the 2013 RFS. In that case, still pending
in January 2014, petitioner Monroe Energy, LLC, argues that the 2013 RFS should be
vacated because EPA was tardy in issuing it.363 Monroe acknowledges the D.C. Circuit
precedent in National Petrochemical Refiners Association v. EPA, upholding EPA’s delayed
issuance of the 2009 and 2010 biomass-based diesel volumes.364 However, Monroe argues
that precedent should not apply here because that decision pertained to delays associated
with the first year of implementation of RFS2.365 In particular, Monroe notes that the
National Petrochemical Refiners Association court took note that “[t]he structure of the
[statute] demonstrates that Congress anticipated the possibility of some retroactive impacts
in the first year of the expanded renewable fuel program.”366 Monroe argues moreover that
obligated parties had no notice that their annual RVO for 2013 would exceed the ethanol
blendwall; therefore, Monroe argues it was unreasonable to increase the RVO “after twothirds of the year had already passed.”367
Tardiness of the issuance of the rule alone will not likely be enough to persuade the court to
vacate the 2013 RFS, because “the Supreme Court has declined to treat a statutory
direction that an agency ‘shall’ act within a specified time, without more, as a jurisdictional
limit precluding action later.”368 However, even in such cases where the agency misses a
statutory deadline, “retroactivity must be ‘reasonable.’”369 Therefore, whether the D.C.
Circuit upholds the very tardily issued 2013 RFS may depend more on whether the court
believes that EPA’s decision was rational.370 Because refiners may have to pay inflated costs
to purchase RINs or sufficient RINs to comply may not be available for purchase, the D.C.
Circuit may be inclined to find that it was not reasonable to retroactively apply the 2013
RFS.371
Statutory deadlines for setting volumes and their legal significance will likely continue to be
raised in litigation. This is because for years beyond 2022 (and for biomass-based diesel for
years after 2012), the CAA requires EPA to set volumes at least 14 months prior to the first
year in which the volumes will apply.372 EPA is currently obligated to set the applicable
volumes for renewable fuel, advanced biofuel, and cellulosic at least one month prior to the
compliance year.373
EPA Must Base Annual Volumes on Actual Projected Fuel Production. The D.C.
Circuit has also determined that the RFS program does not support EPA utilizing a
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
45
methodology to set the annual volumes at a level that intentionally overestimates “what will
actually happen” in terms of fuel production.374 EPA is supposed to make a projection “that
aims at accuracy, not at deliberately indulging a greater risk of overshooting than
undershooting.”375 The court reasoned that, unlike other requirements in the CAA, EPA’s
RFS projection is not intended to be “technology-forcing” such that it kickstarts industry into
producing more renewable fuels.376
Legality of Annual Volume Adjustments Based on Small Refinery Exemptions. A
pending case challenges EPA’s decision to grant an extension of the small refinery
exemption where the proposed rule did not contemplate such an extension. This case
presents the following procedural question: whether or not parties must have notice and an
opportunity to comment on small refinery exemptions granted by EPA, where the
exemptions result in raising the parties’ RVOs during the rulemaking process. In this case,
EPA extended an exemption under CAA § 211(o)(3) to a small refiner in 2013.377 Two trade
associations challenged that decision, arguing that the exemption was not part of the
proposed rule for that year, and therefore, affected parties whose RVOs were increased (as
a result of the exemption) and who were not given the opportunity to comment on the
decision to grant the exemption.378 Their claim is that EPA proposed the 2013 standards
without accounting for a small refinery/small refiner adjustment,379 but finalized the 2013
rule with a small refinery exemption and modified the applicable percentage standards for
2013.380
The trade associations take the position that EPA’s modifications of the volumes to the
detriment of other obligated parties was arbitrary and capricious, because it was
inconsistent with EPA’s stated policy of issuing “a single annual standard in November that
is applicable in the following calendar year, thereby providing advance notice and certainty
to obligated parties regarding their regulatory requirements.”381 EPA has also stated that
“[p]eriodic revisions to the standards to reflect waivers issued to small refineries or refiners
would be inconsistent with the statutory text, and would introduce an undesirable level of
uncertainty for obligated parties.”382 Thus, in 2010, when issuing the final RFS for 2011, EPA
stated that “[i]f any small refinery exemptions are approved after this final rulemaking, the
parties in question would be exempt but we would not intend to modify the applicable
percentage standards and announce new standards for 2011.”383
EPA offers as justification for the action that the exemption was granted in the final rule and
that EPA would not allow any future small refinery exemptions requested for 2013 to affect
the 2013 standards.384 EPA also argues that obligated parties had adequate lead time to
comply with this change to the percentage standards, because parties “have been acquiring
RINs since the beginning of 2013 in anticipation of [the final 2013 RFS].” EPA also extended
the compliance deadline to June 30, 2014.385
EPA further defends its decision by stating that “[c]ompliance is achieved by obligated
parties purchasing an appropriate number of RINs from producers or blenders of the
renewable fuel”; therefore, EPA rationalizes that “obligated parties do not need lead time for
construction or investment purposes.”386 Affected obligated parties’ concern is that
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
46
achieving compliance by purchasing RINs in the marketplace is only one compliance
alternative.387 Framing compliance in this context ignores the possibility that an obligated
party would have sought to generate more RINs during the compliance period, or export
more production had it been given more notice that its RVO would have been higher for
2013.388 The refiners also argued that using carryover RINs from the previous year would
not advance energy independence or security—the primary goals of the RFS program.389 In
addition, the refiners raise the procedural argument that EPA failed to give the public the
opportunity to comment on the decision to grant a small refinery exemption.390 These and
other arguments will be considered by the court in early 2014.391
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
47
Attachment 5: Clean Air Act Key Fuels Definitions
42 U.S.C. § 7545(o)(1)(B): Advanced Biofuel.
(i) In general
The term “advanced biofuel” means renewable fuel, other than ethanol derived from
cornstarch, that has lifecycle greenhouse gas emissions, as determined by the
administrator, after notice and opportunity for comment, that are at least 50 percent less
than baseline lifecycle greenhouse gas emissions.
(ii) Inclusions
The types of fuels eligible for consideration as “advanced biofuel” may include any of the
following:
(I) Ethanol derived from cellulose, hemicellulose, or lignin.
(II) Ethanol derived from sugar or starch (other than cornstarch).
(III) Ethanol derived from waste material, including crop residue, other vegetative waste
material, animal waste, and food waste and yard waste.
(IV) Biomass-based diesel.
(V) Biogas (including landfill gas and sewage waste treatment gas) produced through
the conversion of organic matter from renewable biomass.
(VI) Butanol or other alcohols produced through the conversion of organic matter from
renewable biomass.
(VII) Other fuel derived from cellulosic biomass.
42 U.S.C. § 7545(o)(1)(D): Biomass-based diesel.
The term “biomass-based diesel” means renewable fuel that is biodiesel as defined in
section 13220(f) of this title and that has lifecycle greenhouse gas emissions, as determined
by the administrator, after notice and opportunity for comment, that are at least 50 percent
less than the baseline lifecycle greenhouse gas emissions. Notwithstanding the preceding
sentence, renewable fuel derived from co-processing biomass with a petroleum feedstock
shall be advanced biofuel if it meets the requirements of subparagraph (B), but is not
biomass-based diesel.
42 U.S.C. § 7545(o)(1)(E): Cellulosic biofuel.
The term “cellulosic biofuel” means renewable fuel derived from any cellulose,
hemicellulose, or lignin that is derived from renewable biomass and that has lifecycle
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
48
greenhouse gas emissions, as determined by the administrator, that are at least 60 percent
less than the baseline lifecycle greenhouse gas emissions.
42 U.S.C. § 7545(o)(1)(H): Lifecycle greenhouse gas emissions.
The term “lifecycle greenhouse gas emissions” means the aggregate quantity of greenhouse
gas emissions (including direct emissions and significant indirect emissions, such as
significant emissions from land use changes), as determined by the administrator, related to
the full fuel lifecycle, including all stages of fuel and feedstock production and distribution,
from feedstock generation or extraction through the distribution and delivery and use of the
finished fuel to the ultimate consumer, where the mass values for all greenhouse gases are
adjusted to account for their relative global warming potential.
42 U.S.C. § 7545(o)(1)(I): Renewable biomass.
The term “renewable biomass” means each of the following:
(i) Planted crops and crop residue harvested from agricultural land cleared or cultivated at
any time prior to December 19, 2007, that is either actively managed or fallow, and
nonforested.
(ii) Planted trees and tree residue from actively managed tree plantations on non-federal
land cleared at any time prior to December 19, 2007, including land belonging to an Indian
tribe or an Indian individual, that is held in trust by the United States or subject to a
restriction against alienation imposed by the United States.
(iii) Animal waste material and animal byproducts.
(iv) Slash and pre-commercial thinnings that are from non-federal 10 forestlands, including
forestlands belonging to an Indian tribe or an Indian individual, that are held in trust by the
United States or subject to a restriction against alienation imposed by the United States, but
not forests or forestlands that are ecological communities with a global or state ranking of
critically imperiled, imperiled, or rare pursuant to a State Natural Heritage Program, oldgrowth forest, or late successional forest.
(v) Biomass obtained from the immediate vicinity of buildings and other areas regularly
occupied by people, or of public infrastructure, at risk from wildfire.
(vi) Algae.
(vii) Separated yard waste or food waste, including recycled cooking and trap grease.
42 U.S.C. § 7545(o)(1)(J): Renewable fuel.
The term “renewable fuel” means fuel that is produced from renewable biomass and that is
used to replace or reduce the quantity of fossil fuel present in a transportation fuel.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
49
Attachment 6: Record of Petitions Filed Requesting
Waivers
2009 RFS Volumes
On April 25, 2008, Texas Governor Rick Perry submitted a letter to EPA requesting a waiver
of a portion of the RFS between September 1, 2008, and August 31, 2009, (pursuant to
CAA § 211(o)(7)) “based on data demonstrating that implementation of the mandate is
unnecessarily having a negative impact on Texas’ otherwise strong economy while driving
up global food prices.”392 Given that Texas is a major contributor to the nation’s agricultural
community, Governor Perry was concerned about the RFS driving up food prices.393
Therefore, Governor Perry requested a 50 percent waiver of the mandate for the
“production of ethanol derived from grain.”394
EPA ultimately denied the waiver, stating that the “evidence does not support a
determination that implementation of the RFS mandate during the time period at issue
would severely harm the economy of a State, a region, or the United States.”395 Based on
the data that EPA reviewed, the agency concluded that the “RFS would have no impact on
ethanol production volumes in the relevant time frame, and therefore no impact on corn,
food, or fuel prices.”396 Because this was the first waiver request that EPA had received
under the RFS program, the notice also provided guidance about submitting future requests
for a waiver.397
EPA Administrator Stephen Johnson tried to justify the agency’s position by explaining that
the agency’s “professional staff conducted a detailed analysis … and found that the
Renewable Fuel mandate is not causing severe economic harm, but rather strengthening the
nation’s energy security and farm communities.”398
2012 and 2013 Volumes
The governors of Arkansas, North Carolina, New Mexico, Georgia, Texas, Virginia, Maryland,
Delaware, Utah, and Wyoming filed petitions requesting waivers of the RFS volume
requirements in 2012 and 2013.399 Those requests were based on the negative impact of
the recent drought on corn and feed prices and the impacts of the drought on livestock,
poultry, and other sectors.400 Some of the states additionally claimed that the RFS program
increases demand for corn, causing corn prices to rise and harming the livestock and poultry
industries.401 EPA also received letters from members of Congress supporting a waiver, as
well as letters from agriculture, industry, and interest groups opposed to increased corn
ethanol production.402 EPA denied the requests, explaining that “it is very likely that the RFS
volume requirements will have no impact on ethanol production volumes in the relevant
time frame, and therefore will have no impact on corn, food or fuel prices.”403
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
50
2014 Volumes
On August 13, 2013, American Fuel and Petrochemical Manufacturers (AFPM) and American
Petroleum Institute (API) filed a joint petition for a waiver of the 2014 RFS volumes.404 The
trade groups argue that without a waiver, “the RFS will result in inadequate domestic
supplies of gasoline and diesel fuel and severe economic harm to consumers and the
economy.”405 They also claim that “the United States has hit the ‘blendwall’”—the point at
which the RFS mandates the use of more renewable fuels than can be consumed due to
compatibility concerns with vehicles, machines, and infrastructure.406 Given that the number
of available RINs available depends on consumption of renewable fuels and the RFS
standards are higher than can be consumed, AFPM and API claim that there will be a
shortage of RINs available.407 According to the joint petition, this shortage of RINs will then
limit gasoline and diesel supplies within the United States, because companies “will have no
practical option but ‘to reduce their RIN obligation by decreasing the volume of
transportation fuel supplied to the domestic market—either by reducing production,’
reducing imports, or increasing exports.”408
AFPM and API have requested that “the maximum amount of ethanol mandated should be
no more than 9.7 percent (i.e., 12.88 billion gallons).”409 They also requested that EPA
modify the 2014 RFS as follows:410
RENEWABLE FUEL
STATUTORY MINIMUM (BIL.
GAL.), 42 U.S.C. §
7574(O)(2)(B)
AFPM/API REQUEST (BIL. GAL.)
Biomass-based
1.0
No change
Cellulosic Biofuels
1.75
Lower to reflect actual production
Advanced Biofuels
3.75
1.92
Total Renewable
18.15
14.8
Diesel
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
51
EPA issued a notice in November 2013 acknowledging receipt of the petition filed by API and
AFPM and explaining that several petitions were also filed by various refining companies.411
EPA has invited comments on all issues relevant to the petitions for a waiver filed, which
must be received on or before January 28, 2014.412 In this announcement, EPA noted that
the proposed 2014 rule would “waive part of the 2014 statutory RFS volumes.”413
EPA also proposed to find that there is an inadequate domestic supply of renewable fuels in
2014 under section 211(o)(7)(A) and “to reduce the applicable volume of cellulosic biofuel
under section 211(o)(7)(D).”414 Based on these findings, EPA proposed “to reduce the
applicable volumes of total renewable fuel and advanced biofuel,” noting, however, that the
agency is not proposing to find that implementation of the standards would severely harm
the economy.415
After EPA issued the proposed 2014 volumes, AFPM issued a statement explaining its
petition and responding to the proposed rule.416 AFPM’s statement reported that:
AFPM petitioned for a 9.7 percent cap on ethanol in gasoline and continues to believe
that this is the minimum waiver necessary to promote liquidity in the RIN market, retain
a supply of pure gasoline required for some engines, and account for historical
differences between EIA projections of gasoline demand and actual demand.417
AFPM indicated its appreciation of “EPA’s recognition of the blendwall and the potential
adverse effects on consumers” but indicated that “greater reductions in the biofuel mandate
are necessary if consumers are to avoid all the detrimental impacts of the statute.”418
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
52
Attachment 7: Proposed RIN Quality Assurance
Program
On February 21, 2013, EPA issued a proposed rule under its RFS program that if adopted
would establish a voluntary quality-assurance program (QAP).419 The proposed QAP options
would create more oversight over the RIN-generation market420 and establish an affirmative
defense to civil liability for transferring or using invalid RINs.421 This attachment provides an
overview of the QAP options provided in the proposed rule and the affirmative defense
available under each option.
Overview
Under the proposed rule, three types of RINs would be available in the RFS program:
1. RINs verified by a third-party auditor, which the auditor would be responsible for
replacing in the event they were invalidly generated (A-RINs);
2. RINs verified by a third-party auditor, which the obligated party would remain liable
for replacing (B-RINs); and
3. Unverified RINs, which the obligated party would remain liable for replacing (“buyer
beware”/current regulatory approach).422
RINs that are verified under one of the QAP options would be marked as such in the EPAModerated Transaction System (EMTS).423 Obligated parties would not be required to
purchase verified RINs and RIN generators would not be obligated to have their RINs
verified under an approved QAP.424
Pre-registration of Auditors
Various independent third-party auditors have already submitted pre-registration
information and proposed QAPs to EPA, explaining the types of plans they intend to offer
their prospective customers.425 Auditors must submit a separate QAP for each different
feedstock/production process/fuel type combination (i.e., pathway) that it is offering to
audit. EPA has published the names of those auditors whose QAPs are consistent with the
requirements in the proposed QAP rule.426
All of the pre-registered auditors have indicated they will verify B-RINs and a subset of
those auditors would also verify A-RINs.427 A few auditors are also willing to verify RINs for
production locations outside the United States.428
Differences Between A-RINs and B-RINs
The different requirements and scope of affirmative defenses for A-RINs and B-RINs can be
summarized as follows:
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
53
KEY ELEMENT
QAP OPTION A (A-RINS)
QAP OPTION B (B-RINS)
Audited by independent third
Yes. Auditor must be registered with EPA and must indicate which facilities
party?
they intend to audit and update that list if they wish to verify RINs for
additional renewable fuel producers or new facilities.
Oversight by obligated parties
Little or no oversight by obligated
Obligated parties will presumably
over auditor process?
parties.
want to conduct their own oversight
to verify that acquired RINs are valid.
Benefit of this option
Mitigated risk could incentivize
Would allow obligated parties to
obligated parties to purchase from
purchase RINs that have undergone a
smaller producers. Without QAP
less robust QAP. Obligated parties
Option A, these smaller producers
might prefer this option for RIN
may be perceived as higher risk
producers that are viewed as less
because they may lack the means
risky.
to self-finance a RIN replacement
obligation.
Scope of affirmative defense
Civil penalties for transfer or use
Only civil penalties for transfer or use
available to obligated party for
of invalidly generated RINs and
of invalidly generated RINs.
RINs that were verified by an
obligated party is not responsible
independent third-party auditor
for replacing invalidly generated
using an EPA-approved QAP?
RINs.
Parties responsible for
First, the generator. If the
First, the generator. If the generator
replacement of invalidly generated
generator cannot replace them,
cannot replace them, then the
RINs?
then the third-party auditor.
obligated party.
Treatment of a knowing transfer
Affirmative defense requires the
Affirmative defense requires the party
or use of invalidly generated
party did not know or have reason
did not know or have reason to know
RINs?
to know the RIN was invalidly
the RIN was invalidly generated at
generated before the RIN was
the time it was transferred or used
verified.
for compliance.
Invalid RINs permitted to be used
Yes, obligated parties may use
No, unless the generator of the
by the obligated party for
invalid A-RINs for compliance
invalid B-RINs replaced them.
compliance?
even if found to be invalid. Invalid
A-RINs must be replaced by the
generator or the third-party
auditor must replace the RINs.
Requirement for a RIN
Yes, for third-party auditors.
replacement mechanism as a
Options include, but are not
condition of registration?
limited to: traditional financial
No.
assurance instruments, RIN
banks, and RIN escrow accounts.
Limited exemption for invalidly
No.
Yes, temporary limited exception. For
generated RIN replacement?
2013–2014, up to 2% of the
obligated party’s RVOs.
Requirements for Replacement
A-RINs in the same renewable
B-RINs in the same renewable fuel
RINs?
fuel category.
category.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
54
KEY ELEMENT
QAP OPTION A (A-RINS)
QAP OPTION B (B-RINS)
Cap on RIN replacement?
For 2013–2015, 2% of the most
No.
recent 5 years’ worth of verified
RINs. EPA to reassess cap for
years 2016+.
Requirements for QAPs?
Detailed requirements including
No ongoing monitoring requirement.
ongoing monitoring (batch level
All elements would be evaluated on a
monitoring or as frequent as
quarterly basis. Requires evaluation
information becomes available or
of fewer elements than a QAP A-RIN.
can be monitored).
Requirements to establish an affirmative defense. To obtain the protection of the QAP
affirmative defense, the proposed rule would require the obligated party to submit a written
report to EPA, within 30 days of discovering the invalidity of the RIN, along with any
necessary documentation to demonstrate by a preponderance of the evidence (i.e., more
likely than not) how the following elements were met:
1. The invalidly generated RINs were verified by an independent third-party auditor
with an EPA-approved QAP that meets the applicable regulatory requirements;
2. The obligated party met the requisite knowledge requirement:
A-RINs: the RIN owner did not know or have reason to know that the A-RINs were
being invalidly generated prior to being verified by the third-party auditor;
B-RINs: the RIN owner did not know or have reason to know that the B-RINs were
invalidly generated at the time of transfer or use for compliance, unless a remedial
action had been implemented by the RIN generator;
3. Inform EPA within the next business day of identifying RINs that were invalidly
generated;
4. Demonstrate that the party seeking the affirmative defense did not cause the
invalidity of the RIN in question;
5. Demonstrate that the party seeking the affirmative defense did not have any
financial interest in the company that generated the invalid RIN; and
6. If the RIN owner used the invalid B-RINs for compliance, the RIN owner must
demonstrate that it adjusted its records, reports, and compliance calculations in which
the invalid B-RIN was used, unless a remedial action by the RIN generator was
implemented.429
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
55
Attachment 8: 40 C.F.R. § 79.11
Each application for registration…shall include the following:
(a) The commercial identifying name of each additive that will or may be used in a
designated fuel subsequent to the date prescribed for such fuel in subpart D;
(b) The name of the additive manufacturer of each additive named;
(c) The range of concentration of each additive named, as follows:
In the case of an additive which has been or is being used in the designated fuel, the
range during any 3-month or longer period prior to the date of submission;
In the case of an additive which has not been used in the designated fuel, the expected
or estimated range;
(d) The purpose-in-use of each additive named;
(e) The description (or identification, in the case of a generally accepted method) of a
suitable analytical technique (if one is known) that can be used to detect the presence of
each named additive in the designated fuel and/or to measure its concentration therein;
(f) Such other data and information as are specified in the designation of the fuel in subpart
D;
(g) Assurances that the fuel manufacturer will notify the Administrator in writing and within
a reasonable time of any change in:
The name of any additive previously reported;
The name of the manufacturer of any additive being used;
The purpose-in-use of any additive;
Information submitted pursuant to paragraph (e) of this section;
(h) Assurances that the fuel manufacturer will not represent, directly or indirectly, in any
notice, circular, letter, or other written communication, or any written, oral, or pictorial
notice or other announcement in any publication or by radio or television, that registration
of the fuel constitutes endorsement, certification, or approval by any agency of the United
States;
(i) The manufacturer of any fuel which will be sold, offered for sale, or introduced into
commerce for use in motor vehicles manufactured after model year 1974 shall demonstrate
that the fuel is substantially similar to any fuel utilized in the certification of any 1975 or
subsequent model year vehicle or engine, or that the manufacturer has obtained a waiver
under 42 U.S.C. 7545(f)(4); and
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
56
(j) The manufacturer shall submit, or shall reference prior submissions, including all of the
test data and other information required prior to registration of the fuel by the provisions of
subpart F of this part.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
57
Attachment 9: Summary of Major MTBE Liability Events
Under the 1990 CAA Amendments, to achieve air-quality goals, Congress required EPA to
adopt regulations requiring lower volatility reformulated gasoline to be sold in specified
geographic regions during certain periods of the year.430 Between 1995 and May 2006, CAA
§ 211(k) mandated the blending of 2 percent oxygen by weight into gasoline.431 During that
period, MTBE was the most widely used oxygenate by refiners to meet the requirement.432
With its wider distribution, MTBE was detected more frequently in conjunction with gasoline
that leaked from underground storage tanks and in some cases reached groundwater.
More than 150 lawsuits were filed, claiming water contamination and potential health effects
from MTBE under theories of defective product and failure to warn about environmental
characteristics. Plaintiffs include private individuals,433 public and private water providers,434
and state435 and local governments.436 The lawsuits are complex, multiparty, and lengthy.
Some cases have continued for more than ten years. While most cases named major
refiners, some sought damages from other parties in the fuel supply chain.
In 2001, the first major MTBE case went to trial, brought by the public utility district of
South Tahoe, California, against various refiners, gasoline distributors, and retailers, on
claims including strict liability for marketing a defective product, negligence, trespass, and
nuisance. The jury found against Shell, Equilon, Texaco, and Tosco for manufacturing,
selling, and supplying MTBE for defective design and because of the companies’ failure to
warn their customers regarding the product’s risks.437 All but two of the defendants settled
before trial, but after a trial, the total settlement was $69 million.438
In June 2000, the city of Santa Monica, California, sued various companies in California
state court, claiming that the city’s drinking water had become unusable due to MTBE,
which forced the city to buy water at an annual expense of approximately $3 million.439 The
lawsuit sought compensatory and punitive damages, claiming strict liability, negligence,
trespass, and nuisance.440 ExxonMobil, Shell, and ChevronTexaco settled with the city,
agreeing to pay $30 million and to pay for all the costs resulting from building, operating,
and maintaining a water-treatment facility.441 The parties later amended their settlement
agreement to eliminate the water-treatment plant obligation in exchange for additional
$132 million in cash.442 All of the other companies also ultimately agreed to settle, and, in
total, the city recovered $252 million.443
In 2003, New Hampshire sued ExxonMobil, Shell, Sunoco, ConocoPhillips, ChevronTexaco,
Chevron, Gulf, Lyondell, Motiva, Statoil, Ultramar, Valero, Irving Oil, Vitol, Hess, and Citgo
for using MTBE in gasoline blends despite their knowledge that the chemical would
contaminate groundwater in the state.444 The state sought $772 million in damages for
environmental testing and cleanup of contaminated sites.445 All the defendants settled
except Exxon Mobil.446 In April 2013, a jury found ExxonMobil negligent in its use of MTBE in
New Hampshire, and ExxonMobil was ordered to pay $236 million to the state.447
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
58
In another major products case that went to trial, New York City brought a lawsuit in 2003
against ExxonMobil alleging it contaminated drinking water wells in southeast Queens.448 At
trial, the city brought trespass, nuisance, negligence, and products liability claims against
ExxonMobil, arguing that the company blended MTBE into its gasoline despite knowing that
it would leak from tanks and require remediation.449 The court awarded a judgment of
nearly $105 million, which was upheld by the Second Circuit.450 ExxonMobil filed a petition
for writ of certiorari with the U.S. Supreme Court in January 2014.451
In 2006, a group of Maryland residents filed claims against ExxonMobil alleging personal
and financial harm as well as property damage related to an underground gas leak.
Although plaintiffs were initially awarded $1.5 billion in damages, the Maryland Court of
Appeals reversed the ruling, and, in November 2013, the U.S. Supreme Court denied the
plaintiffs’ petition for certiorari (i.e., rejected the plaintiffs’ request for the U.S. Supreme
Court to review the Maryland Court of Appeals’ decision).452
An unsuccessful lawsuit filed in state court in Maine sought damages from MTBE producers,
industry trade associations, and individuals in the Maine Department of Environmental
Protection for civil conspiracy, fraud, and negligent misrepresentation in failing to warn
them about water contamination.453 The court denied the plaintiffs’ class certification and
later determined that the source of the chemical spill was a vehicle in a rollover accident.
Atlantic Richfield and the insurance company responsible for the vehicle settled with the
plaintiffs out of court.454
In May 2008, parties reached a $423 million settlement in multidistrict litigation against
several large energy companies including BP, Chevron, and Shell brought by individuals,
local governments, and water suppliers in California and 19 other states over alleged MTBE
water contamination.455
In 2010, Hess, BP, Chevron, Shell, and a number of other companies settled MTBE claims
from 23 water districts and towns in New York and Florida for $42 million.456 The water
authorities brought suit beginning in 2004 and claimed that MTBE leaked from underground
storage tanks and contaminated drinking water.457
Cases are still being filed, although years have passed since MTBE has been blended into
gasoline, product liability claims are based on when claims accrue. A new claim of detection
of gasoline containing MTBE in water well can reset the statute of limitations, so cases may
be brought years after the product was sold in the state.
In 2013, MTBE lawsuits were filed in federal courts in Massachusetts, Vermont,458
Missouri,459 and Iowa460 and later transferred to the Southern District of New York where
they were included in the multidistrict litigation there.461 All four suits make nearly identical
claims and ask for nearly identical forms of relief. For example, in Massachusetts, multiple
plaintiffs including several townships sued Atlantic Richfield, BP, Amoco, Chevron, Citgo,
ConocoPhillips, El Paso, Equilon, ExxonMobil, Hess, Mobil, Shell, Sunoco, Texaco, and
Valero, alleging that MTBE contaminated drinking water in Massachusetts.462 Plaintiffs claim
that the companies are liable for creating a public nuisance and a private nuisance, products
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
59
liability (for both a design defect in MTBE and for the failure to warn of the defect),
negligence, trespass, conspiracy, and violations of state law.463 They seek compensation for
costs of: investigation; testing and monitoring; providing water from an alternate source;
installing and maintaining wellhead treatment, wellhead protection program, and an early
warning system to detect MTBE before it reaches a well; and compensating plaintiffs for loss
of consumer confidence and resulting business.464 None of the complaints specifies the
amount of damages sought; however, they all request punitive damages.465
During congressional debate on the 2005 EPAct legislation, MTBE producers vigorously
pursued a provision in the bill to limit liability for providers of renewable fuel, including
MTBE and ethanol. The House of Representatives adopted a provision that protected
renewable fuels meeting all CAA Section 211 requirements from being deemed a defective
product. The Senate adopted a much narrower liability provision but neither version
survived in Conference. The final EPAct provided only that cases involving allegations of
MTBE contamination may be removed to the appropriate federal court.466
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
60
Endnotes
1
Energy Policy Act of 2005 (EPAct), Pub. L. No. 109-58, 119 Stat. 594 (codified as amended in scattered sections
of 42 U.S.C. (2012)).
2
Energy Independence and Security Act of 2007 (EISA), Pub. L. No. 110-140, 121 Stat. 1492 (codified as
amended in scattered sections of 42 U.S.C. (2012)).
3
In EPAct, Congress’s main goal was “[t]o ensure jobs for our future with secure, affordable, and reliable energy.”
Pub. L. No. 109-58, pmbl., 119 Stat. 594 (2005). In EISA, Congress’s primary motivation in increasing the RFS
mandate was securing the market for domestic biofuels producers, which would enhance the economic and energy
security benefits of a robust biofuel sector in the United States. See 121 Stat. 1492, pub., Pub. L. No. 110-140
(2007) (“An Act To move the United States toward greater energy independence and security, to increase the
production of clean renewable fuels, and for other purposes.”). “The Committee believes that increasing and
extending the existing RFS—with specific incentives for the production of biofuels from new sources of renewable
biomass—is required, to provide market certainty to both the existing ethanol industry and the next generation of
advanced biofuels producers.” S. Rep. No. 110-65, at 3 (2007).
4
42 U.S.C. § 7545 (o)(2)(A)(iii) (2012).
5
40 C.F.R. § 80.1426(a) (2013).
6
40 C.F.R. § 80.1425.
7
40 C.F.R. § 80.142.
8
40 C.F.R. § 80.1451 (2013). Until biofuels are blended or sold, the RINs are attached to the fuel. Once detached,
RINs may be traded like other commodities. Obligated parties are required to separate RINs assigned to a volume
of renewable fuel if they own that volume. 40 C.F.R. § 80.1429 (b)(1) (2013); but see 40 C.F.R. § 80.1429 (b)(7),
(9) (providing limited exceptions to this rule).
9
42 U.S.C. § 7545(o)(5) (2012).
10
40 C.F.R. § 80.1452 (2013).
11
42 U.S.C. § 7545(o)(5).
12
40 C.F.R. § 80.1452.
13
See Senate Report 110-65 at 1-3 (May 7, 2007).
14
See, e.g., 42 U.S.C. §§ 7545(o)(3), 7545(o)(7)(A).
15
See, e.g., 42 U.S.C. § 7545(o)(5).
16
See pages 29-31, infra.
17
42 U.S.C. § 7545(o)(2)(B). For biomass-based diesel, for years after 2012, the minimum statutory volume is the
volume EPA adopted for 2012, per CAA § 211(o)(2)(B)(v). 42 U.S.C. § 7545(o)(2)(B)(v).
18
Id. § 7545(o)(2)(A)(i).
19
Id. § 7545(o)(3)(A). EPA’s ability to make adjustments to the values provided by the EIA is an issue that has
been litigated, and the D.C. Circuit is currently considering whether EPA has authority to use revised numbers from
the EIA or if it must use the value originally provided by the EIA by the statutory deadline. See Attachment 3 for
further discussion of these cases.
20
42 U.S.C. § 7545(o)(3)(B)(i), (ii).
21
See Table 5 in Attachment 3. EPA’s failure to meet this statutory deadline has been the subject of litigation. See
Attachment 4 for further discussion of these cases.
22
See 78 Fed. Reg. 9,282, 9,295 (Feb. 7, 2013) (“[T]he volume standards are nested and are not separate,
unrelated standards. Congress established the advanced biofuel standard and its subsets as integral parts of the
total renewable fuel standard.”).
23
42 U.S.C. § 7545(o)(1)(B)(ii).
24
See id. § 7545(o)(1)(B)(i).
25
Id. § 7545(o)(2)(B)(v).
26
Id. § 7545(o)(2)(B).
27
Id. § 7545(o)(2)(B)(ii).
28
Id. § 7545(o)(2)(B)(ii).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
61
29
Id. § 7545(o)(3)(C).
30
Id.
31
Small refineries are those with an average aggregate daily crude oil throughput of 75,000 barrels per day or
fewer. See id. § 7545(o)(K).
32
Id. § 7545(o)(9)(A)(i).
33
Id. § 7545(o)(9)(A)(ii), (B).
34
“Small refiners are those entities who produced gasoline from crude oil in 2004, and who meet the crude
processing capability (no more than 155,000 barrels per calendar day, bpcd) and employee (no more than 1,500
people) criteria as specified in previous EPA fuel regulations.” 72 Fed. Reg. 23,900, 23,911 n.7 (May 1, 2007); see
also 40 C.F.R. § 80.1442(a).
35
Id. § 7545(o)(9)(B)(ii).
36
Id. § 7545(o)(9)(B)(iii).
37
42 U.S.C. §§ 7545(o)(3)(C), (9).
38
See Brief for Petitioners Am. Petroleum Inst. & Am. Fuel & Petrochem. Mfrs. at 20-21, Monroe Energy LLC v. U.S.
Envtl. Prot. Agency, No. 13-01265 (D.C. Cir. Dec. 9, 2013) [Brief for API & AFPM].
39
See 78 Fed. Reg. 49,825 (Aug. 15, 2013).
40
See Brief for API & AFPM, supra note 38 at 20-21. See Attachment 4 for further information regarding this case.
41
42 U.S.C. § 7545(o)(7). EPA’s waiver authority was established by EPAct and amended in EISA in 2007.
42
Id. § 7545(o)(7)(A).
43
Id. § 7545(o)(7)(B).
44
Id. § 7545(o)(7)(C).
45
Id. § 7545(o)(7)(D), (E).
46
Id. § 7545(o)(7)(D), (E).
47
“While EPA realizes that the criteria provided by the statute are quite general, the rationales of severe
environmental harm or inadequate domestic supply are sufficient for a basic framework upon which a petition can
be built and evaluated. Each situation in which a waiver may be requested will be unique, and promulgating a list
of more specific criteria in the abstract may be counter-productive.” 72 Fed. Reg. 23,900 (May 1, 2007).
48
See Attachment 6 (providing a summary of these waiver requests).
49
See, e.g., API, 706 F.3d 474 (D.C. Cir. 2013).
50
Id. § 7545(o)(7)(A)(i), (ii). See pages 12-14, infra, for further discussion of import and export considerations.
51
Id. § 7545(o)(7)(A).
52
See 77 Fed. Reg. 70,752 (Nov. 27, 2012). See Attachment 6.
53
See 73 Fed. Reg. 47,168, 47,168 (Aug. 13, 2008) (denying a waiver request made by the State of Texas for a 50
percent waiver of the mandate for production of ethanol). See Attachment 6.
54
78 Fed. Reg. 71,732, 71,734 (Nov. 29, 2013).
55
78 Fed. Reg. 71,732. See Table 1 in Attachment 1.
56
See Table 3 in Attachment 1.
57
Letter from Richard Moskowitz, Gen. Counsel, AFPM & Robert Greco III, Grp. Dir., API, to Hon. Gina McCarthy,
Admin., U.S. EPA 4 n.13 (Aug. 13, 2013), available at
http://www.afpm.org/WorkArea/DownloadAsset.aspx?id=3930.
58
See EPA Docket EPA–HQ–OAR–2013–0747, available at www.regulations.gov (providing copies of the petitions
filed by Delek, PBF Holding Company, HollyFrontier, Tesoro, ExxonMobil, Marathon, Phillips 66, Lion Oil, Renewable
Fuel Association, and National Cooperative Refinery Association).
59
The “blendwall” is the point when the RFS mandates the use of more renewable fuels than can be consumed.
See 78 Fed. Reg. at 71,735 (explaining that the “blendwall” generally refers to “[l]imitations in the volume of
ethanol that can be consumed in gasoline given practical constraints on the supply of higher ethanol blends to the
vehicles that can use them and other limits on ethanol blend levels in gasoline”). See pages 20-21 and 24-25 for
further discussion regarding the blendwall.
60
42 U.S.C. § 7545(o)(7)(D)(i).
61
Id. § 7545(o)(7)(D)(i).
62
Id. § 7545(o)(1)(B)(ii).
63
See id. § 7545(o)(1)(B)(i).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
62
64
Id. § 7545(o)(7)(D)(i) (“For any calendar year in which the Administrator makes [a reduction of the cellulosic
biofuel volume requirement], the Administrator may also reduce the applicable volume of renewable fuel and
advanced biofuels requirement [under CAA § 211(o)(2)(B)] by the same or a lesser volume.”).
65
Id. § 7545(o)(7)(A).
66
See Table 2 in Attachment 1.
67
75 Fed. Reg. 14,670, 14,750-51 (Mar. 25, 2010).
68
75 Fed. Reg. 76,790, 76,792 (Dec. 9, 2010).
69
77 Fed. Reg. 1,320, 1,320 (Jan. 9, 2012).
70
API v. EPA, 706 F.3d 474, 477-78 (D.C. Cir. 2013).
71
Id. at 481.
72
Id. at 480.
73
Id. at 479-80.
74
API, 706 F.3d at 476 (quoting 42 U.S.C. §§ 7545(o)(3)(B), (o)(7)(D)(i) (2012)).
75
Id. at 476.
76
Letter from Administrator Gina McCarthy to Robert L. Greco III, API (Jan. 23, 2014), available at
http://www.epa.gov/otaq/fuels/renewablefuels/documents/api-01232014.pdf; (“EPA-API 2013 Cellulosic Letter”);
Letter from Administrator Gina McCarthy to Richard Moskowitz, AFPM (Jan. 23, 2014), available at
http://www.epa.gov/otaq/fuels/renewablefuels/documents/afpm-01232014.pdf (“EPA-AFPM 2013 Cellulosic
Letter”).
77
EPA-API 2013 Cellulosic Letter, supra note 76; EPA-AFPM 2013 Cellulosic Letter, supra note 76.
78
Id.
79
Id.
80
42 U.S.C. § 7545(o)(7)(E).
81
Id. § 7545(o)(7)(E)(i).
82
Id. § 7545(o)(7)(E)(ii) (emphasis added); see also API v. EPA., 706 F.3d 474, 479 (D.C. Cir. 2013) (the
biomass-based diesel waiver “authorizes no more than a fifteen percent reduction in applicable volumes, does not
require EPA to project available fuel, and is tied to price spikes, not production volumes” [citing 42 U.S.C.
§ 7545(o)(7)(E)(ii)(2012)]).
83
42 U.S.C. § 7545(o)(7)(E)(ii), (iii).
84
Id. § 7545(o)(7)(E)(ii).
85
Id. § 7545(o)(7)(A).
86
Id. § 7545(o)(7)(E)(ii).
87
78 Fed. Reg. at 49,798.
88
42 U.S.C. § 7545(o)(B)(2)(ii).
89
Because the petitioners were not requesting a waiver below the statutory minimum, they styled their objections
to the biomass-based diesel volume as a petition for reconsideration.
90
78 Fed. Reg. 49,411 (Aug. 14, 2013).
91
U.S. Envtl. Prot. Agency, EPA-420-R-13-009, Response to Petitions of the American Fuel & Petrochemical
Manufacturers (AFPM) and the American Petroleum Institute (API) for Reconsideration of the September 27, 2012,
Final Rule Entitled Regulation of Fuels and Fuel Additives: 2013 Biomass-Based Diesel Renewable Fuel Volume at 5,
10-11 (2013) [hereinafter EPA Response to Petitions], available at
http://www.epa.gov/otaq/fuels/renewablefuels/documents/420r13009.pdf.
92
Id. at 3.
93
Id. at 3-4.
94
Id.
95
77 Fed. Reg. at 59,478.
96
Id.
97
Id. at 59,483.
98
Id. at 59,470.
99
78 Fed. Reg. 71,737.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
63
100
To a certain extent, import and export considerations are already indirectly considered in the decision-making
process set forth by Congress. EPA must base its decision on EIA projections. 42 U.S.C. § 7545(o)(3). EIA
projections are based on a wide range of data, including import and export data. EIA projections indirectly reflect
this information. See, e.g., Adam Sieminski, Admin., U.S. Energy Info. Admin., Statement before the
Subcommittee on Energy & Power of the House Committee on Energy & Commerce 8-9 (June 26, 2013), available
at http://www.eia.gov/pressroom/testimonies/sieminski_06262013.pdf (discussing the projected reliance and
reductions in net oil imports resulting from increased petroleum production).
101
See, e.g., 78 Fed. Reg. 71,732, 71,765 (Nov. 29, 2013) (noting that “more than one third of the 320 mill gal
total production [of corn-oil] was exported in 2012,” and that “[t]hose exports could be diverted to biodiesel
production depending on relative prices and other factors”).
102
See, e.g., Monroe Energy LLC v. EPA, No. 13-1265 (D.C. Cir., filed Oct. 4, 2013); API v. EPA, 706 F.3d 474
(D.C. Cir. 2013); Nat’l Petrochemical & Refiners Ass’n v. EPA, 630 F.3d 145 (D.C. Cir. 2010).
103
78 Fed. Reg. 9,282, 9,298 (Feb. 7, 2013).
104
See, e.g., Am. Fuel & Petrochem. Mfrs., Comments of the American Fuel & Petrochemical Manufacturers,
Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standard, EPA-HQ-OAR-2012-0546, at 5 n.7 (Apr. 8,
2013) (citations omitted), available at http://www.afpm.org/agency-comments-fuels/ (“With respect to inadequate
domestic supply, we note that EPA expects the RFS to force the import of 666 million gallons of sugarcane ethanol
from Brazil to help meet the Advanced Biofuel requirements. This need to import Brazilian sugarcane ethanol runs
counter to EISA’s stated purpose of furthering U.S. energy independence and stands as an acknowledgement of
inadequate domestic supply.”).
105
See n.64, supra.
106
78 Fed. Reg. 9,282, 9,295 (Feb. 7, 2013).
107
Id.
108
109
77 Fed. Reg. 1,320, 1,321 (Jan. 9,2012).
API v. EPA, 706 F.3d 474, 481 (D.C. Cir. 2013).
110
Id.
111
Id.
112
Id.
113
Id.
114
78 Fed. Reg. at 49,794 (Aug. 15, 2013).
115
Id. at 49,795.
116
Brief for Petitioner-Intervenor PBF Holding Co., LLC at 21-26, Monroe Energy LLC v. EPA, No. 13-1265 (D.C. Cir.
Dec. 16, 2013) [Brief for PBF Holding Co.] (“If the ‘projected volume available’ is less than the applicable volumes
of those fuels, then EPA should also reduce those volumes without consideration of any other factor.”).
117
Id. at 25-26.
118
Id. at 24-26.
119
42 U.S.C. § 7545(o)(7)(F).
120
Id.
121
Id.
122
As noted above, Congress set statutory volumes in for renewable fuel for 2006-2022, advanced biofuel for
2009-2022, cellulosic biofuel for 2010-2022, and biomass-based diesel for 2009-2012. 42 U.S.C. § 7545(o)(2)(B).
This requirement would, therefore, not be triggered for any calendar years in which Congress did not set a
statutory volume (e.g., 2023).
123
Id.
124
42 U.S.C. §§ 7545(o)(1)(B)(ii) and (o)(7)(F).
125
See Table 1 in Attachment 1.
126
See 78 Fed. Reg. at 71,734.
127
See 42 U.S.C. § 7545(o)(7)(F).
128
See Table 2 in Attachment 1.
129
See id.
130
See generally id.
131
See id.
132
See Table 3 in Attachment 1.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
64
133
See id.
134
Id. § 7545(o)(2)(B)(i)(IV).
135
Id. § 7545(o)(7)(F) (specifying that the long-term adjustment authority applies to the values in “any of the
tables in [42 U.S.C. § 7545(o)(2)(B)].”).
136
EISA, Pub. L. No. 110–140, §§ 201–204, 121 Stat. 1492 (2007).
137
See Attachment 5 for key definitions.
138
42 U.S.C. § 7545(o)(1)(J); 40 C.F.R. § 80.1401 (2013).
139
Crops, trees, and their residues qualify if the land had been cleared or cultivated and actively managed or fallow
as of the date of enactment of the statute. 42 U.S.C. § 7545(o)(1)(I).
140
For example, under the statute, “renewable” includes algae, animal waste and animal byproducts, and
separated yard waste or food waste, including recycled cooking and trap grease. 42 U.S.C. § 7545(o)(1)(I).
141
Questions and Answers on Changes to the Renewable Fuel Standard Program (RFS2), U.S. Envtl. Prot. Agency,
available at http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-aq.htm#15 (last updated Feb. 6,
2013); 40 C.F.R. § 80.1450(b) (2013) (establishing registration requirements for producers).
142
40 C.F.R. § 80.1426(f)(5)(i)(A) (2013).
143
Id.
144
Id. § 80.1426(f)(5)(i)(B).
145
Id. § 80.1426(f)(5)(i)(C).
146
40 C.F.R. § 80.1401.
147
42 U.S.C. § 7545(o)(1)(I) (2012); 40 C.F.R. § 80.1401.
148
Questions and Answers, supra note 141.
149
75 Fed. Reg. 14,670, 14,692 (Mar. 26, 2010).
150
40 C.F.R. § 80.1401 (providing definitions for renewable biomass and tree residue).
151
Questions and Answers, supra note 141.
152
Id.
153
40 C.F.R. § 80.1454 (2013).
154
Id. § 80.1454(d)(4).
155
Questions and Answers, supra note 141; see also 40 C.F.R. § 80.1454(g) (explaining the aggregate compliance
approach for U.S. planted crop or crop residue and that any such finding regarding the 2007 baseline amount must
be published in the Federal Register by November 30 of the year preceding the compliance period).
156
40 C.F.R. § 80.1454(c), (d).
157
Questions and Answers, supra note 141.
158
Alternative Fuels Data Center, U.S. Dept. of Energy, available at
http://www.afdc.energy.gov/fuels/emerging_dropin_biofuels.html (last updated July 30, 2012).
159
Id.
160
Id.
161
Per the statutory definition in CAA § 211(o)(1)(c) of “baseline lifecycle greenhouse gas emissions,” EPA has
established the 2005 baseline as an average: “[T]he lifecycle GHG emissions of a qualifying renewable fuel must be
less than the lifecycle GHG emissions of the 2005 baseline average gasoline or diesel fuel that it replaces.” 75 Fed.
Reg. 14,670, 14,677 (Mar. 26, 2010). The term “lifecycle greenhouse gas emissions” is defined to include “direct
emissions and significant indirect emissions such as significant emissions from land use changes.” 42 U.S.C.
§ 7545(o)(1)(H) (2012). Although this term “does not specifically mention international emissions,” EPA has
determined that “it would be inconsistent with the intent of [CAA Section 211(o)] to exclude them.” U.S. Envtl.
Prot. Agency, EPA-420-R-10-003, Renewable Fuel Standard Program (RFS2) Summary and Analysis of Comments
7-23 (2010) [hereinafter EPA RFS2 Summary of Comments], available at
http://www.epa.gov/otaq/renewablefuels/420r10003.pdf. Therefore, in interpreting the term “lifecycle greenhouse
gas emissions,” EPA considers itself legally obligated to consider the international indirect land use change impacts
of biofuels. “EPA could not, as a legal matter, ignore those parts of a fuel lifecycle that occur overseas.” Id. at 7-24.
“If the purpose of thresholds is to achieve some reduction in GHG emissions in order to help address climate
change, then ignoring emissions outside our borders interferes with the ability to achieve this objective.” Id. at 725.
162
42 U.S.C. § 7545(o)(4) (2012).
163
Id. § 7545(o)(4)(B).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
65
164
Id. § 7545(o)(4)(C).
165
42 U.S.C. § 7545(o)(4)(F).
166
Id. § 7545(o)(4)(B).
167
Id. § 7545(o)(4)(A).
168
EPA considered reducing the advanced biofuel GHG reduction percentage from the statutory value of 50 percent
to 44 percent or even as low as 40 percent. 74 Fed. Reg. 24,924 (May 26, 2009). However, after conducting a
lifecycle emissions analysis, EPA concluded that it was not necessary to adjust the GHG reduction percentage from
the statutory value because sugarcane ethanol is able to meet the standard for advanced fuels. 75 Fed. Reg. at
14,677, 14,790. When adopting the RFS2 regulations in 2010, EPA committed “to further reassess these
determinations and lifecycle estimates.” Id. at 14,677. Part of that effort included requesting that the National
Academy of Sciences evaluate the approach used in the 2010 rule and to make recommendations. Id. EPA
estimated that it would take the academy at least two years to complete such a review. Id. As of January 2014, no
report has yet been publicly issued.
169
Id. § 7545(o)(4)(C).
170
40 C.F.R. § 80.1416.
171
42 U.S.C. § 7545(o)(4)(E).
172
Id. § 7545(o)(4)(D).
173
Id. § 7545(o)(4)(E).
174
Id. § 7545(o)(4)(F).
175
Id. § 7545(o)(4)(B).
176
Id. § 7545(o)(4)(F) (“If, under subparagraph (D) or (E), the Administrator revises a percent level adjusted as
provided in subparagraphs (A), (B), and (C) to a higher percent, such higher percent may not exceed the
applicable percent specified in paragraph (2)(A)(i), (1)(D), (1)(B)(i), or (1)(E).”).
177
Id. § 7545(o)(4)(G).
178
See 75 Fed. Reg. 14,670, 14,682, 14,688 (Mar. 26, 2010).
179
Id. at 14,682. This exemption is dependent on when the ethanol facility commenced construction—not the date
of startup—provided that such plants “complete such construction in a reasonable amount of time, and continue to
burn only natural gas, biomass, or a combination thereof.” Id. at 14,688.
180
U.S. Envtl. Prot. Agency, Draft Regulatory Impact Analysis: Changes to Renewable Fuel Standard Program 127
(May 2009), available at http://www.epa.gov/otaq/renewablefuels/420d09001.pdf.
181
Id. at 14,682; see also Questions and Answers, supra note 141 (“If a facility meets the requirements for
exemption from the 20% GHG reduction requirement pursuant to 40 CFR § 80.1403(c) or (d), then the baseline
volume of renewable fuel produced by that facility is exempt from the 20% GHG reduction requirement for the life
of the plant. … Grandfathered status applies for the life of a plant. The mere shut-down and start-up of a plant
does not alter this result. Facilities that have been shut down retain the grandfathered facility exemption upon
start-up, regardless of the change in ownership of the facility or the length of time of the shut-down. The
exemption is restricted, however, to the baseline volume of the plant.”). Foreign facilities are subject to and the
same grandfathering provisions as facilities located in the United States. Id. (“The grandfathering provisions apply
equally to facilities inside and outside the RFS program area.”).
182
Id. at 14,688.
183
40 C.F.R. § 80.1403(c).
184
Id. at 14,689.
185
Id. at 14,690.
186
Id.
187
Id.; see also Questions and Answers, supra note 141 (“For grandfathered facilities, only the baseline volumes
are exempt from the 20 percent GHG reduction requirement. Thus, RINs may be generated for baseline volumes of
fuel regardless of lifecycle greenhouse gas emissions performance. Volumes of fuel produced above the baseline
volume must meet the 20 percent GHG reduction requirement to qualify for RIN generation under RFS2.”).
188
75 Fed. Reg. at 14,688; Questions and Answers, supra note 141.
189
75 Fed. Reg. at 14,688.
190
Questions and Answers, supra note 141.
191
Renewable fuel refers to fuels that (1) are “produced from renewable biomass;” (2) are “used to replace or
reduce the quantity of fossil fuel present in a transportation fuel, heating oil, or jet fuel;” (3) have “lifecycle
greenhouse gas emissions that are at least 20 percent less than baseline lifecycle greenhouse gas emissions,
unless the fuel is exempt from this requirement.” 40 C.F.R. § 80.1401 (2013).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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192
42 U.S.C. §§ 7545(o)(2)(A)(ii)(II)(cc), 7545(o)(5).
193
U.S. Energy Information Administration, RINs and RVOs are used to implement the Renewable Fuel Standard,
available at http://www.eia.gov/todayinenergy/detail.cfm?id=11511.
194
40 C.F.R. § 80.1126. In order to generate RINs, an importer must know the origins of the renewable fuel it is
bringing into the United States and the foreign producer of that fuel must be registered with EPA. Questions and
Answers on Changes to the Renewable Fuel Standard Program (RFS2), U.S. Envtl. Prot. Agency, available at
http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-aq.htm#15 (last updated Feb. 6, 2013); 40
C.F.R. § 80.1450(b) (2013) (establishing registration requirements for producers). In addition to providing EPA
documentation regarding the feedstocks and processes used to create the fuel, importers and foreign producers
must provide EPA with an explanation of any co-products that are generated with the fuel. 40 C.F.R.
§ 80.1451(b)(1)(ii)(M), (N). Importers and foreign producers must also comply with the record-keeping and
reporting requirements in 40 C.F.R. § 80.1451 and § 80.1454. Additionally, foreign producers must comply with
the requirements that pertain to the lifecycle emissions analysis. EPA RFS2 Summary of Comments, supra note 161
at 7-23 to 7-25.
195
40 C.F.R. § 80.1127.
196
40 C.F.R. § 80.1127(a)(2)
197
42 U.S.C. § 7545(o)(5)(C).
198
40 C.F.R. § 80.1127(a)(3) (“RINs may only be used to demonstrate compliance with the RVO for the calendar
year in which they were generated or the following calendar year.”). In other words, if a RIN is generated on
January 1, 2013, that RIN could be used to meet the RVO in 2013 or it could be carried over to 2014.
199
42 U.S.C. § 7545(o)(5)(D) (“The regulations promulgated under 42 U.S.C. § 7545(o)(2)(A) shall include
provisions allowing any person that is unable to generate or purchase sufficient credits to meet the requirements of
paragraph (2) to carry forward a renewable fuel deficit on condition that the person, in the calendar year following
the year in which the renewable fuel deficit is created— (i) achieves compliance with the renewable fuel
requirement under paragraph (2); and (ii) generates or purchases additional renewable fuel credits to offset the
renewable fuel deficit of the previous year.”).
200
See EPA, Questions and Answers on Changes to the Renewable Fuel Standard Program (RFS2), available at
http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-aq.htm (“contingent on the requirement that a
deficit cannot be carried over two years in a row”; “Parties that carry a deficit into 2011 must satisfy both that
deficit and their 2011 RVO for compliance year 2011.”); see also 40 C.F.R. § 80.1127(b).
201
42 U.S.C. § 7545(o)(5)(D).
202
Id.
203
40 C.F.R. § 80.1127(a)(3).
204
42 U.S.C. §§ 7545(o)(2)(A)(ii)(II)(cc), (o)(5) (2012).
205
42 U.S.C. § 7545(o)(5)(B) (“A person that generates credits under subparagraph (A) may use the credits, or
transfer all or a portion of the credits to another person for the purpose of [compliance].”).
206
42 U.S.C. § 7545(o)(5)(C).
207
40 C.F.R. § 80.1127(a)(3) (2013).
208
40 C.F.R. § 80.1127(a)(2).
209
42 U.S.C. § 7545(o)(5)(B) (“A person that generates credits under subparagraph (A) may use the credits, or
transfer all or a portion of the credits to another person for the purpose of [compliance].”).
210
40 C.F.R. § 80.1160(b)(4) (2013).
211
See generally id.
212
42 U.S.C. § 7545(o)(5)(B) (emphasis added).
213
Id. § 7545(o)(5)(A).
214
40 C.F.R. § 80.1127(a)(2) (2013).
215
See generally Brief of Monroe Energy, LLC, Monroe Energy, LLC v. EPA, No. 13-1267 (D.C. Cir. Dec. 9, 2013).
216
Id. at 15-16.
217
78 Fed. Reg. 49,794, 49,822 (Aug. 15, 2013).
218
Id. at 49,821-22.
219
Brief of Monroe Energy, supra note 215, at 15-16.
220
78 Fed. Reg. at 49,822.
221
Id.
222
Id.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
67
223
API v. EPA, 706 F.3d 474, 479 (D.C. Cir. 2013).
224
42 U.S.C. § 7545(o)(5)(B) (2012).
225
40 C.F.R. § 80.1431 (2013).
226
40 C.F.R. § 80.1460(b)(2). The only exception to this rule is if too many RINs were generated for a batch
because of a broken meter, inadvertent temperature correction error, or inadvertent administrative error, as well
as showing that six other specific criteria were met, including retiring an equivalent number of the same type of
RINs. 40 C.F.R. § 80.1431(c).
227
40 C.F.R. § 80.1460(c)(1).
228
Id. § 80.1431(b)(2).
229
“In this situation, the obligated party that used the invalid RINs will be required to deduct any invalid RINs from
its compliance calculations. An obligated party is liable for violating the standard if the remaining number of valid
RINs was insufficient to meet its RVO, and the obligated party might be subject to monetary penalties if it used
invalid RINs in its compliance demonstration.” 75 Fed. Reg. 14,669, 14,731 (Mar. 26, 2010).
230
Id.
231
EPA, Civil Enforcement of the Renewable Fuel Standard Program, available at
http://www2.epa.gov/enforcement/civil-enforcement-renewable-fuel-standard-program.
232
U.S. Envtl. Prot. Agency, Interim Enforcement Response Policy to Resolve Violations Arising from the Use of
Invalid 2010 and 2011 Biomass-Based Diesel Renewable Identification Numbers (Mar. 2012), available at
http://www2.epa.gov/enforcement/interim-enforcement-response-policy-resolve-violations-arising-use-invalid2010-and-2011.
233
78 Fed. Reg. 12,158, 12,163 (Feb. 21, 2013).
234
See 78 Fed. Reg. at 12,164 (“The new provisions would … provide an affirmative defense against civil violations
for transferring or using invalidly generated RINs for compliance where the RINs were verified under an approved
QAP.”).
235
EPA’s RIN Questions and Answers, available at
http://www.epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=3c6883aa-e07b-4714-bc1518b142f22917.
236
78 Fed. Reg. 12,163 (Feb. 21, 2013).
237
U.S. Envtl. Prot. Agency, Interim Enforcement Response Policy to Resolve Violations Arising from the Use of
Invalid 2010 and 2011 Biomass-Based Diesel Renewable Identification Numbers (Mar. 2012), available at
http://www2.epa.gov/enforcement/interim-enforcement-response-policy-resolve-violations-arising-use-invalid2010-and-2011.
238
See 78 Fed. Reg. at 12,158.
239
Id. at 12,165
240
Id. at 12,190.
241
Id. at 12,167. EPA established a “pre-registration” program that would authorize approved auditors to verify
RINs generated in 2013 prior to the adoption of a final QAP rule. EPA, Draft Quality Assurance Plan, available at
http://www.epa.gov/otaq/fuels/renewablefuels/qap.htm. “RINs audited prior to the effective date of the final rule”
“would not necessarily be deemed ‘verified’ under the terms of the final rule.” Id. “RINs could only be deemed
‘verified’ after the final rule goes into effect, and after EPA approved the QAP that was used in the audit process.”
Id. However, EPA does not intend to initiate enforcement against RINs that were generated in 2013 and that were
audited prior to the issuance of a final QAP rule. See EPA, Second Interim Enforcement Response Policy (Jan.
2013), available at http://www2.epa.gov/sites/production/files/documents/secondierp013113.pdf.
242
Id.
243
78 Fed. Reg. at 12,167. The defense would cover A- and B-RINs generated after the rule is final, as well as Aand B-RINs generated after January 1, 2013.
244
See id. at 12,164 (“The new provisions would … provide an affirmative defense against civil violations for
transferring or using invalidly generated RINs for compliance where the RINs were verified under an approved
QAP.”).
245
Id. at 12,165 (“the party responsible for replacement of invalid RINs varies between the two new options”). In
other words, if A-RINs are later found to be invalidly generated, the third-party auditor would be required to
replace the invalid RINs if the generator did not do so. Id. The obligated party would not be liable for replacing
those invalidly generated RINs and would be deemed to have met its compliance obligation regardless of the later
discovered invalidity of the RINs. Id. But, if the obligated party purchased B-RINs, that “obligated party would
remain liable for replacing any invalidly generated RINs that it owns if the RIN generator fails to do so, even if the
obligated party successfully asserted an affirmative defense.” Id.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
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246
See U.S. Envtl. Prot. Agency, Second Interim Enforcement Response Policy 2 (2013), available at
http://www2.epa.gov/sites/production/files/documents/secondierp013113.pdf.
247
See Brent D. Yacobucci, Cong. Research Serv. R42824, Analysis of Renewable Identification Numbers (RINs) in
the Renewable Fuel Standard (RFS) 12 (2013), available at http://www.fas.org/sgp/crs/misc/R42824.pdf.
248
EPA’s RIN Questions and Answers, available at
http://www.epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=3c6883aa-e07b-4714-bc1518b142f22917.
249
78 Fed. Reg. at 49,822.
250
78 Fed. Reg. at 49,822 n.73.
251
78 Fed. Reg. at 49,822.
252
151 CONG. REC. S.6601, S.6613 (June 15, 2005) (statement of Sen. Durbin), available at
http://www.gpo.gov/fdsys/pkg/CREC-2005-06-15/pdf/CREC-2005-06-15-pt1-PgS6601-3.pdf.
253
EPA, RFS2 Summary of Comments, supra note 161, at 4-20.
254
Id. Some commenters disagreed with this assessment. See, e.g., Letter from Al Mannato, Fuels Issues Manager,
API, to EPA Docket ID EPA-HQ-OAR-2005-0161, EPA-HQ-OAR-2005-0161-2393, Attachment 2 at 5 (Sept. 25,
2009), available at www.regulations.gov (explaining that if RIN shortfalls “occur late in the year or if there are
structural barriers to the use of renewable fuels, such as the blend wall, there may not be sufficient biofuels
production capability or sufficient market outlets to correct the shortage situation, regardless of how high RIN
prices rise.”); Letter from Robert A. Griffin, President/CEO, Griffin Industries, Inc., to EPA EPA-HQ-OAR-20050161-0994 (June 19, 2009), available at www.regulations.gov (“The value or price of renewable fuel feedstocks,
and the current prices of diesel fuel and gasoline, not the value of RINs, are the significant indicators of health and
direction of the Biofuels industry.”).
255
Id.
256
75 Fed. Reg. 14,670, 14,722 (Mar. 26, 2010).
257
Chem. Mfrs. Ass’n v. EPA, 217 F.3d 861, 867 (D.C. Cir. 2000).
258
Brief of Monroe Energy, supra note 215, at 20; Brief for PBF Holding Co., supra note 116 at 36.
259
Brief of Monroe Energy, supra note 215, at 15-21.
260
Brief for Petitioner-Intervenor PBF Holding Co., supra note 116 at 36.
261
Dole v. United Steelworkers of Am., 494 U.S. 26, 37 (1990).
262
78 Fed. Reg. 12,158, 12,161 (Feb. 21, 2013).
263
See id. at 12,162-63 (explaining that under the current system, “smaller producers have been forced to offer
their RINs at a significant discount relative to RINs from larger producers, assuming they can find obligated parties
or distributors willing to purchase them at all.”).
264
Id. at 12,179.
265
EPAct, Pub. L. No. 109-8, § 1501(a)(2), 119 Stat. 594 (2005).
266
72 Fed. Reg. 23,900, 23,918 (May 1, 2007).
267
75 Fed. Reg. at 14,670, 14,709 (Mar. 26, 2010).
268
72 Fed. Reg. at 23,919.
269
Id.
270
Id. at 23,918.
271
Id.
272
75 Fed. Reg. at 14,709.
273
Id. at 14,710.
274
Id. at 14,709.
275
Id. at 14,710.
276
Id. at 14,709.
277
Ethanol that has been denatured has an equivalence value of 1.0. Biogas with a lower heating value of 77,000
Btu is deemed equivalent to one gallon of renewable fuel with an equivalence value of 1.0, as is 22.6 kW-hr of
electricity. Biodiesel (mono-alkyl ester) has an equivalence value of 1.5 and butanol has an equivalence value of
1.3. Non-ester renewable diesel with a lower heating value of at least 123,500 Btu/gal has an equivalence value of
1.7.
278
40 C.F.R. § 80.1415(b)(7) (2013).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
69
279
EV = (R/0.972) * (EC/77,000). Where:
EV = Equivalence Value for the renewable fuel, rounded to the nearest tenth.
R = Renewable content of the renewable fuel. This is a measure of the portion of a renewable fuel that came from
renewable biomass, expressed as a fraction, on an energy basis.
EC = Energy content of the renewable fuel, in Btu per gallon (lower heating value).
40 C.F.R. § 80.1415(c).
280
40 C.F.R. § 80.1415(b)(7).
281
42 U.S.C. § 7545(o)(2)(iii) (2012).
282
40 C.F.R. § 80.1406(a)(1) (2013). Alaska and U.S. territories may opt-in to the renewable fuel program if the
administrator approves an application to do so under the provisions in 40 C.F.R. § 80.1443. Id. § 80.1406(a)(2).
283
Id. § 80.1406(a)(1).
284
40 C.F.R. § 80.1455(a)-(d) (2013).
285
Id. § 80.1440(a) (2013).
286
Id. § 80.1440(e).
287
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42-43 (1983).
288
40 C.F.R. § 80.1460(c)(1) (2013) (prohibiting a person from failing to acquire sufficient RINs to meet that
person’s RVO).
289
75 Fed. Reg. 14,670, 14,722 (Mar. 26, 2010).
290
78 Fed. Reg. 12,158, 12,158 (Feb. 21, 2013).
291
Id. at 12,166 (“In all cases, and regardless of whether the RINs in question are unverified or verified through
Option A or Option B, the proposed administrative process for replacement of invalid RINs places initial
responsibility to replace invalidly generated RINs on the RIN generator responsible for causing the invalidity. See
40 C.F.R. § 80.1474 of the proposed regulations for details of the administrative process for replacement of invalid
RINs.”).
292
Id.
293
40 C.F.R. § 80.1416 (2013); see, e.g., 78 Fed. Reg. 36,042, 36,042 (June 14, 2013) (proposing to amend RFS2
to include additional pathways).
294
40 C.F.R. § 80.1416(b)(1)(ii); 40 C.F.R. § 80.1426(f) (2013).
295
42 U.S.C. § 7545(o)(2)(B) (2012). This requirement does not apply to facilities that were grandfathered. See 75
Fed. Reg. 14,677, 14,682 (Mar. 26, 2010) (exempting facilities producing renewable fuel from RFS2 if they
“commenced construction prior to December 19, 2007,” or if they are “ethanol plants that use natural gas or
biodiesel for process heat [that commenced construction] on or before December 31, 2009.”). These exemptions
only apply to the volume of fuel production at the facility at the time it was grandfathered.
296
42 U.S.C. § 7545(o)(2)(B); see also 40 C.F.R. § 80.1416(c)(4) (referring to the definitions of renewable fuel,
biomass-based diesel, advanced biofuel, and cellulosic biofuel in 40 C.F.R. § 80.1401). Inherent in the requirement
to comply with these definitions is the obligation that the fuel must be a renewable fuel (i.e., produced from
renewable biomass and used to reduce or replace the fossil fuel present in transportation fuel, heating oil, or jet
fuel).
297
42 U.S.C. § 7545(o)(1)(H). See Attachment 5 for the complete definition.
298
75 Fed. Reg. 14,670 (Mar. 26, 2010).
299
See, e.g., 78 Fed. Reg. 36,041, 36,042 (June 14, 2013) (proposing to amend RFS2 to include additional
pathways).
300
40 C.F.R. § 80.1416(a) (2013). The applicable D code identifies the type of renewable fuel. 40 C.F.R.
§ 80.1125(g). If the renewable fuel can be categorized as cellulosic biomass ethanol, that fuel is assigned a D code
of “1”. 40 C.F.R. § 80.1125(g)(1). If the renewable fuel cannot be categorized as cellulosic biomass ethanol, the
fuel is assigned a D code of “2.” 40 C.F.R. § 80.1125(g)(2).
301
See, e.g., 78 Fed. Reg. at 36,046; 78 Fed. Reg. at 14,190, 14,192 (Mar. 5, 2013).
302
78 Fed. Reg. at 14,200-01.
303
Id. at 14,201.
304
42 U.S.C. § 7545(o)(1)(H) (2012).
305
“The Agency has had multiple meetings and discussions with renewable fuel producers, technology companies,
petroleum refiners and importers, agricultural associations, lifecycle experts, environmental groups, vehicle
manufacturers, states, gasoline and petroleum marketers, pipeline owners and fuel terminal operators. We also
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
70
have worked closely with other Federal agencies and in particular with the Departments of Energy and Agriculture.”
75 Fed. Reg. 14,670, 14,673 (Mar. 26, 2010).
306
75 Fed. Reg. at 14,670.
307
Office of Transp. & Air Quality, U.S. Envtl. Prot. Agency, EPA-420-F-10-006, Lifecycle Analysis of Greenhouse
Gas Emissions from Renewable Fuels 3 (2010), available at
http://www.epa.gov/otaq/renewablefuels/420f10006.pdf.
308
75 Fed. Reg. at 14,670.
309
42 U.S.C. § 7545(o)(4)
310
42 U.S.C. § 7545(o)(4)(B), (C).
311
42 U.S.C. § 7545(o)(4)(A).
312
75 Fed. Reg. at 14,687.
313
42 U.S.C. § 7545(o)(4)(E).
314
Air Pollution Prevention and Control Act, Pub.L. No. 90-148, § 210, 81 Stat. 502 (1967).
315
42 U.S.C. § 7545(a), (b). EPA maintains a list of registered fuels and fuel additives. List of Registered Fuels and
Fuel Additives, U.S. Envtl. Prot. Agency, available at
http://www.epa.gov/OTAQ/fuels/registrationfuels/registeredfuels.htm (last updated Jan. 9, 2014).
316
U.S. Envtl. Prot. Agency, EPA Form 3520-13, Fuel Additive Manufacturer Notification Instructions, available at
http://www.epa.gov/otaq/fuels/registrationfuels/documents/3520-13-instruct.pdf.
317
42 U.S.C. § 7545(f)(3). The burden is placed on the applicant to establish “that its fuel or fuel additive will not
cause or contribute to the failure of vehicles or engines to meet their assigned emission standards over their useful
lives.” 75 Fed. Reg. 68,094, 68,100 (Nov. 4, 2010).
318
42 U.S.C. § 7545(f)(4).
319
75 Fed. Reg. at 68,100.
320
42 U.S.C. § 7545(f)(4).
321
40 C.F.R. § 79.10 (2013). Form EPA 3520-12 should be used for registering fuels. Forms for Registration and
Reporting Fuels and Fuel Additives, U.S. Envtl. Prot. Agency, available at
http://www.epa.gov/OTAQ/fuels/registrationfuels/registration.htm (last updated Nov. 7, 2013). Manufacturers or
importers seeking to register ethanol for use in gasoline up to 15 percent by volume must submit a Fuel Additive
Manufacturer Notification, EPA Form 3520-13. Id. EPA requires companies to fill this form out even if that
manufacturer or importer has already registered with EPA to use ethanol in gasoline up to 10 percent and that
company wishes to use ethanol in gasoline up to 15 percent. Fuels and Fuel Additives Registration, U.S. Envtl. Prot.
Agency, available at http://www.epa.gov/OTAQ/fuels/registrationfuels/index.htm (last updated Dec. 18, 2012).
322
See Attachment 8.
323
42 U.S.C. § 7545(f).
324
See generally 75 Fed. Reg. 68,094 (Nov. 4, 2010).
325
Id. at 68,095. EPA even notes that “DOE expedited the durability testing.” Id. at 68,099.
326
Id. at 68,095.
327
Id. at 68,099.
328
Id.
329
Id.
330
Id.
331
The application was submitted on March 6, 2009, and EPA issued the notice granting the waiver on November 4,
2010. Id.
332
Id. at 68,095 (“[T]he DOE test program was completed for these motor vehicles in September 2010.”).
333
Alt. Fuels Data Ctr., Drop-In Biofuels, U.S. Dept. Of. Energy, available at
http://www.afdc.energy.gov/fuels/emerging_dropin_biofuels.html (last updated July 30, 2012).
334
Id.
335
Among other liabilities associated with the RFS program is, for example, commercial liability risk inherent in all
RIN transactions. Changes to federal regulatory requirements or to expected RIN availability could cause contract
breaches and damages. Environmental contamination liability, were it applicable to renewable fuels, could obligate
parties to clean up and remediate contaminated sites. RFS participants may also face the risk of allegations of
market manipulations for actions that may be deemed to have illegally affected the RIN market.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
71
336
42 U.S.C. §§ 7524, 7545(d) (2012); 40 C.F.R. §§ 80.1461, 80.1463; see also 40 C.F.R. § 19.4 (2013)
(increasing the maximum daily civil penalty to $37,500 for each day of violation plus the economic benefit or
savings from engaging in the violation).
337
42 U.S.C. § 7604(a) (2012) (allowing “any person” to commence a civil action against any person, including the
United States, governmental instrumentality, or agency that is alleged to have violated a CAA emission standard or
limitation or an order issued by EPA or the state with respect to a CAA standard or limitation).
338
The CAA does, however, provide liability protections, including in the RFS program. For example, CAA
§ 211(t)(8) holds all parties other than the blender free from responsibility for penalties arising from blending of
compliant reformulated gasolines by the retailers. 42 U.S.C. § 7545(t)(8) (2012). The CAA provides a “permit
shield” for parties with CAA Title V permits, for whom compliance with the permit is “deemed compliance with all
other applicable provisions” of the CAA. 42 U.S.C. § 7661c(f) (2012).
339
See generally 42 U.S.C. § 7545.
340
Turner v. Chevron U.S.A., Inc., No. 08-2267, 2008 WL 4570271 (C.D. Cal. Oct. 14, 2008). See Attachment 9.
341
Kelecseny v. Chevron U.S.A. Inc., 262 F.R.D. 660 (S.D. Fla. 2009).
342
Grocery Mfrs. Ass’n. v. EPA, 693 F.3d 169 (D.C. Cir. 2012) (upholding EPA’s decision to allow E15 to be
introduced into commerce in select motor vehicles and engines in spite of the challenges raised by various trade
associations representing engine manufacturers, petroleum suppliers, and food producers).
343
In EPAct 2005, Congress repealed the oxygenate requirement, replacing it with the mandate to blend
“renewable fuel.” On passage of EPAct, it was clear that the only renewable fuel available in large enough
quantities for blenders to meet the renewable standard was ethanol.
344
See Attachment 9 for a summary of these major cases.
345
CAA § 211(b)(2) requires that manufacturers test fuels and fuel additives for potential health and environmental
effects and provide that data to EPA as part of the process for the product to be registered and sold. 42 U.S.C.
§ 7545(b)(2) (2012). A manufacturer or supplier of a registered fuel who faces product liability claim would most
certainly point to the mandatory testing and review by EPA to register a renewable fuel. That argument would
support a preemption defense to a defective product claim, but such claims succeed even where government has
fully endorsed the characteristics of a product.
346
As published in the Federal Register.
347
EPA has proposed rescinding this volume because this value was determined using the same basis as in the
2012 rule, which was vacated by the D.C. Circuit. 78 Fed. Reg. 71,732, 71,751 (Nov. 29, 2013).
348
As discussed in note 304 and accompanying text, EPA issued a combined biomass-based diesel volume for 2009
and 2010. Obligated parties were required to meet this total volume by the end of the 2010 compliance year. 75
Fed. Reg. 14,670, 14,675 (Mar. 26, 2010).
349
API v. EPA, 706 F.3d 474, 478 (D.C. Cir. 2013) (citations omitted).
350
Id.
351
API v. EPA, No. 13-1267 (D.C. Cir., filed Oct. 8, 2013); AFPM v. EPA, No. 13-1268 (D.C. Cir., filed Oct. 10,
2013).
352
Brief for API & AFPM, supra note 38 at 15-19.
353
Id.
354
Id.
355
Brief for API & AFPM, supra note 38, at 17-18.
356
Brief for API & AFPM, supra note 38, at 16; 78 Fed. Reg. 49,794, 49,800 (Aug. 15, 2013) (“In light of the delay
in issuing the standards for 2013 we also sought and received an updated estimate of cellulosic biofuel production
from EIA to inform our final standards.”).
357
Id. at 18 (citing Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards Draft Proposed Rule 8,
EPA-HQ-OAR-2012-0546-0014 (Dec. 21, 2012) [hereinafter 2013 Renewable Fuel Standards Draft Proposed Rule]).
358
See 2013 Renewable Fuel Standards Draft Proposed Rule supra note 357, at 8 (showing the sentence “The
proposed percentage standards are based on a projection of volumes of gasoline and diesel consumption in 2013
from the Energy Information Administration (EIA).”).
359
See Envtl. Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005) (“[A]n agency’s proposed rule and its
final rule may differ only insofar as the latter is a ‘logical outgrowth’ of the former.”).
360
Id. (citation omitted).
361
Nat’l Petrochemical & Refiners Ass’n v. EPA, 630 F.3d 145, 155-56 (D.C. Cir. 2010) (upholding EPA’s combined
biomass-based diesel volume for 2009 and 2010).
362
Id. at 154.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
72
363
Brief of Monroe Energy, supra note 215, at 23-26.
364
Nat’l Petrochem. & Refiners Ass’n, 630 F.3d at 150, 163.
365
Brief of Monroe Energy supra note 215, at 24 (citing Nat’l Petrochemical & Refiners Ass’n, 630 F.3d at 163).
366
Nat’l Petrochemical & Refiners Ass’n, 630 F.3d at 163.
367
Brief of Monroe Energy, supra note 215, at 24-25.
368
Nat’l Petrochemical & Refiners Ass’n, 630 F.3d at 154 (citing Barnhart v. Peabody Coal Co., 537 U.S. 149, 158
(2003); Brock v. Pierce County¸476 U.S. 253 (1986); Dolan v. United States, 560 U.S. 605 (2010)).
369
Sierra Club v. Whitman, 285 F.3d 63, 68 (D.C. Cir. 2002) (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S.
204, 224-25 (1988) (Scalia, J., concurring)).
370
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co, 463 U.S. 29, 41-42 (1983).
371
Sierra Club, 285 F.3d at 68 (“EPA failed to make the nonattainment determination within the statutory time
frame … [and] [r]etroactive relief would likely impose large costs on the States, which would face fines and suits
for not implementing air pollution prevention plans in 1997, even though they were not on notice at the time.”).
372
42 U.S.C. § 7545(o)(2)(B)(ii).
373
42 U.S.C. § 7545(o)(3)(B)(i).
374
API v. EPA, 706 F.3d at 474, 479 (D.C. Cir. 2013).
375
Id.
376
Id. at 480.
377
See 78 Fed. Reg. 49,794, 49,825 (Aug. 15, 2013).
378
See Brief for API & AFPM, supra note 38, at 20-21.
379
78 Fed. Reg. 9,282, 9,303 (Feb. 7, 2013).
380
78 Fed. Reg. 49,794, 49,798 (Aug. 15, 2013) (“EPA has approved a single small refinery/small refiner
exemption for 2013, so an adjustment has been made to the standards to account for this exemption.”).
381
75 Fed. Reg. 76,790, 76,804 (Dec. 9, 2010).
382
Id.
383
Id.
384
Id. at 49,825 (“[A]ny requests for exemption that are approved after the release of today’s final rulemaking will
not affect the 2013 standards.”).
385
Id. at 49,800.
386
Id.
387
Brief for Monroe Energy, supra note 215, at 25.
388
Id.
389
Brief for PBF Holding Co., supra note 116, at 36.
390
Brief for API & AFPM, supra note 38, at 20-21.
391
Order, Monroe Energy LLC v. EPA, No. 13-1265 (D.C. Cir. Oct. 29, 2013) (granting the joint request for an
expedited briefing schedule such that briefing will conclude by February 20, 2014).
392
Letter from Gov. Rick Perry to Hon. Stephen L. Johnson, Admin., U.S. Envtl. Prot. Agency 1 (Apr. 25, 2008)
EPA-HQ-OAR-2008-0380-0502, available at http://www.epa.gov/otaq/renewablefuels/rfs-texas-letter.pdf.
393
Id.
394
Id. at 2.
395
73 Fed. Reg. 47,168, 47,168 (Aug. 13, 2008).
396
Id. at 47,169.
397
Id.
398
David Goldman, EPA rejects ethanol waiver request, CNNMoney, available at
http://money.cnn.com/2008/08/07/news/economy/ethanol/?postversion=2008080715 (last updated Aug. 7, 2008,
3:59 p.m.).
399
See 77 Fed. Reg. 70,752 (Nov. 27, 2012) (denying waiver requests made by the governors of Arkansas, North
Carolina, New Mexico, Georgia, Texas, Virginia, Maryland, Delaware, Utah, and Wyoming for the ethanol quotas
and the total renewable fuel volumes).
400
Id.
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
73
401
Id. at 70,753-54.
402
Id. at 70,755.
403
Id. at 70,753.
404
Letter from Richard Moskowitz, Gen. Counsel, AFPM & Robert Greco III, Grp Dir, API, to Hon. Gina McCarthy,
Admin., U.S. Envtl. Prot. Agency (Aug. 13, 2013), available at
http://www.afpm.org/WorkArea/DownloadAsset.aspx?id=3930.
405
Id. at 1.
406
Id.
407
Id. at 2.
408
Id.
409
Id. at 4 n.13.
410
Id. at 3-4.
411
78 Fed. Reg. 71,607, 71,607 (Nov. 29, 2013).
412
Id.
413
Id. at 71,608.
414
Id.
415
Id.
416
Press Release, Am. Fuel & Petrochem. Mfrs., AFPM Responds to EPA Short-Term RFS Fix (Nov. 15, 2013),
available at http://www.afpm.org/news-release.aspx?id=4001.
417
Id.
418
Id.
419
78 Fed. Reg. 12,158, 12,158 (Feb. 21, 2013).
420
Id.
421
Id. at 12,160.
422
Id. at 12,165.
423
Id. at 12,190.
424
Id. at 12,167.
425
See Draft Quality Assurance Plan, U.S. Envtl. Prot. Agency, available at
http://www.epa.gov/otaq/fuels/renewablefuels/qap.htm (last updated Dec. 5, 2013) (providing a list of QAPs preregistered as of August 1, 2013).
426
Id.
427
Id.
428
For example, EcoEngineers is listed on EPA’s website as an auditor that will verify RINs from both domestic and
foreign production. Id.
429
430
Id.
42 U.S.C. § 7545(k)(1)(A) (2012).
431
42 U.S.C. § 7545(k) (1995); Gasoline, U.S. Envtl. Prot. Agency, available at www.epa.gov/mtbe/gas.htm (last
updated May 3, 2013).
432
Gasoline, supra note 431 (“Most refiners have chosen to use MTBE over other oxygenates.”).
433
For example, class-action lawsuits were filed in California and Florida. See, e.g., Turner v. Chevron U.S.A., Inc.,
No. 08-2267, 2008 WL 4570271 (C.D. Cal. Oct. 14, 2008) (granting motion to dismiss because the products
liability claim was preempted by state law, which required the use of either ethanol or MTBE); see also Kelecseny
v. Chevron U.S.A., Inc., 262 F.R.D. 660 (S.D. Fla. 2009) (denying class certification for claims arising from damage
to boats in Florida that was allegedly caused by ethanol blended gasoline known as E10).
434
See, e.g., South Tahoe Pub. Utility Dist. V. Atlantic Richfield Co., No. 99-9128, (San Francisco Cty. Sup. Ct. filed
Nov. 10, 1998).
435
See, e.g., State of New Hampshire v. Hess Corp., No. 03-0550 (N.H. Sup. Ct. filed Sept 30, 2003).
436
City of Santa Monica v. Shell Oil Co., No. 01-04331 (Orange Cty. Sup. Ct. filed Apr. 2, 2001).
437
South Tahoe Pub. Utility Dist. v. Atlantic Richfield Co., No. 99-9128 (San Francisco Cty. Sup. Ct. filed Nov. 10,
1998).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
74
438
Elizabeth Hadzima, Pol’y Research Shop, Policy Brief 0607-01, MTBE Presence in Groundwater 10 (2006)
available at http://rockefeller.dartmought.edu/library/MTBE.pdf.
439
Joseph Lawrence, Water to Waste and Back Again (Someday)—The City of Santa Monica and MTBE (2004)
available at http://www.smgov.net/uploadedFiles/Departments/Public_Works/Civil_Engineering.
440
City of Santa Monica v. Shell Oil Co., No. 01-04331 (Orange Cty. Sup. Ct. filed Apr. 2, 2011).
441
Lawrence, Water to Waste, supra note 439.
442
Id.
443
Id.
444
State of New Hampshire v. Hess Corp., No. 03-0550 (N.H. Sup. Ct. filed Sept. 30, 2003).
445
Juan Carlos Rodriguez, Shell, Sunco, Settle with NH in $772M MTBE Pollution Suit, LAW360 (Nov. 8, 2012 2:19
p.m.), available at http://www.law360.com/articles/392794/shell-sunco-settle-with-nh-in-772m-mtbe-pollutionsuit.
446
Andrew Scurria, NH Appeals Set-Aside of Record $236M Exxon MTBE Verdict, LAW360 (Oct. 3, 2013 7:27 p.m.),
available at http://www.law360.com/articles/478034/nh-appeals-set-aside-of-record-236m-exxon-mtbe-verdict.
Shell and Sunoco agreed to pay $35 million to settle the suit; Giant Yorktown Inc. and Flint Hills Resources settled
for $350,000; BP for $2.4 million, Chevron settled for $625,000; Gulf settled for $900,000; Hess settled for $3
million; El Paso settled for 1.5 million; and Valero settled for $6 million. Rodriguez, Shell, Sunoco Settle, supra note
445.
447
Verdict, State of New Hampshire v. Hess Corp., No. 03-C-0550 (N.H. Sup. Ct. Apr. 9, 2013).
448
In re Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, 725 F.3d 65, 78 (2d Cir. 2013), petition for
cert. filed (U.S. Jan. 13, 2014) (No. 13-842), available at http://www.bancroftpllc.com/wpcontent/uploads/2014/01/2014-01-13-Exxon-Cert-Petition-FINAL.pdf. Shell, BP, Chevron, Citgo, Hess, and Sunoco
previously agreed to a settlement in this case. Press Release, N.Y. City Law Dept., Office of the Corp. Counsel,
Appeals Court Upholds $105 Million Verdict Against ExxonMobil for Contaminating New York City’s Groundwater
(July 26, 2013), available at
http://www.nyc.gov/html/law/downloads/pdf/Exxon%20MTBE%20Appeals%20Win.pdf.
449
Press Release, N.Y. City Law Dept., supra note 448.
450
In re MTBE, 725 F.3d at 75.
451
Chris Knight, Exxon Warns High Court of MTBE Ruling Limiting EPA Air Policy Judgment, InsideEPA (Jan. 15,
2014), available at http://environmentalnewsstand.com/component/option,com_ppv/id,2458349.
452
Albright v. Exxon Mobil Corp., 71 A.3d 30 (Md. 2013), cert denied, 134 S. Ct. 648 (2013).
453
Millet v. Atlantic Richfield Co., No. CV-98-555 (Super. Ct. ME).
454
See generally id.
455
Evan Weinberger, NY, Fla. Towns Settle MTBE Suits with Shell, BP, Law360 (Aug. 4, 2010 6:43 p.m.), available
at http://www.law360.com/articles/185372/ny-fla-towns-settle-mtbe-suits-with-shell-bp. For a complete list of the
defendants, see Notice of Joint Motion to Dismiss, In re Methyl Tertiary Butyl Ether (MTBE) Products Liability
Litigation, Master File No. 00-1898, MDL 1358 (SAS), M21-88 (S.D.N.Y. Aug. 8, 2010).
456
J. Cullen Howe, Defendants Agree to Settle Claims over MTBE Contamination in Long Island, NYSBAR (Aug. 12,
2010 1:09 p.m.), available at
http://nysbar.com/blogs/environmental/2010/08/defendants_agree_to_settle_cla.html.
457
Complaint, Town of Hinesburg v. Atlantic Richfield Co., No. 13-00198 (D. Vt. Filed July 16, 2013).
458
Complaint, Town of Hinesburg v. Atlantic Richfield Co., No. 13-00198 (D. Vt. filed July 16, 2013).
459
Complaint, City of Portageville v. Ashland, Inc., No. 13-00091 (E.D. Mo. filed June 27, 2013).
460
Complaint, City of Manning v. Ashland, Inc., No. 13-03033 (N.D. Iowa filed June 27, 2013).
461
Transfer Order, In re Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, Master File No. 00-1898,
MDL 1358 (SAS), M21-88 (S.D.N.Y. Oct. 9, 2013).
462
Complaint, Town of Brewster v. Atlantic Richfield Co., No. 13-11695 (D. Mass. filed July 15, 2013).
463
Id. at 41-64. The suit filed in Iowa also includes a fraud claim. Complaint at ¶¶ 281087, City of Manning v.
Ashland, Inc., No. 13-03033.
464
Id. at 64.
465
Id. at 65.
466
EPAct, Pub. L. No. 109-58, § 1503, 119 Stat. 594 (Aug. 8, 2005).
The Environmental Protection Agency’s Authority to Amend the Renewable Fuel Standard
75