Growth Energy v. Envtl. Prot. Agency

5 F.4th 1

GROWTH ENERGY, et al., Petitioners

v.ENVIRONMENTAL PROTECTION AGENCY and Michael S. Regan, Administrator, Respondents

American Fuel & Petrochemical Manufacturers, et al., Intervenors

No. 19-1023

C/w 19-1027, 19-1032, 19-1033, 19-1035, 19-1036, 19-1037, 19-1038, 19-1039

United States Court of Appeals, District of Columbia Circuit.

Argued September 25, 2020

Decided July 16, 2021

David M. Lehn, Douglas A. Hastings, and David M. Williamson argued the causes for the Renewable Fuels Producers. With them on the briefs were Bryan M. Killian, Jerome C. Muys, Jr., Sandra P. Franco, Seth P. Waxman, Saurabh Sanghvi, and Claire H. Chung.

Amir C. Tayrani argued the cause for Obligated Parties. With him on the briefs were Samara L. Kline, Lisa M. Jaeger, Brittany M. Pemberton, Clara Poffenberger, Richard S. Moskowitz, Robert J. Meyers, Thomas A. Lorenzen, Elizabeth B. Dawson, Suzanne Murray, Michael J. Scanlon, and Lochlan F. Shelfer. Evan A. Young entered an appearance.

Carrie Apfel argued the cause for Environmental petitioners. With her on the briefs were Peter Lehner and Surbhi Sarang.

Tsuki Hoshijima, Benjamin R. Carlisle, and Michael R. Eitel, Attorneys, U.S. Department of Justice, argued the causes for respondents. With them on the brief were Jeffrey Bossert Clark, Assistant Attorney General, and Jonathan D. Brightbill, Principal Deputy Assistant Attorney General.

Elizabeth B. Dawson argued the cause for intervenors American Fuel & Petrochemical Manufacturers, et al. in support of respondents. With her on the brief were Thomas A. Lorenzen, Robert J. Meyers, Richard S. Moskowitz, Amir C. Tayrani, Lochlan F. Shelfer, Robert A. Long, Jr., Kevin F. King, Thomas R. Brugato, Carlton Forbes, and John Wagner. Stacy R. Linden entered an appearance.

Bryan M. Killian, Douglas A. Hastings, Seth P. Waxman, David M. Lehn, Saurabh Sanghvi, Claire H. Chung, Ethan G. Shenkman, Robert A. Long, Jr., Kevin F. King, and Thomas R. Brugato were on the brief for intervenors Growth Energy, et al. in support of respondents.

Before: Srinivasan, Chief Judge, and Rogers and Garland,^* Circuit Judges.

Per Curiam:

To move the United States towards greater reliance on clean energy, the Clean Air Act's Renewable Fuel Standard Program calls for annual increases in the amount of renewable fuel introduced into the U.S. fuel supply. The statute sets annual targets for renewable fuel volumes, and each year, the Environmental Protection Agency implements those targets. The agency has certain waiver authorities under the statute to reduce the annual targets below the statutory levels.

Three groups of petitioners now challenge EPA's 2019 rulemaking. A group of companies that produce renewable fuels argues that EPA's 2019 volume levels are too low. In contrast, a group of fuel refiners and retailers argues that the agency's 2019 volumes are too high. Finally, a coalition of environmental organizations challenges various aspects of the 2019 Rule relating to environmental considerations.

We deny the petitions for review except for two of the environmental organizations’ challenges. As to those challenges, we remand the 2019 Rule without vacatur to enable EPA to reassess the Rule in relevant part.

I.

In 2005, Congress amended the Clean Air Act to establish the Renewable Fuel Standard (RFS) Program. See Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594. The RFS Program calls for a gradual shift over time to the use of renewable fuels.

This court recently entertained challenges to EPA's 2018 iteration of its annual regulations implementing the RFS Program. See generally Am. Fuel & Petro. Mfrs. v. EPA , 937 F.3d 559 (D.C. Cir. 2019) ( AFPM 2018 ). Now before the court are challenges to EPA's regulations for the ensuing yearly cycle — the 2019 Rule. Renewable Fuel Standard Program: Standards for 2019 and Biomass-Based Diesel Volume for 2020 , 83 Fed. Reg. 63,704 (Dec. 11, 2018) (2019 Rule). Several of the challenges presented in this case resemble or even match ones raised regarding the 2018 Rule.

Because the description of the statutory and regulatory background for the challenges to EPA's 2018 Rule considered in that case is fully applicable to the challenges we now confront to the 2019 Rule, we repeat AFPM 2018 ’s description of that background here rather than reinvent it:

[T]he [RFS] Program regulates suppliers through "applicable volume[s]"—mandatory and annually increasing quantities of renewable fuels that must be "introduced into commerce in the United States" each year—and tasks the EPA Administrator with "ensur[ing]" that those annual targets are met. 42 U.S.C. § 7545(o)(2)(A)(i). As we explained in Americans for Clean Energy v. EPA , "[b]y requiring upstream market participants ... to introduce increasing volumes of renewable fuel into the transportation fuel supply, Congress intended the Renewable Fuel Program to be a ‘market forcing policy’ that would create ‘demand pressure to increase consumption’ of renewable fuel." 864 F.3d 691, 705 (D.C. Cir. 2017) (first quoting Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017, 80 Fed. Reg. 77,420, 77,423 (Dec. 14, 2015) ; then quoting Monroe Energy, LLC v. EPA , 750 F.3d 909, 917 (D.C. Cir. 2014) ).

The Program specifies annual fuel-volume requirements for four overlapping categories of fuel. The first and broadest category, "renewable fuel," includes any "fuel that is produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel present in" either "a transportation fuel," 42 U.S.C. § 7545(o)(1)(J), or "home heating oil or jet fuel," id . § 7545(o)(1)(A) ; see also Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program, 75 Fed. Reg. 14,670, 14,687 (Mar. 26, 2010) (including "home heating oil" and "jet fuel" within the definition of "renewable fuel"). Next are "advanced biofuel[s]," a subset of the renewable-fuel category defined as any "renewable fuel, other than ethanol derived from corn starch, that has lifecycle greenhouse gas emissions ... at least 50 percent less than" "the average lifecycle greenhouse gas emissions ... for gasoline or diesel" as of 2005. 42 U.S.C. § 7545(o)(1)(B)(i), (C). Lastly, of the fuels falling under the advanced-biofuel umbrella, the Program singles out two in particular: "cellulosic biofuel," a fuel derived from the fibrous parts of plants, see id . § 7545(o)(1)(E), and "biomass-based diesel," a renewable substitute for conventional diesel, see id . §§ 7545(o)(1)(D), 13220(f). Because the definitions of these four fuel categories are "nested," so, too, are their applicable volumes. Ams. for Clean Energy , 864 F.3d at 731. As depicted below, the Program will double- or even triple-count the more specialized fuels, such that one gallon of advanced biofuel simultaneously counts as one gallon of renewable fuel, and one gallon of either cellulosic biofuel or biomass-based diesel also counts as one gallon of both advanced biofuel and renewable fuel.

The Program lists calendar years and corresponding applicable volumes for each type of fuel. These tables run through 2022 for renewable fuel, advanced biofuel, and cellulosic biofuel .... See 42 U.S.C. § 7545(o)(2)(B)(i)(I)–(III) ....

Although the statutory tables initially appear to admit no exception, their applicable volumes in fact provide only starting points. Under certain circumstances, the Program grants the Administrator authority to exercise so-called waivers to reduce applicable volumes below statutory levels. Three waivers are relevant to this case.

The first waiver is mandatory. The Program requires that if in any year "the projected volume of cellulosic biofuel production is less than the minimum applicable volume" set by statute, then "the Administrator shall reduce the applicable volume of cellulosic biofuel ... to the projected volume available during that calendar year." Id . § 7545(o)(7)(D)(i). Put simply, regardless of the applicable volume Congress established in the Program, the EPA may require by regulation no more cellulosic biofuel than the market is projected to provide in any given year.

The second waiver flows from the first. For any year in which the EPA reduces the applicable volume of cellulosic biofuel based on a projected shortfall, "the Administrator may also reduce the applicable volume of renewable fuel and advanced biofuels ... by the same or a lesser volume." Id . Unlike its mandatory cousin, this "cellulosic waiver" is discretionary: if cellulosic biofuel is projected to underperform statutory levels, the Administrator may reduce renewable fuel and advanced biofuel volumes by the entire cellulosic deficit, by some percentage of the shortfall, or by nothing at all. See id .; see also Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards, 78 Fed. Reg. 49,794, 49,810 (Aug. 15, 2013) (interpreting the cellulosic waiver provision "as authorizing [the] EPA to reduce both total renewable fuel and advanced biofuel, by the same amounts, if [the] EPA reduces the volume of cellulosic biofuel"). Because cellulosic biofuel is nested within advanced biofuel, if the Administrator exercises anything less than a full cellulosic waiver, other advanced biofuels will need to make up for the difference.

The last waiver, the so-called general waiver, is also discretionary. It permits the Administrator to "reduc[e] the national quantity of renewable fuel required" by the Program "based on a determination" that any of three circumstances exist: first, "that implementation of the requirement would severely harm the economy ... of a State, a region, or the United States," 42 U.S.C. § 7545(o)(7)(A)(i) ; second, "that implementation of the requirement would severely harm the ... environment of a State, a region, or the United States," id . ; or third, "that there is an inadequate domestic supply," id . § 7545(o)(7)(A)(ii). The Administrator may exercise the general waiver in response to a

...