Sinclair Wyoming Refining Co. v. Envtl. Prot. Agency

101 F.4th 871

SINCLAIR WYOMING REFINING COMPANY LLC and Sinclair Casper Refining Company LLC, Appellants v. ENVIRONMENTAL PROTECTION AGENCY, Appellee American Petroleum Institute, et al., Intervenors

No. 22-1210

Consolidated with 22-1225

22-1227

22-1228

22-1229

22-1230

22-1231

United States Court of Appeals, District of Columbia Circuit

Argued November 3, 2023

Decided May 14, 2024

On Petitions for Review of a Final Action of the Environmental Protection Agency

Elizabeth B. Dawson and Jeffrey R. Holmstead argued the causes for petitioners American Fuel & Petrochemical Manufacturers and All Other Obligated Party Petitioners. With them on the briefs were Rober J. Meyers, Jonathan G. Hardin, LeAnn Johnson, Alexandra Magill Bromer, Brittany M. Pemberton, Richard S. Moskowitz, Tyler J. Kubik, Samuel P. Hershey, Thomas E. Lauria, and Andrew K. Gershenfeld. Thomas A. Lorenzen, Taylor R. Pullins, Eric B. Wolff, and Karl J. Worsham entered appearances.

William C. Perdue argued the cause for BioFuels Petitioners. With him on the briefs were Matthew W. Morrison, Cynthia Cook Robertson, Shelby L. Dyl, Ethan G. Shenkman, and Jonathan S. Martel.

Amir C. Tayrani was on the brief for amici curiae Monroe Energy, LLC and PBF Holding Company, LLC in support of Obligated Party Petitioners.

Kimere J. Kimball and Caitlin McCusker, Attorneys, U.S. Department of Justice, argued the causes for respondent. With them on the brief was Todd Kim, Assistant Attorney General. John H. Martin, Attorney, entered an appearance.

Thomas R. Brugato argued the cause for intervenors American Petroleum Institute and American Fuel & Petrochemical Manufacturers in support of respondent. With him on the brief were Robert J. Meyers, Elizabeth B. Dawson, Richard S. Moskowitz, Tyler Kubik, Robert A. Long, Jr., Kevin F. King, Daniel G. Randolph, Makade C. Claypool, John Wagner, and Michele Schoeppe.

Bryan Killian, Douglas Hastings, David M. Lehn, Matthew W. Morrison, and Shelby L. Dyl were on the brief for BioFuel Intervenors in support of respondents. Jonathan S. Martel entered an appearance.

Before: Srinivasan, Chief Judge, Pillard and Katsas, Circuit Judges.

Opinion concurring in part and dissenting in part filed by Circuit Judge Katsas.

Pillard, Circuit Judge:

This is the latest dispute over EPA's implementation of the Clean Air Act's Renewable Fuel Standards Program. 42 U.S.C. § 7545(o). Designed to promote energy independence and curb greenhouse gas emissions, the Program requires the petroleum industry to introduce increasing volumes of renewable fuel from year to year into the nation's transportation fuel supply. In creating the Program, however, Congress dramatically overestimated the speed at which domestic production of renewable fuel could expand, leading EPA year after year to reduce the statutorily required renewable fuel requirements. These reductions almost invariably trigger litigation. The renewable fuel industry argues the reductions are too large, while the petroleum industry argues they are not large enough. We have resolved challenges to the Program's renewable fuel requirements for every year between 2010 and 2019.¹

Today, we resolve challenges to the standards for the years 2020, 2021, and 2022. Once again, renewable fuel producers claim that EPA's standards are set too low, while petroleum refiners contend they are too high. We hold that EPA complied with the law and reasonably exercised its discretion in setting the renewable fuel requirements for the three years at issue. We therefore deny the petitions for review.

BACKGROUND

A.

Enacted in 2005 and amended in 2007, the Renewable Fuel Standards Program (Program) "requires that increasing volumes of renewable fuel be introduced into the Nation's supply of transportation fuel each year." Ams. for Clean Energy v. EPA (ACE), 864 F.3d 691, 697 (D.C. Cir. 2017). "To accomplish these goals, the 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." Am. Fuel & Petrochem. Mfr. v. EPA (AFPM), 937 F.3d 559, 568 (D.C. Cir. 2019) (quoting 42 U.S.C. § 7545(o)(2)(A)(i)). "[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." Id. (internal quotation marks omitted).

We have extensively described the statutory scheme in various opinions, most recently in American Fuel & Petrochemical Manufacturers, 937 F.3d at 568-73. Here is a more streamlined summary:

"The Program specifies annual fuel-volume requirements for four overlapping categories of fuel." Id. at 568. Those categories are: (i) cellulosic biofuel; (ii) biomass-based diesel; (iii) advanced biofuel; and (iv) total renewable fuel. 42 U.S.C. § 7545(o)(2)(B)(i)(I)-(IV). "Those four fuel categories vary with respect to the renewable biomass sources from which they are derived and their greenhouse gas emissions." ACE, 864 F.3d at 697 (citing 42 U.S.C. § 7545(o)(1)(B), (D), (E), (J)). "The statutory categories of fuel types are 'nested,' meaning that cellulosic biofuel and biomass-based diesel are kinds of advanced biofuel, and advanced biofuel in turn is a kind of renewable fuel that may be credited toward the total renewable fuel obligation." Id. at 697-98. Renewable fuel that is not advanced biofuel is "conventional biofuel." 42 U.S.C. § 7545(o)(1)(F). By the same token, we refer to advanced biofuel that is not cellulosic biofuel—including biomass-based diesel—as non-cellulosic advanced biofuel. The volumes of total renewable fuel and advanced biofuel that may respectively be made up of conventional renewable fuel and non-cellulosic advanced biofuel are referred to as "implied statutory volume[s]." See, e.g., Renewable Fuel Standard Program: RFS Annual Rules, 87 Fed. Reg. 39,600, 39,623 n.127 (July 1, 2022).

"The statute contains tables that set forth the annual volume requirements for each category of renewable fuel." ACE, 864 F.3d at 698. For 2006, the first year of the Program, "Congress ordained the inclusion of 4 billion gallons of renewable fuel in the Nation's fuel supply." HollyFrontier Cheyenne Refin., LLC v. Renewable Fuels Ass'n, 594 U.S. 382, 141 S. Ct. 2172, 2175, 210 L.Ed.2d 547 (2021) (citing 42 U.S.C. § 7545(o)(2)(B)(i)(I)). By 2022, that number was supposed to "climb to 36 billion gallons," including 21 billion gallons of advanced biofuel, 16 billion gallons of which were to be cellulosic biofuel. Id.; 42 U.S.C. § 7545(o)(2)(B)(i)(II), (III). The 2022 volumes also contain implied statutory volumes of 15 billion gallons of conventional biofuel and five billion gallons of non-cellulosic advanced biofuel. The statute does not set the requisite amounts for years after 2022 (or, in the case of biomass-based diesel, 2012). Congress instead "largely left it to [EPA] to set the applicable volumes." HollyFrontier, 141 S. Ct. at 2175. EPA must do so "based on a review of the implementation of the program during" previous years and "an analysis of" six other factors, such as the fuel's effect on "the environment," "energy security," "infrastructure," and "cost to consumers." 42 U.S.C. § 7545(o)(B)(ii).

These statutory volumes, however, have consistently proven infeasible. The volumes for cellulosic biofuel in particular "assumed significant innovation in the industry"—innovation that has not kept pace with the growth the Program projected. See Am. Petroleum Inst. v. EPA, 706 F.3d 474, 476 (D.C. Cir. 2013).

Recognizing its market forcing might prove overly ambitious, Congress authorized EPA to adjust the statutory volumes in various scenarios. See 42 U.S.C. § 7545(o)(7). Two such provisions are relevant to this case. The first is the cellulosic waiver provision, which requires EPA to reduce the cellulosic volume to the "projected volume" of available cellulosic biofuel for any year in which the "projected volume of cellulosic biofuel production is less than the minimum applicable [i.e., required] volume" of cellulosic biofuel. Id. § 7545(o)(7)(D). If that waiver is triggered, EPA "may also reduce the applicable volume of renewable fuel and advanced biofuels requirement ... by the same or lesser amount." Id. EPA has invoked the cellulosic waiver provision in every year since 2010.

The second relevant source of adjustment authority is the reset provision. Id. § 7545(o)(7)(F). Under this provision, if EPA waives at least 20 percent of an applicable volume of any renewable fuel for two consecutive years, or waives at least 50 percent for a single year, it "shall promulgate a rule ... that modifies the applicable volumes ... for all years following the final year to which the waiver applies." Id. In promulgating such a rule, EPA must consider the same factors that inform its ordinary volume-setting decisions. Id.

After the applicable volumes are set, EPA must "ensure" they "are met." Id. § 7545(o)(3)(B)(i). It does so by setting percentage standards that inform "each obligated party how much of its fuel production must consist of renewable fuels." Monroe Energy, LLC v. EPA, 750 F.3d 909, 912 (D.C. Cir. 2014). They are calculated by dividing the applicable volume for each renewable fuel type by an estimate of the national volume of gasoline and diesel that will be used that year (which EPA derives based on an estimate provided by the Energy Information Administration). See 42 U.S.C. § 7545(o)(3)(A), (B)(i); 40 C.F.R. § 80.1405(c). For example, if the applicable volume of total renewable fuel is 10 billion gallons and the projected national volume of transportation fuel is 100 billion gallons, the percentage standard would be ten percent. "Thus, if every obligated party incorporates the required...