Friday, January 25, 2013

CADC overturns EPA's cellulosic biofuel mandate

The case is American Petroleum Institute v. U.S. Environmental Protection Agency, 12-1139

The Bloomberg story noted the mandate was 8.65 million gallons of cellulosic ethanol in 2012, [but] the actual U.S. production was 20,000 gallons -- and those were exported to Brazil.

Also in the Bloomberg story:

As a result of the ruling and uncertainty, investments in the nascent industry may fall, said Michael Frohlich, a spokesman for Growth Energy, which represents ethanol producers.

“It dampens any future investment, and creates a further level of vulnerability,” Frohlich said.

The judicial decision addressed the failure in EPA's predictions:

Intervenors’ invocation of Medical Waste is inapt. Here, unlike in Medical Waste, the petitioner attacks a methodology used for prediction, which can look more arbitrary the longer it is applied. The reasonableness of adopting a predictive methodology is not the same as the reasonableness of maintaining one in the face of experience; considering whether to maintain a methodology necessarily invites reflection on the success of earlier applications. API’s challenge to the 2012 RFS rule rests significantly on the complete failure of EPA’s prediction for 2011: 6.6 million gallons, as against zero in reality. See Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards, 75 Fed. Reg. 76,790, 76,793 (Dec. 9, 2010); EPA, Fuels and Fuel Additives, 2011 RFS2 Data, We agree with API that the 2011 failure colors the rationality of EPA’s decision to persist in 2012 and sheds light on the weight EPA gave to specific aspects of its approach. Accordingly we find API’s petition timely.

The court noted:

Viewed in this light, the most natural reading of the provision is to call for a projection that aims at accuracy, not at deliberately indulging a greater risk of overshooting than undershooting. Although as EPA notes the Act allows an obligated entity to carry over a deficit in renewable fuel purchases into the following year, see 42 U.S.C. § 7545(o)(5)(D); 40 C.F.R. § 80.1427(b)(1), that simply makes the controlling unit of time two years rather than one— hardly long enough to sharply reduce the risk of a penalty. As reflected in the chart, supra at 8, history suggests the opposite conclusion: a refiner forced to carry a deficit in 2010, when EPA projected five million gallons of cellulosic biofuel yet none was produced, would not have found relief in 2011, when the agency predicted 6.6 million and actual production was again zero.

The conclusion:

For the reasons set out above, we reject API’s challenge to EPA’s refusal to lower the applicable volume of advanced biofuels for 2012. However, we agree with API that EPA’s 2012 projection of cellulosic biofuel production was in excess of the agency’s statutory authority. We accordingly vacate that aspect of the 2012 RFS rule and remand for further proceedings consistent with this opinion.

UPDATE. From Biofuels groups downplay ruling’s impact on investment

“We are glad the court has put a stop to EPA’s pattern of setting impossible mandates for a biofuel that does not even exist. This absurd mandate acts as a stealth tax on gasoline with no environmental benefit that could have ultimately burdened consumers,” API Group Downstream Director Bob Greco said in a Friday statement.
Bad drafting of thought?


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