The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 17, 2010 Decided December 21, 2010
No. 10-1070
NATIONAL PETROCHEMICAL & REFINERS ASSOCIATION ,
PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY ,
RESPONDENT
GROWTH ENERGY AND NATIONAL BIODIESEL BOARD ,
INTERVENORS
Consolidated with No. 10-1071
On Petitions for Review of a Final Action
of the Environmental Protection Agency
Robert A. Long Jr. argued the cause for petitioners. With
him on the briefs were Keith A. Noreika, Mark W. Mosier, James
McCall Smith, Chet Thompson, and Daniel Wolff.
Daniel R. Dertke, Attorney, U.S. Department of Justice,
argued the cause for respondent. With him on the brief was
Robert G. Dreher, Acting Assistant Attorney General.
2
Dan Himmelfarb argued the cause for intervenors. On the
brief were Jerome C. Muys, Jr., Laura Ford Brust, Stuart A.C.
Drake, Jeffrey Bossert Clark, John C. O'Quinn, and William H.
Burgess.
Before: GINSBURG , ROGERS and GARLAND , Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
ROGERS , Circuit Judge: In 2007, Congress enacted the
Energy Independence and Security Act (“the EISA”), Pub. L.
No. 110–140, §§ 201–204, 121 Stat. 1492 (codified as amended
at 42 U.S.C. § 7545(o) (Supp. II 2008)). It expanded the
renewable fuel program under the Energy Policy Act of 2005,
Pub. L. No. 109–58, § 1501, 119 Stat. 594 (codified as amended
at 42 U.S.C. § 7545(o) (Supp. 2006)) (“2005 Act”), which
required that set volumes of renewable fuel be incorporated into
gasoline sold in the United States each year. The EISA increased
the volume requirements for renewable fuel and added new
volume requirements for advanced biofuels, biomass-based
diesel, and cellulosic biofuel. Congress thus sought “[t]o move
the United States toward greater energy independence and
security, to increase the production of clean renewable fuels, to
protect consumers, to increase the efficiency of products,
buildings, and vehicles, to promote research on and deploy
greenhouse gas capture and storage options, and to improve the
energy performance of the Federal Government.” Pub. L. No.
110–140, 121 Stat. 1492 (2007). EPA posted notice of the final
revisions to the regulations promulgated under the 2005 Act on
its website on February 3, 2010 and published the revised
regulations in the Federal Register on March 26, 2010.
Regulation of Fuels and Fuel Additives: Changes to Renewable
Fuel Standard Program, 75 Fed. Reg. 14,670 (Mar. 26, 2010)
(“Final Rule”).
3
Petitioners, the National Petrochemical and Refiners
Association and the American Petroleum Institute, challenge the
Final Rule on three grounds. They contend that it violates
statutory requirements setting separate biomass-based diesel
volume requirements for 2009 and 2010; it is impermissibly
retroactive; and it violates statutory lead time and compliance
provisions. For the following reasons, we deny the petitions for
review.
I.
In 2005 Congress amended section 211 of the Clean Air Act
that authorizes EPA to regulate fuel and fuel additives to
establish a renewable fuel program. See Pub. L. No. 109–58,
§ 1501, 119 Stat. 594 (codified at 42 U.S.C. § 7545(o)). For
each year from 2006 until 2012, Congress specified increasing
minimum volumes of renewable fuel to be used annually. EPA
was directed to promulgate regulations by August 8, 2006 “to
ensure that gasoline sold or introduced into commerce in the
United States . . . , on an annual average basis, contains the
applicable volume of renewable fuel determined in accordance
with subparagraph (B).”1 Subparagraph (B) listed the applicable
volumes of renewable fuel that “shall be determined in
accordance with” a table stating a volume for each calendar
year.2 The regulations were to include a credit trading program
1
42 U.S.C. § 7545(o)(2)(A)(i) (2005 Act).
2
Under the 2005 Act, subparagraph (B) provided:
For the purpose of subparagraph (A), the applicable
volume for any of calendar years 2006 through 2012
shall be determined in accordance with the following
table:
in billions of gallons, 4.0 in 2006; 4.7 in 2007; 5.4 in 2008; 6.1 in
4
under which an obligated party: (1) may generate credits for over
complying with its annual obligation, and can use or trade these
credits for use by another obligated party, allowing an obligated
party to comply in the most cost effective manner, and (2) may
carry over a renewable fuel deficit to the next calendar year.3
“Regardless of the date of promulgation,”4 the regulations were
to contain provisions to “ensure” the requirements of the
renewable fuel program were met, without restricting geographic
areas in which such fuel may be used or imposing any per-gallon
obligation for use of such fuel.5 If the August 8, 2006 date was
not met, then a default percentage standard for 2006 of 2.78
percent would apply.6
2009; 6.8 in 2010; 7.4 in 2011; 7.5 in 2012. 42 U.S.C.
§ 7545(o)(2)(B)(i).
3
42 U.S.C. § 7545(o)(5)(D) (2005 Act). The deficit
carryover provision of the 2005 Act required the regulations to:
allow[] 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.
Id.
4
42 U.S.C. § 7545(o)(2)(A)(iii) (2005 Act).
5
42 U.S.C. § 7545(o)(2)(A)(iii)(I) & (II) (2005 Act).
6
42 U.S.C. § 7545(o)(2)(A)(iv) (2005 Act).
5
Obligated parties — refiners, importers, and certain blenders
of gasoline — had to show that they had introduced a required
volume of renewable fuel into the domestic gasoline pool each
year.7 The volume is determined by multiplying an obligated
party’s actual annual gasoline production in a given year by a
percentage standard to be calculated and published by EPA by
November 30 prior to each compliance year.8 The percentage
standard is the ratio of the statutory volume of renewable fuel for
the particular year to the amount of gasoline that is projected to
be used in the United States in the same year, subject to certain
adjustments.9 Ultimately, each obligated party is responsible for
ensuring that its share of the overall renewable fuel volume
requirement is blended into the gasoline it sells or introduces into
commerce each year.
EPA published the implementing regulations in the Federal
Register on May 1, 2007. Regulation of Fuels and Fuel
Additives: Renewable Fuel Standard Program, 72 Fed. Reg.
23,900 (May 1, 2007) (“RFS1”). The regulations applied to
gasoline produced or imported on or after September 1, 2007.
RFS1, 72 Fed. Reg. at 23,913. As of that date, obligated parties
7
42 U.S.C. § 7545(o)(3)(B)(ii) (2005 Act).
8
The 2005 Act provided, in pertinent part:
Not later than November 30 of each . . . year . . . based on the
estimate provided under subparagraph (A), . . . [EPA] shall
determine and publish in the Federal Register, with respect to
the following calendar year, the renewable fuel obligation that
ensures that the requirements of paragraph (2) are met.
42 U.S.C. § 7545(o)(3)(B)(i).
9
42 U.S.C. § 7545(o)(3)(B)(ii)(II) & (III) (2005 Act); id.
§ 7545(o)(3)(C) (2005 Act).
6
had to be registered and the record-keeping responsibilities
commenced. EPA stated that the renewable fuel program
adopted in the RFS1 rulemaking “will continue to apply after
2012, though some elements may be modified in the rulemaking
setting the standards for 2013 and beyond.” Id. at 23,913. To
facilitate compliance, EPA adopted a system of Renewable
Identification Numbers (“RINs”) for reporting purposes. Id. at
23,908–10. Thus, obligated parties would demonstrate their
compliance with the annual volume standard by acquiring RINs
for each gallon of renewable fuel, which would be assigned to
batches of renewable fuel produced or imported into the United
States, with different fuels carrying different values based on the
energy content relative to ethanol. See id. at 23,909.
When Congress expanded the renewable fuel program in
2007 in the EISA, Pub. L. No. 110–140, §§ 201–204, 121 Stat.
1492, it significantly increased the applicable volumes of
renewable fuel required to be used annually, beginning with
2008 through 2022.10 In other major changes, it expanded the
fuel pool subject to the standards to include diesel and some non-
road fuels.11 It separated the volumes into four categories
(cellulosic biofuel, biomass-based diesel, advanced biofuel, and
total renewable fuel) for purposes of reducing greenhouse gas
emissions and set annual volume requirements for each
10
Subparagraph (B) under the EISA, which retained the
“shall be determined” phrasing in the 2005 Act, supra note 2, listed
the total renewable fuel volume, in billions of gallons, as 9.0 in 2008;
11.1 in 2009; 12.95 in 2010; 13.95 in 2011; 15.2 in 2012; 16.55 in
2013; 18.15 in 2014; 20.5 in 2015; 22.25 in 2016; 24.0 in 2017; 6.0 in
2018; 28.0 in 2019; 30.0 in 2020; 33.0 in 2021; 36.0 in 2022. See 42
U.S.C. § 7545(o)(2)(B)(i)(I).
11
42 U.S.C. § 7545(o)(2)(A)(i); id. § 7545(o)(1)(L).
7
category.12 It also changed the definition of “renewable fuel”
and set the criteria for determining which of the four renewable
fuel categories a given renewable fuel is eligible to meet;
“renewable fuel” was defined to require that such fuel be
produced solely from feedstocks that qualify as “renewable
biomass.”13 Although the definitions of each of the four
categories of fuel overlap to a certain extent (therefore satisfying
one volume requirement also satisfies other volume requirements
in part), refiners, importers and certain blenders of gasoline are
obligated to demonstrate that they have introduced the requisite
volumes of each of the four categories of fuel into transportation
fuel sold annually. The EISA authorized the waiver of the
volume requirements only in limited circumstances.14 The
12
42 U.S.C. § 7545(o)(2)(B).
13
42 U.S.C. § 7545(o)(1)(J).
14
The waiver provision provided, in pertinent part, that, in
general, the EPA Administrator (“EPA”), in consultation with the
Secretaries of the Agriculture and Energy Departments
may waive the requirements of paragraph (2) in whole or in
part . . . by reducing the national quantity of renewable fuel
required under paragraph (2) --
(i) based on a determination by [EPA], after public notice and
opportunity for comment, that implementation of the
requirement would severely harm the economy or
environment of a State, region, or the United States; or
(ii) based on a determination by [EPA], after public notice
and opportunity for comment, that there is an inadequate
domestic supply.
42 U.S.C. § 7545(o)(7)(A). A waiver is good for one year. Id.
§ 7545(o)(7)(C). The waiver provision also provided that the
biomass-based diesel volume requirements may be temporarily
8
revised regulations were to be promulgated in one year, by
December 19, 200815; the requirement that the volume standard
be published by November 30 of the prior year remained
unchanged.
By Notice of November 21, 2008, EPA published the
renewable fuel standard for 2009. See Renewable Fuel Standard
for 2009, Issued Pursuant to Section 211(o) of the Clean Air Act,
73 Fed. Reg. 70,643, 70,643 (Nov. 21, 2008) (“2008 Notice”).
Additionally, the Notice stated, because EPA was not going to
meet the December 19, 2008 deadline for promulging the revised
regulations, that “for the 2009 compliance period regulated
parties will continue to be subject to the existing RFS1
regulations at 40 C.F.R. part 80, Subpart K.” Id. EPA would
apply the modified volume requirements under the EISA to
generate the 2009 standard. See id. The Notice also stated,
because “the RFS1 regulatory structure does not provide a
mechanism for implementing the [new] EISA requirement for
use of 0.5 billion gallons of biomass-based diesel,” id., that the
future rulemaking proposal would “propose options,” id. EPA
reduced “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.” Id.
§ 7545(o)(7)(E)(ii). See also id. § 7545(o)(7)(F).
15
The EISA provided, in pertinent part:
Not later than 1 year after December 19, 2007, [EPA] shall
revise the regulations under this paragraph to ensure that
transportation fuel sold or introduced into commerce in the
United States . . ., on an annual average basis, contains at least
the applicable volume of renewal fuel . . . , determined in
accordance with subparagraph (B) . . . .”
42 U.S.C. § 7545(o)(2)(A)(i).
9
advised that “[t]he primary approach for proposal that [it had]
identified to date would be to increase the 2010 biomass-based
diesel requirement by 0.5 billion gallons and allow 2009
biodiesel and renewable diesel RINs to be used to meet this
combined 2009/2010 requirement.” Id. “Such an approach to
biomass-based diesel,” EPA explained, “would provide a similar
incentive for biomass-based diesel use in 2009 as would have
occurred had [EPA] been able to implement the standard for
2009.” Id. “While obligated parties would not need to
demonstrate compliance with the combined 2009/2010 biomass-
based diesel standard until the end of the 2010 compliance period
under this approach,” EPA advised that “it would behoove them
to acquire the necessary RINs representing biodiesel and
renewable diesel in 2009 in preparation for their 2010
compliance demonstration.” Id.
On May 26, 2009, EPA published a notice of proposed
rulemaking incorporating the EISA’s changes to the renewable
fuel program into a modified regulatory scheme (hereinafter
referred to as RFS2). Regulation of Fuels and Fuel Additives:
Changes to Renewable Fuel Standard Program, 74 Fed. Reg.
24,904 (May 26, 2009) (“NPRM”); see id. at 24,957. EPA stated
that the proposed RFS2 program was based on its experience
with the RFS1 program, “utilizing and building on the same
programmatic structure created to implement the current [RFS1]
program.” Id. at 24,909. Thus, while “[t]he proposed
regulations make a number of changes to the current Renewable
Fuel Standard program,” the RFS2 program would “retain[]
many elements of the compliance and trading system already in
place.” Id. at 24,904. EPA proposed combining the 2009 and
2010 biomass-based diesel statutory volume requirements to
create one 2010 standard, and allowing obligated parties to
demonstrate their compliance with the 2010 biomass-based
diesel standard on February 28, 2011, see id. at 24,959. EPA also
indicated that it would retain the RIN system developed in RFS1,
10
as modified to accommodate the additional renewable fuels and
other changes made in the EISA, see id. at 24,910. This
approach, EPA explained, was “in keeping with [its] overall
intent for RFS1 — to design a flexible and enforceable system
that could continue to operate effectively regardless of the level
of renewable fuel use or market conditions in the transportation
fuel sector.” Id. at 24,909.
The NPRM stated that the revised regulations would take
effect January 1, 2010. Id. at 24,913. EPA advised, however,
that it was unable to promulgate the revised regulations by the
statutory date, December 19, 2008. See id. EPA pointed
specifically to delays caused by “the addition of [the greenhouse
gas] complex lifecycle assessments to the determination of
eligibility of renewable fuels [to meet the standards for the four
fuel categories], the extensive analysis of impacts [being]
conduct[ed] for the higher renewable fuel volumes, the various
complex changes to the regulatory program [relating to the RINs
and IT technology] that require close collaboration with
stakeholders, and various statutory limitations such as . . . a 60
day Congressional review period for all significant action.” Id.16
16
The Congressional Review Act requires a period of 60 days
for congressional review of a “major rule.” 5 U.S.C. § 801(a)(3)
(2006). A “major rule” is defined, as relevant, as any rule that the
Office of Management and Budget finds has resulted in or is likely to
result in--
(A) an annual effect on the economy of $100,000,000 or
more;
(B) a major increase in costs or prices for consumers,
individual industries, Federal, State, or local government
agencies, or geographic regions; or
(C) significant adverse effects on competition, employment,
investment, productivity, innovation, or on the ability of
United States-based enterprises to compete with foreign-based
11
EPA alerted obligated parties, much as it had in the 2008 Notice,
that although “[f]or the remainder of 2009, the current RFS1
regulations would apply,” “in anticipation of the biomass-based
diesel standard proposed for 2010, obligated parties may find it
in their best interest to plan accordingly in 2009.” Id. at 24,908.
EPA promulgated the final revised regulations on February
3, 2010 and posted notice of the 2010 standards on its website
the same day,17 and published the Final Rule in the Federal
Register on March 26, 2010. The Final Rule made few changes
to the NPRM.18 Thus, obligated parties were required to use
enterprises in domestic and export markets.
Id. § 804(2) (2006). The term “rule” has the meaning given in
section 551 with exceptions not relevant here. Id. § 804(3).
17
See EPA Regulatory Announcement: EPA Finalizes
Regulations for the National Renewable Fuel Standard Program for
2010 and Beyond (Feb. 2010),
h ttp ://w w w .ep a.g o v /o m s/ren ew ab lefu els/4 2 0 f1 0 0 0 7 .p d f;
http://www.epa.gov/oms/whatsnew.htm. (Feb. 3, 2010).
18
For example, the Final Rule adjusted the value of the
biomass-based diesel volume requirement “upward by a factor of 1.5,
the Equivalence Value for biodiesel,” to ensure the mandated gallons
were used. Renewable Fuel Standard Program (RFS2) Summary and
Analysis of Comments: Chapter 3, Major Elements of the Program
Required Under EISA 3.6.2 (Feb. 2010). EPA interpreted the EISA
to require the biomass-based diesel volumes be met only with
renewable fuels that displace fossil-based diesel. See id. The
biomass-based diesel standard for 2010 was projected in the NPRM
to be .71%, while it was set in the Final Rule at 1.10%. See NPRM,
74 Fed. Reg. at 24,915; Final Rule, 75 Fed. Reg. at 14,675. EPA
treated the biomass-based diesel volume requirement as a diesel
volume, not an ethanol-equivalent volume (which is the basis for the
equivalence values), and adjusted its percentage standard by a factor
12
1.15 billion gallons of biomass-based diesel based on the
combined volume requirements for 2009/2010, with a deferred
compliance date. The Final Rule also set the final 2010
percentage standards for cellulosic biofuel, advanced biofuel,
and total renewable fuel based on the statutory tables of
applicable volumes for those fuels, in view of available volumes.
75 Fed. Reg. at 14,675. Obligated parties were required to apply
these percentage standards to their 2010 production or
importation of gasoline and diesel fuel to calculate their
renewable volume obligation for 2010. Id. at 14,676. As a
transition measure, obligated parties were allowed to use RINs
generated under the RFS1 program in 2009 and in the first part
of 2010 to meet the 2010 RFS2 renewable volume obligations,
even though these RFS1 RINs may have been generated for fuel
that did not meet the EISA’s new greenhouse gas reduction and
renewable biomass requirements. Id. at 14,723, 724. With
certain limitations, parties also could use 2008 RINs to comply
with the 2010 biomass-based diesel standard.19 Id. at 14,719.
of 1.5 (changing it from .71% to 1.10%). EPA explained in the Final
Rule that “[t]he net result is a biomass-based diesel gallon being worth
1.0 gallons toward the biomass-based diesel standard, but 1.5 gallons
toward the other [fuel] standards.” 75 Fed. Reg. at 14,716. Because
this was the first time a percentage standard was set for biomass-based
diesel and biomass-based diesel continues to be worth 1.5 gallons for
all of the other fuel standards, the Final Rule made no change in
equivalence values for biodiesel from the RFS1 regulations. Further,
because the biomass-based diesel standard changed only to account for
the 1:1 equivalence value, the biomass-based diesel standard in the
Final Rule does not meaningfully differ from the proposed standard in
the NPRM.
19
Under the Final Rule, obligated parties can carryover 57%
of their 2010 obligation. The remaining 43% represents the portion of
that obligation necessary to ensure use of the 2009 applicable volume,
and must be satisfied in 2010. 75 Fed. Reg. 14,719.
13
The compliance date for the combined 2009/2010 volume
requirement was February 28, 2011, the end of the 2010
compliance year. Id. at 14,676. The effective date of the Final
Rule was July 1, 2010, “the start of the first [reporting] quarter
following completion of the statutorily required 60-day
Congressional Review period” for a “major rule.” Id. at
14,675.20
EPA explained in the preamble that, in contrast to the
alternatives proposed by commenters, it had adopted the
combined 2009/2010 approach because it “more closely
represent[ed] what would have occurred if [EPA] had been able
to implement the 0.5 bill[ion] gal[lon] requirement in 2009.” Id.
at 14,719. This was, EPA stated, “a reasonable exercise of [its]
authority under section [7545](o)(2) to issue regulations that
ensure that the volumes for 2009 are ultimately used, even
though [EPA was] unable to issue final regulations prior to the
2009 compliance year.” Id. at 14,718. EPA observed that “the
deficit carryover provision provides a conceptual mechanism for
this approach, since it would have allowed obligated parties to
defer compliance with any or all of the 2009 standards until
2010.” Id. at 14,718. 21
20
See supra note 16.
21
By notice of May 10, 2010, EPA, responding to critical
comments, published a “direct final rule” to amend the RFS2 program
requirements, withdrawing provisions regarding definition of terms,
the technical requirements for generating and coding of RINs and
transactions involving RINs, and the requirements for a fuel to be
considered a biogas for coding purposes. Regulation of Fuels and Fuel
Additives: Modifications to Renewable Fuel Standard Program, 75
Fed. Reg. 37,733, 37,733 (June 30, 2010). Petitioners do not rely on
these changes in challenging the Final Rule.
14
II.
Petitioners contend that the Final Rule violates the clear
statutory mandate in 42 U.S.C. § 7545(o)(2)(B) that the biomass-
based diesel requirement for 2010 “shall” be 0.65 billion gallons
by imposing a combined 2009/2010 requirement of 1.15 billion
gallons. Congress’ use of the word “shall” has a clear meaning,
they maintain, citing Lopez v. Davis, 531 U.S. 230, 241 (2001),
for the proposition that “shall” imposes “discretionless
obligations.” Having missed the statutory deadline of December
19, 2008 by which Congress directed that EPA “shall” publish
the revised regulations for the 2009 requirement, petitioners
conclude that EPA lacked authority to increase the 2010 volume
requirement to include the 2009 volume requirement. In their
view, Congress’ specific directive for 2010 overrides EPA’s
general rulemaking authority, and nothing in the deficit
carryover provision22 suggests that EPA has authority to
carryover a renewable fuel requirement from 2009 into 2010.
Put otherwise by intervenors representing the biodiesel industry
and ethanol producers, petitioners urge that because the EISA
provides that EPA “shall” issue regulations by December 19,
2008 and “shall” publish the renewable volume standard by
November 30 of the prior year, “EPA’s failure to do so requires
it to ignore its obligations under [the EISA] to ensure that the
renewable fuel requirements for 2009 and part of 2010 are
satisfied.” Intvrs.’ Br. 13. EPA offers two responses, pointing
to its mandate under section 7545(o)(2)(A)(i) to “ensure” that “at
least” the statutory volumes are used, and to the reasonableness
of its response to missing the statutory deadlines.
We begin with the text of the statute to determine whether
Congress has spoken directly to the precise issue. See generally
Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 450 (2002);
22
42 U.S.C. § 7545(o)(5)(D); see supra note 3 (2005 Act).
15
Chevron USA v. NRDC, 467 U.S. 837, 842 (1984); Engine Mfrs.
Ass’n v. EPA, 88 F.3d 1075, 1084 (D.C. Cir. 1996). Section
7545(o)(2)(A)(i) provides that EPA
shall promulgate regulations to ensure that
transportation fuel sold or introduced into commerce in
the United States . . . , 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
subparagraph (B) . . . .
42 U.S.C. § 7545(o)(2)(A)(i) (emphasis added). The “ordinary
or natural meaning,” Bailey v. United States, 516 U.S. 137, 145
(1995) (internal citation omitted), of the word “ensure” is “to
make sure, [or] certain,” MERRIAM -WEBSTER’S COLLEGIATE
DICTIONARY 386 (10th ed. 1993). Congress thus delegated
authority to EPA to make certain that the 2009 applicable
volume of each type of renewable fuel is sold or introduced into
commerce. Further, as EPA observes, petitioners’ contention
that Congress has not delegated authority to EPA to use anything
other than the 0.65 billion gallons of biomass-based diesel in
setting the 2010 standard — i.e., that the general authority in
section 7545(o)(2)(A)(i) cannot increase the 2010 statutory
amount set in section 7545(o)(2)(B)(i)(IV) — overlooks the
phrase “at least” and the ambiguity it creates regarding EPA’s
determination of the 2010 standard for biomass-based diesel.23
23
EPA and intervenors also rely on 42 U.S.C.
§ 7545(o)(2)(A)(iii), as amended in 2007, which provides:
Regardless of the date of promulgation, the regulations
promulgated under clause (i) –
(I) shall contain compliance provisions applicable to
refineries, blenders, distributors, and importers, as
16
Petitioners object that EPA is suggesting for the first time on
appeal that the statutory text is ambiguous and, consequently, the
court owes no deference to this post hoc rationale, citing City of
Kansas City v. HUD, 923 F.2d 188, 192 (D.C. Cir. 1991). They
maintain that the statutory text must be interpreted so it does not
conflict with other statutory provisions, see, e.g., Ricci v.
DeStefano, 129 S. Ct. 2658, 2674 (2009), and that the clear text
and statutory structure of the EISA undermine EPA’s position.
They also suggest that the phrase “at least” can “readily” be
interpreted to avoid a conflict with the specific volume
requirements (implicitly appearing to agree that the phrase is
ambiguous) by interpreting “at least” to mean that
“transportation fuel contains no less and no more than the
applicable volume.” Reply Br. 7 (emphasis in original). Further,
they continue, the reference to “subparagraph (B)” in section
7545(o)(2)(A)(i) confirms that the “at least” phrase does not
authorize EPA to disregard the provisions of subparagraph (B),
wherein the “shall” directive is found for the annual volume
requirements. They note that Congress used clear statutory
language in the waiver provision to grant EPA authority to
appropriate, to ensure that the requirements of this
paragraph are met; but
(II) shall not–
(aa) restrict geographic areas in which
renewable fuel may be used; or
(bb) impose any per-gallon obligation for the
use of renewable fuel.
Clause (i), as amended by the EISA, refers to regulations to be
promulgated one year after August 8, 2005 and the revised regulations
to be promulgated not later than one year after December 19, 2007.
Petitioners reply only that EPA properly did not rely on this provision
in promulgating the Final Rule because it does not provide authority
for EPA to increase the 2010 statutory volume of biomass-based
diesel.
17
decrease the statutory volume requirements in particular
circumstances24 but omitted any similar provision to grant EPA
the authority to increase the 2010 biomass-based diesel volume
requirements.
Congress did not state in the EISA what would happen if
EPA failed to meet the statutory deadline for promulgating the
revised renewable fuel regulations on the increased 2009 volume
requirements. Although it had provided in the 2005 Act that a
default standard would apply in 2006 if the initial regulations
were not promulgated by the statutory deadline of August 8,
2006,25 Congress included no similar provision when it expanded
the renewable fuel program in the EISA. Neither did it provide
that the 2009 volume requirements should be forgone if EPA did
not promulgate the revised regulations “by one year,” or
December 19, 2009. Similarly it made no such provision if the
2010 standard deadline was missed. Precedent from the
Supreme Court and this court instructs, however, that where
there are less drastic remedies available for an agency’s failure
to meet a statutory deadline, courts should not assume Congress
intended for the agency to lose its power to act. See, e.g., Brock
v. Pierce County, 476 U.S. 253, 260 (1986). Petitioners’
response, that EPA cannot ignore that the volume requirement
set by Congress for 2010 is 0.65 billion gallons, fails to address
this precedent and is unsupported by the case law.
Contrary to the core of petitioners’ position, 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.” Barnhart v. Peabody
Coal Co., 537 U.S. 149, 158 (2003) (citing Brock, 476 U.S. 253);
24
See supra note 14.
25
See supra note 6.
18
see also Dolan v. United States, 130 S. Ct. 2533, 2538–41
(2010). In Barnhart, the Court held that an initial assignment of
a coal industry retiree eligible for benefits to an operating
company or related entity responsible for funding the benefits
was valid although made after the statutory date by which the
Commissioner of Social Security “shall” make the assignment.
The Court observed that “[i]t misses the point simply to argue
that the [statutory date] was ‘mandatory,’ ‘imperative,’ or a
‘deadline,’ as of course it was, however unrealistic the mandate
may have been.” Id. at 157. Citing Brock, the Court noted that
it had “expressed reluctance ‘to conclude that every failure of an
agency to observe a procedural requirement voids subsequent
agency action, especially when important public rights are at
stake.’” Id. at 158 (quoting Brock, 476 U.S. at 260). The Court
had summarized its position a decade earlier: “‘if a statute does
not specify a consequence for noncompliance with statutory
timing provisions, the federal courts will not in the ordinary
course impose their own coercive sanction.’” Id. at 159 (quoting
United States v. James Daniel Good Real Property, 510 U.S. 43,
63 (1993)). Additionally, the Court noted, the statute at issue
was enacted after Brock was decided, when “Congress was
presumably aware that we do not readily infer congressional
intent to limit an agency’s power to get a mandatory job done
merely from a specification to act by a certain time.” Id. at 160.
The Court found nothing in the statutory text to support the
conclusion that the Commissioner lacked authority to act after
the date passed, and nothing in the structure, purpose, and
legislative history to the contrary. Id. at 161.
Brock, 476 U.S. 253, is both illustrative and instructive. The
Comprehensive Education Training Act (“CETA”) provided that
the Secretary of Labor “shall” issue a final determination as to
the misuse of CETA funds by a grant recipient within 120 days
of receiving a complaint. 29 U.S.C. § 816(b) (Supp.V 1976)
(repealed 1982). Pierce County objected that it was prejudiced
19
when the final determination occurred after 120 days. Upon
examining the statute and its legislative history, the Supreme
Court concluded that Congress did not intend the “somewhat
incongruous result” that the Secretary would lose authority to
recover misspent funds 120 days after learning of the misuse. Id.
at 258. Observing that the harm to the Federal Treasury was “a
matter . . . of interest to every citizen,” id. at 262, the Court
instructed that when “there are less drastic remedies available for
failure to meet a statutory deadline, courts should not assume
that Congress intended the agency to lose its power to act.” Id.
at 260. In explaining its “reluctan[ce] to conclude that every
failure of an agency to observe a procedural requirement voids
subsequent agency action,” id., the Court referred to “‘the great
principle of public policy, applicable to all governments alike,
which forbids that the public interests should be prejudiced by
the negligence of the officers or agents to whose care they are
confided.’” Id. (internal citations omitted). The Supreme Court
applied Brock’s teaching in General Motors Corp. v. United
States, 496 U.S. 530, 542 (1990), upholding EPA’s authority to
bring an enforcement action under the Clean Air Act after the
statutory deadline had passed. Lopez, 531 U.S. at 241, on which
petitioners rely, addresses a different statutory issue and casts no
doubt on this precedent.
In keeping with Supreme Court precedent, this court in
Linemaster Switch Corp. v. EPA, 938 F.2d 1299 (D.C. Cir.
1991), upheld EPA’s listing of hazardous waste sites after the
statutory deadline had passed. See 42 U.S.C. § 9605(c)(1)
(1986). EPA had developed the new hazardous ranking system
(“HRS”) almost 29 months after the statutory deadline. Between
the listing deadline and the effective date of the HRS, EPA added
71 sites to the National Priorities List, using the old HRS criteria.
Observing that the provision imposing the deadline included no
consequences for failure to comply with it, the court declined to
resolve the statutory ambiguity through resort to deference under
20
Chevron, 467 U.S. 837, stating “it would indeed be odd to
conclude that Congress implicitly entrusted a laggard agency
with the authority to devise a remedy for its own untimeliness,”
Linemaster Switch, 938 F.2d at 1303. Instead, the court
determined for itself what Congress would have intended in
enacting a statute “to ensure that an amended [listing] would
‘accurately assess[] the relative degree of risk’” presented by
sites potentially subject to being listed. Id. (internal citation
omitted). The court upheld EPA’s authority to act after the
statutory deadline had passed, looking to the legislative history
that indicated “the strong public interest in EPA’s ongoing
identification of sites for . . . listing, combined with Congress’
accommodation of the private interests potentially harmed by
[inaccurate listings] and its contemplation of citizen suits as a
remedy for EPA non-compliance [with deadlines].” Id.
This precedent from the Supreme Court and our court thus
makes clear that in the face of congressional silence in the EISA
on the effect of EPA’s delay in promulgating the revised
regulations, we should not presume Congress intended EPA
would lose authority to act upon missing statutory deadlines but
must determine, see Barnhart, 537 U.S. at 161, without deferring
to post hoc arguments of counsel, see Motor Vehicle Mfrs. Ass’n
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983), what
Congress would have intended when EPA missed a statutory
deadline in the EISA. The self-evident purpose of the EISA
permits EPA’s action in promulgating the Final Rule in order “to
ensure” the volume of biomass-based diesel required for 2009 is
not forgone. Congress enacted the EISA to expand the
renewable fuel program under the 2005 Act in order “to increase
the production of clean renewable fuels.” Pub. L. No. 110–140,
121 Stat. 1492. It tied this expansion to, among other things, the
nation’s security, see id., a “matter . . . of interest to every
citizen,” as harm to the Federal Treasury was in Brock, 476 U.S.
at 262. See also NPRM, 73 Fed. Reg. at 24,916. By including
21
the authorizing phrase “at least” Congress also signaled its intent
that volumes not be reduced, at least not in the first decade of the
renewable fuel program. The structure of the statute and the
absence of a default standard for 2010 furthermore suggest that
Congress envisioned a smooth transition through the revised
renewable fuel regulations, from the 2005 Act’s renewable fuel
program (RFS1) to the EISA’s expansion of it (RFS2).
Understandably, perhaps, there thus is scant legislative history
for the EISA.
The rulemaking record suggests, moreover, that the
deadlines in the EISA for promulgating the revised regulations
and the 2010 standard were likely unrealistic. See Barnhart, 537
U.S. at 157. The President signed the EISA into law on
December 19, 2007. Final revised regulations were due in a
year. Yet the EISA included several “new, complex provisions.”
NPRM, 74 Fed. Reg. at 24,909. A stated purpose of the EISA
was “to promote research on and deploy greenhouse gas capture
and storage options.” Pub. L. No. 110–140, 121 Stat. 1492.
EPA noted that the provision on the greenhouse gas impact of
renewable fuels required “a comprehensive evaluation of
renewable fuels, as well as of gasoline and diesel, on the basis of
their lifecycle emissions,” NPRM, 74 Fed. Reg. at 24,909,
including “direct and indirect emissions” and “significant
emissions from land use changes,” id. By May 26, 2009, EPA
had conducted its analyses, but because lifecycle analysis was a
new part of the renewable fuel program, EPA determined it
should solicit public and expert comment in addition to the
formal comment period on the proposed rule, and intended to do
so at a forthcoming public workshop and by peer reviews of key
components of its analysis, all before the final rule was adopted.
See id.
Under the circumstances, Congress’ purpose in expanding
the renewable fuel program under the EISA is better served by
22
EPA’s approach in the Final Rule than it would be by forgoing
the 2009 applicable volume requirement as petitioners propose.
Congress required a biomass-based diesel program beginning
January 1, 2009, with a volume mandate of 0.5 billion gallons,
and it directed EPA to “ensure” that volume would be used in
2009. It also directed EPA to “ensure” that “at least” the set
volumes were used each year. EPA’s 2009/2010 solution to
account for its delay reflects Congress’ vision in expanding the
renewable fuel program without rendering nugatory the EISA’s
restrictions on EPA’s authority to revise the volume
requirements as such. See Whitman v. Am. Trucking Ass’ns, 531
U.S. 457, 484–85 (2001). It seems highly unlikely that in 2007
Congress intended in enacting the EISA that EPA’s failure
timely to issue the revised regulations or the 2010 standard
would lead to the drastic and “somewhat incongruous result,”
Brock, 476 U.S. at 258, that petitioners urge, namely precluding
EPA from ensuring that both the 2009 and 2010 applicable
volumes of biomass-based diesel are eventually sold or
introduced into commerce. As EPA suggests, “such a result
seems flatly contrary to Congress’ intent and would turn agency
delay into a windfall for the regulated entities.” Respt.’s Br. 31.
Petitioners’ arguments to the contrary are unpersuasive.
They maintain that nothing in the EISA’s structure indicates
EPA can increase the applicable volume of biomass-based diesel
above 0.65 billion gallons for 2010, and that the grant of express
authority to waive applicable volumes is limited by specific
criteria. But EPA relies not on general structure but on its
express authority under section 7545(o)(2)(A)(i). See 75 Fed.
Reg. at 14,718. Congress mandated EPA to “ensure” that
obligated parties sell or introduce into commerce the 2009
applicable volumes of biomass-based diesel and the only
question is how EPA may exercise that authority when it misses
the statutory deadline for promulgating the implementing
regulations. Nothing in the waiver provision suggests anything
23
negative about EPA’s authority to ensure 2009 applicable
volumes are used, even if EPA acts after the statutory deadline,
a situation not addressed in the waiver provision. Indeed
intervenors suggest that the restrictions in the waiver provision
“reinforce[] how serious Congress was about compliance with
[the EISA’s] annual volume requirements, and further establishes
that EPA could not ignore the 2009 mandate.” Intvrs.’ Br. 20.
Likewise, petitioners’ focus on Congress’ use of the word
“shall” in the tables setting the 2009 and 2010 volumes
overlooks the authority Congress granted to EPA to ensure
compliance with those volumes by providing that EPA ensure
that “at least” the applicable volume is used each year. They
offer no explanation why the same use of “shall” in connection
with the 2009 volume requirement means nothing, while its use
for 2010 means so much.
In urging that by delineating the years in which EPA can
specify an applicable volume “Congress reinforced the
conclusion that EPA is not authorized to disregard Congress’s
specific instruction that [EPA] ‘shall’ impose a 0.65 billion
gallon biomass-based diesel mandate in 2010,” Petrs.’ Br. 25
(emphasis in the original), petitioners create a straw man. EPA
is not asserting authority to establish any applicable volume it
considers appropriate; it disclaimed such authority when that
suggestion was made, see RFS2 Summary and Analysis of
Comments, Section 3.6.2. Rather, EPA incorporated into the
2010 standard the mandated 2009 applicable volume of
renewable fuel that otherwise would not be used.
Petitioners also maintain that the deficit carryover provision,
as a “conceptual mechanism,” 75 Fed. Reg. at 14,718, is not an
express authorization for EPA to combine two years of
applicable volumes. Intervenors suggest this puts form over
substance. EPA, in any event, considered the deficit carryover
24
provision, which generally permits obligated parties to defer
compliance with one year’s obligations to the following year,
only as a model to support by analogy the reasonableness of the
approach it adopted for satisfying the statutory directive to
“ensure” use of the 2009 volumes where the renewable fuel
standard was not published until 2010. See id. By not relying on
the deficit carryover requirements, EPA afforded obligated
parties more time for the 2009/2010 volume in the event they did
not actually purchase and use the required volumes of biodiesel
in 2009. Id. at 14,719. Thus, intervenors note, petitioners are
better off under the Final Rule than they would be had EPA
implemented the EISA’s expanded renewable fuel program on
time. As intervenors suggest, under EPA’s approach the 2010
statutory volume remains 0.65 billion gallons, as EPA merely
postponed the compliance date for the statutory 2009 volume.
The cases on which petitioners rely are inapposite. In
Friends of the Earth, Inc. v. EPA, 446 F.3d 140, 142 (D.C. Cir.
2006), the court held that EPA lacked authority to set seasonal or
annual loads for discharge standards for certain pollutants when
the Clean Water Act mandated “daily” loads. In American
Petroleum Institute v. EPA, 52 F.3d 1113, 1119 (D.C. Cir 1995),
the court similarly held that nothing in the Clean Air Act gave
EPA authority to require a percentage of the oxygen in
reformulated gasoline come from renewable sources. Neither of
these situations is comparable to the instant case where EPA is
following Congress’ direction to “ensure” the mandated fuel
volumes are met. In those cases, unlike here, there was no gap
in the statute for EPA to fill. Petitioners’ reliance on the court’s
observation in NRDC v. Thomas, 805 F.2d 410, 435 (D.C. Cir.
1986), that “two wrongs do not make a right,” thus misses the
mark.
We therefore hold that the EISA authorized EPA to apply in
2010 the volume requirement for biomass-based diesel that
25
Congress established for 2009. Absent Congress’ provision for
a loss of authority as a result of delay, the purpose and structure
of the EISA are contraindications of a congressional intent to
divest EPA of authority to act when it missed, due in part to
carrying out the EISA’s directives, the statutory deadlines for
revising the RFS1 regulations and setting biomass-based diesel
standards for 2009 and 2010.
III.
Petitioners also contend that by imposing renewable fuel
standards that became effective in July 2010 but that apply to
2010 as a whole, the Final Rule is impermissibly retroactive.
They point to the definition of “rule” in the Administrative
Procedure Act as “the whole or a part of an agency statement of
general or particular applicability and future effect,” 5 U.S.C.
§ 551(4) (emphasis added), and to the “deeply rooted”
presumption that “‘the legal effect of conduct should ordinarily
be assessed under the law that existed when the conduct took
place,’” Landgraf v. USI Film Products, 511 U.S. 244, 265
(1994) (internal citation omitted). They note the Supreme
Court’s admonition that “[e]ven where some substantial
justification for retroactive rulemaking is presented, courts
should be reluctant to find such authority absent an express
statutory grant.” Bowen v. Georgetown Univ. Hosp., 488 U.S.
204, 208–09 (1988). EPA responds that, even assuming the
Final Rule has retroactive effects, Congress expressly and
impliedly authorized this result by directing EPA to “ensure”26
the specified renewable fuel volume requirements are sold or
introduced into commerce on an average basis, and also by
requiring EPA to do so “regardless of the date of promulgation”27
26
See supra note 15.
27
See supra note 23.
26
of the necessary implementing regulations. To the extent the
Final Rule may be retroactive, we hold that EPA did not exceed
its authority under the EISA.
A.
In determining whether a statute or regulation has
retroactive effect, the court considers among other things
“whether it would . . . impose new duties with respect to
transactions already completed.” Landgraf, 511 U.S. at 280; see
Boniface v. U.S. Dep’t of Homeland Sec., 613 F.3d 282, 288
(D.C. Cir. 2010). This court has recognized the distinction
between a rule that imposes new sanctions on past conduct,
which is retroactive and invalid unless specifically authorized,
and one that merely “upsets expectations,” which is secondarily
retroactive and invalid only if arbitrary and capricious. See Nat’l
Cable & Telecomms. Ass’n v. FCC, 567 F.3d 659, 670–71 (D.C.
Cir. 2009). Landgraf, on which petitioners rely, makes a similar
distinction for statutes, stating that “[a] statute does not operate
‘retrospectively’ merely because it is applied in a case arising
from conduct antedating the statute’s enactment, . . . or upsets
expectations based in prior law.” 511 U.S. at 269 & 270 n.24
(internal citation omitted).
Petitioners contend that the Final Rule is impermissibly
retroactive because as of July 1, 2010, when the Final Rule
became effective, they were subjected to new duties or
disabilities regarding past transactions when they were required
to obtain RINs to demonstrate their compliance with the four
renewable fuel standards based on their purchase or production
of types of fuel that were finally identified in the Final Rule, see
75 Fed. Reg. at 14,676. They note that although the 2009
renewable fuel standard was (timely) published in the 2008
Notice, 73 Fed. Reg. at 70,644– 45, EPA did not publish separate
standards for biomass-based diesel, advanced biofuels, or
cellulosic biofuels until the NPRM, 74 Fed. Reg. at 24,915, and
27
then adopted some changes with regard to fuel categories in the
Final Rule, 75 Fed. Reg. at 14,675. They maintain that having
until February 28, 2011 to obtain RINs does not cure the
retroactivity problem because “it is the production or importation
of transportation fuel that triggers the obligation [to] accumulate
RINs.” Petrs.’ Br. 19. Consequently, petitioners state, “[p]rior to
the promulgation of the [F]inal [R]ule, obligated parties lacked
certainty regarding what renewable fuels EPA would consider to
be compliant with RFS2 requirements (such as [greenhouse gas]
thresholds established through lifecycle analysis).” Petrs.’ Br.
32. Likewise they “lacked assurance that RINs they might
accumulate prior to the issuance of a final rule would qualify
under the RFS2 program.” Id.
In the preamble, EPA stated that the Final Rule was not
retroactive because its approach was forward looking because
compliance with any new requirements would be determined in
the spring of 2011. It also stated that the Final Rule does “not
change in any way the legal obligations or requirements that
apply prior to [the Final Rule’s] effective date.” 75 Fed. Reg. at
14,676. EPA does not defend this position on appeal, arguing
instead that, assuming there were retroactive effects, it had
authority to engage in retroactive rulemaking.
Intervenors, however, support EPA’s regulatory position
that the Final Rule is not retroactive, at least in a primary sense.
They contend that “[o]bligated parties were fully aware of their
statutory duty to acquire renewable fuels if they participated in
the domestic market in 2009 or 2010,” and “[t]o the extent the
[RFS2] regulations impair the value of past bargains or alter their
future legal effect (which is the crux of [p]etitioners’
retroactivity allegation), they are not ‘retroactive’ within the
meaning of the law that [p]etitioners cite.” Intvrs.’ Br. 25.
Intervenors point out that the 2010 renewable volume
requirements were set by the EISA in 2007, not in the RFS2
28
regulations, and that, contrary to petitioners’ assertion that the
2010 renewable volume obligations create new obligations for
transactions occurring before the Final Rule took effect, the law
as it existed since January 1, 2009 is the RFS1 regulatory
program under the 2005 Act, as amended in 2007 by the EISA.
Retroactivity as defined in Landgraf, as intervenors note,
“turns on ‘the nature and extent of the change in the law and the
degree of connection between the operation of the new rule and
a relevant past event.’” Intvrs.’ Br. 25 (citing 511 U.S. at 270).
The EISA set forth the minimum annual volumes for each year,
identified producers and importers of transportation fuel as
obligated parties subject to those requirements, and defined
transportation fuel to include both gasoline and diesel fuel.28 In
intervenors’ view, petitioners’ objections that their members
“lacked certainty” and “lacked assurance” about the scope of
their obligations under the EISA “all but undoes their
retroactivity theory” because these objections do not show
petitioners lacked notice of their obligations to fulfill the volume
28
Thus, intervenors note,
[e]ven [p]etitioners’ hypothetical fleeting diesel importer –
who imported a million gallons of diesel and quit the business
before the [RFS2] regulations were finalized in 2010 and who
must now acquire some renewable fuels – cannot assert a
legitimate expectation that its transaction would not be subject
to the Renewable Fuel Standard.
Intvrs.’ Br. 26 n.8. See Petrs.’ Br. 33–34. The EISA applied to diesel
importers and “put them on notice of their obligations under the
statute,” the only exceptions to these requirements in 2009 and 2010
being, intervenors note, for small refineries. Intvrs.’ Br. 26 n.8 (citing
42 U.S.C. § 7545(o)(9)). Further, intervenors note, EPA provided
notice and met with the petroleum industry throughout the rulemaking
process. See id. (citing 75 Fed. Reg. at 14,673).
29
mandates. Id. at 27. Indeed, in Landgraf the Supreme Court
suggested that the “familiar considerations of fair notice,
reasonable reliance, and settled expectations offer sound
guidance” on retroactivity. 511 U.S. at 270. Cases like Bowen,
488 U.S. 204, and National Mining Ass’n v. Department of
Labor, 292 F.3d 849 (D.C. Cir. 2002), are distinguishable, as
intervenors point out, as instances in which an agency
“completely reversed the status quo ante.” Intvrs.’ Br. 27.
Intervenors also point to industry comments indicating some
obligated parties in fact began preparing for their 2010
obligations, citing comments by petitioners, Exxon, and
Chevron, and demonstrating that the renewable fuel volume is
“simply a formula (the required volume divided by the amount
of applicable transportation fuel estimated to be sold) that can
easily be estimated by obligated parties.”29 Id. 27–28. To
intervenors, the fact that EPA had “to further define certain
requirements regarding what RINs to purchase,” does not show
the Final Rule is retroactive because “the final renewable volume
obligations are based on obligations previously created by statute
and issuing [standards] without revision prior to November 30 is
not a prerequisite to EPA’s mandate to ensure the entire volumes
are met.” Id. at 28.
In National Cable, the court rejected a retroactivity
challenge to a rule barring cable operators from entering
exclusivity contracts for multi-unit dwellings and forbidding
enforcement of such contracts executed before the rule was
29
See formulas for calculating the percentage standards, EPA
Memorandum on Calculation of the Renewable Fuel Standard for
Gasoline and Diesel (Apr. 30, 2009). Intervenors explain that issuance
of the final renewable fuel standard by November 30 of the prior year
simply allows EPA to rely on the most recent estimates of next year’s
fuel production and use. See 42 U.S.C. § 7545(o)(3)(A); Intvrs.’ Br.
28.
30
adopted. There it was argued that the agency’s decision to apply
its rule to existing contracts amounted to “‘directly retroactive’
action barred by the APA[].” 567 F.3d at 670 (internal citations
omitted). Alternatively, it was argued that the rule had “harmful,
secondarily retroactive effects that the [agency] failed to
consider.” Id. The court was unpersuaded, holding that “the
[agency’s] action has only ‘future effect’ as the APA and our
precedents use that term.” Id. Noting that “[t]he exclusivity ban
purports to alter only the present situation, not ‘the past legal
consequences of past actions,’” the court emphasized that it has
“repeatedly made clear that an agency order that only ‘upsets
expectations based on prior law is not retroactive.’” Id. (internal
citations omitted). The agency action merely “impaired the
future value of past bargains but has not rendered past actions
illegal or otherwise sanctionable.” Id. The court quoted from
Chemical Waste Management v. EPA, 869 F.2d 1526, 1536
(D.C. Cir. 1989), where the court had observed that “[i]t is often
the case that a business will undertake a certain course of
conduct based on the current law, and will then find its
expectations frustrated when the law changes.” 567 F.3d at 670.
In Chemical Waste, the court had further observed that “[t]his
has never been thought to constitute retroactive lawmaking, and
indeed most economic regulation would be unworkable if all
laws disrupting prior expectations were deemed suspect.” 869
F.2d at 1536. By parity of reasoning, the court in National Cable
held that “[s]uch expectations, however legitimate, cannot
furnish a sufficient basis for identifying impermissibly
retroactive rules.” 567 F.3d at 670.
Additionally, intervenors maintain, the Final Rule does not
make past conduct illegal or newly sanctionable for at least two
reasons. First, in the transition from RFS1 to RFS2, EPA
allowed obligated parties “credit for renewable fuel purchased in
2009, and protect[ed] any vested rights in credits (or RINs)
already purchased.” Intvrs.’ Br. 30; see 75 Fed. Reg. at 14,719,
31
724.30 There is no change. As in 2009, EPA determined
obligated parties will continue to receive 1.5 equivalent credits
for each gallon of biodiesel, including biomass-based diesel. See
supra note 18. Petitioners’ claim, then, that under the RFS2
regulations the biodiesel RINs are valued at only 1 gallon of
renewable fuel whereas the 2009 biodiesel RINs were worth 1.5
gallons for each gallon of biodiesel, ignores the equivalence
provided by the biomass-based diesel standard. See supra note
18. Further, EPA applied this same 1.5 credit to the advanced
biofuels requirement, “determining that the 2010 biomass-based
diesel requirement ‘will automatically fulfill the advanced
biofuel standard, given the energy-based Equivalence Values for
biodiesel and renewable diesel.’” Intvrs.’ Br. 30–31 (quoting
Renewable Fuel Standard Program (RFS2) Summary and
Analysis of Comments at 3.6.2); see supra note 18. Second,
30
Petitioner NPRA had commented:
To be fair to companies that relied on EPA’s strongly-
worded advice and to maintain the regulated industry’s
confidence in EPA’s written word, [EPA] needs to preserve
the ability to use prior-year diesel RINs for biomass-based
diesel compliance regardless of how and when the program
finally rolls out. To do otherwise is to strand capital or
operating expense. Companies that followed [EPA’s] advice
should not be punished for acting in good faith. Also at risk
is EPA’s often-used contention that regulated parties know
what is coming and so have time to prepare for compliance in
excess of what is provided between final Agency action and
effective date. If EPA’s written advice in this case cannot be
relied upon, regulated parties cannot possibly be expected to
do any compliance planning until final action is complete.
Comments of the National Petrochemical & Refiners Association on
EPA’s Proposed Changes to the Renewable Fuel Standard Rules at 12
(Sept. 25, 2009) (emphasis in original).
32
although the Final Rule changed EPA’s proposed determination
as to which renewable fuels will qualify for each mandate, “those
determinations apply solely to renewable fuel produced (and thus
purchased) after July 1, 2010,” Intvrs.’ Br. 31 (citing 75 Fed.
Reg. at 14,877), and “all RINs generated in 2010 will be valid
for meeting the 2010 standards,” 75 Fed. Reg. at 14,684.
Petitioners’ contrary suggestion, that the Final Rule “attaches
new consequences to 2009 transactions” by changing the fuels
that qualify to generate RINs, is incorrect. Petrs.’ Br. 35.
Intervenors conclude obligated parties that did not purchase
biodiesel in 2009 (or for the first half of 2010) unreasonably
relied on the assumption that EPA would not require the
biomass-based diesel levels to be met.
Intervenors acknowledge, however, that to the extent
petitioners contend the RFS2 regulations affect their expectations
and the future value of past bargains, their objection is to
secondary retroactivity, see Nat’l Cable, 567 F.3d at 670–71; see
also Bowen, 488 U.S. at 220 (Scalia, J., concurring). Intervenors
respond that this objection is overcome by the reasonableness of
EPA’s approach in the Final Rule.
Petitioners resist categorizing their retroactivity challenge as
confined to secondary retroactivity on two grounds. First,
petitioners reply that “[r]etroactive rules are not limited to those
that render past actions ‘illegal’” but include “laws that impose
new obligations on completed transactions.” Reply Br. 17. They
point, however, only to their hypothetical diesel importer without
claiming that either they or their members include such a
company or disputing intervenors’ analysis of the state of the law
prior to July 1, 2010. See supra note 28. Second, petitioners
point out that the EISA is not self-executing and required
revisions to the RFS1 regulations promulgated under the 2005
Act. This is evident to some extent from the plain text of the
EISA and, indeed, EPA acknowledged that “[w]ith very few
33
exceptions, the new EISA requirements are not effective until
such time as EPA issues final regulations to implement them,”
2008 Notice, 73 Fed. Reg. at 70,643.
It is unnecessary for the court to resolve whether petitioners
have thus shown that the legal obligations for pre-July 1, 2010
production or importation changed to their detriment under the
Final Rule. If petitioners are correct that as of July 1, 2010 they
were subject to new duties or disabilities regarding past
transactions, any primary retroactive effects were implicitly
authorized under the EISA and EPA reasonably balanced any
retroactive effects against the benefits of applying the RFS2
regulations to the full calendar year.
B.
In Sierra Club v. Whitman, 285 F.3d 63, 68 (D.C. Cir.
2002), this court observed that although “[t]he relevant
provisions of the Clean Air Act contain no language suggesting
that Congress intended to give EPA the unusual ability to
implement rules retroactively,” “[t]here may be an exception for
situations in which the ‘statute prescribes a deadline by which
particular rules must be in effect’ and the ‘agency misses that
deadline.’” The internal quotation was to Mr. Justice Scalia’s
concurring opinion in Bowen, 488 U.S. at 224–25, which
observed additionally that the retroactivity must be “reasonable.”
Id. at 224. This court has “treat[ed] Justice Scalia’s concurring
opinion as substantially authoritative, though noting that ‘[t]he
Bowen majority . . . neither embraced nor rejected Justice
Scalia’s view.’” Celtronix Telemetry, Inc. v. FCC, 272 F.3d 585,
588 (D.C. Cir. 2001) (citing and quoting Bergerco Canada v.
U.S. Treasury Dep’t, 129 F.3d 189, 192–93 (D.C. Cir. 1997)).
The court in Sierra Club concluded that retroactive application
would not be reasonable because “[r]etroactive relief would
likely impose large costs on the States . . . even though they were
34
not on notice at the time.” 285 F.3d at 68. A contrary
conclusion is warranted in the instant case.
EPA had clear albeit implicit authority under the EISA to
apply both the 2009 and 2010 volume requirements in the 2010
calendar year in order to achieve the statutory purpose. The
structure of the EISA demonstrates that Congress anticipated the
possibility of some retroactive impacts in the first year of the
expanded renewable fuel program. Cf. Bowen, 488 U.S. at
209–11. Congress set volume requirements for the entire
calendar year even though that year’s renewable fuel standard
was not required to be in place until November 30 of the prior
year and the revised regulations were not required to be in place
until December 19, 2008. Thus, even if the 2009 renewable fuel
standard was in place by November 30, 2008 and the revised
regulations had been promulgated by December 19, 2008, the
final rule would not have been effective until completion of the
60-day Congressional Review period for a major rule, see supra
note 16, at the earliest February 18, 2009, one and one-half
months into the calendar year. Yet the revised regulations would
have applied to all of an obligated party’s production or
importation of gasoline or diesel fuel in the 2009 calendar year.
As Congress structured the EISA, then, Congress knew that
in the first year of the expanded renewable fuel standard there
could be one and one-half months of retroactive effect from the
effective date of the revised regulations. In initially establishing
the renewable fuel program Congress was explicitly aware EPA
might miss a statutory deadline for promulgating regulations.
The 2005 Act set an August 8, 2006 deadline but directed that
those regulations would apply to the entire year, regardless of
when the regulations were issued31; further, that if EPA did not
promulgate regulations by that date, then the default renewable
31
See supra note 4.
35
fuel standard would apply for all of 2006.32 The absence of a
comparable default provision in the EISA appears explained by
the fact that Congress was expanding an existing renewable fuel
program and EPA could, as it did, leave in place the RFS1
regulatory program, adjusting it to incorporate the 2009 volume
requirement, until the revised regulations under the EISA (i.e.,
RFS2) were finalized. See 2008 Notice, 73 Fed. Reg. at 70,643.
EPA points to section 7545(o)(2)(A)(iii), supra note 23, and that
provision indicates as well Congress’ focus on ensuring the
annual volume requirement was met regardless of EPA delay.
The Final Rule adopts the same approach: putting the 2009/2010
volume requirements in place at the earliest date notwithstanding
agency delay.
Furthermore, unlike in Whitman, 285 F.3d at 68, the effect
of the Final Rule’s retroactivity does not make “the situation
worse,” id., for the obligated parties had ample notice that they
would need to accumulate RINs to meet the 2010 standards.
Long before the Final Rule was published in the Federal Register
on March 26, 2010, the 2008 Notice alerted obligated parties to
EPA’s likely approach of increasing the 2010 obligation and
allowing 2009 RINs to be counted in meeting that obligation,
and advised that it “would behoove [obligated parties] to acquire
the necessary RINs . . . in 2009 in preparation for their 2010
compliance demonstration.” 73 Fed. Reg. at 70,643. Similar
advice was included in the NPRM when the 2009/2010 approach
was formally proposed. 74 Fed. Reg. at 24,908. Obligated
parties had actual notice of the 2010 standards when they were
posted on EPA’s website on February 3, 2010. See NPRA
Responds to New Renewable Fuel Standard Guidance for 2010
and Beyond (Feb. 3, 2010); API Statement on RFS2
Announcement (Feb. 3, 2010). EPA found that renewable fuel
producers and importers continued to generate RINs between
32
See supra note 6.
36
January 1 and July 1, 2010 for fuels qualifying as renewable
fuels under the RFS1 program. 75 Fed. Reg. at 14,676. Under
the Final Rule, these RINs are available for purchase and can be
used to demonstrate compliance with the 2010 standard, id., and
so obligated parties are able to purchase RINs towards
compliance with their 2010 obligations during the entire calendar
year. And with one limited exception, obligated parties can carry
over a deficit from 2010 into 2011, and they have until February
28, 2011 to demonstrate their compliance with the 2010
standards. See 75 Fed. Reg. at 14,719; supra note 19.
C.
Petitioners respond that the court cannot uphold the Final
Rule based on EPA’s post hoc rationalization that it is
permissibly retroactive, as opposed to not being retroactive at all.
Although petitioners do not seek a remand of the Final Rule,
their position presents the question whether a remand is required.
See State Farm, 463 U.S. at 43. During oral argument counsel
for EPA suggested a remand is not required because the question
whether the Final Rule was impermissibly retroactive is a legal
question for the court to decide and does not involve a policy or
judgment entrusted to EPA by Congress. Oral Argument at
40:50. But in State Farm, the Supreme Court, citing SEC v.
Chenery Corp., 332 U.S. 194, 196 (1947), adopted the same
approach in a rulemaking as in an adjudication to the extent it
rejected the view that the court could supply reasons for the
agency’s action that the agency has not given. 436 U.S. at 43.
In the initial Chenery decision, the Supreme Court instructed that
when Congress has delegated “a determination of policy or
judgment which the agency alone is authorized to make and
which it has not made, a judicial judgment cannot be made to do
service for an administrative judgment.” SEC v. Chenery Corp.,
318 U.S. 80, 88 (1943) (emphasis added). It follows that
although it is for the court to decide the legal question presented
by petitioners’ retroactivity challenge to the Final Rule, the
37
agency had to grapple with the question, given its delay, in
reaching its determination about how it would apply the revised
regulations promulgated pursuant to the EISA. “[T]he courts
may not accept appellate counsel’s post hoc rationalizations for
agency action.” State Farm, 463 U.S. at 50.
We reject petitioners’ position, however, because it is based
upon the false premise that EPA did not “consider whether the
strong considerations that weigh against adopting retroactive
rules would justify a different course than it chose.” Reply Br.
18. The rulemaking record demonstrates that, in rejecting
obligated parties’ concerns about possible retroactive effects,
EPA has fulfilled its obligation “to consider the relative benefits
and burdens,” National Cable, 567 F.3d at 671, in concluding
that applying the RFS2 standard to the entire 2010 calendar year
was the course “clearly . . . most consistent with [the] EISA’s
requirement of four different volume mandates for all of calendar
year 2010,” 75 Fed. Reg. at 14,676.
First, EPA concluded that there was adequate lead time. “To
facilitate the volume obligations being based on the full year’s
gasoline and diesel production, and to enable the smooth
transition,” the revised regulations provided that RINs “that were
generated under the RFS1 regulations will continue to be valid
for compliance with the RFS2 obligations.” 75 Fed. Reg. at
14,675. Obligated parties also would have “two months after the
end of the calendar year,” until February 28, 2011, to
demonstrate compliance with their volume obligations. Id. at
14,676. EPA noted that there was an adequate supply of RINs
available, and that having the transition from the RFS1
regulatory program occur on July 1, 2010, the start of the first
quarter following completion of the statutorily required 60–day
Congressional Review period, would simplify recordkeeping and
reporting transitions to the RFS2 regulations. Id. at 14,675.
EPA observed that obligated parties comply by obtaining the
38
appropriate number of RINs from producers of renewable fuel,
which is a matter of contract or other arrangements with
renewable fuel producers or other holders of RINs. See id. at
14,676. They do not need lead time for construction or
investment purposes; they are not changing the way they produce
gasoline or diesel; they do not need to design or install new
equipment, or take other actions that require longer lead time. Id.
Although EPA had endorsed a delayed effective date for the
initial renewable fuel program, when the regulatory system was
new and time was needed to put in place the RIN tracking system
and train staff, see RFS1, 72 Fed. Reg. at 23,913, EPA noted that
now “[o]bligated parties . . . have experience implementing
RFS1 and the actions needed to comply [with RFS2] are a
continuation of these kinds of RFS1 activities.” 75 Fed. Reg. at
14,676.
Second, EPA concluded that obligated parties “have
received adequate notice of this obligation,” id., referencing the
NPRM, EPA’s “discussions with many stakeholders during the
rulemaking,” and publication of the Final Rule in the Federal
Register. Id. In reaching its conclusion, EPA also took into
consideration what was required for the re-registration process
of RINs for 2010 and IT systems changes that would be
necessary. See id.
Third, EPA considered other approaches and found them
problematic. In the NPRM, EPA sought comments on different
effective dates and reduction of the total renewable fuel standard
for 2010. See 74 Fed. Reg. at 24,956. Upon consideration of the
alternatives suggested by refiners and producers — from
delaying the effective date to 2011 to using an interim rule for
2009 — EPA concluded these approaches would create
“significant legal and policy issues” without meeting the volume
mandates at the earliest time. 75 Fed. Reg. at 14,718–19. For
example, the suggestion for an interim rule that put in place a
39
new volume requirement without also putting in place the
EISA’s new definition of biomass-based diesel renewable fuel
and renewable biomass would have required a new proposal with
public notice and time for public comment, making it unlikely
any interim rule could have affected biodiesel demand in 2009.
See id. Further, EPA explained, resources applied to the interim
rule would have been unavailable for development of the final
RFS2 rulemaking and undermined EPA’s ability to complete the
RFS2 program in time for its implementation in 2010. See id. at
14,719.
Because EPA balanced the benefits and the burdens
attendant to its approach, and considered the suggested
alternatives, a remand would serve no purpose. See NLRB v.
Wyman-Gordon Co., 394 U.S. 759, 765 n.6 (1969); Nat’l
Mining Ass’n v. U.S. Dep’t of Interior, 251 F.3d 1007, 1014
(D.C. Cir. 2001); see also Mass. Trustees of E. Gas & Fuel, 377
U.S. 235, 247 (1964). EPA has already adequately examined the
claimed retroactive effects of the Final Rule in determining how
best to carry out Congress’ mandate that it “ensure” the
applicable volume requirement for 2009 is met.
IV.
In what petitioners term the “leadtime” issue, they contend
that in order to give obligated parties the time specified by
Congress to comply with the RFS2 regulations, “if the rules take
effect on July 1, 2010, they must be issued by June 17, and
cannot apply to transactions completed before July 1.” Reply Br.
28. Petitioners note that EPA delayed publication of RFS2
regulations and the 2010 standard in the Federal Register until
March 26, 2010, but imposed obligations on transactions
beginning January 1, 2010. There is no meaningful difference
between this contention, however, and petitioners’ contention
that the Final Rule is impermissibly retroactive.
40
Lastly, petitioners contended in their opening brief that the
credit and deficit carryover provisions require EPA to give
petitioners “the full statutory compliance period of one year to
fulfill each year’s volume obligations.” Petrs.’ Br. 39. On reply
petitioners retreat to the position that “EPA ignore[d] the option
. . . of providing a shorter period of time to comply with a
proportionally reduced obligation, such as six months to comply
with 50 percent of the annual obligation.” Reply Br. 28. The
cited provisions merely limit the duration of the credits obligated
parties may generate and establish conditions for carrying
forward deficits. The rulemaking shows EPA considered other
options and rejected them. In any event, the obligated parties
represented by petitioners were given more than a year to comply
with the Final Rule — from at least February 3, 2010, when
notice of the 2010 standards in the Final Rule was posted on
EPA’s website and petitioners issued press releases indicating
familiarity with the Final Rule, until February 28, 2011, when
they will need to show that they have complied with the RFS2
regulations for 2010 — and no provision in the EISA requires
EPA to create a “proportionally reduced obligation.”
Accordingly, we deny the petitions for review.