Monroe Energy, LLC v. Environmental Protection Agency

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 7, 2014 Decided May 6, 2014

No. 13-1265

MONROE ENERGY, LLC,

PETITIONER

v.

ENVIRONMENTAL PROTECTION AGENCY,

RESPONDENT

PBF HOLDING COMPANY LLC, ET AL.,

INTERVENORS

Consolidated with 13-1267, 13-1268

On Petitions for Review of Final Agency Action of

the United States Environmental Protection Agency

David W. DeBruin argued the cause for petitioner Monroe

Energy, LLC. With him on the briefs were Marc A. Goldman and

Matthew E. Price.

Robert A. Long Jr. argued the cause for petitioners American

Petroleum Institute and American Fuel & Petrochemical

Manufacturers. With him on the briefs were Kristen E.

Eichensehr, Harry M. Ng, Chet M. Thompson, Robert Meyers,

2

David Y. Chung, and Richard Moskowitz.

Bart E. Cassidy, Katherine L. Vaccaro, and Bryan P. Franny

were on the brief for petitioner-intervenor PBF Holding Company

LLC in support of petitioner.

Lisa M. Bell and Brian H. Lynk, Attorneys, U.S. Department

of Justice, argued the causes for respondent. With them on the

brief was Robert G. Dreher, Acting Assistant Attorney General.

Jessica O'Donnell, Attorney, entered an appearance.

David B. Salmons argued the cause for respondent-

intervenors. With him on the brief were John C. O'Quinn,

William H. Burgess, Sandra P. Franco, and Bryan M. Killian.

Before: ROGERS, GRIFFITH and PILLARD, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: The petition for review challenges

the 2013 Renewable Fuel Standards issued pursuant to section

211(o) of the Clean Air Act, 42 U.S.C. § 7545(o). See

Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel

Standards, 78 Fed. Reg. 49,794 (Aug. 15, 2013) (“Final Rule”).

These standards are part of Congress’ effort “[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.” Energy Independence

and Security Act of 2007, Pub. L. No. 110-140, 121 Stat. 1492

(2007); see also Am. Petroleum Inst. v. EPA, 706 F.3d 474, 479

(D.C. Cir. 2013). Monroe Energy LLC, joined by intervenor

PBF Holding Company LLC, another independent petroleum

refiner, contends that the rule must be vacated because EPA

3

declined to reduce the total renewable fuel volume, failed to

address a malfunction of the credit system, and failed to

promulgate the standards until more than eight months after the

statutory deadline had passed. For the following reasons, we

deny the petition for review.1

I.

The Renewable Fuel Standards (“RFS”) program was

established by Congress in the Energy Policy Act of 2005, Pub.

L. No. 109-58, 119 Stat. 594 (2005). It mandates the gradual

introduction of renewable fuels into the U.S. supply of gasoline,

diesel, and other transportation fuels. As amended in the Energy

Independence and Security Act of 2007, Pub. L. No. 110-140,

121 Stat. 1492 (2007), the program requires an “applicable

volume” of total renewable fuel to be sold or introduced into

U.S. commerce each year. See 42 U.S.C. § 7545(o)(2)(B)(i).

The volumes increase progressively through 2022; thereafter,

EPA, rather than Congress, will set the applicable volumes. See

id. § 7545(o)(2)(A)(i), 7545(o)(2)(B)(i). From each year’s

applicable volume of total renewable fuel, a certain volume must

consist of “advanced biofuel,” see id. § 7545(o)(1)(B),

7545(o)(2)(B)(i)(II), and this advanced biofuel quota must be

met using specified minimum volumes of “cellulosic biofuel”

and “biomass-based diesel” from among the various types of

advanced biofuels, see id. § 7545(o)(1)(D)–(E),

1

By post-argument motion of April 11, 2014, petitioners

American Petroleum Institute and American Fuel & Petrochemical

Manufacturers moved to sever their remaining challenges to the Final

Rule, for lack of notice of EPA’s use of updated EIA information and

approval of a small refinery exemption. EPA joined the motion. The

court deconsolidates case Nos. 13-1267& 13-1268, and holds them in

abeyance; this panel will retain these consolidated petitions for any

further proceedings.

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7545(o)(2)(B)(i)(III)–(IV). Annual “applicable volumes” are

prescribed for four categories of fuel: total renewable fuel,

advanced biofuel, biomass-based diesel, and cellulosic biofuel.

See id. § 7545(o)(2)(A)(i). These categories are “nested”:

biomass-based diesel and cellulosic biofuel count toward the

applicable volume for advanced biofuel, and advanced biofuel

counts toward the applicable volume for total renewable fuel.

The obligation to meet the applicable volumes falls

collectively to “refineries, blenders, and importers, as

appropriate.” 42 U.S.C. § 7545(o)(3)(B)(ii)(I). EPA determined

in 2007, and reaffirmed in 2010, that blenders “who only blend[]

renewable fuels downstream from the refinery or importer” are

exempt from the requirements, leaving refiners and importers as

the primary obligated parties under the RFS program. See

Regulation of Fuels and Fuel Additives: Renewable Fuel

Standard Program, 72 Fed. Reg. 23,900, 23,924 (May 1, 2007)

(“2007 RFS”); Regulation of Fuels and Fuel Additives:

Changes to Renewable Fuel Standard Program, 75 Fed. Reg.

14,670, 14,722 (Mar. 26, 2010) (“2010 RFS”). Pursuant to EPA

regulations, refiners and importers must demonstrate that they

have introduced into U.S. commerce an amount of renewable

fuel that is proportional to their import or production of

conventional fuel. See 40 C.F.R. § 80.1405(c). EPA determines

the required proportion on an annual basis by dividing the

statutory applicable volumes by the country’s projected non-

renewable gasoline and diesel use in the compliance year. See

id. The result is a percentage standard informing each obligated

party how much of its fuel production must consist of renewable

fuels. For example, if the projected non-renewable gasoline and

diesel use for a given year is 100 billion gallons and the

applicable volume of renewable fuel is 15 billion gallons, the

percentage standard will be 15 percent; a refiner that will

produce 20 billion gallons of non-renewable fuel must ensure it

also introduces an additional 15 percent of that amount (3 billion

5

gallons) of renewable fuel into U.S. commerce.

To afford obligated parties a degree of compliance

flexibility, Congress also required a credit trading program be

established whereby a party that produces more than the

required quantity of renewable fuels can generate credits for the

excess and use them, or transfer all or a part to another person,

for purposes of compliance. See 42 U.S.C. § 7545(o)(5). The

credits are valid to show compliance for “the 12 months as of

the date of generation.” Id. § 7545(o)(5)(C). Under the

regulations, see 40 C.F.R. § 80.1415, 80.1426(e), each batch of

renewable fuel that is produced or imported for use in the U.S.

is assigned a set of “Renewable Identification Numbers”

(“RINs”) that correspond to the volume of ethanol-equivalent

fuel gallons in that batch. (The per-gallon energy content varies

among different types of fuels; all fuel volumes in this opinion

are denoted in ethanol-equivalent gallons.) When a blender or

obligated party blends renewable fuel into conventional fuel, the

RINs from the blended renewable batch are deemed “separated”

and may be traded in the market. See id. § 80.1426(e),

80.1429(b). Obligated parties must demonstrate their

compliance with the renewable fuel standards by “retiring” RINs

in an annual compliance demonstration. See id. § 80.1427(a).

Prior to this demonstration, parties that have accumulated excess

RINs may sell theirs to other parties, while obligated parties that

have not generated sufficient RINs through their own activities

may seek to purchase them. See id. § 80.1425–29. A party may

also “bank” some of its RINs for use in the subsequent

compliance year; up to 20 percent of a party’s annual

compliance obligation may be satisfied using such “carryover”

RINs. See id. § 80.1427(a)(1), 80.1427(a)(5). Carryover RINs

that are not so used will expire and become useless. See id.

§ 80.1427(a)(6).

6

In addition to allowing a deficit to be carried forward for

one year under certain circumstances, see 42 U.S.C.

§ 7545(o)(5)(D), and addressing effects of seasonal variation,

see id. § 7545(o)(6), Congress authorized EPA to waive the

applicable volumes, in consultation with the Secretaries of

Agriculture and Energy, after notice and comment, when

“implementation of the requirement would severely harm the

economy or environment,” id. § 7545(o)(7)(A)(i), or “there is an

inadequate domestic supply,” id. § 7545(o)(7)(A)(ii). Of

particular relevance here, when the actual production of

cellulosic biofuel will fall short of the statutory quota, EPA is

required to adjust the applicable volume of cellulosic biofuel to

the “projected volume available during that calendar year.” Id.

§ 7545(o)(7)(D)(i). If EPA reduces the applicable volume of

cellulosic biofuel, then it “may also reduce” the required

amounts of advanced biofuel and total renewable fuel “by the

same or a lesser volume,” but is not required to do so. Id.

(emphasis added). Because the cellulosic biofuel industry has

not developed as rapidly as Congress expected, EPA had to

reduce the cellulosic biofuel quota in 2010, 2011, and 2012;

EPA did not, however, exercise its discretion to reduce the

advanced biofuel and total renewable fuel quotas in those years.

See generally 2010 RFS, 75 Fed. Reg. 14,670; Regulation of

Fuels and Fuel Additives: 2011 Renewable Fuel Standards, 75

Fed. Reg. 76,790 (Dec. 9, 2010) (“2011 RFS”); Regulation of

Fuels and Fuel Additives: 2012 Renewable Fuel Standards, 77

Fed. Reg. 1320 (Jan. 9, 2012) (“2012 RFS”).

In the proposed rule for 2013, EPA stated its intent to

reduce the applicable volume of cellulosic biofuel from 1 billion

gallons to 14 million gallons due to low anticipated production,

but not to reduce the advanced biofuel and total renewable fuel

quotas. See Regulation of Fuels and Fuel Additives: 2013

Renewable Fuel Standards, 78 Fed. Reg. 9282, 9285, 9295,

9301 (Feb. 7, 2013) (“NPRM”). Recognizing, however, that

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there were “various uncertainties” in its projections and

estimations, EPA requested comment on “whether and to what

extent a reduction is warranted” and “whether the blendwall

presents any difficulty in terms of compliance with the RFS

volume requirements in 2013.” Id. at 9286, 9301. EPA

acknowledged stakeholders’ concerns that the statutory quotas

for total renewable fuel will become infeasible due to an

infrastructure and market-related constraint on ethanol demand

known as the “E10 blendwall.” See id. at 9301. (This

blendwall arises because most U.S. vehicle engines were not

designed to handle gasoline consisting of more than 10 percent

ethanol; exceeding that limit will void the engines’ warranties.)

Given that most renewable fuel in the U.S. is corn ethanol and

that the applicable volumes for renewable fuel are increasing

each year while total gasoline consumption is flat or declining,

some suggested that the RFS program may soon require

obligated parties to sell more renewable fuel than the U.S.

market can absorb. Although many commenters supported the

proposed standards, the petroleum industry commented that the

standards were unrealistic and economically damaging,

Comments of American Fuel & Petrochemical Manufacturers at

2–3 (Apr. 8, 2013), and urged EPA to reduce the cellulosic

biofuel quota even further than was proposed, noting that in

February 2013 the Energy Information Administration (“EIA”)

had “lowered [its] estimate” of cellulosic biofuel production, id.

at 10. The national trade association also urged EPA to “waive

the entire RFS” or “at a minimum,” to “reduce the advanced and

total [applicable] volume[s] so that the quantity of ethanol

mandated is less than 10% of gasoline demand,” id. at 2,

pointing to a steep increase in RIN prices as evidence that the

E10 blendwall had been reached, see id. at 4.

EPA maintained the statutorily mandated volume for total

renewable fuel in the Final Rule but made other adjustments,

including further reducing the applicable volume for cellulosic

8

biofuel from 14 million gallons to 6 million gallons in light of

updated information from the producing companies and EIA.

See 78 Fed. Reg. at 49,803. Based on updated EIA information,

EPA also revised downward its projection of total gasoline and

diesel use in 2013, which had the effect of slightly increasing the

renewable fuel standards. See id. at 49,825 n.76, 49,826. EPA

further adjusted the renewable fuel standards to account for a

small refinery exemption that had been granted after publication

of the proposed rule. See id. at 49,825–26. And, in light of the

issuance of the Final Rule past the statutory deadline, EPA

extended the 2013 compliance demonstration deadline to June

30, 2014. See id. at 49,799–800, 49,823. Monroe Energy

petitions for review and PBF Holding Company intervenes in

support.

II.

Monroe Energy contends that EPA acted arbitrarily when

it declined to exercise its discretion to reduce the 2013

applicable volume for total renewable fuel, thereby requiring use

of more renewable fuel than the economy can absorb given the

E10 blendwall. Moreover, Monroe Energy maintains, EPA’s

decision imposes substantial and disproportionate costs on

independent refiners without serving any statutory purposes.

Additionally, it contends the consequences of EPA’s “irrational”

rule, Monroe Energy Pet’r’s Br. 12, are aggravated by EPA’s

tardiness in issuing the Final Rule after the statutory deadline

had passed, depriving parties of the opportunity to adjust their

production levels or else choose to export. Our standard of

review is established under 42 U.S.C. § 7607(d)(9). See also

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto Ins. Co., 463

U.S. 29, 43 (1983); Nat’l Shooting Sports Found., Inc. v. Jones,

716 F.3d 200, 214 (D.C. Cir. 2013).

9

A.

As a threshold matter, we address a challenge to Monroe

Energy’s standing under Article III of the Constitution.

Respondent-intervenors — National Biodiesel Board,

Biotechnology Industry Organization, Growth Energy, and

Renewable Fuels Association — maintain that Monroe Energy’s

“brief makes clear that its claimed injury is the result of actions

by third parties in response to economic and regulatory

incentives — such as ‘banking’ or ‘hoarding’ RINs, or offering

them at prices Monroe finds undesirable.” Resp’t-Intv’nrs’ Br.

13 (citations omitted). They maintain that Monroe Energy

cannot show causation or redressability because its theories

depend on speculation about how third parties might react to

different regulatory incentives.

The cases on which respondent-intervenors rely, such as

Simon v. Eastern Kentucky Welfare Rights Organization, 426

U.S. 26, 40–46 (1976), and Allen v. Wright, 468 U.S. 737,

757–59 (1984), are not dispositive because they did not involve

parties who were the direct objects of the government actions

being challenged. See Simon, 426 U.S. at 42–43; Allen, 468

U.S. at 746, 757. Here, Monroe Energy is contesting its own

compliance obligations under the RFS program as implemented

in the Final Rule. See Int’l Fabricare Inst. v. EPA, 972 F.2d

384, 390 (D.C. Cir. 1992). Congress has established a

renewable fuel program that includes a credit trading program

for the benefit of obligated parties like Monroe Energy. Not

only must Monroe Energy meet renewable fuel requirements

subject to penalties for noncompliance, see 42 U.S.C.

§§ 7545(d), 7524(b)–(c), respondent-intervenors acknowledge

that Monroe Energy “must submit RINs to demonstrate

compliance,” Resp’t-Intv’nrs’ Br. 13. Whether RIN prices are

high or low, and whether third parties play a role in determining

those prices, is irrelevant to Monroe Energy’s standing so long

as RINs cost something. The more rigorous the fuel standards,

10

the more RINs Monroe Energy will have to purchase.

Because the financial burden of purchasing RINs is a

cognizable injury-in-fact, and it is fairly traceable to the 2013

fuel standards and remediable by vacatur of the Final Rule, see

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992), we

hold that Monroe Energy has Article III standing to challenge

the Final Rule.

B.

Turning to the merits, the Clean Air Act provides that if

EPA reduces the cellulosic biofuel requirement, as it did here,

then it “may also reduce” the advanced biofuel and total

renewable fuel quotas “by the same or a lesser volume.” 42

U.S.C. § 7545(o)(7)(D)(i). There is no requirement to reduce

these latter quotas, nor does the statute prescribe any factors that

EPA must consider in making its decision. See id. In the

absence of any express or implied statutory directive to consider

particular factors, EPA reasonably concluded that it enjoys

broad discretion regarding whether and in what circumstances

to reduce the advanced biofuel and total renewable fuel volumes

under the cellulosic biofuel waiver provision. “[W]hen a statute

is silent with respect to all potentially relevant factors, it is

eminently reasonable to conclude that the silence is meant to

convey nothing more than a refusal to tie the agency’s hands.”

Catawba Cnty., N.C. v. EPA, 571 F.3d 20, 37 (D.C. Cir. 2009)

(quotation marks and alterations omitted); see also Entergy

Corp. v. Riverkeeper, Inc., 129 S. Ct. 1498, 1508 (2009);

Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S.

837, 843 (1984).

EPA exercised its waiver discretion in a reasonable manner,

focusing on “the availability of renewable fuels that would

qualify as advanced biofuel and renewable fuel, the ability of

those fuels to be consumed, and carryover RINs from 2012.”

11

Final Rule, 78 Fed. Reg. at 49,797. EPA first determined that

although production of cellulosic biofuel would be much lower

than the statutory volume, the resulting shortfall in the advanced

biofuel category could be made up using other types of

advanced biofuel, particularly biomass-based diesel and

imported sugarcane ethanol. See id.; see also id. at 49,812–20.

This conclusion was supported by substantial evidence,

including production estimates for biomass-based diesel,

consideration of incentives produced by the reinstatement of the

biodiesel tax credit, and an analysis of sugarcane ethanol trade

with Brazil. See id. at 49,812–20. EPA reasonably decided that

because the advanced biofuel quota could be achieved, the quota

did not need to be reduced.

EPA next considered whether the total renewable fuel quota

could also be met, taking into account the constraints imposed

by the E10 blendwall. See id. at 49,820–22. Specifically, EPA

estimated the volumes of ethanol and non-ethanol renewable

fuel that could be used to satisfy the statutory requirement. See

id. at 49,820. EPA concluded, based on conservative

assumptions that were likely to “overstate the volume of ethanol

that would have to be consumed,” that 14.5 billion gallons of

ethanol consumption would be necessary. Id. at 49,820–21.

EPA acknowledged this figure was 1.4 billion gallons in excess

of the projected blendwall; in other words, 1.4 billion gallons

more than the consumer market would likely absorb. See id. at

49,821. EPA nevertheless concluded that an adjustment to the

statutory volume for total renewable fuel was unnecessary

because, in addition to the fact that these estimates represented

an improbable worst case scenario, there were also more than

enough carryover 2012 RINs in the market to enable obligated

parties to demonstrate compliance. See id. at 49,821, 49,823.

Indeed, the number of carryover RINs — more than 2.6 billion

— was almost double the amount needed, even in the most

pessimistic scenario. See id.

12

Intervenor PBF Holding Company lodges a statutory

challenge to EPA’s refusal to reduce the fuel quotas,

maintaining that EPA was “unambiguously” required under 42

U.S.C. § 7545(o)(7)(D)(i) to look solely at the projected

volumes of advanced biofuel and total renewable fuel that could

be consumed in 2013 — not at other factors such as the

existence of carryover RINs. This contention is meritless. As

noted, the cellulosic biofuel waiver provision identifies no

factors that EPA must or may not consider when making its

decision; in light of that statutory silence, EPA was entitled to

conclude, as it did, that it had wide latitude to consider a range

of factors as appropriate. See, e.g., Catawba Cnty., 571 F.3d at

37. To the extent PBF Holding Company alternatively contends

that EPA “did not clearly identify” the factors it considered,

Pet’r-Intv’nr’s Br. 29, that argument is beyond the scope of the

issues raised by petitioners, see Nat’l Ass’n of Regulatory Util.

Comm’rs v. ICC, 41 F.3d 721, 729 (D.C. Cir. 1994), and so not

properly before the court.

Intervenor PBF Holding Company contends as well that

EPA’s consideration of 2012 carryover RINs is unreasonable

because it “undermines the flexibility that Congress sought to

preserve to obligated parties” through the RIN-trading system.

Pet’r-Intv’nr’s Br. 34. EPA explained, however, that “carryover

RINs are a valid compliance mechanism” and a means for

obligated parties to “protect[] against any potential supply

shortfalls that could limit the availability of RINs.” Final Rule,

78 Fed. Reg. at 49,822 (emphasis added). Further, EPA noted

it was logical to assume that 2012 carryover RINs would be

used for compliance in 2013 because otherwise they would

expire and become useless. See id. EPA reasonably concluded

that “the availability of carryover RINs [wa]s certainly relevant”

to its decision whether to reduce the volume requirement for

total renewable fuel. Id.

13

Monroe Energy’s contention that EPA’s decision to

maintain the statutory volume for total renewable fuel is

arbitrary because it does not serve “any statutory purpose,”

Monroe Energy Pet’r’s Br. 14, also lacks merit. In the Final

Rule, EPA identified several ways in which preservation of the

requirement helps “ensure” that U.S. transportation fuel

“contains at least the applicable volume[s]” prescribed in the

statute. 42 U.S.C. § 7545(o)(2)(A)(i) (emphasis added). For

example, maintaining the requirement would create “demand

pressure” to increase consumption of E85 (a higher-ethanol

blend of gasoline), which would in turn effectively ‘raise’ the

blendwall. Final Rule, 78 Fed. Reg. at 49,821. Additionally,

even assuming that the E10 blendwall imposes a firm cap on

ethanol consumption, maintaining the statutory requirement for

total renewable fuel would promote the use of non-ethanol

renewable fuels such as biodiesel. See id. at 49,822.

Respondent-intervenors point out that “[t]he volumes provide an

incentive for continued investment and innovation,” which “in

turn, leads to reduced petroleum emissions and increased energy

security benefits.” Resp’t-Intv’nrs’ Br. 18.

Nor does Monroe Energy’s contention that EPA wrongfully

failed to consider an “important aspect of the problem,” namely,

obligated parties’ incentive to bank 2013 RINs, Monroe Energy

Reply Br. 5 (quoting State Farm, 463 U.S. at 43), withstand

scrutiny. Although “EPA determined that 2.6 billion RINs have

been carried over from 2012 into 2013,” Monroe Energy

maintains that “an even greater number of RINs — at least three

billion — can be carried over from 2013 to 2014.” Monroe

Energy Pet’r’s Br. 15. As a result, it claims that “the market will

be 1.8 billion RINs short of what is needed for parties to comply

in 2013, even after counting every banked 2012 RIN.” Id. at 16.

In its view, EPA analyzed only “one side of the equation,” Oral

Arg. 00:41–43, considering the carry-over of RINs from the

prior year, but ignoring the carry-over of RINs into the

14

subsequent year.

In the Final Rule, EPA considered the likelihood that “those

who own carryover RINs may opt to not sell them, instead

carrying them over to help assure compliance with their own

obligations in a future year.” Final Rule, 78 Fed. Reg. at 49,822.

EPA acknowledged that it was not possible to “determine what

fraction of carryover RINs may fall into this category.” Id.

Nevertheless, even with parties’ incentive to bank 2013 RINs,

EPA concluded that “the blendwall w[ould] [not] represent an

impediment to compliance in 2013 due to the availability of

carryover RINs from 2012, opportunities for some increase in

consumption of E85, and opportunities for non-ethanol

biofuels.” Id. at 49,823. EPA’s reference to “those who own

carryover RINs,” id. at 49,822, could reasonably be understood

in context to mean those who own 2013 RINs and would carry

them over for use in 2014. Although EPA’s analysis was not as

robust at it might have been, the court “will uphold a decision of

less than ideal clarity if the agency’s path may reasonably be

discerned.” Bowman Transp. v. Arkansas-Best Freight Sys.,

Inc., 419 U.S. 281, 286 (1974). Two aspects of EPA’s

discussion bear out that it adequately considered the RIN-

banking phenomenon of concern to Monroe Energy.

First, EPA recognized that obligated parties have “various

alternative methods to comply” with the standards besides

blending ethanol as E10. Final Rule, 78 Fed. Reg. at 49,822.

For example, EPA explained that “there is unused biodiesel

production capacity and sufficient feedstocks available to permit

biodiesel production in excess of [the applicable volume] if

demand for it exists.” Id.; see also id. at 49,820. Because

biodiesel is different from ethanol, its use is not limited by the

E10 blendwall. EPA stated that “[a]s of February 2013, the

aggregate production capacity of registered biodiesel plants in

the U.S. was [approximately 4.2] bill[ion] gal[lons] per year

15

across 171 facilities” and that “[t]he biodiesel industry has

demonstrated that it can increase production quickly under

appropriate circumstances.” Id. at 49,813. Moreover, EPA

observed that the recent reinstatement of the biodiesel tax credit

was expected to provide an “additional incentive to produce and

consume biodiesel volumes in excess of” the required amount.

Id. Respondent-intervenors note that EPA’s projections were

borne out: biodiesel RIN generation in 2013 totaled over 2.71

billion gallons, nearly 800 million higher than EPA’s

conservative estimate had assumed. See Resp’t-Intv’nrs’ Br. 21

n.12.2 The magnitude of the purported RIN deficit is therefore

not as large as Monroe now contends. See Monroe Energy

Pet’r’s Br. 16.

Second, recognizing the multi-year character of RIN-

banking decisions, EPA postponed the 2013 compliance

deadline until after the announcement of the 2014 fuel standards.

See Final Rule, 78 Fed. Reg. at 49,823. EPA concluded (and

Monroe Energy does not dispute) that the “primary driver”

behind rising RIN prices was “anticipation of future scarcity.”

Id. at 49,822 (emphasis added). Indeed, Monroe Energy agrees

with EPA that “[p]arties[] [were] apprehensi[ve] that, going

forward, EPA would require them to demonstrate compliance

with volume requirements that could not be achieved[.]”

Monroe Energy Reply Br. 3 (emphasis added). To that extent,

then, the complained-of RIN scarcity depends as much on what

EPA might require in 2014 as it does on the challenged 2013

standards. The 2014 requirements determine the number of

2013 RINs that may be banked, as well as whether reliance on

banked RINs will be necessary (as opposed to merely helpful)

for compliance with obligations in 2014. If it were known that

2

2013 RFS2 DATA: RIN GENERATION SUMMARY,

http://www.epa.gov/otaq/fuels/rfsdata/2013emts.htm (last visited Apr.

17, 2014).

16

2013 carryover RINs would not be needed for compliance in

2014, many of those carryover RINs would presumably become

available for sale. EPA observed that “[k]nowledge of the

volume requirements for 2014 is crucial to the strategies that

obligated parties may implement when purchasing RINs and wet

gallons of fuel for compliance with their individual 2013

[renewable volume obligations].” Final Rule, 78 Fed. Reg. at

49,823; cf. 2007 RFS, 72 Fed. Reg. at 23,903. EPA could

reasonably conclude that sufficient RINs would be available for

compliance in 2013 because EPA intended, before the 2013

compliance deadline, “to establish [2014] volume requirements

that are reasonably attainable.” Final Rule, 78 Fed. Reg. at

49,823 (emphasis added). These 2014 requirements would

reflect “adjustments . . . to both the advanced biofuel and total

renewable fuel categories” and would embody a “reasonable

path forward that appropriately addresses the blendwall and

other constraints.” Id. In fact, EPA followed through on these

commitments, proposing to reduce the 2014 applicable volumes

for advanced biofuel and total renewable fuel in light of “both

availability of qualifying renewable fuels and constraints on

their consumption.” 2014 Standards for the Renewable Fuel

Standard Program, 78 Fed. Reg. 71,732, 71,734, 71,737 (Nov.

29, 2013). Of course, the price of 2013 RINs might still be

higher than Monroe Energy would prefer, because the owners of

RINs might wish to rely on them to preserve compliance

flexibility in the next year. But so long as sufficient RINs exist

for obligated parties to meet the fuel standards, the court has no

ground to conclude the 2013 standards are unlawful simply

because RINs are costlier than in prior years, especially as high

RIN prices should, in theory, incentivize precisely the sorts of

technology and infrastructure investments and fuel supply

diversification that the RFS program was intended to promote.

Still, Monroe Energy maintains that “even if compliance

were feasible,” EPA’s rule imposes disproportionate hardship on

17

independent refiners, “who must acquire their RINs on the

secondary market, and who therefore must pay . . . high and

unpredictable prices for every RIN they need.” Monroe Energy

Pet’r’s Br. 17–18. To the extent Monroe Energy contends that

EPA could have eliminated the asserted “disproportionate”

hardship on independent refiners by placing compliance

obligations on blenders rather than on refiners and importers,

that challenge is not properly before the court. It was not at

issue in this rulemaking, and because the decision to place

compliance obligations on importers and refiners, rather than

blenders, was reaffirmed in 2010, see 2010 RFS, 75 Fed. Reg.

at 14,722, the time to challenge that decision has passed, see 42

U.S.C. § 7607(b)(1); Am. Road & Transp. Builders Ass’n v.

EPA, 588 F.3d 1109, 1115 (D.C. Cir. 2009); Motor & Equip.

Mfrs. Ass’n v. Nichols, 142 F.3d 449, 460 (D.C. Cir. 1998).

C.

Monroe Energy also seeks vacatur of the Final Rule because

it was untimely issued. Section 211(o) required the 2013

renewable fuel standards to be issued no later than November

30, 2012, see 42 U.S.C. § 7545(o)(3)(B)(i), but EPA missed this

deadline by many months. Monroe Energy therefore contends

that EPA lacked authority to promulgate the 2013 standards and

then to apply those standards “retroactively” to the entire

compliance year. Even if EPA had such authority, Monroe

Energy contends, alternatively, EPA exercised its authority

unreasonably. Neither contention is persuasive.

In National Petrochemical & Refiners Ass’n v. EPA, 630

F.3d 145 (D.C. Cir. 2010), the court resolved the question of

EPA’s authority when EPA missed the statutory deadline for

formally announcing the annual renewable fuel standards.

There the national trade association challenged the 2010 RFS on

grounds that missing the deadline divested EPA of authority to

issue the fuel standards, and, alternatively, that the rule was

18

“impermissibly retroactive” and “violate[d] statutory lead time

and compliance provisions.” Id. at 147, 152. The court held

that EPA had not forfeited its authority to promulgate the

challenged standards, id. at 158, applying the well-established

principle 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,” id. at 154 (citing Brock v. Pierce Cnty., 476 U.S. 253,

260 (1986)). In section 211(o), Congress “directed EPA to

‘ensure’ that ‘at least’ the set volumes [of renewable fuel] were

used each year,” id. at 156; in light of that directive, and

considering the overall statutory scheme and legislative history,

the court concluded that it was “highly unlikely that . . .

Congress intended . . . that EPA’s failure timely to issue the . . .

2010 standard would lead to the drastic and somewhat

incongruous result” of precluding EPA from fulfilling its

statutory mandate, id. at 156–57 (quotation marks and citation

omitted). The court also rejected the trade association’s

“retroactivity” challenge, holding that “any . . . retroactive

effects were implicitly authorized under the [statute] and EPA

reasonably balanced any retroactive effects against the benefits

of applying the [fuel standard] regulations to the full calendar

year.” Id. at 162. The court dismissed the “lead-time” challenge

as having no “meaningful difference” from the retroactivity

challenge. Id. at 166.

Attempting to distinguish National Petrochemical, Monroe

Energy points to the court’s statement that “Congress anticipated

the possibility of some retroactive impacts in the first year of the

renewable fuel program.” Id. at 163 (emphasis added). This

disregards the broader issue before the court, namely,

“Congress’ focus on ensuring the annual volume requirement

was met regardless of EPA delay.” Id. That congressional

“focus” is no less compelling here, notwithstanding Monroe

Energy’s contention, and so compels the same outcome. Indeed,

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the “retroactivity” label may somewhat overstate the issue. See

id. at 162. The statute set the renewable fuel obligation, and

Monroe Energy had no legally settled expectation that EPA

would exercise its waiver authority to reduce that obligation.

See NRPM, 78 Fed. Reg. at 9295. Further, EPA finalized its

standards during the compliance year, well before the

compliance demonstration deadline, so the rule did not change

the legal effect of a completed course of conduct. Cf. Landgraf

v. USI Film Prods., 511 U.S. 244, 280 (1994).

Alternatively, Monroe Energy contends that even if EPA

had authority to act as it did here, EPA failed to exercise that

authority in a reasonable manner. EPA acknowledged the

lateness of the Final Rule and considered various ways to

minimize the hardship caused to obligated parties, ultimately

concluding that the best way to balance obligated parties’

interest in regulatory certainty with EPA’s statutory obligation

to ensure the renewable fuel volumes are annually met was to

extend the compliance demonstration deadline by four months

to June 30, 2014. See Final Rule, 78 Fed. Reg. at

49,799–49,800, 49,823. Because EPA “anticipate[d] issuing a

final rule establishing the 2014 RFS standards as soon as

possible before that date,” the extension was designed to give

obligated parties an opportunity “to take their 2014 obligations

into consideration as they determine how to utilize RINs for

2013 compliance.” Id. at 49,800.

Monroe Energy’s position that EPA should have waived the

2013 standards altogether because obligated parties needed

advance notice in order to “make informed business decisions

that w[ould] affect their compliance obligations,” such as

deciding “whether to reduce production of blendstock” and

“whether to sell blendstock domestically . . . or export it,”

Monroe Energy Pet’r’s Br. 25, ignores salient facts. Obligated

parties had long been aware of the applicable volumes

20

prescribed in the statute. See 42 U.S.C. § 7545(o)(2)(B)(i).

They could readily have estimated their respective obligations

using the EIA’s October 2012 projections of fuel production and

consumption. See NPRM, 78 Fed. Reg. at 9286 n.4. The only

major point of uncertainty was whether EPA would reduce any

of the applicable volumes pursuant to its waiver authority, and

that uncertainty was eliminated when EPA stated in February

2013 that it was “not proposing to reduce the required volumes

of advanced biofuel and total renewable fuel for 2013.” Id. at

9295. Moreover, EPA counsel suggested that the delays in 2010

and 2013 arose because EPA was addressing “novel policy

issues,” whereas in the other years the final standards were

promulgated on time or within weeks of the statutory deadline.

Oral Arg. 35:52–37:40. All told, EPA’s decision to preserve the

2013 fuel standards while extending the compliance deadline to

June 30, 2014 was reasonable. Cf. Nat’l Petrochem., 630 F.3d

at 162–63.

Accordingly, we deny Monroe Energy’s petition for review.