The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 3, 2023 Decided May 14, 2024
No. 22-1210
SINCLAIR WYOMING REFINING COMPANY LLC AND SINCLAIR
CASPER REFINING COMPANY LLC,
APPELLANTS
v.
ENVIRONMENTAL PROTECTION AGENCY,
APPELLEE
AMERICAN PETROLEUM INSTITUTE, ET AL.,
INTERVENORS
Consolidated with 22-1225, 22-1227, 22-1228, 22-1229,
22-1230, 22-1231
On Petitions for Review of a Final Action
of the Environmental Protection Agency
Elizabeth B. Dawson and Jeffrey R. Holmstead argued the
causes for petitioners American Fuel & Petrochemical
Manufacturers and All Other Obligated Party Petitioners. With
them on the briefs were Rober J. Meyers, Jonathan G. Hardin,
LeAnn Johnson, Alexandra Magill Bromer, Brittany M.
2
Pemberton, Richard S. Moskowitz, Tyler J. Kubik, Samuel P.
Hershey, Thomas E. Lauria, and Andrew K. Gershenfeld.
Thomas A. Lorenzen, Taylor R. Pullins, Eric B. Wolff, and Karl
J. Worsham entered appearances.
William C. Perdue argued the cause for BioFuels
Petitioners. With him on the briefs were Matthew W.
Morrison, Cynthia Cook Robertson, Shelby L. Dyl, Ethan G.
Shenkman, and Jonathan S. Martel.
Amir C. Tayrani was on the brief for amici curiae Monroe
Energy, LLC and PBF Holding Company, LLC in support of
Obligated Party Petitioners.
Kimere J. Kimball and Caitlin McCusker, Attorneys, U.S.
Department of Justice, argued the causes for respondent. With
them on the brief was Todd Kim, Assistant Attorney General.
John H. Martin, Attorney, entered an appearance.
Thomas R. Brugato argued the cause for intervenors
American Petroleum Institute and American Fuel &
Petrochemical Manufacturers in support of respondent. With
him on the brief were Robert J. Meyers, Elizabeth B. Dawson,
Richard S. Moskowitz, Tyler Kubik, Robert A. Long, Jr., Kevin
F. King, Daniel G. Randolph, Makade C. Claypool, John
Wagner, and Michele Schoeppe.
Bryan Killian, Douglas Hastings, David M. Lehn,
Matthew W. Morrison, and Shelby L. Dyl were on the brief for
BioFuel Intervenors in support of respondents. Jonathan S.
Martel entered an appearance.
Before: SRINIVASAN, Chief Judge, PILLARD and KATSAS,
Circuit Judges.
3
Opinion for the Court filed by Circuit Judge PILLARD.
Opinion concurring in part and dissenting in part filed by
Circuit Judge KATSAS.
PILLARD, Circuit Judge: This is the latest dispute over
EPA’s implementation of the Clean Air Act’s Renewable Fuel
Standards Program. 42 U.S.C. § 7545(o). Designed to
promote energy independence and curb greenhouse gas
emissions, the Program requires the petroleum industry to
introduce increasing volumes of renewable fuel from year to
year into the nation’s transportation fuel supply. In creating the
Program, however, Congress dramatically overestimated the
speed at which domestic production of renewable fuel could
expand, leading EPA year after year to reduce the statutorily
required renewable fuel requirements. These reductions almost
invariably trigger litigation. The renewable fuel industry
argues the reductions are too large, while the petroleum
industry argues they are not large enough. We have resolved
challenges to the Program’s renewable fuel requirements for
every year between 2010 and 2019.1
1
See Nat’l Petrochem. & Refiners Ass’n v. EPA, 630 F.3d 145 (D.C.
Cir. 2010) (2010 renewable fuel standards); Am. Fuel & Petrochem.
Mfrs. v. EPA, No. 12-1249 (D.C. Cir. Dec. 17, 2012) (2011
renewable fuel standards); Am. Petroleum Inst. v. EPA, 706 F.3d 474
(D.C. Cir. 2013) (2012 renewable fuel standards); Monroe Energy,
LLC v. EPA, 750 F.3d 909 (D.C. Cir. 2014) (2013 renewable fuel
standards); Ams. for Clean Energy v. EPA, 864 F.3d 691 (D.C. Cir.
2017) (2014, 2015, and 2016 renewable fuel standards); Alon Refin.
Krotz Springs, Inc. v. EPA, 936 F.3d 628 (D.C. Cir. 2019) (2017 and
2018 renewable fuel standards); Am. Fuel & Petrochem. Mfr. v. EPA,
937 F.3d 559 (D.C. Cir. 2019) (2018 renewable fuel standards);
Growth Energy v. EPA, 5 F.4th 1 (D.C. Cir. 2021) (2019 renewable
fuel standards).
4
Today, we resolve challenges to the standards for the years
2020, 2021, and 2022. Once again, renewable fuel producers
claim that EPA’s standards are set too low, while petroleum
refiners contend they are too high. We hold that EPA complied
with the law and reasonably exercised its discretion in setting
the renewable fuel requirements for the three years at issue.
We therefore deny the petitions for review.
BACKGROUND
A.
Enacted in 2005 and amended in 2007, the Renewable
Fuel Standards Program (Program) “requires that increasing
volumes of renewable fuel be introduced into the Nation’s
supply of transportation fuel each year.” Ams. for Clean
Energy v. EPA (ACE), 864 F.3d 691, 697 (D.C. Cir. 2017). “To
accomplish these goals, the Program regulates suppliers
through ‘applicable volume[s]’—mandatory and annually
increasing quantities of renewable fuels that must be
‘introduced into commerce in the United States’ each year—
and tasks the EPA Administrator with ‘ensur[ing]’ that those
annual targets are met.” Am. Fuel & Petrochem. Mfr. v. EPA
(AFPM), 937 F.3d 559, 568 (D.C. Cir. 2019) (quoting 42
U.S.C. § 7545(o)(2)(A)(i)). “[B]y requiring upstream market
participants . . . to introduce increasing volumes of renewable
fuel into the transportation fuel supply, Congress intended the
Renewable Fuel Program to be a market forcing policy that
would create demand pressure to increase consumption of
renewable fuel.” Id. (internal quotation marks omitted).
We have extensively described the statutory scheme in
various opinions, most recently in American Fuel &
Petrochemical Manufacturers, 937 F.3d at 568-73. Here is a
more streamlined summary:
5
“The Program specifies annual fuel-volume requirements
for four overlapping categories of fuel.” Id. at 568. Those
categories are: (i) cellulosic biofuel; (ii) biomass-based diesel;
(iii) advanced biofuel; and (iv) total renewable fuel. 42 U.S.C.
§ 7545(o)(2)(B)(i)(I)-(IV). “Those four fuel categories vary
with respect to the renewable biomass sources from which they
are derived and their greenhouse gas emissions.” ACE, 864
F.3d at 697 (citing 42 U.S.C. § 7545(o)(1)(B), (D), (E), (J)).
“The statutory categories of fuel types are ‘nested,’ meaning
that cellulosic biofuel and biomass-based diesel are kinds of
advanced biofuel, and advanced biofuel in turn is a kind of
renewable fuel that may be credited toward the total renewable
fuel obligation.” Id. at 697-98. Renewable fuel that is not
advanced biofuel is “conventional biofuel.” 42 U.S.C.
§ 7545(o)(1)(F). By the same token, we refer to advanced
biofuel that is not cellulosic biofuel—including biomass-based
diesel—as non-cellulosic advanced biofuel. The volumes of
total renewable fuel and advanced biofuel that may
respectively be made up of conventional renewable fuel and
non-cellulosic advanced biofuel are referred to as “implied
statutory volume[s].” See, e.g., Renewable Fuel Standard
Program: RFS Annual Rules, 87 Fed. Reg. 39,600, 39,623
n.127 (July 1, 2022).
“The statute contains tables that set forth the annual
volume requirements for each category of renewable fuel.”
ACE, 864 F.3d at 698. For 2006, the first year of the Program,
“Congress ordained the inclusion of 4 billion gallons of
renewable fuel in the Nation’s fuel supply.” HollyFrontier
Cheyenne Refin., LLC v. Renewable Fuels Ass’n, 141 S. Ct.
2172, 2175 (2021) (citing 42 U.S.C. § 7545(o)(2)(B)(i)(I)). By
2022, that number was supposed to “climb to 36 billion
gallons,” including 21 billion gallons of advanced biofuel, 16
billion gallons of which were to be cellulosic biofuel. Id.; 42
U.S.C. § 7545(o)(2)(B)(i)(II), (III). The 2022 volumes also
6
contain implied statutory volumes of 15 billion gallons of
conventional biofuel and five billion gallons of non-cellulosic
advanced biofuel. The statute does not set the requisite
amounts for years after 2022 (or, in the case of biomass-based
diesel, 2012). Congress instead “largely left it to [EPA] to set
the applicable volumes.” HollyFrontier, 141 S. Ct. at 2175.
EPA must do so “based on a review of the implementation of
the program during” previous years and “an analysis of” six
other factors, such as the fuel’s effect on “the environment,”
“energy security,” “infrastructure,” and “cost to consumers.”
42 U.S.C. § 7545(o)(B)(ii).
These statutory volumes, however, have consistently
proven infeasible. The volumes for cellulosic biofuel in
particular “assumed significant innovation in the industry”—
innovation that has not kept pace with the growth the Program
projected. See Am. Petroleum Inst. v. EPA, 706 F.3d 474, 476
(D.C. Cir. 2013).
Recognizing its market forcing might prove overly
ambitious, Congress authorized EPA to adjust the statutory
volumes in various scenarios. See 42 U.S.C. § 7545(o)(7).
Two such provisions are relevant to this case. The first is the
cellulosic waiver provision, which requires EPA to reduce the
cellulosic volume to the “projected volume” of available
cellulosic biofuel for any year in which the “projected volume
of cellulosic biofuel production is less than the minimum
applicable [i.e., required] volume” of cellulosic biofuel. Id.
§ 7545(o)(7)(D). If that waiver is triggered, EPA “may also
reduce the applicable volume of renewable fuel and advanced
biofuels requirement . . . by the same or lesser amount.” Id.
EPA has invoked the cellulosic waiver provision in every year
since 2010.
7
The second relevant source of adjustment authority is the
reset provision. Id. § 7545(o)(7)(F). Under this provision, if
EPA waives at least 20 percent of an applicable volume of any
renewable fuel for two consecutive years, or waives at least 50
percent for a single year, it “shall promulgate a rule . . . that
modifies the applicable volumes . . . for all years following the
final year to which the waiver applies.” Id. In promulgating
such a rule, EPA must consider the same factors that inform its
ordinary volume-setting decisions. Id.
After the applicable volumes are set, EPA must “ensure”
they “are met.” Id. § 7545(o)(3)(B)(i). It does so by setting
percentage standards that inform “each obligated party how
much of its fuel production must consist of renewable fuels.”
Monroe Energy, LLC v. EPA, 750 F.3d 909, 912 (D.C. Cir.
2014). They are calculated by dividing the applicable volume
for each renewable fuel type by an estimate of the national
volume of gasoline and diesel that will be used that year (which
EPA derives based on an estimate provided by the Energy
Information Administration). See 42 U.S.C. § 7545(o)(3)(A),
(B)(i); 40 C.F.R. § 80.1405(c). For example, if the applicable
volume of total renewable fuel is 10 billion gallons and the
projected national volume of transportation fuel is 100 billion
gallons, the percentage standard would be ten percent. “Thus,
if every obligated party incorporates the required percentage of
renewable fuel into the gasoline and diesel it sells, the
transportation fuel industry as a whole will achieve the
established applicable volumes.” AFPM, 937 F.3d at 587.
EPA must promulgate annual percentage standards no later
than November 30 of the preceding year for each compliance
year through 2022. 42 U.S.C. § 7545(o)(3)(B)(i).
Generally, the obligated parties are refiners and importers
of transportation fuel. See id. § 7545(o)(3)(B)(ii); 40 C.F.R.
§ 80.1406(a)(1). There is, however, an exception for small
8
refineries that produce fewer than 75,000 barrels per day on
average. 42 U.S.C. § 7545(o)(1)(K). The statute permits a
limited class of small refineries to petition “at any time” for an
exemption based on “disproportionate economic hardship.” Id.
§ 7545(o)(9)(B)(i); see HollyFrontier, 141 S. Ct. at 2181-82.
Obligated parties need not themselves produce or import
renewable fuel. “Congress directed EPA to establish a ‘credit
program’ through which obligated parties can acquire and trade
credits,” and thereby comply with the statute. ACE, 864 F.3d
at 699 (quoting 42 U.S.C. § 7545(o)(5)). These credits, called
RINs—short for “Renewable Identification Numbers”—“serve
as the currency of the RFS Program.” Wynnewood Refin. Co.,
LLC v. EPA, 77 F.4th 767, 774 (D.C. Cir. 2023). They are
generated when renewable fuel is produced in or imported to
the United States, and they are valid for twelve months from
the date of generation. 42 U.S.C. § 7545(o)(5). “RINs remain
attached to the renewable fuel until that fuel is purchased by an
obligated party or blended into fossil fuels to be used for
transportation fuel,” at which point “the RINs become
‘separated’” and available to use as compliance credits. Alon
Refin. Krotz Springs, Inc. v. EPA, 936 F.3d 628, 637 (D.C. Cir.
2019).
RINs “facilitate flexible and cost-effective compliance.”
ACE, 864 F.3d at 699. An obligated party that has accumulated
excess RINs can sell them on the market or carry them over to
be used to satisfy a portion of the following year’s obligations.
See 42 U.S.C. § 7545(o)(5)(C); 40 C.F.R. § 80.1427(a)(1), (5).
Conversely, an obligated party that has not accumulated
enough RINs can purchase them on the market or, provided
certain conditions are met, carry a deficit forward into the next
compliance year. 42 U.S.C. § 7545(o)(5)(D); 40 C.F.R.
§ 80.1427(b). In addition, if EPA invokes the cellulosic waiver
provision, it must “make available for sale cellulosic biofuel
9
credits,” which obligated parties may use, alongside or instead
of RINs, to meet their cellulosic biofuel obligations. 42 U.S.C.
§ 7545(o)(7)(D)(ii). EPA must “determin[e] the exact price of
[cellulosic biofuel] credits in the event of a waiver,” subject to
various restrictions. Id. § 7545(o)(7)(D)(iii). “Any [obligated
party] may therefore comply with the law thanks to its own
blending efforts, the purchase of credits from someone else, or
a combination of both.” HollyFrontier, 141 S. Ct. at 2175.
B.
In July 2022, EPA set volume requirements and resulting
percentage standards for the years 2020, 2021, and 2022 for, as
relevant here, total renewable fuel, advanced biofuel, and
cellulosic biofuel. See Renewable Fuel Standard Program:
RFS Annual Rules, 87 Fed. Reg. 39,600 (July 1, 2022)
(hereinafter Final Rule). The Final Rule also reaffirmed its
latest formula for calculating the percentage standards and
imposed a supplemental volume requirement in response to the
remand from our court in ACE, 864 F.3d 691.
1.
The Final Rule established renewable fuel requirements
for 2021 and 2022 and modified previously established
requirements for 2020. EPA invoked its authority under both
the cellulosic waiver provision and the reset provision. In
particular, EPA relied on the cellulosic waiver provision and
the reset provision to establish the 2020, 2021, and 2022
cellulosic biofuel volumes and the 2022 total renewable fuel
and advanced biofuel volumes. EPA relied exclusively on the
reset provision to establish the 2020 and 2021 total renewable
fuel and advanced biofuel volumes, which are not challenged
in these petitions.
10
EPA acknowledged that it lagged behind the statutory time
frame for setting these volumes, making them late and either
partially or wholly retroactive. 87 Fed. Reg. at 39,620, 39,622,
39,624. EPA nevertheless relied on precedent of this court that,
in its view, authorized late and retroactive fuel volumes, “so
long as EPA exercises this authority reasonably.” Id. at 39,609
n.49 (citing ACE, 864 F.3d at 720; Monroe Energy, 750 F.3d
909; Nat’l Petrochem. & Refiners Ass’n v. EPA, 630 F.3d 145,
154-58 (D.C. Cir. 2010)).
Starting with the cellulosic waiver provision, EPA
determined that the “projected volumes of cellulosic biofuel
production for 2020, 2021, and 2022 are all significantly less
than the volume targets in the statute.” Id. at 39,606.
Therefore, EPA reduced the applicable volumes to the
“projected volume available” of cellulosic biofuel. Id.
Because 2020 and 2021 had “already passed,” EPA did not
need to rely on projections. See id. at 39,617. It simply reduced
the applicable volumes to the amount of cellulosic biofuel
actually used in those years. Id. It lowered the 2020 volume
from 10.5 billion to 0.51 billion gallons, and it reduced the
2021 volume from 13.5 billion gallons to 0.56 billion. Id. at
39,601; see also EPA Regulatory Impact Analysis: Renewable
Fuel Standard (RFS) Program: RFS Annual Rules 159 (2022)
(RIA) (Joint Appendix (J.A.) 145) (actual volumes). For 2022,
EPA reduced the volume from 16 billion gallons to the 0.63
billion gallons it projected would be available that year—a
reduction of 15.37 billion gallons. 87 Fed. Reg. at 39,601; see
also RIA at 175 (J.A. 330) (projected volume available).
Under the discretionary prong of the cellulosic waiver
provision, EPA had the option to reduce the advanced biofuel
and total renewable fuel volumes by as much as the same
amount as it had reduced the cellulosic biofuel volumes. It did
so for the 2022 volumes, reducing the advanced biofuel and
11
total renewable fuel volumes by the same 15.37 billion gallons
as it had reduced the cellulosic biofuel volume. 87 Fed. Reg.
at 39,608. The advanced biofuel volume was thus reduced
from 21 billion gallons to 5.63 billion gallons, and the total
renewable fuel volume from 36 billion gallons to 20.63 billion
gallons. Id. at 39,601, 39,608. Because the 2022 volumes were
partially prospective, EPA expected they would “induce the
market to produce, import, and consume additional biofuels in
2022.” Id. at 39,624.
EPA took a different approach for the years 2020 and
2021. Because those years had already passed, EPA
determined that the “appropriate volume” for advanced biofuel
and total renewable fuel would be the “actual volumes of such
fuels available” in those years. Id. at 39,608. Such reductions,
however, would be larger than permitted under the cellulosic
waiver provision. Id. For example, the 2020 statutory volume
for advanced biofuel was 30 billion gallons, but the amount
available was 17.13 billion gallons—meaning the market came
up short by 12.87 billion gallons. 42 U.S.C.
§ 7545(o)(2)(B)(i)(I); 87 Fed. Reg. at 39,601. The cellulosic
waiver provision, however, authorized EPA to reduce the 2020
volume by no more than 9.99 billion gallons—the amount it
reduced the cellulosic biofuel volume.
To reduce the 2020 and 2021 volumes below what would
have been permissible under the cellulosic waiver provision,
EPA invoked the reset provision. It determined the reset
provision was triggered for all three categories of renewable
fuel: cellulosic biofuel, advanced biofuel, and total renewable
fuel. 87 Fed. Reg. at 39,607. Therefore, EPA was required to
modify the statutory volumes for the years 2020, 2021, and
2022. See 42 U.S.C. § 7545(o)(7)(F). After consulting the
statutory factors laid out in Section 7545(o)(2)(B)(ii), EPA set
the total renewable fuel and advanced biofuel volumes for the
12
years 2020 and 2021 to the “actual volumes of such fuels
available in 2020 and 2021.” 87 Fed. Reg. at 39,608. This
approach, we have explained, “guards against RIN shortages
by ensuring that the quantity of RINs already generated during
the relevant year will be adequate to satisfy the renewable fuel
standards for that compliance year.” Wynnewood, 77 F.4th at
783. EPA also used the reset provision as an independent basis
to support the various reductions made under the cellulosic
waiver provision. 87 Fed. Reg. at 39,608.
2.
The Final Rule also reaffirmed a change EPA first made in
2020 to the formula it used to calculate percentage standards.
See 87 Fed. Reg. at 39,631-33. As mentioned, in setting the
percentage standards, EPA divides the applicable volume for
each renewable fuel type by an estimate of the national volume
of non-renewable transportation fuel that will be used that year.
See 40 C.F.R. § 80.1405(c). EPA may, however, “exempt from
compliance small refineries experiencing disproportionate
economic hardship in complying with their renewable fuel
obligations.” AFPM, 937 F.3d at 587. By permitting some
petroleum refiners “to incorporate less renewable fuel into the
gasoline and diesel they sell, small refinery exemptions can
impede attainment of overall applicable volumes.” Id. at 588.
“To avoid such a shortfall,” EPA has long adjusted the
percentage standards applicable to other petroleum refiners and
importers to account for small refinery exemptions. Id. Until
2020, EPA excluded from the denominator petroleum fuel
produced by small refineries already exempted by the time the
rule was promulgated. 87 Fed. Reg. at 39,632. But EPA also
retroactively granted exemptions to small refineries whose
petroleum-based transportation fuel EPA had already
calculated into the percentage standards for the upcoming
13
compliance year. Without further adjustment, those retroactive
exemptions from the renewable-fuel requirements hindered the
achievement of the applicable renewable-fuel volumes because
they artificially inflated the denominator—the nation’s total
supply of petroleum-based transportation fuel—and thereby
reduced the percentage standards applied to nonexempt
refiners and importers. See id. So, in 2020, EPA changed
course. It began excluding from the denominator not only the
gasoline and diesel fuel produced by small refineries that had
already received an exemption at the time the rule was
promulgated but also those fuels produced by small refineries
projected to receive an exemption for the coming year. Id. In
the Final Rule, EPA reaffirmed this new approach. Id. at
39,633.
3.
Finally, the Final Rule imposed a supplemental volume
requirement for 2022 in response to the ACE remand. The
statutory total renewable fuel volume for 2016 was 22.25
billion gallons. 42 U.S.C. § 7545(o)(2)(B)(i)(I). In 2015, EPA
reduced that volume in two ways, the second of which we held
was unlawful. First, EPA invoked the cellulosic waiver
provision to reduce the volume by 3.64 billion gallons. See
Renewable Fuel Standard Program: Standards for 2014, 2015,
and 2016 and Biomass-Based Diesel Volume for 2017, 80 Fed.
Reg. 77,420, 77,439 (Dec. 14, 2015). Then, EPA invoked
another waiver provision—the so-called “inadequate domestic
supply” provision—to reduce the volume by another 500
million gallons. Id. In doing so, EPA construed that provision
to refer to the domestic supply of renewable fuel available to
consumers for use in their vehicles. Id. at 77,436. In ACE, we
rejected that interpretation of the inadequate domestic supply
provision, holding that the provision “refers to the supply of
renewable fuel available to refiners, blenders, and importers to
14
meet the statutory volume requirements.” 864 F.3d at 709.
“We therefore vacate[d] EPA’s decision to reduce the total
renewable fuel volume requirements for 2016 through use of
the ‘inadequate domestic supply’ waiver provision and
remand[ed] the Final Rule to the agency for further
consideration in light of our decision.” Id. at 713.
In the Final Rule, EPA determined that it would comply
with the ACE remand and remedy the erroneous use of the
inadequate domestic supply waiver by “restor[ing] the full 500
million gallons” incorrectly waived in the 2016 Rule. 87 Fed.
Reg. at 39,603. Invoking its statutory authority to “ensure” that
the volume requirements “are met,” 42 U.S.C.
§ 7545(o)(3)(B)(i), EPA decided to impose two supplemental
obligations of 250 million gallons each. The first—and the one
at issue here—it established for 2022; the second it planned for
later action in 2023. 87 Fed. Reg. at 39,629. The 250-million-
gallon supplemental volume sits atop the 20.63-billion-gallon
total standard, meaning that the total renewable fuel obligation
for 2022 is effectively 20.87 billion gallons. Id. at 39,601.
***
Using the waiver-adjusted and supplemental applicable
volumes, EPA set the 2020, 2021, and 2022 percentage
standards for total renewable fuel, advanced biofuel, and
cellulosic biofuel. Id.
C.
Two sets of parties filed petitions for review challenging
the Final Rule on various grounds. The first set of petitioners
produce cellulosic biofuels, so we will refer to them as the
Biofuel Petitioners. They contend that the cellulosic biofuel
volumes are too low. The second set of petitioners are (or
represent) fossil fuel refiners and retailers subject to the volume
15
requirements, so we will call them the Refiner Petitioners.
They generally argue that the volumes are set at too high a
level. Several other parties intervened, including a set of
intervenors that are (or represent) fossil fuel refiners, whom we
will call the Refiner Intervenors, and another set that are (or
represent) renewable fuel producers, whom we will call the
Renewable Intervenors.
We review the Final Rule under 42 U.S.C. § 7607(b)(1).
Under that section, “[w]e may reverse the EPA’s actions under
the Program if we find them to be ‘arbitrary, capricious, [or] an
abuse of discretion.’” AFPM, 937 F.3d at 574 (quoting 42
U.S.C. § 7607(d)(9)(A)). “We will sustain the EPA’s actions,
however, so long as the agency ‘consider[ed] all of the relevant
factors and demonstrate[d] a reasonable connection between
the facts on the record and the resulting policy choice.’” Id.
(quoting Sierra Club v. Costle, 657 F.2d 298, 323 (D.C. Cir.
1981)). We “give an extreme degree of deference to the EPA’s
evaluation of scientific data within its technical expertise,
especially where, as here, we review the EPA’s administration
of the complicated provisions of the Clean Air Act.” Id.
(internal quotation marks omitted). And “our review is
particularly deferential in matters implicating predictive
judgments.” Alon Refin., 936 F.3d at 663 (internal quotation
marks omitted). “We also may reverse an EPA action under
the Program if we determine that it is ‘otherwise not in
accordance with law’ or ‘in excess of statutory jurisdiction,
authority, or limitations, or short of statutory right.’” AFPM,
937 F.3d at 574 (quoting 42 U.S.C. § 7607(d)(9)(A), (C)). We
review EPA’s interpretation of the Clean Air Act under the
familiar two-step framework formulated in Chevron, U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984). See AFPM, 937 F.3d at 574.
16
DISCUSSION
We start with the Biofuel Petitioners’ challenges and then
turn to the Refiner Petitioners’ challenges.
A.
The Biofuel Petitioners challenge the cellulosic biofuel
volumes. EPA set those volumes under the cellulosic waiver
provision. 42 U.S.C. § 7545(o)(7)(D)(i). All parties agree that
the waiver was triggered for the years 2020, 2021, and 2022
because “the projected volume of cellulosic biofuel production
[was] less than the minimum applicable volume[s] established”
in the statutory table. Id. The Biofuel Petitioners contend,
however, that EPA misinterpreted or unreasonably applied the
cellulosic waiver provision when lowering the cellulosic
biofuel volumes to the “projected volume available” during
each calendar year.
EPA construed the term “projected volume available
during that calendar year” to refer to “the volume of qualifying
cellulosic biofuel projected to be produced or imported and
available for use as transportation fuel in the U.S. in that year.”
87 Fed. Reg. at 39,615. In doing so, EPA did not include
carryover cellulosic RINs, which represent the volume
produced or imported the previous year but that remains
available for compliance for that year. The Biofuel Petitioners
contend that this was a mistake. In their view, EPA was
required to include carryover cellulosic RINs in calculating the
projected volume of available cellulosic biofuel. For 2020, for
example, that would have added an additional 38 million
gallons of cellulosic biofuel volume on top of the applicable
volume of 510 million gallons. See id. at 39,616 n.95.
Therefore, they argue, EPA set the cellulosic biofuel volume
requirements too low.
17
We reject that challenge. As the Biofuel Petitioners
concede, we review EPA’s interpretation of the Program under
Chevron. Biofuel Br. 18. Chevron, however, “does not apply
where the statute is clear.” Garvey v. Admin. Rev. Bd., 56 F.4th
110, 121 (D.C. Cir. 2022) (quoting Johnson v. Guzman Chavez,
141 S. Ct. 2271, 2291 n.9 (2021)). Here, the statute clearly
does not mandate the inclusion of carryover cellulosic RINs in
calculating the “projected volume available.”
We addressed, and rejected, a similar argument in ACE.
There, as noted above, we construed another waiver authority,
the so-called inadequate domestic supply provision. ACE, 864
F.3d at 713. The inadequate domestic supply provision
authorizes EPA to reduce volume requirements “based on a
determination . . . that there is an inadequate domestic supply.”
42 U.S.C. § 7545(o)(7)(A)(ii). Like here, the petitioners there
argued that, “[w]hen evaluating the available ‘supply’ of
renewable fuel for purposes of the ‘inadequate domestic
supply’ waiver provision,” EPA must “consider carryover
RINs as a supply source of renewable fuel.” ACE, 864 F.3d at
714. We held that “the statute is better read not to require EPA
to consider carryover RINs.” Id. With respect to text, we
observed that the waiver provision “does not reference
carryover RINs as a source of supply of renewable fuel.” Id.
We also concluded that EPA’s interpretation better comports
with the statute’s purpose. Id. The contrary approach, we said,
would reduce the number of carryover RINs in the market to
“almost zero.” Id. at 715. “Without the flexibility and liquidity
provided by carryover RINs, EPA reasoned that obligated
parties facing unexpected shortfalls or increased demand for
transportation fuel [might] be left with no way to comply with
the statute.” Id. We thus upheld this aspect of “EPA’s
interpretation of the ‘inadequate domestic supply’ waiver
provision.” Id.
18
ACE interpreted a different waiver provision, but its logic
applies here. As in ACE, “[w]e look first to the text of the
statute.” Id. at 714. When triggered, the cellulosic waiver
provision, like the inadequate-supply provision, contemplates
a reduction in the renewable fuel requirements the statute
specifies. In the case of the cellulosic waiver provision, EPA
must “reduce the applicable volume of cellulosic biofuel” in
the statutory table “to the projected volume available during
that calendar year.” See 42 U.S.C. § 7545(o)(7)(D)(i). A
provision separate from either of the waiver authorities requires
EPA to create a “credit program.” Id. § 7545(o)(5)
(capitalization altered). “Congress contemplated that an
obligated party would be allowed to carry over credits from one
year into the next: One of the credit program’s provisions
states that credits generated in the credit program ‘shall be valid
to show compliance for the 12 months as of the date of
generation.’” ACE, 864 F.3d at 714 (quoting 42 U.S.C.
§ 7545(o)(5)(C)). “But nothing in the text of either [the waiver
or the credit] provision indicates” that the projected volume of
available cellulosic biofuel “must include any available
‘carryover’ credits from the prior year.” Id.
The Biofuel Petitioners would have us infer a requirement
to count carryover RINs as a source of available cellulosic
biofuel from the statutory structure. They point out that the
cellulosic waiver provision contains two relevant “volumetric
terms.” Biofuel Br. 21. First, to determine whether the waiver
provision is triggered, EPA must calculate the “projected
volume of cellulosic biofuel production.” 42 U.S.C.
§ 7454(o)(7)(D)(i). Second, if the provision is triggered, EPA
must reduce the statutory volume to the “projected volume
available” for that calendar year. Id. These two terms, they
insist, “cannot both mean the same thing.” Biofuel Br. 21. In
their view, the former refers to the “cellulosic biofuel projected
to be produced during the year in question,” whereas the latter
19
refers to the fuel “projected to be available to obligated parties
for compliance during that year,” which, they claim, includes
the portion of the prior year’s production that remains available
for compliance in the current year in the form of carryover
RINs. Id.
In fact, however, the text and structure of the provision
foreclose the Biofuel Petitioners’ reading. On their reading, the
cellulosic waiver provision could require EPA to raise the
applicable volume of cellulosic biofuel, despite the fact that the
provision explicitly calls for a “reduc[tion].” 42 U.S.C.
§ 7545(o)(7)(D)(i). Consider the statutory volume for 2022: 16
billion gallons. See Id. § 7545(o)(2)(B)(i)(III). Suppose that
EPA pegged “the projected volume of cellulosic biofuel
production” at 15.9 billion gallons, all of which, let us assume,
would be available for compliance purposes. And suppose that
EPA projected that an additional 200 million gallons of
carryover cellulosic RINs would be available for compliance
for that year. Because the projected volume of production
(15.9 billion gallons) “is less than” the statutory volume (16
billion gallons), EPA would be required to “reduce the
applicable volume of cellulosic biofuel . . . to the projected
volume available during that calendar year.” Id.
§ 7545(o)(7)(D)(i). But, on the Biofuel Petitioners’ reading,
there would be 16.1 billion gallons of cellulosic biofuel
available for compliance purposes—the 15.9 billion gallons
produced that year plus the 200 million gallons produced the
previous year but available in the form of carryover RINs.
Thus, EPA would be required to somehow “reduce” the
applicable volume from 16 billion gallons to 16.1 billion
gallons.
The better reading of the statute avoids such absurd results.
See Ctr. for Biological Diversity v. EPA, 722 F.3d 401, 411
(D.C. Cir. 2013). “When Congress uses the same word in
20
different parts of a statute, it usually means the same thing.”
PDK Laby’s Inc. v. DEA, 362 F.3d 786, 796 (D.C. Cir. 2004).
As the Refiner Intervenors suggest, the term “projected volume
available” is best read as a subset of the “projected volume
of . . . production.” See Refiner Intervenors Br. 5-7. The term
“available” thus operates as a modifier that narrows the
relevant category of “projected volume” of cellulosic biofuel
production, allowing EPA to account for situations where some
portion of the projected volume of production may not be
available to use for compliance. That may happen, for
example, when cellulosic biofuel is produced in facilities that
“sell the [fuel] they produce into non-transportation markets.”
See 80 Fed. Reg. at 77,506 n.217.
On this reading, the cellulosic waiver provision, when
triggered, inevitably calls for a “reduc[tion]” in the applicable
volume of cellulosic biofuel. Consider, again, the 2022
statutory volume of 16 billion gallons. If the “projected
volume of . . . production” is 15.9 billion gallons, EPA will be
required to reduce the statutory volume to the “projected
volume available,” which will necessarily be less than the
statutory volume. 42 U.S.C. § 7545(o)(7)(D)(i).
In linking the “projected volume of . . . production” with
the “projected volume available,” we do not embrace a
definitive interpretation of the former term. For present
purposes, it is enough to conclude, as the Biofuel Petitioners
concede, that the term “projected volume of . . . production”
does not include volume reflected in carryover RINs. See
Biofuel Br. 21 (“‘[T]he projected volume of cellulosic biofuel
production’ refers to cellulosic biofuel projected to be
produced during the year in question.”). That conclusion
makes good sense. The cellulosic waiver provision instructs
EPA to calculate the “projected volume of . . . production”
“based on the estimate provided under paragraph (3)(A),”
21
which refers to “an estimate . . . of the volumes of
transportation fuel, biomass-based diesel, and cellulosic
biofuel projected to be sold or introduced into commerce in the
United States.” See 42 U.S.C. § 7545(o)(3)(A). The estimate
on which the “projected volume of . . . production” must be
made, then, is an estimate of actual fuel use, not carryover
RINs. It follows that the “projected volume available” also
does not encompass carryover RINs. We leave for another day
other questions regarding the scope of the “projected volume
of . . . production,” including, for example, whether the term
may or must include imported cellulosic biofuel. See EPA
Response to Comments (RTC) 45-46 (2022) (J.A. 485-86).
The exclusion of carryover RINs “makes eminent
sense . . . when considered in light of the purposes of the
Renewable Fuel Program statute.” ACE, 864 F.3d at 714. The
carryover RIN bank is of “critical importance . . . to the
functioning of the renewable fuel market and to the ability of
obligated parties to comply with their obligations.” Id. It
provides crucial “flexibility and liquidity.” Id. at 715. Under
the Biofuel Petitioners’ reading, however, “the number of
carryover RINs in the market would be reduced to almost
zero.” Id. Every time the cellulosic waiver provision is
triggered, EPA would be required to set the applicable volume
of cellulosic biofuel at a level that would systemically draw
down or eliminate the bank of carryover cellulosic RINs. For
good reason, we rejected a similar reading of the inadequate
domestic supply waiver provision in ACE. Id. at 714-15.
To be sure, there are differences between the cellulosic
waiver provision and the inadequate domestic supply provision
at issue in ACE. As the Biofuel Petitioners point out, EPA must
issue cellulosic waiver credits when it reduces the cellulosic
volume requirements under the cellulosic waiver provision.
See 42 U.S.C. § 7545(o)(7)(D)(ii). Contrary to the Biofuel
22
Petitioners’ argument, however, the availability of cellulosic
waiver credits does not negate the role of carryover cellulosic
RINs. Rather, they work together to provide additional
flexibility to obligated parties in satisfying the cellulosic
biofuel requirements. Such flexibility is particularly sensible
given the heightened uncertainty surrounding the production of
cellulosic biofuel at the inception of the Program. Indeed,
because “there was no commercial-scale production at all” for
cellulosic biofuel at the time, the statutory volumes assumed
“significant innovation in the industry.” Am. Petroleum, 706
F.3d at 476.
For the foregoing reasons, we hold that the cellulosic
waiver provision unambiguously excludes carryover cellulosic
RINs from the “projected volume available.” We reject the
Biofuel Petitioners’ various arbitrary and capricious
challenges, which rely on the (mistaken) assumption that EPA
selected from among a range of “permissible” interpretations.
Biofuel Br. 31. And we therefore reject the Biofuel Petitioners’
challenges to the cellulosic biofuel volumes for the years 2020,
2021, and 2022. Because we uphold the cellulosic biofuel
volumes under the cellulosic waiver provision, we need not
address whether—absent application of the cellulosic waiver
provision—EPA could have or was required to set them at a
higher level under the reset provision alone.
B.
We now address the Refiner Petitioners’ challenges to the
total renewable fuel and advanced biofuel volumes for 2022,
the new formula for calculating the percentage standards, and
the supplemental volume for 2022.
23
1.
The Refiner Petitioners challenge the 2022 total renewable
fuel and advanced biofuel volumes. As mentioned, EPA set
those volumes under both the cellulosic waiver provision and
reset provision. The Refiner Petitioners challenge the volumes
on four grounds. We address each in turn.
First, the Refiner Petitioners argue that, when it set them
midway through that year, EPA “failed to adequately consider
the retroactivity” of the 2022 applicable volumes. Refiner Br.
18. In their view, EPA should have set the 2022 applicable
volumes based on year-to-date production levels, rather than
try to induce the market to increase production levels during
the remaining months of 2022. We have made clear, however,
that EPA “may promulgate late renewable fuel requirements—
and even apply those standards retroactively—so long as EPA
reasonably considers and mitigates any hardship caused to
obligated parties by reason of the lateness.” ACE, 864 F.3d at
718. In assessing whether EPA has acted reasonably, we look
to “whether obligated parties had adequate lead time and access
to a sufficient number of RINs to comply with the delayed
requirement.” Id. (internal quotation marks omitted).
Here, EPA took sufficient care to minimize the hardship
caused by its late issuance of the 2022 standards. EPA
extended the compliance deadline, giving the obligated parties
at least 11 months to comply with the renewable fuel
requirements. 87 Fed. Reg. at 39,624. We have already held
in Wynnewood that the new compliance deadline “is both
reasonable and reasonably justified by the agency.” 77 F.4th
at 783. And the proposed rule, published in February 2020,
gave “obligated parties . . . many months’ notice of EPA’s
intent to issue [the] volume requirements.” ACE, 864 F.3d at
771; see also Wynnewood, 77 F.4th at 783. EPA also
24
reasonably determined that the “market [was] capable of
meeting the increased 2022 volumes through increased biofuel
use” and that “any shortfall can be met by carryover RINs.” 87
Fed. Reg. at 39,624.
The Refiner Petitioners do not dispute that they have
access to enough RINs; instead, they complain that they may
have to rely on imported fuel, more expensive biodiesel and
renewable diesel, and carryover RINs to satisfy the standard.
See Refiner Br. 18. This, they contend, will unreasonably drive
up compliance costs and increase greenhouse gas emissions.
Id. at 15, 17. But we “give EPA considerable discretion to
weigh and balance the various factors required by statute,”
especially where, as here, the statute “does not state what
weight should be accorded to the relevant factors.” Nat’l
Wildlife Fed’n v. EPA, 286 F.3d 554, 570 (D.C. Cir. 2002).
EPA concluded that “[t]he advanced biofuel and total
renewable fuel volumes strike a balance between numerous
competing statutory factors.” 87 Fed. Reg. at 39,623. That
assessment was not arbitrary or capricious.
Second, the Refiner Petitioners argue that EPA arbitrarily
and capriciously relied on the so-called “implied statutory
targets” in setting the applicable volumes. Refiner Br. 14. As
discussed, the implied statutory volume reflects the volumes of
renewable fuels—such as conventional renewable fuel and
non-cellulosic advanced biofuel—that an obligated party may,
but need not, use to comply with the renewable fuel
requirements. See 87 Fed. Reg. at 39,623 n.127. The concept
is most readily understood by way of example. The 2022
statutory volume called for 36 billion gallons of total renewable
fuel, 21 billion gallons of which were required to be advanced
biofuel, resulting in an implied volume of 15 billion gallons of
conventional renewable fuel. Likewise, of the 21 billion
gallons of advanced biofuel, the statute required 16 billion
25
gallons to be cellulosic biofuel, implying that obligated parties
may comply with the advanced biofuel requirement by using at
least the requisite volume of cellulosic biofuel and at most five
billion gallons of non-cellulosic advanced biofuel.
In setting the 2022 applicable volumes, EPA held constant
these implied statutory targets, even as it lowered the overall
applicable volumes. See 87 Fed. Reg. at 39,623. EPA lowered
the total renewable fuel volume from 36 billion to 20.63 billion
gallons; the advanced biofuel volume from 21 billion to 5.63
billion gallons; and the cellulosic biofuel volume from 16
billion to 0.63 billion gallons. Thus, the implied volumes—15
billion gallons of conventional renewable fuel and five billion
gallons non-cellulosic advanced biofuel—remained the same.
See id.
The Refiner Petitioners contend that was a mistake. In
their view, the reset provision required EPA to “replace the
statutory volumes with new applicable volumes,” rendering the
implied statutory volumes obsolete. Refiner Br. 14 (emphases
omitted). Any reliance on those implied volumes, they insist,
is arbitrary and capricious.
We disagree. EPA reasonably used the implied statutory
volumes in setting the 2022 applicable volumes. The implied
volumes are not binding. As EPA explained in response to a
comment, “the implied volume requirement for conventional
renewable fuel is not a requirement per se, but instead is only a
description of that portion of the total volume requirement
which is not required to be advanced biofuel.” RTC at 119
(J.A. 495). Nothing in the cellulosic waiver provision or the
reset provision limits EPA’s discretion to retain the implied
volumes for conventional renewable fuel and non-cellulosic
advanced biofuel.
26
To the contrary, the cellulosic waiver provision—which
EPA also invoked in setting the 2022 volumes—inevitably
implies that compliance may be accomplished in part by
reliance on other renewable fuels. As we have observed, “a
reduction to the cellulosic biofuel volume requirement leaves a
gap in the supply of advanced biofuel available to satisfy the
advanced biofuel volume requirement.” ACE, 864 F.3d at 731.
The cellulosic waiver provision authorizes EPA to close that
gap by subtracting from the total renewable fuel and advanced
biofuel volumes the amount that would have been filled by the
now-waived cellulosic biofuel volumes. Here, EPA exercised
the cellulosic waiver provision when it determined that there
would not be enough cellulosic biofuel production to meet the
16-billion-gallon statutory volume. It therefore reduced the
applicable volume of cellulosic biofuel to the projected volume
available during that calendar year. And, to close the resultant
gap, it reduced the advanced biofuel and total renewable fuel
volumes by the same amount. The reductions were based on
updated projections of the availability of cellulosic biofuel;
they had nothing to do with the availability (or lack thereof) of
non-cellulosic advanced biofuel or conventional renewable
fuel. So, EPA reasonably held those implied volumes constant.
Because we hold that EPA reasonably declined to change the
implied volumes, we need not address the Renewable
Intervenors’ argument that EPA lacked authority to do so.
Third, the Refiner Petitioners contend that EPA, apart
from inadequately weighing environmental costs in balancing
the reset factors, violated the Endangered Species Act. They
make two arguments to fold this point into the Clean Air Act:
First, they say the reset factors incorporate the ESA by
referencing environmental impact; and second, the judicial-
review provision of the Clean Air Act, in requiring us to reverse
rules that are not “in accordance with law,” 42 U.S.C.
§ 7607(d)(9)(A), sweeps in violations of the ESA. Neither
27
argument is properly before us: The first was not adequately
developed before EPA, and the second was not adequately
developed in the Refiner Petitioners’ opening brief.
Fourth, the Refiner Petitioners argue that EPA failed to
adequately explain how it balanced the statutory factors, and
the partial dissent agrees. In particular, the Refiners fault EPA
for crediting nonmonetized benefits over monetized costs.
They point to a table in EPA’s Regulatory Impact Analysis that
identifies nearly 30 potential impacts—both costs and
benefits—associated with the Final Rule. See RIA, at v (J.A.
151). EPA compiled the table “to provide additional
information to the public regarding this rulemaking and to
comply with [OMB] Circular A4,” which provides guidance to
agencies on conducting and reporting their regulatory analysis.
RIA, at iv (J.A. 150). Most of the listed impacts in EPA’s table
are not monetized. For example, EPA places no specific dollar
value on the benefit of increased employment attributable to
increased renewable fuel production or the cost associated with
higher food prices. Id. At the same time, EPA monetized two
impacts, calculating that the Final Rule would generate $294
million in increased energy security and $7 billion in costs from
higher fuel prices. EPA’s failure to reconcile this “vast
disparity” in costs over benefits, they argue, is arbitrary and
capricious. Refiner Reply Br. 6.
This argument is flawed: It faults EPA for the fact that the
statute Congress drafted is designed to yield benefits that it
deemed important but understood are not easily monetizable.
As the partial dissent recognizes, renewable fuels are generally
more expensive than fossil fuels. Diss. Op. 3. (The partial
dissent emphasizes EPA’s projection that the 2022 standards
will increase aggregate fuel costs for consumers by $5.72
billion. See id. at 1. For context, that cashes out at the pump
in a one cent per gallon increase in the cost of E10, the most
28
common blend of transportation fuel sold in the United States.
See RIA at 298 (J.A. 453)). If it were otherwise, the RFS
Program would be largely superfluous; the market would
independently incentivize the production and consumption of
renewable fuels. Because renewable fuels are more expensive,
however, “Congress adopted a ‘market forcing policy’
intended to ‘overcome constraints in the market’ by creating
‘demand pressure to increase consumption’ of renewable
fuels.” ACE, 864 F.3d at 710 (quoting 80 Fed. Reg. at 77,423).
And that demand pressure comes with costs. In other words, in
enacting the Renewable Fuel Standards Program, Congress
made a policy choice to accept higher fuel prices in order to
reap the benefits of “greater energy independence and . . .
reduce[d] greenhouse gas emissions.” Id. at 696. That those
benefits are not easily monetizable does not mean they are less
valuable. But it does mean that simply weighing the
monetizable costs against the monetizable benefits—and
thereby excluding the primary benefits for which Congress
created the Program—will yield a misleading result.
EPA recognized as much in the Final Rule. The agency
provided information on benefits and costs to comply with
OMB Circular A-4. But, as we have elsewhere explained, “the
Circular itself calls for a qualitative analysis” where “no
quantified information on benefits, costs, and effectiveness can
be produced.” Mozilla Corp. v. FCC, 940 F.3d 1, 70 (D.C. Cir.
2019) (per curiam) (quoting OMB Circular A-4, at 10 (2003)).
EPA found that it would be infeasible to monetize the benefits
associated with reduced greenhouse gas emissions. RIA at 70
(J.A. 225). In such a situation, Circular A-4 explains, a
quantitative cost-benefit analysis can “be misleading, because
the calculation of new benefits . . . does not provide a full
evaluation of all relevant benefits and costs.” Mozilla, 940
F.3d at 71 (quoting OMB Circular A-4, at 10). For that reason,
EPA conducted a qualitative analysis and concluded that “[t]he
29
advanced biofuel and total renewable fuel volumes strike a
balance between numerous competing statutory factors.” 87
Fed. Reg. at 39,623. In doing so, EPA reasonably identified
benefits in the form of “the potential for growth in the volume
of renewable fuel produced and consumed in the U.S., and the
potential energy security and climate change benefits that
producing and consuming increasing volumes of qualifying
renewable fuels provide” as well as “the potential negative
impacts of renewable fuels produced from crops such as corn
or soybeans on environmental factors such as the conversion of
wetlands, ecosystems, and wildlife habitat, water quality, and
water supply.” Id. at 39,623-24. And EPA likewise concluded
that the benefits of the cellulosic biofuel volume—including
climate-change related benefits—outweigh its predictable
effect on fuel prices. Id. at 39,623
To the extent EPA could monetize the benefits associated
with reduced greenhouse gas emissions, it supplies an array of
calculations to help contextualize the Final Rule. EPA offered
an “illustrative assessment” of benefits associated with reduced
greenhouse gas emissions in light of various assumptions. RIA
at 71 (J.A. 226). As EPA explained, reductions in greenhouse
gas emissions can have a cascading beneficial impact on
“changes in net agricultural productivity, human health effects,
property damage from increased flood risk and natural
disasters, disruption of energy systems, risk of conflict,
environmental migration, and the value of ecosystem services.”
Id. at 81 (J.A. 236). And because greenhouse gas “emissions
today continue to impact society far out into the future,” id. at
87 (J.A. 242), EPA explained, the results of such a cost-benefit
analysis will depend in large part on how heavily we discount
“costs that accrue to future generations,” id. (J.A. 242).
Notwithstanding these “limitations and uncertainties,” id. (J.A.
242), EPA acknowledged the possibility that the 2022
standards could result in monetary benefits ranging from $1.95
30
billion to $25.84 billion, depending on the applicable discount
rate, see id. at 93, Table 3.2.2.3.2-2 (J.A.248). To be sure, EPA
acknowledged that the various uncertainties prevented the
agency from relying on these figures in justifying the Final
Rule. See id. at 71 (J.A. 226). Nevertheless, these illustrative
benefits—as to which the Refiner Petitioners offer no
objections—help to demonstrate the magnitude of the potential
climate-change related benefits EPA associated with the Final
Rule. It was not unreasonable for EPA to account for those
potential benefits in setting the 2022 standards.
We therefore reject the Refiner Petitioners’ challenges to
the 2022 total renewable fuel and advanced biofuel volumes.
2.
Some of the Refiner Petitioners challenge EPA’s new
formula for calculating the annual percentage standards. See
Refiner Br. 22 & n.8. As discussed, the old formula accounted
for small refinery exemptions by excluding from the total
transportation fuel introduced into the U.S. economy the
amount of such fuel produced by small refineries that had
received an exemption by the time the rule was promulgated.
The new formula also excludes fuel produced by small
refineries that are projected for but have yet to receive an
exemption for the coming year.
To understand the difference, consider an example.
Suppose the total transportation fuel projected for a given year
is 100 billion gallons, and the required total renewable fuel is
10 billion gallons. The percentage standard would be ten
percent (i.e., 10 / 100). But suppose small refineries that
already obtained exemptions are responsible for five billion
gallons of transportation fuel, and that other small refineries
projected to receive exemptions they have yet to obtain are
responsible for another five billion gallons. Under the old
31
formula, the percentage standard would be 10.5 percent (i.e.,
10 / 95). Under the new formula, it would be 11.1 percent (i.e.,
10 / 90).
The Refiner Petitioners argue that EPA’s new formula
violates the statute. And even if it were statutorily permissible,
they argue, EPA failed to justify the extent to which it departs
from the old formula. We disagree. The statute does not
confine EPA to the Refiner Petitioners’ preferred method of
accounting for small-refinery exemptions, and EPA’s choice to
account for them both retrospectively and prospectively is not
arbitrary or capricious.
EPA locates its authority to account for the small refinery
exemptions in the statutory language directing EPA to
promulgate regulations to “ensure” that the applicable volumes
“are met.” See 87 Fed. Reg. at 39,632 (quoting 42 U.S.C.
§ 7545(o)(3)(B)(i)). The Refiner Petitioners do not question
this authority. To the contrary, they concede that EPA may
adjust the percentage standards to account for small refinery
exemptions already granted at the time a rule is promulgated.
See Refiner Br. 24. The only question, then, is whether the
statute otherwise withholds from EPA the authority to account
for such exemptions on a prospective basis.
The Refiner Petitioners point to two provisions, but neither
imposes the claimed restriction. The first, 42 U.S.C.
§ 7545(o)(3)(C)(ii), requires EPA to reduce the requisite
percentage standards to “account for the use of renewable fuel
during the previous calendar year by small refineries that are
exempt.” The Refiner Petitioners argue that this provision
confirms that exemptions must be granted “on a retrospective
basis.” Refiner Br. 24. We disagree. Section 7545(o)(3)(C)(ii)
addresses a different issue; it and the new formula work to
correct opposing distortions that result from small refinery
32
exemptions. Section 7545(o)(3)(C)(ii) prevents
overcompliance by crediting any renewable fuel use by exempt
small refineries toward meeting the overall national volume
requirements. Returning to our example from above, if exempt
small refineries nevertheless blended one hundred million
gallons of renewable fuel, Section 7545(o)(3)(C)(ii) would
appear to require EPA to subtract one hundred million gallons
from the numerator in setting the following year’s percentage
standard. The percentage standard would go from 10 percent
(10 / 100) to 9.9 percent (9.9 / 100). This difference—a tenth
of one percent—represents the renewable fuel used by exempt
small refineries that were under no obligation to do so. The
new formula, on the other hand, helps prevent
undercompliance by ensuring that the leeway afforded to small
refineries does not lead to percentage standards that undershoot
the target renewable fuel requirements. Given these competing
aims, we conclude that Section 7545(o)(3)(C)(ii) has no
bearing on whether or how EPA may account for the
transportation fuel used by small refineries that are or will be
exempted from their renewable fuel obligations.
The second provision the Refiner Petitioners cite, Section
7545(o)(3)(C)(i), requires EPA to adjust the percentage
standards to avoid the imposition of “redundant obligations.”
The Refiner Petitioners contend that the new formula runs
afoul of this provision because it could require obligated parties
to produce more renewable fuel than would be necessary to
satisfy the applicable volumes. Refiner Br. 25. The Refiner
Petitioners are correct that, because it relies on an estimate of
future exemptions, the new formula could lead to
overcompliance. If EPA overestimates the number of small
refinery exemptions it will grant, the percentage standard may
lead to obligated parties producing excess renewable fuel. But
the Refiner Petitioners are wrong that the new formula
impermissibly results in redundant obligations. As the Refiner
33
Petitioners concede, “imprecision is inherent in the statute.”
Refiner Reply Br. 14-15. Overcompliance risks also occur, for
example, whenever EPA estimates the national volume of
transportation fuel that will be used that year. If EPA
underestimates the national volume, the percentage standards
will be set too high, causing obligated parties to produce more
renewable fuel than necessary to satisfy the applicable
volumes. EPA no more imposes “redundant obligations” by
underestimating the total national volume of transportation fuel
than it does by overestimating the total volume of small
refinery exemptions. As with cellulosic biofuel projections,
EPA must “take neutral aim at accuracy” when projecting the
total of small refinery exemptions it will grant. Am. Petroleum,
706 F.3d at 477. An EPA projection that turns out to be off the
mark does not retroactively violate Section 7545(o)(3)(C)(i).
We therefore conclude that EPA has the statutory authority to
account for small refinery exemptions on a prospective basis.
The Refiner Petitioners also argue that, even if the new
formula complies with the statute, EPA failed to justify its
departure from the old formula. They point out that, in
defending the old formula, EPA had emphasized the difficulty
of accurately projecting how many small refineries would
receive exemptions. See Refiner Br. 28. Like any other
agency, EPA may “depart from a prior policy position” so long
as it “display[s] awareness that it is changing position.” FCC
v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009)
(emphasis omitted). In doing so, EPA “need not demonstrate
to a court’s satisfaction that the reasons for the new policy are
better than the reasons for the old one; it suffices that the new
policy is permissible under the statute, that there are good
reasons for it, and that the agency believes it to be better, which
the conscious change of course adequately indicates.” Id.
34
EPA adequately justified its decision to adopt the new
formula. In the Final Rule, EPA explained that it “believe[s]
[it] can project the exempt small refinery volume with
reasonable accuracy despite the uncertainties associated with
this projection.” 87 Fed. Reg. at 39,632. EPA first noted that
the new formula required a projection of “only the aggregate
exempted volume in a given compliance year,” meaning it
would not have to “wrestle with the difficulties” of predicting
the outcomes of particular small refinery exemption
applications. Id. In addition, EPA explained that, unlike in
previous years, EPA had the “benefit of a stated policy for
adjudicating [small refinery exemption] applications,” a fact
that, in its view, “strongly augment[ed]” its ability to make
such projections. Id. EPA also emphasized that the stated
policy would likely lead to the rejection of all small refinery
exemption applications, see id. at 39,633, making such
projections even easier. EPA developed that new policy in
response to the Tenth Circuit’s (now-vacated) decision in
Renewable Fuels Ass’n v. EPA, 948 F.3d 1206 (10th Cir.
2020), rev’d sub nom. HollyFrontier, 141 S. Ct. 2172, and first
invoked the policy as a basis for denying small refinery
exemptions in April 2022. See 87 Fed. Reg. at 39,633 n.192.
Whether that small refinery exemption policy is permissible is
at issue in another set of pending petitions. See Sinclair
Wyoming Refin. Co. LLC. v. EPA, No. 22-1073. No such
challenge is presented here, and we take no position on its
merits. But EPA had the authority to rely on that new
exemption policy as a reason to abandon the old formula and
adopt the new formula. Finally, EPA explained that it could
make such projections because it had already decided many of
the relevant applications, giving it a better sense of the total
volume of exemptions it would grant. 87 Fed. Reg. at 39,633.
Thus, EPA reasonably explained its adoption of the new
formula.
35
In sum, EPA has the authority to adjust the percentage
standards to account for small refinery exemptions; nothing in
the statute limits EPA to making such adjustments on a
retrospective basis; and EPA adequately justified its decision
to also make such adjustments on a prospective basis. We
therefore reject the Refiner Petitioners’ challenges to the new
formula.
3.
The last set of challenges relates to the 250-million-gallon
supplemental volume EPA imposed in response to our remand
in ACE. The Refiner Petitioners challenge the supplemental
volume as both unlawful and arbitrary and capricious. We
address each challenge in turn.
To start, we conclude that EPA had the statutory authority
to impose the supplemental volume for 2022. To justify the
volume, EPA invoked its power to “ensure” that applicable
volumes “are met.” 87 Fed. Reg. at 39,629 (citing 42 U.S.C.
§ 7545(o)(3)(B)(i)). The Refiner Petitioners object that EPA
lacks authority to impose a 2022 volume to make up for the fact
that the 2016 volume was too low. They argue that the statute
does not provide a “true-up mechanism on the back end if
things didn’t go as planned.” Refiner Br. 32. That argument is
unpersuasive.
We have made clear that EPA must ensure the applicable
volumes are met, “regardless of EPA delay.” Monroe Energy,
750 F.3d at 920 (quoting Nat’l Petrochem., 630 F.3d at 163).
Therefore, EPA may increase later year volumes to make sure
that volumes that should have been met in earlier years “are
eventually sold or introduced into commerce.” Nat’l
Petrochem., 630 F.3d at 157.
36
That is the lesson of National Petrochemical and Refiners
Association v. EPA, 630 F.3d 145 (D.C. Cir. 2010). That case
concerned the 2009 and 2010 applicable volumes of biomass-
based diesel. Id. at 150. By statute, the applicable volume for
2009 was 0.5 billion gallons, while the volume for 2010 was
0.65 billion gallons. Id. (citing 42 U.S.C.
§ 7545(o)(2)(B)(i)(IV)). EPA missed the deadline to set the
2009 standards. Id. at 148 (citing 42 U.S.C.
§ 7545(o)(3)(B)(i)). To make up for the lost volume, EPA
decided to “combin[e] the 2009 and 2010 biomass-based diesel
statutory volume requirements to create one 2010 standard.”
Id. at 150. Therefore, the “obligated parties were required to
use 1.15 billion gallons of biomass-based diesel based on the
combined volume requirements for 2009/2010.” Id. at 151.
The petitioners challenged the 2009/2010 volume, arguing that
“EPA lacked authority to increase the 2010 volume
requirement to include the 2009 volume requirement.” Id. at
152. We rejected that claim, holding that EPA’s delay did not
“preclud[e] EPA from ensuring that both the 2009 and 2010
applicable volumes of biomass-based diesel are eventually sold
or introduced into commerce.” Id. at 157.
The partial dissent’s attempt to distinguish National
Petrochemical falls short. It contends that the 2009 standards
in that case, although promulgated late and consolidated with
the 2010 standards, still “retained the compliance flexibilities
of normal 2009 standards” since compliance could be met
“with credits generated in 2008 or 2009.” Diss. Op. 22. That
is not quite right. Obligated parties could also use 2010 RINs
to comply with their 2009 renewable fuel obligations. See
Nat’l Petrochem., 630 F.3d at 162. In addition, an obligated
party could carry forward a portion of its 2010 obligations into
2011, meaning that it could functionally use 2011 RINs to
satisfy its 2009 renewable obligations. Id. at 151 n.19. We say
“functionally” because technically an obligated party was
37
permitted to carry forward only the portion of the 2009/2010
volume attributable to its 2010 obligations. Id. But that is still
more compliance flexibility than afforded by the statutory
carry-forward provision, which would have prohibited an
obligated party that carried forward a 2009 deficit into 2010 to
then carry forward a 2010 deficit into 2011. See 42 U.S.C.
§ 7545(o)(5)(D). In other words, under the rule we upheld in
National Petrochemical, EPA authorized obligated parties to
make up for volumes that should have been satisfied in 2009
through increased renewable fuel production in 2010 or even
2011. In approving a remedy allowing use of 2008, 2009,
2010, or 2011 RINs to comply with the 2009 standards, we
sustained EPA’s authority to impose supplemental standards to
ensure that the applicable volumes of renewable fuels are
eventually sold or introduced into commerce.
By the same token, EPA has the authority to impose a
supplemental 2022 volume to make up for volume that should
have been satisfied in 2016. EPA impermissibly waived 500
million gallons of renewable fuel from the 2016 applicable
volume. ACE, 864 F.3d at 713. We therefore “vacate[d] EPA’s
decision to reduce the total renewable fuel volume
requirements for 2016 through use of the ‘inadequate domestic
supply’ waiver provision and remand[ed] the Final Rule to the
agency for further consideration in light of our decision.” Id.
EPA missed the deadline to establish the appropriate 2016
volume but, under National Petrochemical, it has the statutory
authority to “ensure” that obligated parties “eventually” sell or
introduce that fuel into commerce. Nat’l Petrochem., 630 F.3d
at 157.
To be sure, the supplemental standard here was more
delayed than the one at issue in National Petrochemical. It
came six years after the relevant compliance period, rather than
a single year. And EPA gave obligated parties more
38
compliance flexibility in that case than it did here: In National
Petrochemical, EPA allowed obligated parties to use
2008/2009 RINs to comply with the supplemental 2010
standard, whereas in this case EPA did not permit them to use
2015/2016 RINs to comply with the 2022 supplemental
standard. This, however, has no bearing on EPA’s statutory
authority to promulgate the standard. It goes, rather, to whether
the standard is reasonable. To that end, the Refiner Petitioners
contend that, even if EPA had authority to impose a
supplemental volume, its decision to do so here was arbitrary
and capricious. None of their various arguments is meritorious.
First, the Refiner Petitioners argue that EPA arbitrarily
decides when it will and will not backfill missing volumes.
Refiner Br. 32-33. They point out that EPA does not impose
supplemental volumes to “correct the volume requirements
based on deviations in [fuel] projections from the volumes
actually consumed.” Refiner Br. 32 (quoting RIA at 5 (J.A.
160)). For example, suppose that EPA sets the applicable
volume of total renewable fuel at 10 billion gallons and projects
100 billion gallons of transportation fuel will be introduced into
the market, yielding a percentage standard of 10 percent. If
EPA’s projection were too high, such that only 90 billion
gallons of transportation fuel were in fact introduced into the
market, then, pursuant to the percentage standard, only 9 billion
gallons of renewable fuel would have been introduced into the
market. In such a case, as EPA concedes, EPA would not
implement a one-billion-gallon supplemental volume to
account for that shortfall. See RIA at 5 (J.A. 160).
The two situations are materially different, however,
making it reasonable for EPA to treat them differently. As
discussed, EPA establishes the percentage standards by
dividing the applicable volume for each renewable fuel type by
an estimate of the national volume of transportation fuel that
39
will be used that year. The numerator represents the applicable
volume required by the Program: the amount of renewable fuel
EPA must “ensure” is “met.” 42 U.S.C. § 7545(o)(3)(B)(i).
The denominator is a factual forecast: the amount of
transportation fuel “projected to be sold or introduced into
commerce in the United States.” Id. § 7545(o)(3)(A). EPA can
thwart the Program by setting the numerator too low (i.e.,
adopting an impermissibly low applicable volume) or by
setting the denominator too high (e.g., incorrectly forecasting
total fuel usage). The former is a legal mistake, and, as
occurred in ACE, it subjects the resulting percentage standard
to vacatur. See 864 F.3d at 713. The latter is a technical error
inherent in the nature of projecting events that have yet to
occur. As EPA explained, the Program requires that EPA rely
on such projections. RIA at 5 (J.A. 160). It is not arbitrary and
capricious for EPA to treat a legal mistake differently from a
prognostication error.
Second, the Refiner Petitioners contend that EPA, after
initially suggesting that it would not impose a supplemental
volume in response to the ACE remand, failed to explain its
decision to change course. Refiner Br. 33-34. True, in a
previous proposed rule EPA suggested it would not impose a
supplemental volume in order to avoid taxing the carryover
RIN bank. See 87 Fed. Reg. at 39,629. But EPA
“recognize[d]” its change of position and explained that it no
longer believed the supplemental volume would result in a
drawdown of carryover RINs. Id. Specifically, EPA
determined that the “market is capable of achieving the
supplemental volumes with increased biofuel use.” Id. Thus,
EPA “display[ed] awareness that it is changing position” and
offered a reasonable basis for doing so. Fox, 556 U.S. at 515.
Third, the Refiner Petitioners argue that EPA failed to
consider other options to comply with the ACE remand.
40
Refiner Br. 36-39. To the contrary, EPA considered, for
example, whether it could simply maintain the 2016 volume
requirements and impose no supplemental volume. RTC at 151
(J.A. 527). EPA determined that approach would be
inconsistent with its statutory mandate to “ensure,” even if
belatedly, that the applicable volumes are met. Id. EPA also
considered whether to retroactively apply the discretionary
component of the cellulosic waiver provision or the inadequate
domestic supply waiver provision. Id. at 151-53 (J.A. 527-29).
Invocation of those provisions is discretionary, and EPA’s
choice not to invoke them retroactively was not arbitrary and
capricious. EPA thus “examine[d] the relevant data and
articulate[d] a satisfactory explanation for its action including
a rational connection between the facts found and the choice
made.” Bluewater Network v. EPA, 370 F.3d 1, 11 (D.C. Cir.
2004).
Fourth, the Refiner Petitioners contend that EPA imposed
the supplemental volume without considering the relevant
statutory criteria. Refiner Br. 35-36. That argument has it
backwards. EPA’s statutory obligation is to impose percentage
standards to meet the statutorily prescribed volumes; it may
reduce those volumes “only in limited circumstances.” Nat’l
Petrochem., 630 F.3d at 149. The vacatur in ACE had the effect
of re-imposing the 500-million-gallon volume requirement.
That volume requirement had to be met unless lawfully waived.
Contrary to what appears to be the Refiner Petitioners’ view,
EPA did not need to rely on some waiver provision—like the
reset provision—to re-impose the 500 million gallons. In the
Final Rule, EPA correctly recognized an obligation to impose
a requirement to “ensure” that the prescribed volume was met.
It had no obligation to consider the statutory factors as if it were
devising a volume requirement anew.
41
Given that EPA was late in promulgating the supplemental
volume, it had to “consider[] and mitigate[] any hardship
caused to obligated parties by reason of the lateness.” ACE,
864 F.3d at 718. We conclude that EPA did so. EPA
recognized that the supplemental volume would present
“significant challenges,” especially in light of “market-forcing
standards” already set for 2022. 87 Fed. Reg. at 39,629.
Nevertheless, EPA concluded that “compliance with the 2022
supplemental standard in addition to the 2022 annual standards
is feasible and can be achieved through the actual use of
renewable fuels, including imports, in 2022 as opposed to
carryover RINs.” Id. at 39,628. Rather than require a single
500-million-gallon supplemental volume, EPA split the
obligation “across two compliance years.” Id. at 39,630. To
the extent the obligated parties come up short, EPA determined
the supplemental volume “could be met through a drawdown
of the carryover RIN bank.” Id. at 39,628. As discussed above,
EPA provided at least 11 months of lead time, giving the
obligated parties a reasonable period to comply with the
obligation. See id. And EPA adopted various mechanisms to
further “mitigate the compliance burden.” Id. at 39,630. EPA
concluded that the overall benefits of the supplemental volume
outweigh the potential burdens. Id. That was a reasonable
conclusion.
Finally, some Refiner Petitioners argue that EPA should
have permitted obligated parties to satisfy the supplemental
volume with 2015/2016 RINs. Refiner Br. 39 & n.12. To be
sure, doing so would have been more consistent with the
agency’s approach in National Petrochemical, where obligated
parties were permitted to use old RINs (from 2008 and 2009)
alongside new RINs (from 2010) to meet the 2009 standards.
But EPA considered that option and concluded that doing so
would be “administratively impractical and highly
burdensome,” EPA Br. 74, since it would require rescinding
42
the 2016 standard, promulgating a new 2016 standard,
returning the 2015/2016 RINs used for compliance to the
original owners (some of whom may no longer exist), and
requiring a new compliance demonstration, RTC at 153-54
(J.A. 529-30). EPA also explained that it would need to reopen
compliance for all years from 2016 onward because the two-
year lifespan of RINs means that returning RINs for one year
creates “cascading impacts on each subsequent year’s
compliance.” Id. EPA reasonably avoided that relatively
complex set of adjustments by declining to permit obligated
parties to satisfy the supplemental volumes with 2015/2016
RINs.
CONCLUSION
For these reasons, the petitions for review are denied.
So ordered.
KATSAS, Circuit Judge, concurring in part and dissenting
in part: In 2022, the Environmental Protection Agency
substantially increased the minimum volumes of renewable
fuel that must be sold in the United States as transportation fuel.
EPA estimated that these new standards would increase annual
fuel costs for consumers by over $5.72 billion. “[T]hat’s
billion with a b.” White Stallion Energy Ctr., LLC v. EPA, 748
F.3d 1222, 1259 (D.C. Cir. 2014) (Kavanaugh, J., concurring
in part and dissenting in part), rev’d sub nom. Michigan v. EPA,
576 U.S. 743 (2015). The agency further estimated that the
new standards would generate only $160 million in quantified
annual benefits, all coming from increased energy security.
One need hardly be an expert to see that the $5.72 billion in
costs is strikingly larger than the $160 million in benefits—
more than 35 times larger, to be precise.
So what justifies a rule for which costs so dramatically
exceed benefits? The regulatory preamble says very little
about this. For two kinds of renewable fuel, EPA merely stated
the obvious—that the volume requirements strike a balance
among competing statutory considerations, which include
“potential” energy security and climate change benefits. See
Renewable Fuel Standard (RFS) Program: RFS Annual Rules,
87 Fed. Reg. 39,600, 39,623–24 (July 1, 2022) (Final Rule).
Yet in doing so, EPA did not even mention the most important
competing consideration—the $5.72 billion annual increase in
fuel costs. See id. For a third kind of renewable fuel, EPA
acknowledged cost considerations but again stressed a
“potential” offsetting climate benefit from reduced
greenhouse-gas emissions. See id. at 39,623. Nonetheless,
citing “uncertainty” about how the standards might affect those
emissions, EPA refused to give any “quantified projection of
the GHG emission impacts of the rule.” Id. at 39,626 n.139.
A regulatory impact analysis elaborates on how EPA
assessed the governing statutory considerations. Renewable
Fuel Standard (RFS) Program: RFS Annual Rules, Regulatory
2
Impact Analysis (June 2022) (RIA). As to any possible climate
benefit, EPA again hedged its bets: The RIA likewise declined
to commit to any quantitative estimate, instead repeatedly
stressing what EPA views as “considerable uncertainty” about
how renewable fuels might affect greenhouse-gas emissions.
Id. at 67, 71. The RIA did set forth what EPA described as an
“illustrative” attempt to estimate climate benefits over the next
three decades, but the agency expressly disclaimed reliance on
it. Id. at 71 (“This illustrative scenario is not EPA’s assessment
of the likely greenhouse gas impacts of this rulemaking.”).
To make matters worse, the 2022 standards imposed two
distinct volume requirements for renewable fuel: a base and a
supplement. The supplement seeks to cancel out a legal error
that EPA made in setting the 2016 volume requirement too low.
But the statute mandates volume requirements to be set, and
compliance to be assessed, on a year-by-year basis; it provides
no authority for EPA to transfer volume requirements from one
year to another. EPA fixed the 2022 volume requirement—
which it regarded as aggressive—based on its assessment of the
statutory factors governing that inquiry. Then, it added an extra
quarter-billion gallons to boot.
In my view, the 2022 volume requirements are arbitrarily
high. According to EPA, their quantified annual costs exceed
their quantified annual benefits by over $5.5 billion. And
vague references to potential climate benefits over the course
of decades, which EPA viewed as too uncertain even to
estimate, do not make up the difference. Moreover, the
supplement does not even purport to reflect application of the
3
governing legal standards. For these reasons, I would set aside
the 2022 volume requirements.1
I
The Clean Air Act creates a Renewable Fuel Standard
Program, which requires minimum volumes of renewable fuels
to be sold in the United States as transportation fuel. 42 U.S.C.
§ 7545(o)(2)(A)(i). These fuels are produced from renewable
biomass such as corn, soybeans, or landfill waste, and they
replace traditional fossil fuels such as gasoline, diesel fuel, and
natural gas. Id. § 7545(o)(1)(J). Renewable fuels are more
expensive than traditional fuels. When burned, they emit less
greenhouse gas. But the production of renewable fuels itself
can generate significant emissions, from activities such as
preparing land to grow the necessary feedstocks.
The statute addresses four types of biofuels—renewable
fuel, advanced biofuel, cellulosic biofuel, and biomass-based
diesel. The fuels vary according to their feedstocks and
expected reduction in greenhouse-gas emissions. 42 U.S.C.
§ 7545(o)(1)(B), (D), (E), (J). Some of these categories are
nested within others: Cellulosic biofuel and biomass-based
diesel are specific types of advanced biofuel, which in turn is a
specific type of renewable fuel. See Ams. for Clean Energy v.
EPA, 864 F.3d 691, 697–98 (D.C. Cir. 2017) (ACE). For
renewable fuel, advanced biofuel, and cellulosic biofuel,
Congress set increasing annual minimum volumes in statutory
tables running through 2022. 42 U.S.C. § 7545(o)(2)(B)(i)(I)–
1
Like my colleagues, I would deny the petitions for review
filed by the biofuel producers, who seek to make the volume
requirements even higher. I further agree with my colleagues that, if
the volume requirements are valid, EPA did not independently err in
setting compliance standards based on those requirements.
4
(III). For later years, EPA itself must set annual minimum
volumes based on six considerations. Id. § 7545(o)(2)(B)(ii).
To ensure that these minimum volumes are in fact sold, EPA
also must convert the volumes into percentage requirements
imposed on obligated parties such as refiners and importers of
transportation fuel. Id. § 7545(o)(3). Furthermore, EPA must
administer a program for suppliers of renewable fuel to obtain
tradeable credits valid for one year after they are generated. Id.
§ 7545(o)(5).
The statutory minimum volumes “provide only starting
points.” Am. Fuel & Petrochemical Mfrs. v. EPA, 937 F.3d
559, 569 (D.C. Cir. 2019) (AFPM). Several waiver provisions
allow—and at times require—EPA to reduce the statutory
minima. A general waiver provision permits the agency to
reduce any minimum volume that would “severely harm the
economy or environment” or that has proven infeasible because
of an “inadequate domestic supply” of the relevant fuel. 42
U.S.C. § 7545(o)(7)(A). There is also a separate waiver
provision keyed to shortages of cellulosic biofuel: In any year
“for which the projected volume of cellulosic biofuel
production” is less than the statutory minimum, EPA must
reduce the statutory minimum to the projected available
volume, and it may reduce the statutory minima for the broader
categories of advanced biofuel and renewable fuel by up to the
same amounts. Id. § 7545(o)(7)(D)(i).
A further provision, titled “Modification of applicable
volumes” and known as the reset authority, kicks in if EPA has
made large enough waivers in prior years. 42 U.S.C.
§ 7545(o)(7)(F). It applies to any statutory volume table for
which the agency has waived either (i) at least 20 percent of
statutory minima for two consecutive years or (ii) at least 50
percent of a statutory minimum for one year. Id. This reset
authority requires EPA, within one year of issuing the
5
triggering waiver, to modify all minimum volumes for later
years covered by the statutory table. Id. EPA could not
exercise its reset authority until 2016, but waivers before 2016
could (and did) trigger a requirement for EPA to exercise its
authority for years after 2016. Id.
In exercising its reset authority, EPA must use the same
“processes, criteria, and standards” that it uses to set volume
requirements for years not covered by the tables. 42 U.S.C.
§ 7545(o)(7)(F). Those criteria require EPA to set annual
minimum volumes based on past implementation and six
enumerated factors:
(I) the impact of the production and use of
renewable fuels on the environment, including
on air quality, climate change, conversion of
wetlands, ecosystems, wildlife habitat, water
quality, and water supply;
(II) the impact of renewable fuels on the energy
security of the United States;
(III) the expected annual rate of future commercial
production of renewable fuels … ;
(IV) the impact of renewable fuels on the
infrastructure of the United States … ;
(V) the impact of the use of renewable fuels on the
cost to consumers of transportation fuel and on
the cost to transport goods; and
(VI) the impact of the use of renewable fuels on
other factors, including job creation, the price
and supply of agricultural commodities, rural
economic development, and food prices.
6
Id. § 7545(o)(2)(B)(ii). Boiled down, paragraph (2)(B)(ii)
requires EPA to set minimum volumes based on its analysis of
(1) environmental impacts including climate change, (2)
energy security, (3) production of renewable fuels, (4)
infrastructure, (5) cost, and (6) other factors.
The waiver provisions have proven essential to the RFS
program, for “[t]he statute was a bit optimistic, to put it
generously.” ACE, 864 F.3d at 726. Most notably, cellulosic
biofuel has not been produced at even a fraction of what was
expected. See id. And because cellulosic biofuel is a specific
kind of advanced biofuel and renewable fuel, its failed
development has dragged down those categories as well. See
AFPM, 937 F.3d at 572. For years, EPA has addressed these
shortfalls through the waiver provision for cellulosic biofuel,
making significant reductions to the minimum volumes for
cellulosic biofuel, advanced biofuel, and renewable fuel.
These reductions have triggered EPA’s reset authority for all
three of the fuel categories, in 2010, 2015, and 2019
respectively. See Final Rule, 87 Fed. Reg. at 39,607. Yet until
this rulemaking, EPA had never exercised its reset authority.
II
The Final Rule sets minimum volumes for 2020, 2021, and
2022; sets a second, supplemental volume for 2022; and
calculates the applicable percentage requirements. See 87 Fed.
Reg. at 39,610–35. As has been the case throughout the RFS
program, the volume requirements were substantially lower
than the statutory targets. Yet the 2022 volume requirements
also were “significantly higher” than the those established by
EPA for preceding years. Id. at 39,603; see also id. at 39,631
7
(table of volumes). A group of refiners challenge the 2022
volumes as unlawfully high.2
To justify setting volumes below the statutory baselines,
EPA invoked both the reset provision and the waiver provision
for cellulosic biofuel. Final Rule, 87 Fed. Reg. at 39,608. In
explaining the volumes selected, EPA framed its analysis
around “the statutory factors that the reset authority requires us
to consider.” Id. Yet it reduced the 2022 volumes to the exact
levels that the cellulosic-waiver provision by itself would have
required (for cellulosic biofuel) or permitted (for advanced
biofuel and total renewable fuel). See id. at 39,623. EPA
sought to explain these volumes in a regulatory preamble and
in a separate regulatory impact analysis.
A
The preamble contains only a cursory discussion of how
EPA balanced the statutory factors to set the 2022 volumes.
For cellulosic biofuel, EPA recognized that the cellulosic-
waiver provision required the agency to reduce the volume to
the amount projected to be available. Final Rule, 87 Fed. Reg.
at 39,623. EPA also recognized that the reset authority
required it to consider further reductions. Id. Here is EPA’s
explanation for making no such reductions:
EPA’s approach to the cellulosic biofuel volume for
2022 seeks to realize the potential for GHG benefits
associated with increased cellulosic biofuel
production despite the relatively high costs of liquid
cellulosic biofuels, and, in the case of [cellulosic
fuels] derived from biogas, the impact on the price of
transportation fuel. Because cellulosic biofuels
2
Because the refiners do not challenge the 2020 or 2021
volumes, I do not consider whether they too are unlawfully high.
8
through 2022 are projected to be produced from
wastes or residues, their production is not expected to
have significant adverse impacts on several of the
statutory factors such as the price and supply of
agricultural commodities, water quality and supply,
and the conversion of wetlands, ecosystems, and
wildlife habitat. Thus, while some of the statutory
factors (such as the cost to consumers of
transportation fuel and the cost to transport goods)
may suggest that a volume of cellulosic biofuel lower
than the volume projected to be produced in 2022
would be appropriate, we have determined that these
factors are outweighed by other factors (such as
climate change).
Id.
The preamble has a similarly terse justification for why
EPA, in exercising its reset authority, made no further
reduction to the 2022 volumes for advanced biofuel and total
renewable fuel beyond what the cellulosic waiver allowed.
Here is EPA’s analysis of the governing statutory factors:
The advanced biofuel and total renewable fuel
volumes strike a balance between numerous
competing statutory factors. They reflect the potential
for growth in the volume of renewable fuel produced
and consumed in the U.S., and the potential energy
security and climate change benefits that producing
and consuming increasing volumes of qualifying
renewable fuels provide. They also take into
consideration the potential negative impacts of
renewable fuels produced from crops such as corn or
soybeans on environmental factors such as the
9
conversion of wetlands, ecosystems, and wildlife
habitat, water quality, and water supply.
Final Rule, 87 Fed. Reg. at 39,623–24. EPA also expressed a
desire to maintain “statutorily implied” volumes. Id. at 39,624.
An implied volume is the difference between expressly
required volumes for nested categories. For example, the
implied volume for conventional renewable fuel is the required
volume for all renewable fuel minus the required volume for
advanced biofuel. Likewise, the implied volume for non-
cellulosic advanced biofuel is the required volume for all
advanced biofuel minus the required volume for cellulosic
biofuel. EPA reasoned that maintaining these implied volumes
would be “inherently consistent” with the statutory scheme. Id.
The preamble then sets forth “quantitative impacts” of the
volume requirements. EPA found two such impacts: On the
cost side of the ledger, the 2022 standards (including the
supplement) would raise annual fuel costs to consumers by
$5.72 billion relative to the 2020 standards. Final Rule, 87 Fed.
Reg. at 39,626. On the benefit side, the 2022 standards would
increase annual energy security by $160 million relative to the
same baseline. RIA at 155.3 As for climate benefits, EPA
noted the “uncertainty related to the GHG emission impacts of
this rule,” and it therefore expressly declined to make any
“quantified projection” of that variable. Id. at 39,626 n.139.
Finally, the preamble explained EPA’s decision to impose
a “supplemental” volume for 2022 to offset an unlawful
reduction that EPA had made to an annual volume for 2016. In
3
The preamble reports increased energy security for 2022 to be
$227 million. Final Rule, 87 Fed. Reg. at 39,626. That figure
appears to misstate the RIA, which calculated $227 million in energy
security benefits from the 2021 and 2022 standards combined. RIA
at 155. This discrepancy is immaterial to the analysis that follows.
10
ACE, this Court set aside EPA’s use of the general waiver
provision to reduce the 2016 requirement for total renewable
fuel by 500 million gallons. See 864 F.3d at 702, 713. We held
that EPA had impermissibly used that provision, which
requires an inadequate domestic supply of the relevant fuel, to
address demand-side constraints. Id. at 707. We vacated the
waiver and “remand[ed] the rule to EPA for further
consideration.” Id. at 737.
In this rulemaking, EPA responded to ACE by (1) tacking
on an extra 250 million gallons of renewable fuel to the volume
requirement for 2022 and (2) promising to tack on the same
amount to the volume requirement for 2023. Final Rule, 87
Fed. Reg. at 39,628. EPA rejected implementing ACE by
reassessing compliance for 2016 or by reducing the outstanding
2016 volume through a retroactive exercise of the cellulosic-
waiver provision. J.A. 528–30. Instead, EPA imposed what it
described as a “supplemental standard” functioning “like a
2022 standard in all respects.” Final Rule, 87 Fed. Reg. at
39,628. Yet in doing so, EPA excluded the supplement from
its assessment of what volume of renewable fuel for 2022
would best comport with the paragraph (2)(B)(ii) factors.
Compare id. at 39,623–25 (assessing factors) with id. at
39,627–31 (explaining supplement).
B
EPA supplemented the preamble with a regulatory impact
analysis examining the factors governing its exercise of the
reset authority. The RIA began by identifying 28 possible
effects, organized around the six paragraph 2(B)(ii) factors.
RIA at v. Almost all of these were costs as opposed to benefits,
including increased annual fuel costs of $5.72 billion for 2022.
Id. at v, 293–94. Other potential costs included harms to air
quality from biofuel production, harms to wetlands and other
11
ecosystems from land-use change, harms to soil and water
quality from feedstock production, aquifer depletion, “[u]se of
limited water resources for irrigation instead of meeting human
needs,” higher corn and soybean prices, and higher food prices
more generally. Id. at v. EPA quantified only one benefit:
increased annual energy security of $160 million. Id. at v, 155.
And it identified only four other potential benefits: reduced
greenhouse-gas emissions, increased employment, increased
economic development in rural areas, and increased supply of
certain agricultural commodities. Id. at v.
For greenhouse-gas emissions, EPA did not commit to a
quantified impact. In 2010, it had estimated the GHG
emissions of different kinds of biofuel to determine which ones
met the statutory definitions for each type of renewable fuel.
RIA at 66. Later, it made some partial updates. See id. at 66
& nn. 130–34. But EPA did not rely on these figures to assess
the effect of the volume requirements on GHG emissions.
Instead, EPA repeatedly stressed that there was “considerable
uncertainty regarding the GHG emission impacts of renewable
fuel use,” id. at 67, and it invoked that uncertainty as a reason
for “not presenting modeled estimates of the GHG impacts of
the combined volumes in this final rule,” id. 70–71. EPA did
say that its 2010 estimates remained “within ranges found in
more recent studies,” but it also noted that the studies reflect
divergent views on the “lifecycle GHG emissions” of
renewable fuels. Id. at 67 & n.139. The most recent study cited
by EPA looked at the impact of the RFS program itself on GHG
emissions. This study concluded that the emissions from land-
use changes to implement the program were “enough to fully
negate or even reverse any GHG advantages of the fuel relative
to gasoline”—largely due to a net increase in lifecycle GHG
emissions from corn-based ethanol. Lark et al., Environmental
Outcomes of the US Renewable Fuel Standard, 119
Proceedings of the Nat’l Academy of Sciences No. 9,
12
e210184119 at 2 (Feb. 14, 2022). In the end, the most EPA was
willing to say was that the volume requirements “may affect
climate change by altering the amount” of GHG emissions.
RIA at 65 (emphasis added).
EPA did provide an “illustrative analysis of GHG
emissions.” RIA 71. It estimated changed emissions
attributable to the volume requirements over the next three
decades. Id. at 78–80. Using three possible discount rates,
EPA then estimated the social cost of carbon—measured in
dollars per unit of carbon—over the same three decades. Id. at
86. Finally, it multiplied those figures to estimate the dollar
values of the reduced carbon emissions over the same period.
Id. at 92–94. But despite the complexity of this analysis, EPA
expressly disavowed it. In the first paragraph of a 25-page
discussion, the agency stated: “This illustrative scenario is not
EPA’s assessment of the likely greenhouse gas impacts of this
rulemaking.” Id. at 71.
III
A
The Clean Air Act requires us to reverse rules that are
“arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” 42 U.S.C. § 7607(d)(9)(A). This
language parrots the Administrative Procedure Act. See 5
U.S.C. § 706(2)(A). We therefore must consider whether EPA
has given a “satisfactory explanation for its action.” Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983) (cleaned up). Likewise, we must consider
whether its decision “was based on a consideration of the
relevant factors and whether there has been a clear error of
judgment.” Id. (cleaned up). And we must set aside the
decision if the agency “entirely failed to consider an important
aspect of the problem” or “offered an explanation for its
13
decision that runs counter to the evidence” before it. Id. Justice
Kavanaugh has distilled these familiar principles into one
overarching insight: Agency action must be “reasonable and
reasonably explained.” FCC v. Prometheus Radio Project, 141
S. Ct. 1150, 1158 (2021); see also ACE, 864 F.3d at 726.
B
The reset authority required EPA to consider six general
factors in setting the minimum volumes for 2022. 42 U.S.C.
§ 7545(o)(2)(B)(ii), (o)(7)(F). EPA identified some 28
considerations bearing on these factors. RIA at v. It quantified
two of them: According to EPA, the 2022 standards would
increase annual fuel costs to consumers by $5.72 billion and
would increase the Nation’s annual energy security by only
about $160 million. Final Rule, 87 Fed. Reg. at 39,626; RIA
at 155, 294. In other words, the costs of the standards exceed
their benefits by more than 35 times, and their net annual cost
is over $5.5 billion—yes, with a b. Costs of this magnitude are
an “important aspect of the problem” for EPA to consider, State
Farm, 463 U.S. at 43, particularly because paragraph (2)(B)(ii)
expressly requires it to analyze “cost to consumers of
transportation fuel,” 42 U.S.C. § 7545(o)(2)(B)(ii)(V). In
setting aside another EPA rule promulgated with scant
consideration of a ten-digit price tag, the Supreme Court
explained: “Agencies have long treated cost as a centrally
relevant factor when deciding whether to regulate.
Consideration of cost reflects the understanding that reasonable
regulation ordinarily requires paying attention to the
advantages and the disadvantages of agency decisions.”
Michigan v. EPA, 576 U.S. 743, 752–53 (2015). The dissenters
fully agreed. See id. at 769 (Kagan, J., dissenting) (“Cost is
almost always a relevant—and usually, a highly important—
factor in regulation. Unless Congress provides otherwise, …
14
an agency must take costs into account in some manner before
imposing significant regulatory burdens.”).
By this metric, EPA’s justification of the 2022 volumes
does not fare well. Start with its explanation for setting the
cellulosic-biofuel volume at the full amount expected to be
produced. EPA acknowledged that cost considerations cut in
favor of a lower volume. Final Rule, 87 Fed. Reg. at 39,623;
see also id. at 39,611 (“the cost of producing liquid cellulosic
biofuel is high”). EPA then explained that because cellulosic
biofuel is produced from waste rather than crops, various
environmental harms from the production of crop-based
renewable fuels (“such as the price and supply of agricultural
commodities, water quality and supply, and the conversion of
wetlands, ecosystems, and wildlife habitat”) would not raise
the price tag even more. Id. at 39,623. But what benefits cut
in the other direction? Without elaboration, EPA named “other
factors (such as climate change)” and noted a “potential for
GHG benefits.” Id. Yet as explained above, EPA declined to
commit itself to any estimate of the reduced emissions
attributable to the 2022 volumes, much less to any estimate
monetizing those benefits. And assertions so “conclusory,”
regarding issues so critically important, do not count as a
reasonable explanation. Am. Clean Power Ass’n v. FERC, 54
F.4th 722, 727 (D.C. Cir. 2022).
Next consider EPA’s explanation for the advanced and
renewable fuel volumes. EPA began with a truism—the
volumes “strike a balance” (as any volumes would) among
“competing statutory factors.” Final Rule, 87 Fed. Reg. at
39,623. But in discussing these factors, EPA failed to mention
increased fuel costs at all, much less acknowledge that it had
estimated them to be several billion dollars annually. See id. at
39,623–24. Instead, the agency ticked off two potential
benefits from the higher volumes—“energy security” (without
15
mentioning that it had estimated this benefit to be a paltry $160
million annually) and “climate change benefits” (without
mentioning that it had declined to estimate reduced emissions
or to monetize those benefits). See id. at 39,623. The only
other considerations mentioned fell on the costs side of the
ledger—the various environmental harms from crop-based
renewable fuels “such as the conversion of wetlands,
ecosystems, and wildlife habitat, water quality, and water
supply.” Id. at 39,624. Far from decreasing the $5.5 billion
annual deficit of costs over benefits, those additional costs
would have made it even higher.
Rather than engage with the paragraph (2)(B)(ii) factors,
EPA asserted a different rationale for reducing the advanced
and renewable volumes only as permitted by the cellulosic-
waiver provision. The agency reasoned that maintaining
“statutorily implied” volumes—of non-advanced renewable
fuel and of non-cellulosic advanced biofuel—would be more
“inherently consistent” with the statute. Final Rule, 87 Fed.
Reg. at 39,624. But that reasoning is itself inconsistent with
the statute. When there is a shortfall in production of cellulosic
biofuel, the waiver provision requires EPA to reduce the
cellulosic-biofuel volume to account for the shortfall and then
permits the agency to reduce volumes for the broader
categories of advanced biofuel and renewable fuel by no more
than the same amount. 42 U.S.C. § 7545(o)(7)(D). But the
cellulosic-waiver provision and the reset authority are
different. The latter requires EPA, when statutory volume
targets are missed by a sufficiently large amount, to consider
broader changes based on its own assessment of the paragraph
(2)(B)(ii) factors. Id. § 7545(o)(7)(F). And here, the reset
provision was triggered many times over: EPA reduced the
cellulosic-biofuel volume by 93.5 percent in 2010, and it has
reduced that annual volume by similarly large percentages ever
since. See Final Rule, 87 Fed. Reg. at 39,607 & n.30.
16
Likewise, the relevant waivers for advanced biofuel and
renewable fuel easily exceeded the statutory trigger for the
reset provision. See id. at 39,607. Because these wholesale
reductions triggered the reset authority as to all three kinds of
renewable fuel, EPA was required to come up with new
volumes by reasonably balancing the paragraph (2)(B)(ii)
factors, including increased fuel costs. It could not simply
collapse that inquiry into the much narrower one governing the
cellulosic-waiver provision.
EPA’s reasoning as to implied volumes also fails for a
different reason—it assumes that the only ongoing concern has
been the chronic unavailability of cellulosic biofuel. EPA’s
own analysis indicates otherwise. According to EPA, use of
conventional renewable fuel, which is overwhelmingly corn-
based ethanol, has “virtually stagnated as the market reached
the E10 blendwall.” Final Rule, 87 Fed. Reg. at 39,612. This
happened because almost all gasoline sold in the United States
now contains at least ten percent ethanol (i.e., is E10). RIA at
30. And most vehicle engines in the United States “were not
designed to handle gasoline consisting of more than 10 percent
ethanol.” Monroe Energy, LLC v. EPA, 750 F.3d 909, 914
(D.C. Cir. 2014). So as the implied volume for conventional
renewable fuel rose above the blendwall, and as cellulosic
biofuel continued to be unavailable, the practical effect was to
require obligated parties to replace diesel fuel with advanced
biofuels at levels well above the volume requirements for that
category. Final Rule, 87 Fed. Reg. at 39,612, 39,624. Because
advanced biofuels are more expensive than corn-based ethanol,
this dynamic drove the projected $5.72 billion increase in fuel
costs—primarily through an 8.62 cent-per-gallon increase in
the cost of diesel. RIA at 287–294. Yet despite laying all of
this out, the agency did not consider any cost issues, much less
these interrelated cost issues spanning all three nested
categories, in setting the advanced and renewable fuel volumes.
17
On the benefits side of the analysis, it is of course true that
qualitative benefits are sometimes as important as, or even
more important than, quantified costs or benefits. See Mozilla
Corp. v. FCC, 940 F.3d 1, 70–71 (D.C. Cir. 2019). But the
larger the quantified net costs, the more significant and certain
the qualitative benefits must be to tip the scales in the other
direction. Here, EPA remained agnostic on the extent of any
climate benefits from reduced GHG emissions. Because of
what it viewed as “the uncertainty related to GHG emission
impacts of th[e] rule,” EPA declined to make any “quantified
projection of the GHG emission impacts of the rule.” Final
Rule, 87 Fed. Reg. at 39,926 n.139. Moreover, it repeatedly
stressed its view that there was “considerable uncertainty”
about how the volume requirements would impact GHG
emissions. RIA at 67, 71. EPA even cited a study arguing that
the shift to some renewable fuels has led to a net increase in
GHG emissions. Id. at 68 n.139 (Lark). So EPA’s own expert
judgment was that the impact of renewable fuels on GHG
emissions is deeply uncertain. And all this uncertainty related
to the amount of reduced GHG emissions—before even
beginning to estimate the dollar value of those reduced
volumes. In sum, it is unreasonable to impose many billions of
dollars of annual costs when any offsetting benefit is—by
EPA’s own expert judgment—so uncertain.
What to make of EPA’s “illustrative” analysis of GHG
emissions? The short answer is that EPA firmly disavowed it:
“This illustrative scenario is not EPA’s assessment of the likely
greenhouse gas impacts of this rulemaking.” RIA at 71
(emphasis added). A longer answer, buried in the fine print, is
that EPA had many good reasons for caution. First, the RIA
explains that measuring the various “GHG emissions
associated with an increase in biofuel use” is a source of
“uncertainty,” and “[e]stimating indirect categories of
emissions—such as land-use change—is particularly
18
challenging.” Id. at 68–69. Second, the illustration was based
on dated studies that may have underestimated GHG emissions
from such land-use change. See id. at 65–67. Third, the
illustration assumes that renewable fuels will fully displace
corresponding categories of fossil fuels. Id. at 72. Yet EPA
noted reasons to think that increased use of renewable fuels in
the United States will cause an increase in fossil-fuel
consumption abroad. Id. at 72 n.153. Fourth, the illustration
assumes that 30 years “is an appropriate timeframe for
evaluating the lifecycle GHG emissions of renewable fuels.”
Id. at 70. But while EPA endorses this timeframe to determine
which fuels satisfy the statutory definitions, it expressed only
agnosticism on whether 30 years is anything close to
appropriate for present purposes. See id. (“the application of a
30-year time period may or may not be the most appropriate
analytical time period over which to evaluate the impact of a
rule that covers only three years of volume requirements”).
And for dominant, plant-based renewable fuels such as corn-
based ethanol and soybean-based diesel, the illustration itself
projects that the renewables do not so much as break even on
GHG emissions until about seven to eleven years after the
initial land-use changes. Id. at 79. Fifth, the illustration
explains that attempts to monetize GHG emissions depend
heavily on selecting an appropriate discount rate, which has
been a source of substantial and ongoing disagreement. See id.
at 81–85. For instance, the three discount rates used in the
illustration for the 2022 standards, ranging from 2.5 to 5
percent, yield present values ranging from $1.9 billion to $13
billion in climate benefits. Id. at 93. Sixth, the illustration
projects benefits attributable to the new standards over the
course of three decades, id., whereas the increased fuel costs
calculated by EPA are for one year only, id. at 282–95. So, the
illustration indicates that the climate benefit of the 2022
standards over three decades ($8.40 billion, using the
intermediate three percent discount rate) only modestly
19
exceeds the $5.72 billion cost for 2022 alone. This would be a
much closer case if EPA had endorsed the illustration and then
given some account of why avoiding worst-case, decades-long
scenarios on climate change justifies ten-digit annual costs.
But here, EPA affirmatively disclaimed what seems to be a
highly contestable illustration, leaving no reasonable account
of why inflicting such costs was warranted.
Finally, EPA cited no other benefits that could reasonably
support the 2022 volume requirements. Of the 28
considerations around which the RIA was organized, only five
involved potential benefits. I have already addressed the two
principal ones—increased energy security and possibly lower
GHG emissions. The other three are increased employment,
rural economic development, and increased supply of
agricultural commodities. RIA at v. But EPA acknowledged
that any increased employment for biofuel production and
agriculture may be offset by decreased employment in other
sectors, and it did not “estimate the net employment effects.”
Id. at 223. For ethanol, EPA predicted only “economic
restoration” from a return to pre-pandemic levels of
consumption. Id. at 229. For cellulosic biofuel, it predicted
increased economic activity of only $76 million in 2022. Id.
And EPA was unable to estimate the “potential impact” of
increased agricultural commodities. Id. It did suggest that the
RFS program likely caused an increase in soybean oil
production, but it concluded that “the primary driver for growth
over the past 15 years in soybean production and planted acres
has clearly been rising exports.” Id. at 231–32. The small
magnitude of these various secondary effects is not surprising,
for the Clean Air Act is not primarily a jobs bill or a farm bill.
These considerations do not substantially mitigate the multi-
billion-dollar annual deficit of costs over benefits, and EPA
could not reasonably conclude otherwise.
20
In defense of the 2022 volumes, my colleagues attribute to
Congress “a policy choice to accept higher fuel prices in order
to reap the benefits” of greater energy independence and
reduced GHG emissions. Ante at 28. But the RFS statute is
more nuanced than that. As explained above, it contains waiver
provisions to account for economic and feasibility constraints
in any given year. And paragraph (2)(B)(ii), which governs the
reset question at issue here as well as volumes for all years after
2022, does not simply instruct EPA to prioritize energy security
and reduced emissions above all else. To the contrary, it
requires EPA to consider both those potential benefits and
various costs, specifically including increased fuel costs to
consumers. The RFS statute is thus quite unlike statutes
requiring protection no matter the cost. See, e.g., TVA v. Hill,
437 U.S. 153, 172–73 (1978). And it is much like the Clean
Air Act provision at issue in Michigan v. EPA—except that
here, the requirement to consider costs is express rather than
implied. To render a non-arbitrary decision, EPA thus had to
reasonably explain why benefits so uncertain outweigh costs so
substantial, not merely to assert that conclusion.
IV
The supplemental volume suffers from a further defect—
it is not authorized by statute. As explained above, EPA must
consider the paragraph (2)(B)(ii) factors in exercising its reset
authority. EPA applied those factors to set a 2022 requirement
of 20.63 billion gallons of total renewable fuel. Final Rule, 87
Fed. Reg. at 39,601–03. EPA recognized that this amount was
aggressive: The agency described it as “significantly higher”
than the 202l requirement of 18.84 billion gallons, id. at
39,603; as “market-forcing,” id. at 39,628; and as reflecting an
“implied conventional renewable fuel volume” that exceeded
the amount of conventional renewable fuel expected to be
consumed, id. at 39,624. But despite pushing the outer limits
21
in setting this base volume requirement for 2022, EPA then
tacked on a “supplemental” requirement, not because the
paragraph (2)(B)(ii) factors supported it, but to “restore” half
of the volumes that EPA had impermissibly waived in 2016.
See id. at 39,629.
In support of its claimed authority to shift 2016 volume
requirements to 2022, EPA invokes paragraph (3) of the RFS
statute, which requires the agency to promulgate applicable
percentages that “ensure[]” the volume requirements are met.
87 Fed. Reg. at 39,629–30; see 42 U.S.C. § 7545(o)(3)(B)(i).
EPA overlooks a critical feature of this duty—it is specific to
individual calendar years. Paragraph (3) provides that, by
November 30 of each “calendar year[]” between 2005 and
2021, EPA must “determine and publish in the Federal
Register, with respect to the following calendar year, the
renewable fuel obligation that ensures that the [volume]
requirements of paragraph (2) are met.” 42 U.S.C.
§ 7545(o)(3)(B)(i) (emphasis added). So, EPA had one duty to
ensure that 2016 volume requirements were met by 2016
obligated parties in 2016 and another duty to ensure that 2022
volume requirements were met by 2022 obligated parties in
2022. Under this scheme, EPA could not shift statutory
volumes from one year to another.
Broader statutory structure confirms this point. Paragraph
(2) prospectively establishes varying applicable volumes for
each calendar year between 2006 and 2022. 42 U.S.C.
§ 7545(o)(2)(B)(i). It then requires EPA to establish applicable
volumes “for calendar years after the calendar years specified
in the tables” and to do so fourteen months in advance. Id.
§ 7545(o)(2)(B)(ii). Paragraph (7) establishes waiver and reset
authorities that operate yearly on these applicable volumes. Id.
§ 7545(o)(7)(A), (D), (E), (F). As noted above, paragraph (3)
requires EPA to establish applicable percentages prospectively,
22
“with respect to the following calendar year.” Id.
§ 7545(o)(3)(B)(i). And paragraph (5) requires EPA to
establish a program of tradeable credits “valid to show
compliance” for one year from the date of generation. Id.
§ 7545(o)(5)(A), (C). So compliance—like the underlying
volume and percentage requirements—operates on a yearly
basis. And the annual waivers and credits ensure that obligated
parties are never stretched beyond reason. Allowing EPA to
shift volume requirements from one calendar year to another—
to foreclose otherwise available waivers or the use of otherwise
available credits—would upend this balanced scheme.
EPA also relies on decisions upholding the promulgation
of untimely and even retroactive volume requirements, so long
as the agency “reasonably considers and mitigates any hardship
caused to obligated parties by reason of the lateness.” ACE,
864 F.3d at 718; see also Monroe Energy, 750 F.3d at 919–21;
Nat’l Petrochemical & Refiners Ass’n v. EPA, 630 F.3d 145,
153–64 (D.C. Cir. 2010). But in these cases, the late or
retroactive standards operated on the calendar year at issue,
together with the waiver authorities, compliance obligations,
and tradeable credits for the same year. For example, in
National Petrochemical, this Court upheld “combined volume
requirements” for 2009 and 2010 that were imposed in a single,
partially retroactive rule promulgated in February 2010. See
630 F.3d at 151. Critically, the 2009 component of this
requirement retained the compliance flexibilities of normal
2009 standards, as refiners and importers could satisfy their
obligations with credits generated in 2008 or 2009. See id.
Indeed, as my colleagues note, the combined standard gave
obligated parties even more flexibility than would otherwise be
the case, to the extent that EPA allowed obligated parties to use
2011 credits to satisfy 2009 obligations. Ante at 36–37.
Neither National Petrochemical nor its progeny involved the
promulgation of supplemental volumes for a later compliance
23
year to make up for EPA’s failure to promulgate volumes in an
earlier one. And none of those cases involved the elimination
of waivers and tradeable credits otherwise available in the year
from which the volumes were shifted away. These cases do
not support EPA’s volume-shifting gambit.
EPA further reasons that it had to respond to ACE
somehow, and reopening compliance for 2016 would have
been impractical. Final Rule, 87 Fed. Reg. at 39,628. But if
that were true, then EPA may have simply been unable to cure
its 2016 mistake some six years later—a possibility the agency
itself acknowledged in its notice of proposed rulemaking, see
id. at 39,630. In ACE, we remanded “the rule”—i.e., the rule
through which EPA had established applicable volumes and
percentages for 2016—for further consideration in light of our
holding that the agency had unlawfully invoked the general
waiver provision to lower the 2016 volumes. See 864 F.3d at
737. We did not, and could not, require EPA to act contrary to
the statute, including by shifting the disputed volume six and
seven years into the future.
Finally, the supplemental volume would be arbitrary even
if EPA did have statutory authority to shift volumes from one
year to another. The Final Rule was promulgated on July 1,
2022—years after EPA’s statutory deadlines for exercising the
reset authority based on triggering waivers in 2010, 2015, and
2019, see 42 U.S.C. § 7545(o)(7)(F); Final Rule, 87 Fed. Reg.
at 39,607, and eight months after its deadlines for exercising
the cellulosic waiver and setting the applicable percentages for
2022, see 42 U.S.C. § 7545(o)(3)(B)(i), (7)(D)(i). EPA also
noted that it imposed the supplemental volume “significantly
after” the November 2015 deadline for setting applicable
volumes and percentages for 2016, see Final Rule, 87 Fed. Reg.
at 39,630, though the significance of that observation is unclear
if we credit EPA’s assertion that it is “treating the supplemental
24
standard like a 2022 standard in all respects,” rather than “as a
supplement to standards for 2016,” see id. at 39,628. Whatever
the relevant deadline, EPA missed it, triggering what the
agency acknowledged was an obligation to “mitigate hardship”
caused by “late issuance of this standard.” Id.at 39,630.
EPA did far less than it reasonably could have to mitigate
the hardship. Among other things, it could have eliminated
most of the outstanding 2016 volume through a retroactive
application of the cellulosic-waiver provision. For 2016
volumes, EPA had invoked that provision to reduce the
cellulosic-biofuel volume by 4.02 billion gallons, which gave
it discretion to reduce the total renewable fuel volume by the
same amount. But EPA reduced the latter volume by only 3.64
billion gallons—some 380 million fewer gallons than it could
have. J.A. 737 & n.102. And ACE itself, despite holding that
EPA could not invoke the general-waiver provision to reduce
volumes based on “demand-side constraints,” further held that
EPA could invoke the discretionary component of the
cellulosic-biofuel waiver to address that very consideration.
864 F.3d at 732–33. So, as to 380 million of the presently
disputed 500 million gallons, EPA in 2016 simply invoked the
wrong waiver provision.
EPA gave two reasons for not retroactively applying the
cellulosic waiver to reduce the outstanding 2016 volume by
380 million gallons. First, it found that the supplemental
standard was “achievable” in 2022. 87 Fed. Reg. at 39,630–
31. But the relevant question is not one of feasibility; rather, it
is whether EPA reasonably “mitigate[d] any hardship caused
to obligated parties by reason of its lateness.” ACE, 864 F.3d
at 718–19. Applying a waiver theory that we specifically
blessed in ACE surely counts as reasonable mitigation.
Second, EPA thought it inappropriate to consider 2016 market
conditions in assessing what it called a 2022 volume. J.A. 528.
25
But as shown above, RFS volumes and waivers operate
together, on a calendar-year basis. And for 2016, EPA’s
biggest mistake was simply invoking the wrong waiver. In
sum, even if the supplemental volume for 2022 were authorized
by statute, it would still be arbitrary.
V
EPA has not reasonably explained any of the challenged
2022 volume requirements, and the supplemental requirement
is also contrary to law. I would therefore set them aside. As
my colleagues conclude otherwise, I respectfully dissent.