Respondents Brief — Valero Energy Corporation, et al., Petitioners v. Environmental Protection Agency

No. 19-835

In the Supreme Court of the United States

VALERO ENERGY CORPORATION, ET AL., PETITIONERS

v.

ENVIRONMENTAL PROTECTION AGENCY

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

NOEL J. FRANCISCO

Solicitor General

Counsel of Record

JEFFREY BOSSERT CLARK

Assistant Attorney General

MEGHAN E. GREENFIELD

Attorney

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTIONS PRESENTED

1. Whether the Clean Air Act, 42 U.S.C.

7545(o)(3)(B)(ii)(I), requires the Environmental Protection Agency (EPA) to reevaluate which regulated entities must comply with the Renewable Fuel Standard

program as part of every annual rulemaking in which

the agency establishes the following year’s volumetric

targets for the sale and introduction of renewable fuels.

2. Whether EPA acted arbitrarily and capriciously

in conducting a separate proceeding to consider petitioners’ request to revise the agency’s regulation designating which regulated entities must comply with the

Renewable Fuel Standard program, rather than considering that request in the course of its annual volumetric

rulemakings.

(I)

TABLE OF CONTENTS

Page

Opinions below .............................................................................. 1

Jurisdiction .................................................................................... 1

Statement ...................................................................................... 2

Argument..................................................................................... 11

Conclusion ................................................................................... 23

TABLE OF AUTHORITIES

Cases:

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984) ........... 14

Kisor v. Wilkie, 139 S. Ct. 2400 (2019) ............................ 8, 14

Massachusetts v. EPA, 549 U.S. 497 (2007) ................. 19, 20

Michigan v. EPA, 135 S. Ct. 2699 (2015) ........................ 8, 14

Natural Res. Def. Council, Inc. v. EPA,

194 F.3d 130 (D.C. Cir. 1999) ............................................. 16

SEC v. Chenery Corp., 332 U.S. 194 (1947)..................... 8, 19

Valero Energy Corp. v. EPA, No. 17-cv-4,

2017 WL 8780888 (N.D. Tex. Nov. 28, 2017) .............. 21, 22

Statutes and regulation:

Clean Air Act, 42 U.S.C. 7401 et seq. ..................................... 2

42 U.S.C. 7409(d)(1) ........................................................ 12

42 U.S.C. 7412(d)(6) ........................................................ 12

42 U.S.C. 7545(o) ............................................................... 2

42 U.S.C. 7545(o)(1)(J) ...................................................... 2

42 U.S.C. 7545(o)(2)(A) ................................................... 13

42 U.S.C. 7545(o)(2)(A)(i)............................................ 3, 12

42 U.S.C. 7545(o)(2)(A)(iii) ............................................. 15

42 U.S.C. 7545(o)(2)(A)(iii)(I) ............................... 3, 12, 15

42 U.S.C. 7545(o)(2)(B) ................................................... 13

42 U.S.C. 7545(o)(2)(B)(i) ................................................. 3

(III)

IV

Statutes and regulation—Continued:

Page

42 U.S.C. 7545(o)(2)(B)(i)(I)-(III) .................................. 22

42 U.S.C. 7545(o)(2)(B)(i)(IV) ........................................ 23

42 U.S.C. 7545(o)(2)(B)(ii) .......................................... 3, 22

42 U.S.C. 7545(o)(3) ......................................................... 11

42 U.S.C. 7545(o)(3)(A) ............................................... 3, 13

42 U.S.C. 7545(o)(3)(B)(i) ....................................... 3, 4, 14

42 U.S.C. 7545(o)(3)(B)(ii) ................................................ 4

42 U.S.C. 7545(o)(3)(B)(ii)(I) ................................. passim

42 U.S.C. 7545(o)(7)(A) ..................................................... 3

42 U.S.C. 7545(o)(7)(D)(i) ................................................. 3

42 U.S.C. 7545(o)(11) ....................................................... 13

42 U.S.C. 7604(a) ............................................................. 16

Energy Independence and Security Act of 2007,

Pub. L. No. 110-140, 121 Stat. 1492 .................................... 2

Tit. II, Subtit. A, 121 Stat. 1519

(42 U.S.C. 7545(o)) ....................................................... 2

40 C.F.R. 80.1406(a)(1) ............................................................ 4

Miscellaneous:

72 Fed. Reg. 23,900 (May 1, 2007) ......................................... 4

75 Fed. Reg. 14,670 (Mar. 26, 2010) ................................. 4, 12

In the Supreme Court of the United States

No. 19-835

VALERO ENERGY CORPORATION, ET AL., PETITIONERS

v.

ENVIRONMENTAL PROTECTION AGENCY

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals in Alon Refining

Krotz Springs, Inc. v. EPA and Coffeyville Resources

Refining & Marketing, LLC v. EPA (Pet. App. 1a-90a)

is reported at 936 F.3d 628. The opinion of the court of

appeals in American Fuel & Petrochemical Manufacturers v. EPA (Pet. App. 91a-155a) is reported at

937 F.3d 559.

JURISDICTION

The judgment of the court of appeals in Alon v. EPA

and Coffeyville v. EPA was entered on August 30, 2019.

The judgment of the court of appeals in American Fuel

& Petrochemical Manufacturers v. EPA was entered

on September 6, 2019. On November 19, 2019, the Chief

Justice extended the time within which to file a petition

for a writ of certiorari to and including December 30,

(1)

2

2019, and the petition was filed on that date. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

This case involves challenges to three decisions of

the Environmental Protection Agency (EPA) concerning the Renewable Fuel Standard program established

by the Clean Air Act (CAA), 42 U.S.C. 7401 et seq. Under that program, EPA is required each year to issue a

rule setting the volume of renewable fuels that must be

contained in transportation fuel that is sold or introduced into commerce in the United States in the following year. In conducting the 2017 and 2018 annual rulemakings, EPA declined to reconsider its longstanding

“point of obligation” rule, which identifies the entities

that must comply with the renewable-fuels requirements. In a separate proceeding, EPA denied several

petitions for a rulemaking to reevaluate the same pointof-obligation rule, and explained why the existing rule

was appropriate. The court of appeals denied petitions

for review challenging the two annual volumetric rules

and EPA’s denial of the rulemaking petitions.

1. a. In 2007, Congress enacted the Renewable Fuel

Standard program as an amendment to the CAA, see

Energy Independence and Security Act of 2007, Pub. L.

No. 110-140, Tit. II, Subtit. A, 121 Stat. 1519 (42 U.S.C.

7545(o)), in an effort “[t]o move the United States toward greater energy independence” and “increase the

production of clean renewable fuels.” 121 Stat. 1492.

Renewable fuel is fuel made from renewable biomass

(such as corn) that is “used to replace or reduce the

quantity of fossil fuel present in a transportation fuel”

for use in motor vehicles, motor vehicle engines, or

other non-ocean-going vehicles or engines. 42 U.S.C.

7545(o)(1)(J).

3

As amended, the CAA requires EPA to promulgate

regulations to “ensure that,” for each calendar year,

“transportation fuel sold or introduced into commerce

in the United States” contains at least certain “applicable volume[s] of renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel.” 42 U.S.C.

7545(o)(2)(A)(i). The Act states that those regulations

“shall contain compliance provisions applicable to refineries, blenders, distributors, and importers, as appropriate, to ensure that the requirements” of the renewablefuels program are met. 42 U.S.C. 7545(o)(2)(A)(iii)(I).

The CAA itself sets the annual volume targets for

each year through 2012 for biomass-based diesel fuel,

and through 2022 for other types of renewable fuel.

42 U.S.C. 7545(o)(2)(B)(i); see 42 U.S.C. 7545(o)(7)(A)

and (D)(i) (authorizing EPA reductions in certain circumstances). For later years, EPA is required to determine the applicable volumes for each renewable-fuel

category, in coordination with the Departments of Energy and Agriculture, “based on a review of the implementation of the program during calendar years” in

which the volume targets are specified in the Act and on

“analysis of ” several other statutory criteria. 42 U.S.C.

7545(o)(2)(B)(ii).

To meet the annual volume targets, EPA must undertake annual rulemakings to determine the “renewable fuel obligation” for the following year. 42 U.S.C.

7545(o)(3)(B)(i). No later than October 31 of each year,

the Administrator of the Energy Information Administration must supply the Administrator of EPA “an estimate, with respect to the following calendar year, of

the volumes of transportation fuel, biomass-based diesel, and cellulosic biofuel projected to be sold or introduced into commerce in the United States.” 42 U.S.C.

4

7545(o)(3)(A). No later than November 30, EPA must

“determine and publish in the Federal Register, with

respect to the following calendar year, the renewable

fuel obligation.” 42 U.S.C. 7545(o)(3)(B)(i).

Under the CAA, the renewable-fuel obligation “shall”

(I) “be applicable to refineries, blenders, and importers,

as appropriate”; (II) “be expressed in terms of a volume

percentage of transportation fuel sold or introduced

into commerce in the United States”; and (III) “consist

of a single applicable percentage” for each type of renewable fuel “that applies to all categories of persons”

that EPA has determined under subclause (I) should be

subject to the renewable-fuel obligation. 42 U.S.C.

7545(o)(3)(B)(ii). The percentage standards set in each

annual rule allow regulated entities to determine their

renewable-fuel requirements for the upcoming year.

b. In a 2007 rulemaking, EPA first identified the

entities that would be required to comply with the

renewable-fuel obligation (referred to as “obligated

parties”). See 72 Fed. Reg. 23,900, 23,924, 23,994 (May

1, 2007). In that rule, EPA identified refineries and importers of gasoline and diesel as the “appropriate” obligated parties. Ibid. In 2010, EPA reexamined and reaffirmed that approach when it promulgated regulations implementing amendments to the renewable-fuels

program. 75 Fed. Reg. 14,670, 14,722, 14,867 (Mar. 26,

2010); see 40 C.F.R. 80.1406(a)(1). This regulation is

commonly referred to as the “point of obligation” rule.

No party challenged the point-of-obligation rule in 2007

or in 2010. See Pet. App. 11a-12a.

2. Petitioners challenge three subsequent actions

taken by EPA in implementing the renewable-fuels

program.

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a. Petitioners challenge the 2017 and the 2018 annual volumetric rules. See Pet. App. 189a-355a (2017

Rule); id. at 552a-670a (2018 Rule). These rules established, for the respective years, the applicable volume

requirements and percentage standards for each type

of renewable fuel under the program. See id. at 198a,

209a-216a (2017 Rule); id. at 560a, 571a-579a (2018

Rule). EPA noted in each rulemaking that it had “received comments requesting that [it] change the point

of obligation in the [renewable-fuels] program.” Id. at

187a; see id. at 551a. Each time, EPA explained that

identification of the appropriate obligated parties was

“beyond the scope” of the annual volumetric rulemaking, and that the agency accordingly would not address

the topic in those proceedings. Id. at 187a, 551a.

b. Petitioners also challenge EPA’s 2017 denial of

petitions seeking a rulemaking to revisit the point-ofobligation rule. In 2016, a number of obligated parties,

including petitioners, filed petitions asking EPA to revise the rule. See Pet. App. 356a-357a. In November

2016, EPA proposed to deny these petitions and invited

comments on its proposal. See id. at 358a. In November 2017, after receiving and reviewing more than

18,000 comments, the agency published an 85-page

decision document denying the petitions. Id. at 356a530a. EPA determined that a revision of the point-ofobligation rule would not result in net benefits to the

renewable-fuels program and that, even if there were a

marginal net benefit, the disruptive effects of such a

change in the program, the fuels marketplace, and the

long-settled expectations of the participants would still

warrant denial. Id. at 356a-361a.

EPA explained that changing the point of obligation

would not increase, and might decrease, the production

6

or use of renewable fuels. Pet. App. 458a-486a. The

agency acknowledged a shortfall in one type of renewable fuel called cellulosic biofuel. Id. at 386a-387a. EPA

concluded, however, that the shortfall in this fuel resulted from challenges in the “current research, development, and commercialization” of cellulosic biofuel.

Id. at 483a. The agency found that changing the point

of obligation to encompass new entities would not address any of these challenges. Id. at 487a-489a. By contrast, production of other renewable fuels had increased

significantly and was “projected to meet or exceed the

statutory volumes.” Id. at 385a.

EPA also found that, contrary to petitioners’ comments, the point-of-obligation rule did not disproportionately impact any particular group of refineries or

provide windfall profits to unobligated blenders. Pet.

App. 398a-419a. Based on the agency’s own analysis

and on independent third-party studies, EPA concluded

that all petroleum refineries were generally able to

charge higher fuel prices and thereby recover the costs

of complying with the program. Id. at 410a-411a. The

agency found that petitioners’ contention regarding

purported windfall profits “ignore[d] costs” that unobligated blenders incurred. Id. at 412a.

EPA determined that moving the point of obligation

to encompass blenders would have the counterproductive effects of greatly increasing the number of obligated parties and the complexity of the renewable-fuels

program. Pet. App. 496a-525a. EPA observed that

many blenders are “very small entities, including retail

station owners” that “may not have the resources or expertise to comply” with program requirements. Id. at

509a. It further determined that imposing the renewablefuel obligations on those entities “could lead to increased

7

overall noncompliance with [program] requirements”

and “place greater strain on [the agency’s] limited resources to ensure compliance and conduct program

oversight.” Id. at 509a, 511a.

Finally, EPA found that changing the point of obligation would not increase energy security. Pet. App.

487a-496a. Some commenters had asserted that the

current point of obligation threatened the “viability of

some refineries,” increased domestic fuel costs, and

stimulated demand for foreign biofuels. Id. at 487a.

But after examining the data submitted by the commenters and other publicly available data, the agency

found no indication of general “hardship on the part of

the US refining industry” and an “insufficient factual

basis” for the commenters’ claims. Id. at 487a, 495a.

3. In two published opinions, the court of appeals denied the petitions for review challenging the 2017 Rule,

the denial of the rulemaking petitions to revise the

point-of-obligation rule, and the 2018 Rule.

a. On August 30, 2019, the court of appeals denied the

petitions for review challenging the 2017 Rule and EPA’s

denial of the rulemaking petitions. Pet. App. 1a-90a.

i. With respect to the 2017 Rule, petitioners argued

that 42 U.S.C. 7545(o)(3)(B)(ii)(I), which directs EPA to

establish annual renewable-fuel obligations that apply

“to refineries, blenders, and importers, as appropriate,”

required EPA to reconsider the point-of-obligation rule

as part of every annual volumetric rulemaking proceeding. See Pet. App. 44a-45a. The court of appeals rejected that contention. Id. at 44a-55a. The court observed that the statute “does not specify when or in

what context EPA must make its appropriateness determination.” Id. at 46a. The court further explained

8

that “[t]he term ‘appropriate’ ‘naturally and traditionally includes consideration of all the relevant factors,’ ”

but it “does not dictate when that consideration must be

made.” Ibid. (quoting Michigan v. EPA, 135 S. Ct.

2699, 2707 (2015)). The court construed the term as instead affording EPA “broad policy discretion” to determine the best means for addressing the question. Ibid.

(citing Kisor v. Wilkie, 139 S. Ct. 2400, 2448-2449 (2019)

(Kavanaugh, J., concurring in the judgment)). It held

that EPA had “reasonably exercised [that] discretion,

and explained its decision, to address the point of obligation issue in a separate proceeding from its annual

volumetric rulemaking.” Ibid.

The court of appeals found support for EPA’s approach in the CAA’s structure and purposes. The court

explained that the Renewable Fuels Standard program

“contains not only ‘annual’ volumetric determinations,

but also a slew of compliance provisions that are not annually redetermined.” Pet. App. 50a (citation omitted).

The point of obligation, it added, “is the foundational

‘compliance provision’ of the entire renewable fuels program.” Ibid. The court explained that “[i]t would be

strange indeed if Congress required EPA, as it went

about its annual quantitative standard-setting duties,

also to rethink a choice so basic to the RFS program’s

architecture.” Id. at 51a. The court found it implausible

“that Congress meant EPA to consider uprooting the

baseline of the RFS program every year.” Id. at 52a.

Finally, the court of appeals concluded that EPA’s

approach comported with “basic principles of administrative law,” under which, as a general matter, the “choice

between various procedural channels lies within the ‘informed discretion of the administrative agency.’ ” Pet.

App. 53a-54a (quoting SEC v. Chenery Corp., 332 U.S.

9

194, 203 (1947)). That discretion, the court explained,

“properly includes judgments about the scope of rulemakings and when to relegate ancillary issues to separate proceedings.” Id. at 54a. The court held that EPA

had acted reasonably in reading the term “as appropriate” in Section 7545(o)(3)(B)(ii)(I) to leave “undisturbed

these background norms of broad but reviewable procedural discretion.” Ibid.

The court of appeals noted that its interpretation of

the CAA did not give the agency “limitless and unreviewable discretion.” Pet. App. 54a. Rather, the court

explained that “EPA’s determination as to whether it is

‘appropriate’ to reconsider the point of obligation” in an

annual rulemaking “is reviewable for abuse of discretion.” Ibid. The court held that EPA had not abused its

discretion here, particularly given the “separate, contemporaneous proceeding” in which it had considered

“whether to change the point of obligation rule.” Ibid.

ii. The court of appeals also denied the challenge to

EPA’s decision not to revise the point-of-obligation rule

through a separate rulemaking. Pet. App. 32a-42a. The

court observed that its review of an agency’s denial of a

rulemaking petition is “extremely limited” and “highly

deferential.” Id. at 32a (citation omitted). It concluded

that EPA’s 85-page decision denying the rulemaking

petitions here had “considered the ‘information currently before’ it” and had “wrestl[ed] with the petitioners’ claims” with sufficient “thoroughness and reasonableness.” Ibid. (citation omitted).

The court of appeals specifically addressed petitioners’ contention that “the current point of obligation

misaligns incentives,” thereby threatening the viability

of refineries and “feed[ing] market volatility.” Pet.

10

App. 33a. The court held that EPA had “reasonably explained why, in its view, there is no misalignment in the

RFS program.” Ibid. The court also upheld, as reasonable, EPA’s conclusion that refineries can generally use

downstream fuel sales to recover their costs of compliance with program requirements. Id. at 35a-36a. The

court criticized petitioners for “plucking snippets from

the [agency’s] denial” to allege inconsistencies that the

omitted details resolved. Id. at 36a; see id. at 36a-41a.

It also found that EPA had acted reasonably in expressing concern about the uncertainty that would be injected into the renewable-fuels market by “overhauling

a foundational element of the [renewable-fuels] program.” Id. at 41a.

b. Judge Williams concurred in part and concurred

in the judgment. Pet. App. 73a-90a. In his view, Section 7545(o)(3)(B)(ii)(I) unambiguously requires EPA to

reconsider the point-of-obligation issue as part of each

annual volumetric rulemaking. Id. at 76a. He acknowledged, however, the “substantial reliance interests” implicated by EPA’s longstanding rule. Id. at 87a. He accordingly suggested that, “in the absence of significantly changed circumstances or a compelling new analysis,” EPA could “make rather short work” of the analysis that he thought was required. Ibid. Despite his view

that the CAA requires an annual point-of-obligation

assessment, Judge Williams concurred in the denial of

the petitions for review of both the 2017 Rule and the

denial of the rulemaking petitions. He concluded that

the agency had satisfied the relevant statutory requirement because, roughly contemporaneously with the 2017

Rule, EPA had adequately explained in its denial of the

rulemaking petitions “why it was not ‘appropriate’ * * *

11

to change the point of obligation.” Id. at 89a (citation

omitted).

c. One week later, in a separate per curiam opinion,

the court of appeals unanimously denied the petitions

for review challenging the 2018 Rule. Pet. App. 91a155a. Relying on its week-old decision, the court rejected petitioners’ arguments that (1) the CAA required

EPA to reconsider the point-of-obligation rule in that

annual volumetric rulemaking, and (2) the agency had

acted arbitrarily and capriciously by declining to reconsider that rule “in promulgating the annual applicable

volumes and percentage standards in the 2018 Rule.”

Id. at 133a; see id. at 132a-133a.

ARGUMENT

Petitioners contend (Pet. 13-33) that the CAA,

42 U.S.C. 7545(o)(3)(B)(ii)(I), requires EPA to reconsider the agency’s point-of-obligation rule during every

annual volumetric rulemaking proceeding under the Renewable Fuels Standard program, and that the agency

acted arbitrarily and capriciously by considering petitioners’ request to revise the point-of-obligation rule

through a separate proceeding instead. The court of appeals correctly recognized that the point-of-obligation

rule is a foundational component of the program that

has implications well beyond the annual renewablefuels obligation. Although Section 7545(o)(3) requires

EPA to identify the entities to whom the obligation applies, nothing in the text of that provision requires EPA

to conduct an annual reconsideration of such a fundamental aspect of the renewable-fuels program. The

CAA’s structure and purposes strongly support EPA’s

determination not to do so. In any event, EPA thoroughly considered petitioners’ concerns about the point-

12

of-obligation rule in a separate proceeding roughly contemporaneous with the annual rulemakings at issue

here.

The court of appeals correctly declined to disturb the

EPA actions reflected in the decisions below. Those

decisions do not conflict with any decision of this Court

or of another court of appeals. Further review is not

warranted.

1. The court of appeals correctly held that 42 U.S.C.

7545(o)(3)(B)(ii)(I) does not require EPA to conduct an

annual reconsideration of its point-of-obligation rule.

a. The 2007 amendments to the CAA required EPA

to implement the renewable-fuels program by promulgating regulations that “shall contain compliance provisions applicable to refineries, blenders, distributors,

and importers, as appropriate, to ensure that the requirements of this paragraph are met.” 42 U.S.C.

7545(o)(2)(A)(iii)(I); see 42 U.S.C. 7545(o)(2)(A)(i). In

compliance with that command, EPA defined the term

“obligated party” to include refineries and importers.

75 Fed. Reg. 14,721-14,722. The Act further specifies

that the annual renewable-fuel percentage standards

“shall be applicable to refineries, blenders, and importers, as appropriate.” 42 U.S.C. 7545(o)(3)(B)(ii)(I). That

provision is reasonably understood as permitting EPA

to apply its prior “obligated party” determination in

conducting its annual analysis, not as a command to reconsider each year what definition of “obligated party”

would be “appropriate.”

Other CAA provisions require EPA to review and, if

appropriate, revise its regulations by a date certain.

See, e.g., 42 U.S.C. 7409(d)(1) (requiring the agency

to undertake reviews “[n]ot later than December 31,

1980, and at five-year intervals thereafter”); 42 U.S.C.

13

7412(d)(6) (requiring the agency to “review, and revise

as necessary * * * emission standards promulgated under this section no less often than every 8 years”). Section 7545(o)(2)(A), by contrast, does not require EPA to

revisit its point-of-obligation rule after any specific interval. Cf. 42 U.S.C. 7545(o)(11) (requiring EPA to

“conduct periodic reviews of * * * the feasibility of

achieving compliance” with the volume requirements in

Section 7545(o)(2)(B)). Although the annual renewablefuel obligation must reflect EPA’s determination as to

the parties on whom the obligation falls, that requirement does not logically imply that EPA must reconsider

its initial determination each year.

This understanding of the CAA is strongly supported by the structure of the Act and the renewablefuels program. The “focus of the annual rulemakings”

is to calculate percentage standards, not to reconsider

the basic structure of the program as a whole. Pet. App.

51a. “It would be strange indeed if Congress required

EPA, as it went about its annual quantitative standardsetting duties, also to rethink * * * choice[s] so basic to

the * * * program’s architecture.” Ibid. That approach

would create significant uncertainty for obligated parties, biofuel producers, and the market. Id. at 51a-52a.

The statutory deadlines also indicate that annual reconsideration of the program’s basic structure is not required. To complete its annual standard-setting task,

EPA must consider a vast amount of information in a

short time frame. EPA conducts an in-depth analysis of

renewable-fuels markets and evaluates many thousand

comments. Pet. App. 51a; see id. at 53a. The Act

requires EPA to determine the applicable percentage

standards within a one-month period each fall. Compare 42 U.S.C. 7545(o)(3)(A) (requiring annual volume

14

estimates to be provided to EPA by October 31), with

42 U.S.C. 7545(o)(3)(B)(i) (requiring EPA to publish the

percentage standards no later than November 30). Congress could not realistically have expected the agency

also to undertake annually a wholesale reevaluation of

the placement of the point of obligation, and to promulgate new compliance regulations for newly regulated

entities if the point-of-obligation rule was changed. Pet.

App. 51a; see id. at 520a-525a.

For all these reasons, the CAA is best read not to

require EPA to reconsider the point-of-obligation rule

in conducting each annual volumetric rulemaking. At a

minimum, the statute does not unambiguously require

EPA to undertake such review on an annual basis. The

court below therefore correctly deferred to EPA’s reasonable interpretation. See Chevron U.S.A. Inc. v.

NRDC, 467 U.S. 837 (1984).

b. Petitioners’ contrary arguments are unpersuasive.

i. Petitioners contend (Pet. 15-16) that the term “as

appropriate” in Section 7545(o)(3)(B)(ii)(I) unambiguously requires the agency to reconsider the point-ofobligation rule as part of each annual volumetric rulemaking. They assert that the term “appropriate” “traditionally includes consideration of all the relevant factors.” Pet. 16 (quoting Michigan v. EPA, 135 S. Ct.

2699, 2707 (2015)) (emphasis omitted); see also Pet. 18

(suggesting that Kisor v. Wilkie, 139 S. Ct. 2400 (2019),

requires the agency to “choose among the options that

Congress has given it”) (citations omitted). But the

question is not whether EPA must identify the entities

on whom the relevant obligation should be placed. Pet.

App. 46a. The agency has done so repeatedly—in 2007,

2010, and 2017. The question is “when that consideration must be made,” and specifically, whether it must be

15

made anew in every annual volumetric rulemaking.

Ibid. The term “as appropriate” does not specify the

point(s) in time at which that determination must be

made.

Petitioners also rely (Pet. 16-17) on Section

7545(o)(2)(A)(iii)(I)’s requirement that EPA’s implementation regulations must include compliance provisions that are “applicable to refineries, blenders,

distributors, and importers, as appropriate.” 42 U.S.C.

7545(o)(2)(A)(iii)(I). Petitioners contend (Pet. 17) that

this provision mandates consideration of the appropriate point of obligation “at the implementing stage”

of the renewable-fuels program, and that the term

“as appropriate” in Section 7545(o)(3)(B)(ii)(I) therefore must “require[ ] the same consideration at

the annual-rule stage.” As noted, however, Section

7545(o)(3)(B)(ii)(I) can reasonably be understood as a

cross-reference to EPA’s prior determination under

Section 7545(o)(2)(A)(iii). The Act’s structure and purpose strongly support that reading.

Contrary to petitioners’ assertion (Pet. 19-20), EPA’s

approach does not render Section 7545(o)(3)(B)(ii)(I)

superfluous. That provision makes clear that, although

for other aspects of the renewable-fuels program obligated parties may include “refineries, blenders, distributors, [or] importers,” 42 U.S.C. 7545(o)(2)(A)(iii)(I),

the renewable-fuel obligation may only “be applicable

to refineries, blenders, and importers,” 42 U.S.C.

7545(o)(3)(B)(ii)(I), i.e., not to distributors. See Pet.

App. 47a-49a. While petitioners repeat (Pet. 19) Judge

Williams’s view that the exclusion of distributors might

be gleaned from other provisions in the Act, the court

of appeals correctly explained that Congress may have

16

reasonably sought to clarify that “at best * * * nonobvious inference.” Pet. App. 48a.

ii. Petitioners argue (Pet. 20) that, even if 42 U.S.C.

7545(o)(3)(B)(ii)(I) is ambiguous, EPA’s interpretation

is unreasonable because it would “allow EPA to disregard indefinitely a central aspect” of the renewablefuels program. But even absent a statutory duty, EPA’s

decision not to examine the point-of-obligation issue in

an annual rulemaking is reviewable for abuse of discretion. Pet. App. 54a. The court of appeals found it unlikely that “when and if the need for a program restructuring arises, EPA would fail to act.” Id. at 53a. Petitioners’ expressed concern rings particularly hollow

in light of the agency’s thorough consideration of the issue in response to their petition for rulemaking, reflected in an 85-page decision document addressing

some 18,000 comments. Id. at 358a. If EPA unreasonably delays action upon similar petitions in the future,

the CAA provides a mechanism to compel agency action. See 42 U.S.C. 7604(a).

Petitioners suggest (Pet. 21) that EPA’s statutory

interpretation is unreasonable because the agency’s denial of a petition for rulemaking is reviewed by the court

of appeals under a highly deferential standard. But

EPA would likewise receive substantial deference for

its technical determinations related to the point of obligation if they had been made as part of the volumetric

rule. Pet. App. 16a (stating that “EPA’s actions are

‘presumptively valid provided they meet a minimum rationality standard’ ”) (citing Natural Res. Def. Council,

Inc. v. EPA, 194 F.3d 130, 136 (D.C. Cir. 1999)) (brackets omitted). There is no sound reason to suppose that

any differences between those deferential standards

would materially affect the outcome of judicial review.

17

Indeed, although Judge Williams otherwise agreed with

petitioners’ statutory analysis, he found that the standard of review made no difference here. Id. at 89a.

Petitioners also contend (Pet. 21) that EPA’s interpretation is unreasonable because of the practical effects of the agency’s “misplaced point of obligation.”

That argument is misguided. In its denial of the rulemaking petitions, EPA considered and rejected petitioners’ criticisms of the agency’s point-of-obligation

rule. Compare, e.g., Pet. App. 199a-200a (acknowledging “real-world constraints” like “the slower than expected development of the cellulosic biofuel industry”),

with id. at 483a (concluding that “[c]hanging the point

of obligation would not be expected to address the current research, development, and commercialization

challenges” facing the cellulosic biofuels industry, and

might “negatively impact the ability of [that] industry

to overcome these challenges”); see id. at 384a-439a.

Petitioners provide no reason to believe that EPA

would have reached a different conclusion if it had undertaken that consideration as part of its annual volumetric rulemaking instead.

2. The court of appeals likewise correctly held that

EPA had not acted arbitrarily and capriciously in considering petitioners’ request to revise the point-ofobligation rule through a separate proceeding. “The focus of the annual rulemakings * * * is to translate the

applicable volumes * * * into percentage requirements

for each renewable fuel,” Pet. App. 51a—not to resolve

a question so “foundational” to the entire renewablefuels program as the point of obligation, Pet. 23 (citation

omitted). “ ‘Given the time pressure associated with its

annual standards rulemaking,’ ” EPA reasonably concluded that “it would not be feasible or worthwhile to

18

undertake such reconsideration” in those annual proceedings. Pet. App. 53a (citation omitted).

a. As petitioners’ phrasing of the second question

makes clear, their contrary arguments largely assume

that EPA must annually reconsider the point-ofobligation issue. See Pet. i (asking “[w]hether EPA can

evade the annual duty by partitioning the point of obligation into a one-time collateral proceeding”); see also,

e.g., Pet. 26 (contending that consideration of the appropriate point of obligation as part of each annual volumetric proceeding is required by the statute’s inclusion

of the issues “side by side in the same list of annual duties”); ibid. (arguing that the timing of EPA’s separate

proceeding here did not satisfy the agency’s duty of “annual consideration”); Pet. 27 (contending that the burden on stakeholders of a separate proceeding and the

lack of a definite timeline “demonstrate that an isolated

collateral proceeding cannot discharge what Congress

made an annual duty”); Pet. 28 (faulting EPA for failing to show that “any material convenience results from

disregarding its statutory duty”). Because the court below correctly held that EPA has no such duty, these arguments also fail.

Petitioners argue (Pet. 26) that the point-of-obligation

rule and the percentage standards raise “interdependent” issues. See Pet. 28 (arguing that the annual volumetric rulemakings “encompass[] symptoms of the misaligned point of obligation * * * but not the underlying

cause”). But the renewable-fuel program contains

“a slew of compliance provisions” that all rely on the

point of obligation to ensure that the renewable-fuel

standards are carried into operation. Pet. App. 50a.

And “[a]gencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop.”

19

Id. at 54a (quoting Massachusetts v. EPA, 549 U.S. 497,

524 (2007)).

Petitioners contend (Pet. 26) that participating in a

separate proceeding unduly burdens stakeholders. But

petitioners identify no judicial decision holding that

such concerns override an agency’s broad discretion to

choose the procedural mechanisms that it deems appropriate to “perform[] its important functions.” SEC v.

Chenery Corp., 332 U.S. 194, 202 (1947); see ibid. (“To

insist upon one form of action to the exclusion of the

other is to exalt form over necessity.”). Petitioners likewise identify no reason to believe that conducting a new

point-of-obligation inquiry every year would reduce the

burden on stakeholders, many of whom might perceive

a practical imperative to devote resources to challenging or defending the agency’s current approach.

Petitioners insist (Pet. 26) that EPA’s decision to address the point-of-obligation issue in a separate proceeding prevented the agency from considering additional information that arose after that proceeding concluded. The same problem could have arisen, however,

if EPA had considered the point-of-obligation issue as

part of its annual volumetric rulemaking. Under the

court of appeals’ interpretation, regulated entities are

free to bring new material information to the agency’s

attention through a new petition for rulemaking or in

comments to a future volumetric rule, and to challenge

the agency’s response as arbitrary and capricious if

warranted. See p. 16, supra.

Petitioners argue (Pet. 28) that administrative convenience cannot justify placing the renewable-fuels program’s “foundational feature on autopilot.” See id. at

29 (“[A]dministrative ease is not a valid rationale for an

20

agency to do nothing.”). But EPA’s comprehensive consideration of the point-of-obligation issue in the separate proceeding belies petitioners’ suggestion (Pet. 28)

that the agency has placed the issue “on autopilot.” Petitioners may disagree with the agency’s resolution of

that proceeding, but their contention that the agency ignored their concerns is baseless.

b. In addition to challenging EPA’s decision to address the point-of-obligation issue in a separate proceeding, petitioners also briefly argue (Pet. 25) that the

separate proceeding itself was arbitrary and capricious

because it “reached the wrong result.” It is not clear

that this contention is encompassed within either question presented, and the argument lacks merit in any

event. Petitioners do not dispute that judicial review of

EPA’s decision not to revise the point-of-obligation rule

is “ ‘extremely limited’ and ‘highly deferential.’ ” Massachusetts, 549 U.S. at 527-528 (citation omitted).

EPA’s thorough decision denying the petitions for rulemaking easily survives that review. See Pet. App. 89a

(Williams, J., concurring in part and concurring in the

judgment) (concluding that “EPA’s reasoning was sufficient even under the deference level that” applies to

determinations made in annual volumetric rulemakings.).

In denying the rulemaking petitions, EPA examined

in detail whether revising the point-of-obligation rule

would benefit the renewable-fuels program, and found

that it would not. Based on its own analysis and its review of numerous studies, EPA found that treating

“blenders” as obligated parties would not increase production or use of renewable fuels or improve the functioning of the program. Pet. App. 458a-486a. The agency

further concluded that the renewable-fuel volumes

21

mandated by the CAA were unachievable at that time

due solely to a shortfall in cellulosic biofuel, and that

this shortfall resulted from factors other than the placement of the point of obligation, including challenges in

the “current research, development, and commercialization” of cellulosic biofuel. Id. at 483a. EPA also considered and rejected arguments that some refineries

were unfairly disadvantaged by the placement of the

point of obligation. Id. at 398a-419a.

The court of appeals evaluated in detail the same

challenges to EPA’s reasoning that petitioners advance

here, and it unanimously “found them to be * * * without merit.” Pet. App. 42a; see id. at 32a-42a. Petitioners emphasize (Pet. 30-31) that some refineries have recently faced economic hardship. But the court of appeals correctly recognized that, because many of these

events occurred after EPA issued its denial, they were

not properly before the court. See Pet. App. 35a-36a. If

developments that postdate EPA’s final action provide

any reason to question the agency’s conclusions, the

proper remedy is to present those developments to the

agency in the first instance.

3. Although petitioners themselves have raised the

statutory-interpretation question outside the D.C. Circuit, see Valero Energy Corp. v. EPA, No. 17-cv-4, 2017

WL 8780888, at *3 (N.D. Tex. Nov. 28, 2017) (“Plaintiffs

claim that Defendants have neglected to conduct yearly

reviews of what entities are ‘appropriate’ to regulate

under the RFS program.”), they do not identify any conflict in authority that would warrant this Court’s review.

Like the court below, the Northern District of Texas

has held that “Section 211(o)(2)-(3) [of the CAA] * * *

does not require the EPA to annually evaluate and ad-

22

just what entities are ‘appropriate[ly]’ subject to the implementing regulations and the annual percentage obligation.” Id. at *4 (brackets in original). 1 Instead, petitioners contend (Pet. 32-34) that review is warranted to

avoid undermining other statutorily mandated procedural requirements, and to facilitate EPA’s upcoming

review of the implementation of the renewable-fuels

program for 2023. Neither assertion provides a sound

basis for this Court’s review.

The decision below does not impede the satisfaction

of other statutory requirements. All of the mandates on

which petitioners rely (Pet. 32-33) are imposed by differently worded provisions contained in different statutory programs and structures that serve different purposes. The D.C. Circuit’s decision in this case, which

addressed specific provisions of the CAA, does not dictate any particular interpretation of the unrelated statutory requirements that petitioners identify.

The prospect of EPA’s review of the implementation

of the 2023 renewable-fuels program likewise does not

make review in this case “timely and urgent.” Pet. 34.

As noted, the CAA specifies volumes for three types

of renewable fuels through the year 2022. 42 U.S.C.

7545(o)(2)(B)(i)(I)-(III). Beginning with the 2023 annual volumetric rule, the Act requires EPA to “review

* * * the implementation” of the program in prior years,

and to analyze six other statutory criteria, to set the annual volume standard. 42 U.S.C. 7545(o)(2)(B)(ii). That

shift, however, will not break entirely new ground for

Because the citizen-suit provision that petitioners invoked in

that court authorizes suits only “to force compliance with nondiscretionary duties,” the district court dismissed petitioners’ claim

for lack of jurisdiction. Valero Energy, 2017 WL 8780888, at *3. Petitioners’ appeal of that decision is pending before the Fifth Circuit.

1

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the program. Because the CAA specified volumes for

biomass-based diesel only through 2012, see 42 U.S.C.

7545(o)(2)(B)(i)(IV), EPA has already undertaken several reviews to set biomass-based diesel volumes.

In any event, EPA has repeatedly and recently reaffirmed the current point-of-obligation rule, and the

agency’s decisions whether to reconsider that rule in future annual volumetric rulemakings will be reviewable

for abuse of discretion. Pet. App. 54a. 2 Petitioners

identify no reason to believe that imposing an additional

statutory duty to reconsider the point of obligation is

likely to make any substantive difference in the future

implementation of the renewable-fuels program.

CONCLUSION

The petition for writ of certiorari should be denied.

Respectfully submitted.

NOEL J. FRANCISCO

Solicitor General

JEFFREY BOSSERT CLARK

Assistant Attorney General

MEGHAN E. GREENFIELD

Attorney

APRIL 2020

The court of appeals’ succinct rejection of petitioner’s abuse-ofdiscretion challenge to the 2018 Rule—in a decision issued one week

after the court of appeals’ thorough analysis of the point-of-obligation

issue—does not suggest that its consideration was not thorough or

that its review of future annual volumetric rules will be “toothless.”

Pet. 14; see Pet. 34.

2