EPA authority to reduce the RFS
The leaked draft projects that substantially less cellulosic ethanol will be produced in 2014 than required by the RFS. Accordingly, EPA must reduce the cellulosic biofuel requirement and proposes to do so by 1.52 billion gallons. Because it is reducing the cellulosic requirement, EPA is permitted to also reduce the renewable fuel and the advanced biofuel requirements but by no more than the amount of the cellulosic reduction. The leaked draft indicates, however, that EPA intends to reduce the renewable fuel requirement even further, specifically dropping the requirement for conventional corn ethanol by 1.4 billion gallons to 13 billion gallons. This further reduction raises questions about EPA's authority under the statute.
Without finding harm to the economy or the environment from the RFS, EPA can only reduce the statutory requirements based on a determination that there is "an inadequate domestic supply." In the leaked draft, EPA justifies the reduction on concerns with domestic supply that are the result of the expected limits on the amount of ethanol that can be consumed at current gasoline blend rates of predominantly 10 percent ethanol. This is commonly referred to as the "blend wall" (more on the blend wall is available here and here). The statute does not mention the blend wall, but EPA concludes that the blend wall's structural limits on the volume of renewable fuel that can be available to consumers qualifies as an inadequate domestic supply.
Two recent cases before the Federal court of appeals in Washington D.C. have involved the RFS by addressing EPA's authority for setting the requirements and for making reductions based on the waiver provisions. In National Petrochemical & Refiners Association v. EPA (available here, case number 10-1070) the court upheld EPA's decision to shift some of the 2009 biomass-based diesel requirement to 2010 because of a delay in getting the rules published. In its decision, the court emphasized the fact that Congress required EPA to administer the RFS so as to increase renewable fuel production. The court relied on the specific wording of the statute, which states that "the Administrator shall . . . ensure that transportation fuel . . . on an annual average basis, contains at least the applicable volume of renewable fuel" listed. (emphasis added) The court particularly noted the use of the phrase "at least" which it concluded signaled Congressional intent that production be increased and the volumes in the statute not be easily reduced.
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