EPA authority to reduce the RFS
The bottom line question remains whether relying solely on the blend wall to justify a reduction is within a reasonable interpretation of what Congress meant by inadequate supply. One clue, or at least an interesting argument, may be found in the API decision discussed above. The court was troubled by EPA's justification because of the "asymmetry in incentives" - that forcing the oil industry to purchase fuel that could not be produced in the quantities required could not reasonably be considered a way to grow the industry or force the technology. Arguably there is a similar asymmetry at work here: the blend wall does not involve the ability of the domestic renewable fuels industry to produce and supply renewable fuel to meet the mandate. The blend wall is a limitation outside of the industry's production capabilities because it is a constraint from blending most of our fuel at 10 percent ethanol along with reduced demand for gasoline. Similar to the court's argument in the API case, using the blend wall to reduce the mandate may be "asymmetrical." The renewable fuels industry has little or no control over the blend wall and the burden of using it to reduce the mandate falls exclusively on the renewable fuels industry - the very industry Congress was seeking to expand.
While it is impossible to predict how a court would rule, EPA appears to be making a novel use of its waiver authority. EPA's interpretation of what constitutes inadequate supply could be viewed as contrary to Congressional intent to increase renewable fuel production because it holds the renewable fuels industry responsible for something beyond its control (the blend wall) at a time when the industry appears capable of producing sufficient quantities to supply the liquid fuel market.
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