BIOFUELS:

Court rejects refiners' challenge to EPA blending rules

An appeals court rejected a challenge today by petroleum industry groups to U.S. EPA's biodiesel blending requirements, in a move affirming the agency's implementation of the renewable fuel standard (RFS2).

A three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia unanimously dismissed arguments by the American Petroleum Institute and the National Petrochemical & Refiners Association that the court should review EPA's rules on biodiesel blending.

The groups had challenged the rules on three grounds, maintaining they improperly combined requirements for 2009 and 2010, that they should not have been made retroactive and that they violated requirements for minimum lead times.

The petition argued, in part, that EPA's own delays in finalizing the rules made it unfair to impose significant blending requirements under the originally described timeline.

The oil industry expressed concern that the rule's near-term deadlines, especially a requirement for blending twice as much biodiesel this year as in 2009, meant refiners must race to blend enough renewable fuels or face fines of more than $32,000 per day.

The groups made the arguments in two separate challenges filed in March (E&ENews PM, March 30).

Today's decision was a clear win for EPA in the case, rejecting each of the petitioners' arguments.

"Under the circumstances [of the delayed rulemaking], Congress' purpose in expanding the renewable fuel program under the [2007 Energy Independence and Security Act] is better served by EPA's approach in the final rule than it would be by forgoing" blending requirements for 2009, the court panel said in its decision.

The panel also said EPA had adequately considered alternative approaches and was justified in taking its chosen path, because of factors that include the availability of blending credits in the marketplace and ample notice of the likely need for them.

Under the rules, refiners have until next Feb. 28, 2011, to show they have blended the required amounts of biodiesel into the nation's diesel fuel supply for 2009 and 2010.

EPA does not comment on lawsuits, but the National Biodiesel Board (NBB), which along with ethanol industry group Growth Energy had joined EPA in arguing the case, welcomed the court's decision.

"The NBB is obviously pleased with the Court's unanimous decision," said Manning Feraci, the group's vice president of federal affairs, in a statement. "This wholly validates the U.S. biodiesel industry's legal position and sends a clear, unambiguous signal to the marketplace that the common-sense renewable goals established in the RFS2 program will be met."

Renewable Energy Group, which describes itself as the leading domestic marketer of biodiesel, said the decision cleared the way for a strong 2011 market.

"This lawsuit was the final piece of uncertainty creating market disruption for the biodiesel industry," the group said. "With last week's reinstatement of the biodiesel blenders' tax credit and today's announcement by the court, [Renewable Energy Group] is bullish on the 2011 market for biodiesel demand."