BIOFUELS:

Court faults EPA over cellulosic standards

A federal appeals court ruled today that U.S. EPA must revise its cellulosic biofuel projections for 2012.

The three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit held that EPA's methodology in calculating how much cellulosic biofuel could be produced in 2012 was not accurate enough.

The court did, however, rule in favor of EPA over its decision not to reduce the total volume of advanced biofuels that refiners, importers and blenders are expected to purchase in order to meet requirements under the renewable fuel standard, or RFS, program.

The American Petroleum Institute had challenged the agency on both points, meaning today's ruling was a partial victory.

The rule issued in December 2011 required producers to generate 8.65 million gallons of cellulosic biofuel in 2012 or purchase renewable fuel credits to meet the obligation.

EPA bases its annual biofuels requirements on predictions from the federal Energy Information Administration and industry production assumptions.

In today's ruling, Senior Judge Stephen Williams said the court agreed with API that the 8.65 million gallons number was based on open-ended projections rather than adhering to the language contained in the Energy Policy Act of 2005 and amended by the Energy Independence and Security Act of 2007.

The agency methodology included a "special tilt" toward promoting growth of the cellulosic biofuel industry, Williams noted.

"We agree with API that such a purpose has no basis in the relevant text of the act," he added.

Although the RFS program in general is aimed at increasing production of renewable fuels, "that general mandate does not mean that every constitutive element of the RFS program should be understood to individually advance a technology-forcing agenda," Williams wrote.

The statute requires "a projection that aims at accuracy, not at deliberately indulging a greater risk of overshooting than undershooting," he added.

As a result of the ruling, EPA will now have to carry out a new calculation based more closely on the statutory language.

The court was less receptive to API's argument over EPA's refusal to reduce the total volume of advanced biofuels for 2012 based on the cellulosic biofuel projection. EPA had said that other advanced biofuels could meet the shortfall, but API said the agency needed to specify exactly which types of fuel and how much of each would fill the gap.

Williams wrote that EPA was not required to be that specific.

"Certainly EPA must provide a reasoned explanation for its actions, but rationality does not always imply a high degree of quantitative specificity," he wrote.

Bob Greco, director of downstream activities at API, said the court had "put a stop to EPA's pattern of setting impossible mandates for a biofuel that does not even exist."

The current law "acts as a stealth tax on gasoline with no environmental benefit that could have ultimately burdened consumers," he added.

Stephen Brown, a lobbyist for refiner Tesoro Corp., generally welcomed the ruling, saying that it "underscores the fact that there are a host of problems with the RFS" that Congress should fix.

EPA must now "go back and do what the law tells them they should do," he added, rather than reaching a number based on a "political wish on what they were hoping to see."

Brent Erickson, executive vice president of the Biotechnology Industry Organization's industrial and environmental section, described the ruling as a "mixed result" for the biofuels industry.

"On one hand, we are surprised and disappointed that the court chose not to defer to EPA's broad discretion to administer the RFS and carry out congressional intent to drive volumes by vacating the 2012 cellulosic required volume obligations," he said.

But, he added, "we are encouraged that the court did defer to the agency on setting the advanced volumes in upholding that portion of the 2012 rule."

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