Litigation Surrounding RFS, Biofuels Heats Up

Two separate lawsuits have been filed in recent weeks challenging the Environmental Protection Agency's (EPA's) efforts to encourage more biofuels, including biodiesel, in the market.

RFS Lawsuit 
First, a coalition of biofuels interests sued EPA over its recent Renewable Fuel Standard (RFS) volume obligations for 2014-2016.  The lawsuit argues that EPA is misusing its "waiver authority" to avoid the so-called "blend-wall" in a way that exceeds the Agency's statutory authority. 
When Congress enacted the RFS, it explicitly permitted EPA to lower the annual volume obligations that Congress proscribed in instances where there was an inadequate domestic supply of renewable fuel, or where the RFS would otherwise lead to severe economic harm. EPA maintains that the "blend wall," represented by the various impediments affecting the market's ability to distribute, blend, dispense, and consume renewable fuels (including a lack of customer demand and equipment compatibility issues) means that there is "inadequate supply" of renewable fuel justifying exercise of its waiver authority.
The lawsuit contends that EPA is misreading the waiver authority and that "inadequate domestic supply" exists only in instances where domestic production itself cannot supply enough renewable fuel. 
NATSO supports EPA's exercise of its waiver authority, and urged the EPA to exercise that authority in its comments to EPA. Specifically, NATSO thinks that in evaluating the "supply" of a product, such as renewable fuel, it is best to examine the product's ability to be used, rather than produced.  NATSO further stated that if the RFS's volume obligations exceed the volume of renewable fuel that the market is prepared to absorb, there would not be enough Renewable Identification Numbers (RINs) to allow obligated parties to satisfy their volume obligations, leading to significantly elevated prices for RINs that are available, which will result in higher prices at the pump.
The refining community, which is mulling its own legal challenge to the RFS on other issues, including EPA's increase in biodiesel requirements and how EPA projects cellulosic biofuel availability, may help defend EPA against the biofuels groups' attack.
Biodiesel Imports
The National Biodiesel Board (NBB) also has sued EPA arguing that the Agency unlawfully did not seek public comment before it approved a measure that would allow biodiesel imports from Argentina to generate RINs under the RFS.  NBB argued that the plan EPA approved for Camara Argentina de Biocombustibles (CARBIO) was less rigorous than the recordkeeping demands placed on American biodiesel producers.
The NBB also sought to discourage Argentinian imports by urging Congress to convert the biodiesel blenders' credit to a producers' credit available only to domestic producers. NATSO and a coalition of like-minded interests successfully convinced Congress to oppose this change because, among other reasons, it would limit access to (and consumption of) biodiesel in coastal regions that rely on imports from countries like Argentina (and the availability of a $1/gallon blenders credit for such imports).
In responding to NBB's lawsuit, EPA argued that NBB failed to establish that the alternative recordkeeping requirement approved for CARBIO caused NBB's members any "imminent, nonconjectural injury or that vacating the approval would relieve its members' purported injury."
Oral arguments in the case have not yet been scheduled. 
David Fialkov's photo

David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov directs NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More
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