In a brief filed in federal court on Feb. 14, the Trump Administration Department of Justice reiterated legal arguments made by the Obama Administration to defend against claims from the refining industry that Renewable Fuel Standard (RFS) volume mandates are too high, and from renewable groups that the mandates are too low. This is a welcome development for many stakeholders concerned that the Trump Administration could significantly disrupt RFS implementation, but it remains possible that incoming Environmental Protection Agency (EPA) Administrator Scott Pruitt intends to do just that.
The consolidated lawsuit pertains to EPA's rule establishing blending targets for renewable fuels for compliance years 2014-2016. In that regulation, EPA exercised its waiver authority to lower the blending targets beneath what Congress had originally called for; the Agency maintained 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 consumer demand and equipment compatibility issues), means that there is "inadequate supply" of renewable fuel justifying lowering the annual volume obligations.
In the litigation, the ethanol industry contends that EPA is misreading the waiver authority and that "inadequate supply" exists only in instances where domestic production itself cannot supply enough renewable fuel. At the time time, the American Petroleum Institute (API) and other refining interests argue that EPA used flawed methodologies in establishing volume requirements, and in fact should have lowered them even further.
The Trump Administration's brief in this case is one of the first major legal briefs filed in a lawsuit over an EPA rule since the Senate confirmed new Attorney General Jeff Sessions. Some observers believed that Sessions could shift strategy from the Obama Administration, and potentially relent in litigation in a manner that would comport with the Trump Administration's policy desires (e.g., not defending the Agency's methodology and admitting the 2014-2016 volume targets should be lowered).
The Department of Justice's brief also defended maintaining the current regulatory scheme whereby refiners -- as opposed to blenders and retailers -- are "obligated parties" under the RFS. NATSO and a number of other entities have been strongly opposing efforts by certain merchant refiners to shift the "point of obligation" downstream, which would require many NATSO members to acquire RINs under the RFS program, and would dramatically raise the price of fuel throughout the country.
In its brief, the Department of Justice says that the compliance responsibility lies with the appropriate parties, and need not be reexamined every year. The Clean Air Act is silent on when, how, and how often EPA must determine the appropriate obligated parties, which indicates that Congress intended to confer broad discretion on EPA, the Department argued.
Because this litigation is being conducted before Trump's EPA Administrator nominee Scott Pruitt is confirmed by the Senate (likely to occur by Feb. 17), observers should take caution in trying to read the case's tea leaves too extensively as reflecting the Trump Administration's future policy approaches. Indeed, some observers think the Trump EPA ultimately will shift the compliance responsibility under the RFS downstream. Nonetheless, until more palpable policy pronouncements come out of EPA, tea leaves are all that stakeholders have for the time being.
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