Americans for Clean Energy v. Environmental Protection Agency
864 F.3d 691 (2017)
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Rule of Law:
Under the Clean Air Act, the Environmental Protection Agency's (EPA) authority to waive renewable fuel volume requirements due to an "inadequate domestic supply" is limited to considering supply-side factors affecting the availability of fuel to refiners, blenders, and importers, and does not extend to demand-side constraints such as consumer consumption or downstream distribution capacity.
Facts:
- The Clean Air Act’s Renewable Fuel Program mandates that increasing volumes of renewable fuel be blended into the national transportation fuel supply each year.
- The Environmental Protection Agency (EPA) is responsible for administering the program and setting annual volume requirements for fuel refiners and importers.
- The statute includes a waiver provision allowing the EPA to reduce volume requirements if it determines there is an "inadequate domestic supply."
- By 2014, the fuel industry encountered the "E10 blendwall," a market constraint where the supply of ethanol surpassed what could be absorbed by the market, as most vehicles are not designed for gasoline blends containing more than 10% ethanol.
- In a December 2015 Final Rule, the EPA set renewable fuel requirements for 2014-2016.
- For the first time, the EPA interpreted the "inadequate domestic supply" waiver to refer to the supply of renewable fuel available to ultimate consumers.
- Based on this interpretation, the EPA considered demand-side factors, including the E10 blendwall and downstream distribution limitations, and subsequently reduced the total renewable fuel volume requirements for 2014, 2015, and 2016.
Procedural Posture:
- The Environmental Protection Agency (EPA) promulgated a Final Rule in December 2015 setting renewable fuel standards for 2014, 2015, 2016, and 2017.
- Multiple parties, including Americans for Clean Energy (arguing the requirements were too low) and a group of Obligated Party Petitioners (arguing the requirements were too high), filed petitions for review of the rule.
- The petitions were filed directly in the U.S. Court of Appeals for the D.C. Circuit.
- The court consolidated the various petitions for review.
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Issue:
Does the "inadequate domestic supply" waiver provision of the Clean Air Act authorize the Environmental Protection Agency (EPA) to consider demand-side factors, such as consumer consumption capacity and downstream distribution constraints, when reducing the statutory renewable fuel volume requirements?
Opinions:
Majority - Kavanaugh
No. The 'inadequate domestic supply' waiver provision does not authorize the EPA to consider demand-side factors; it is limited to considering the supply of renewable fuel available to refiners, blenders, and importers for the purpose of meeting their statutory obligations. The court reasoned that the text of the provision refers to the supply of "renewable fuel" required by the statute, which is an obligation placed on upstream producers like refiners, blenders, and importers, not on downstream consumers. Therefore, the adequacy of supply must be measured from the perspective of those obligated parties. Furthermore, the statute's purpose is to be a "market forcing policy" that creates demand; allowing the EPA to reduce requirements based on a lack of demand would turn the statutory scheme on its head. The court also noted that other sections of the Clean Air Act explicitly refer to "distribution capacity" when Congress intended it to be a factor, and the absence of such language in this provision, along with legislative history showing its removal, indicates a deliberate exclusion. The provision is a waiver for when compliance is infeasible due to supply shortages for producers, not for when market demand is low.
Analysis:
This decision significantly curtails the EPA's discretion in administering the Renewable Fuel Program by establishing a bright-line rule for the "inadequate domestic supply" waiver. It solidifies the statute's function as a "market-forcing" mechanism, shifting the burden of overcoming consumer demand hurdles and infrastructure limitations squarely onto the fuel industry. The ruling forces the EPA to use other, more stringent waiver provisions, such as the one for "severe economic harm," if it wishes to lower standards due to market conditions, thereby making such reductions more difficult to justify. This precedent will likely constrain future EPA attempts to ease renewable fuel standards in response to market resistance or economic arguments that fall short of severe harm.
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