The Nickel Report

On November 22, 2017, Environmental Protection Agency (EPA) Administrator Pruitt signed a notice denying petitions to change the “point of obligation” under the Renewable Fuel Standard (RFS) program away from refiners and importers.  The notice, which was sent to the Federal Register for publication, provides a broad overview of EPA objections to the petitions.  EPA also posted on its website a final decision document explaining its denial in detail.

EPA stated that its “primary consideration” in reviewing the petitions was whether changing the point of obligation would improve the effectiveness of the RFS program to achieve Congress’s goals.  EPA concluded that the petitions did not meet that standard.  Specifically, EPA found that changing the point of obligation would not address challenges associated with “commercializing cellulosic biofuel technologies” and the “marketplace dynamics that inhibit the greater use of fuels containing higher levels of ethanol.”  EPA also determined that changing the point of obligation would disrupt investments – particularly for cellulosic biofuels – made by investors relying on long-established regulatory structures, and “significantly increase the complexity of the RFS program.”  Furthermore, EPA was not persuaded by arguments and available data that merchant refiners are disadvantaged under the current regulations in comparison to integrated refiners in terms of their costs of compliance, nor that other stakeholders such as unobligated blenders are receiving windfall profits.

EPA also noted that petitioner proposals predominately sought to change the definition of “obligated parties” to “position holders” (i.e., entities that hold title to the gasoline or diesel fuel immediately prior to the sale of these fuels at the terminal).  EPA concluded that, since not all position holders are refiners, importers, or blenders, such a change to the definition of “obligated party” did not well align with EPA’s statutory requirement to place the RFS obligation on “refineries, importers and blenders, as appropriate.”

Finally, the notice addressed challenges to EPA’s multi-year rule establishing RFS standards for 2014, 2015, 2016.  EPA noted that the D.C. Circuit declined, in Americans for Clean Energy v. EPA, to address whether EPA had to set such standard annually.  EPA re-affirmed its opinion that the existing regulation applies for all years going forward unless and until it is revised.  According to EPA, to the extent that it has discretion under the statute to undertake such annual reevaluations, it is declining to do so on the grounds that the resulting lack of certainty would undermine the RFS program’s success.