# U n i t e d S t a t e s C o u r t o f A p p e a l s

F O R T H E D I S T R I C T O F C O L U M B I A C I R C U I T

Arg ued September

17, 2010 Dec ided Dec ember 21, 2010

No. 10-1070

N A T I O N A L P E T R O C H E M I C A L & R E F I N E R S A S S O C I A T I O N ,

P E T I T I O N E R

v.

E N V I R O N M E N T A L P R O T E C T I O N A G E N C Y ,

R E S P O N D E N T

G R O W T H E N E R G Y A N D N A T I O N A L B I O D I E S E L B O A R D ,

I N T E R V E N O R S

Consolidated with No. 10-1071

On Petitions for Review of a Final Ac tion of the Environme ntal Protection Ag ency

Robert A. Long Jr. arg ued the cause for petitioners. Wit h him on the briefs wer e Keith A. Noreika

, Mark W

. Mosier
, Jame

s McCall Smith

, Chet Thompson , and Daniel W olff

.

Daniel R. Dertke

, Attorney
, U.S. Depa rtment of J ustice,

ar gu ed the cause for responde nt. Wit h him on the brief was Robert G. Dre her , Acting Assistant Attorney Gene ral.2

Dan Himmelfarb arg ued th e cause for intervenor s. On the brief wer e Jerom e C. Mu ys , Jr

. , Laura Ford Brust
, Stuart A.C. Drake

, Jeffrey Bossert Clark

, John C. O'Quinn , and W illiam H. Burgess

.

Be fore : G I N S B U R G , R O G E R S and G A R L A N D , Circuit Judges

. Opinion for the Court by Circuit Judge R O G E R S

.

R O G E R S , Circuit Judge : I n 2007, Congr ess enac ted the Energ y I ndepende nce and Security Ac t (“the EI SA”), Pub. L

. No. 110–140, §§ 201–204, 121 Stat. 1492 (codifie d as amende d
at 42 U.S.C. § 7545(o) (Supp. I I 2008)). I t expanded the

rene wable fuel program under the Energ y Policy Act of 2005, Pub. L

. No. 109–58, § 1501, 119 Stat. 594 (codifie d as amende d
at 42 U.S.C. § 7545(o) (Supp. 2006)) (“2005 Act”)

, which require d that set volumes of rene wable fuel be incorporated into
g asoline sold in the United States eac h y ear

. The EI SA incre ased the volume require ment s fo r rene wable fuel and added new volume require ments for advanced biofuels, biomass-based diesel, and cellulosic biofuel. Con gre ss thus soug ht “[t] o move the United States toward g rea ter ener g y independe nce and

secur ity

, to incre ase the production of clea n rene wable fuels, t o protec t consumers, to incre ase the eff iciency of products, buildings, and vehicl es , to promote rese arc h on and deploy
g ree nhouse g as ca

pture a nd storag e options, and to improve the

ener g y perf

ormanc e of the Fe dera l Gover n m en t.” Pub. L

. No. 110–140, 121 Stat. 1492 (2007). EPA posted notice of the final revisions to the reg ulations promulga ted under the 2005 Act on its we b s i te on Fe bruar

y 3, 2010 and published the revised
reg ulat ions in the Fe dera l Reg ister on Marc h 26, 2010. Regulation of Fuels and Fuel Additives: Changes to Rene wable Fuel Standar d P r o g ram , 75 Fe d. Reg

. 14,670 (Mar

. 26, 2010) (“F inal Rule”).3

Petition ers, the National Petroche mical and Refiner s Association and the Americ an Petroleum I nstitut e, challeng e the Final Rule on three g rounds. They contend that it v i o l ates statutory require ments setting separ ate biomass-based dies el volume require ments for 2009 and 2010; i t i s i mpermissibly
retroa ctive; an d it violates statutory lead time and compliance provisions. For the following rea sons, we deny the petitions for revie w.

I.

I n 2005 Congr ess amende d section 211 of the Clean Air Act that authorizes EPA to reg ulate fuel and fuel additives to establi s h a rene wable fuel prog ram. See Pub. L

. No. 109–58, § 1501, 119 Stat. 594 (codifie d at 42 U.S.C. § 7545 (o))

. For

eac h y ear from 2006 until 2012, Congr ess spec i fi ed incre asing minimum volumes of rene wable fuel to be used annua lly . EPA

was direc ted to promulg ate reg ulations by Aug u s t 8
, 2 006 “to

ensure that g asoline sold or introduced i n t o comm erc e in the United States

. . . , on an annual aver ag e basis, contains t h e applicable volume of rene wable fuel deter mined in acc ordanc e with subpara g raph (B ).” Subparag raph (B ) listed the applicable 1 vol u m es of rene wable fuel that “shall be deter mined in

acc ordanc e with” a table stating a volume for ea ch ca lendar
y ear

. The reg ulations were to include a c redit trading prog ram 2

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i ) ( 2 0 0 5 A c t )

. 1

U n d e r t h e 2 0 0 5 A c t , s u b p a r a g r a p h ( B ) p r o v i d e d : 2

F o r t h e p u r p o s e o f s u b p a r a g r a p h ( A )

, t h e a p p l i c a b l e

v o l u m e f o r a n y o f c a l e n d a r y e a r s 2 0 0 6 t h r o u g h 2 0 1 2

s h a l l b e d e t e r m i n e d i n a c c o r d a n c e w i t h t h e f o l l o w i n g t a b l e :

i n b i l l i o n s o f g a l l o n s , 4

. 0 i n 2 0 0 6 ; 4

. 7 i n 2 0 0 7 ; 5

. 4 i n 2 0 0 8 ; 6

. 1 i n4

under which an obliga ted party : (1) may g ener ate cre dits for over comply ing with its a

nnual obliga tion, a

nd can use or trade these

cre dits for use by another obliga ted party , allowing an obliga ted party to comply in t h e m o s t cost eff ective manner, and (2) may

car ry over a rene wable fuel defic it t o the next cale ndar y ear

. 3 “Reg ardle ss of the date of promulg ation,” the reg ulations were 4
to contain provisions to “ensur e” the re quirements of the

rene wable fuel prog ram wer e met, without restric ting g eog raphic

are as in which such fuel may be used or imposing any per- g allon obliga tion for use of such fuel. I f the Aug ust 8, 2006 date wa s 5
not met, then a defa

ul t perc entag e standard for 2006 of 2.78
perc ent would apply

. 6

2 0 0 9 ; 6

. 8 i n 2 0 1 0 ; 7

. 4 i n 2 0 1 1 ; 7

. 5 i n 2 0 1 2

. 4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( B ) ( i )

.

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 5 ) ( D ) ( 2 0 0 5 A c t )

. T h e d e f i c i t 3

c a r r y o v e r p r o v i s i o n o f t h e 2 0 0 5 A c t r e q u i r e d t h e r e g u l a t i o n s t o :

a l l o w [ ] a n y p e r s o n t h a t i s u n a b l e t o g e n e r a t e o r p u r c h a s e

s u f f i c i e n t c r e d i t s t o m e e t t h e r e q u i r e m e n t s o f p a r a g r a p h ( 2 ) t o

c a r r y f o r w a r d a r e n e w a b l e f

u e l d e f i c i t o n c o n d i t i o n t h a t t h e p e r s o n , i n t h e c a l e n d a r y e a r f o l l o w i n g t h e y e a r i n w h i c h t h e

r e n e w a b l e f

u e l d e f i c i t i s c r e a t e d

– ( i ) a c h i e v e s c o m p l i a n c e w i t h t h e r e n e w a b l e f u e l

r e q u i r e m e n t u n d e r p a r a g r a p h ( 2 ) ; a n d ( i i ) g e n e r a t e s o r p u r c h a s e s a d d i t i o n a l r e n e w a b l e f u e l

c r e d i t s t o o f

f s e t t h e r e n e w a b l e f

u e l d e f i c i t o f t h e p r e v i o u s y e a r

.

I d

.

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i i i ) ( 2 0 0 5 A c t )

.

4

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i i i ) ( I ) & ( I I ) ( 2 0 0 5 A c t )

. 5

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i v ) ( 2 0 0 5 A c t )

. 65

Obligated parties — ref

iners

, im p orters, and cer

tain blender s of g asoline — had to s h o w t hat they had introduced a require d volume of renewa b l e fuel into the domestic g asoline pool eac h
y ear

. The volume is deter mined by multipl y ing an obligat ed 7 party ’s act u al annual g asoline production in a g iven y ear by a perc entag e standard to be calc ulated and publis h ed b y EPA by November 30 prior to eac h compliance y ea r. The perc entag e 8 standard is the ratio of the statutory volume of rene wable fuel for the par ticular y ear

to the amount of g asoline that is projec ted to be used in the Unit ed S tates i n the s ame y ear , subject t o cer tain adjustments. Ultimately

, eac h obliga ted party is responsible for

9 ensuring that its s h ar e of the overa ll rene wable fuel volume require ment is blended into the g asoline it sells or introduces into

commerc e ea ch y ear

.

EPA published the implementing reg ulations in the Fe dera l Reg ister on May 1, 2007. Regulation of F u el s and Fuel Additives: Rene wabl e F

uel Standard Program
, 72 Fe d. Reg

. 23,900 (May 1, 2007) (“RF S 1 ”)

. The reg ulations applied to g asoline produce d or imported on or afte r September 1, 2007. RFS1, 72 Fe d. Reg

. at 23,913. As of that date, obliga ted parties

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 3 ) ( B ) ( i i ) ( 2 0 0 5 A c t )

. 7

T h e 2 0 0 5 A c t p r o v i d e d

, i n p e r t i n e n t p a r t : 8

N o t l a t e r t h a n N o v e m b e r 3 0 o f e a c h

. . . y e a r

. . . b a s e d o n t h e

e s t i m a t e p r o v i d e d u n d e r s u b p a r a g r a p h ( A )

, . . . [ E P A ] s h a l l d e t e r m i n e a n d p u b l i s h i n t h e F e d e r a l R e g i s t e r , w i t h r e s p e c t t o t h e f o l l o w i n g c a l e n d a r y e a r , t h e r e n e w a b l e f u e l o b l i g a t i o n t h a t

e n s u r e s t h a t t h e r e q u i r e m e n t s o f p a r a g r a p h ( 2 ) a r e m e t

.

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 3 ) ( B ) ( i )

.

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 3 ) ( B ) ( i i ) ( I I ) & ( I I I ) ( 2 0 0 5 A c t ) ; i d

. 9 § 7 5 4 5 ( o ) ( 3 ) ( C ) ( 2 0 0 5 A c t )

.6

had to be regi s tere d and the rec ord-ke eping responsibilities

commence d. EPA sta t ed that the rene wable fuel prog ram ado pted in the RFS1 rulemaking “will continue to apply afte r 2012, though some elements may be modified in the rulemaking setting th e standards for 2013 and bey ond.” Id. at 23,913. To fac ilitate compliance

, EPA adopted a sy s tem of Renewa ble I d en t i fica tion Numbers (“RI Ns”) for repor

ting purposes. Id. at 23,908–10. Thus, obliga ted parties woul d demonstrate their compliance with the annual volume standard by acquir ing RI Ns for eac h g allon of rene wable fuel, which would be assig ned to batche s of rene wable fuel produce d or imported into the United States, with differ ent fuels car ry ing differ ent values based on the

ener g y content re lative to ethanol. See id. at 23,909.

When C o n g ress expanded the rene wable fuel prog ram in 2 0 07 in the EI SA, Pub. L

. No. 110–140, §§ 201–204, 121 St at

. 1492, it signific antly increased the applicable volumes of

rene wable fuel require d to be used annually

, beg inning with 2008 throug h 2022. I n o t h er m ajor chang es, it expanded the 1 0 fuel pool subject to the standards to include diesel and some nonroad fuels. I t separ ated the v olumes into four cate g ories

1 1 (ce llulosi c biofuel, biomass-based diesel, advanc ed biofuel, and total rene wable fuel) for purposes of reduc ing g ree nhouse gas emis s i o ns and set annual volume require ments for eac h

S u b p a r a g r a p h ( B ) u n d e r t h e E I S A
, w h i c h r e t a i n e d t h e 1 0

“ s h a l l b e d e t e r m i n e d ” p h r a s i n g i n t h e 2 0 0 5 A c t , s u p r a n o t e 2
, l i s t e d

t h e t o t a l r e n e w a b l e f

u e l v o l u m e , i n b i l l i o n s o f g a l l o n s , a s 9

. 0 i n 2 0 0 8 ; 1 1

. 1 i n 2 0 0 9 ; 1 2

. 9 5 i n 2 0 1 0 ; 1 3

. 9 5 i n 2 0 1 1 ; 1 5

. 2 i n 2 0 1 2 ; 1 6

. 5 5 i n 2 0 1 3 ; 1 8

. 1 5 i n 2 0 1 4 ; 2 0

. 5 i n 2 0 1 5 ; 2 2

. 2 5 i n 2 0 1 6 ; 2 4

. 0 i n 2 0 1 7 ; 6

. 0 i n 2 0 1 8 ; 2 8

. 0 i n 2 0 1 9 ; 3 0

. 0 i n 2 0 2 0 ; 3 3

. 0 i n 2 0 2 1 ; 3 6

. 0 i n 2 0 2 2

. S e e 4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( B ) ( i ) ( I )

.

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i ) ; i d

. § 7 5 4 5 ( o ) ( 1 ) ( L )

. 1 17

cate g ory

. I t also chang ed the definition of “re newa ble fuel” 1 2 and set the c riteria f

or dete rmining w hich of the four r enew able fuel cate g ories a g iven rene wable fuel is elig ible t o m ee t ; “re newa ble fuel” was define d to requi re that such fuel be produce d solely from fee dstocks that qual i fy as “re newa ble biomass.” Although the definitions o f each of the four

1 3
cate g ories of fuel overla

p to a cer tain extent (there fore satisfy ing

one volume require ment also satisfies other volume r e q u ir e me n ts in p art), refine rs, i mporters and cer tain blender s of gasoline are obliga ted to de monstrate that they have introduced the requisite volumes of eac h of the four cate g ories of fuel into transporta tion fuel sold annually

. The EI SA auth o ri z ed the waiver of the volume require ments only in limit ed circ umsta n ces. The 1 4

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( B )

. 1 2

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 1 ) ( J )

. 1 3

T h e w a i v e r p r o v i s i o n p r o v i d e d

, i n p e r t i n e n t p a r t , t h a t , i n 1 4

g e n e r a l

, t h e E P A A d m i n i s t r a t o r ( “ E P A ” )

, i n c o n s u l t a t i o n w i t h t h e S e c r e t a r i e s o f t h e A g r i c u l t u r e a n d E n e r g y D e p a r t m e n t s

m a y w a i v e t h e r e q u i r e m e n t s o f p a r a g r a p h ( 2 ) i n w h o l e o r i n p a r t

. . . b y r e d u c i n g t h e n a t i o n a l q u a n t i t y o f r e n e w a b l e f u e l

r e q u i r e d u n d e r p a r a g r a p h ( 2 )

- -

( i ) b a s e d o n a d e t e r m i n a t i o n b y [ E P A ]
, a f t e r p u b l i c n o t i c e a n d

o p p o r t u n i t y f

o r c o m m e n t , t h a t i m p l e m e n t a t i o n o f t h e

r e q u i r e m e n t w o u l d s e v e r e l y h a r m t h e e c o n o m y o r

e n v i r o n m e n t o f a S t a t e , r e g i o n , o r t h e U n i t e d S t a t e s ; o r ( i i ) b a s e d o n a d e t e r m i n a t i o n b y [ E P A ]
, a f t e r p u b l i c n o t i c e

a n d o p p o r t u n i t y f

o r c o m m e n t , t h a t t h e r e i s a n i n a d e q u a t e d o m e s t i c s u p p l y

.

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 7 ) ( A )

. A w a i v e r i s g o o d f o r o n e y e a r

. I

d

. § 7 5 4 5 ( o ) ( 7 ) ( C )

. T h e w a i v e r p r o v i s i o n a l s o p r o v i d e d t h a t t h e b i o m a s s

- b a s e d d i e s e l v o l u m e r e q u i r e m e n t s m a y b e t e m p o r a r i l y8

revised reg ulations wer e to be promulg ated i n one y ear , by Dec ember 19, 2008 ; the require ment that the volume standard 1 5 be published by November 3 0 o f the prior y ear rema ined unchang ed.

By Notice of November 21, 2008, EPA published the

rene wable fuel standard for 2009. See Rene wable Fuel Standard for 2009, Issued Pursuant to Section 211( o) of the Clean Air Act
, 73 Fe d. Reg

. 70,643, 70,643 (Nov. 21, 2008) (“2008 Notice” ). Additionally

, the Notice s t ated, beca use EPA was not g oing to meet the Dec ember 19, 2008 deadline for promulg ing the revised
reg ulations, that “for t he 2009 compliance period reg ulated parti es will continue to be subject to the exis ting RFS1

re gu l at i o ns at 40 C.F.R. part 80, Subpart K.” Id. EPA woul d apply the m o d i fi ed volume require ments under the EI SA to g ener ate the 2009 standard. See id. The Not i ce al s o stated, beca use “the RFS1 reg ulatory structure does not p ro v i de a mecha nism for implementing the [new] EI SA require m en t for use of 0.5 billion g allons of b i o m ass-ba sed di esel,” id.

, that the future rulemaking proposal would “prop o se options,” id. EPA

r e d u c e d “ i f [ E P A ] d e t e r m i n e s t h a t t h e r e i s a s i g n i f i c a n t r e n e w a b l e f e e d s t o c k d i s r u p t i o n o r o t h e r m a r k e t c i r c u m s t a n c e s t h a t w o u l d m a k e t h e p r i c e o f b i o m a s s

- b a s e d d i e s e l f u e l i n c r e a s e s i g n i f

i c a n t l y

. ” I

d

. § 7 5 4 5 ( o ) ( 7 ) ( E ) ( i i )

. S e e a l s o i d

. § 7 5 4 5 ( o ) ( 7 ) ( F )

.

T h e E I S A p r o v i d e d

, i n p e r t i n e n t p a r t : 1 5

N o t l a t e r t h a n 1 y e a r a f t e r D e c e m b e r 1 9
, 2 0 0 7
, [ E P A ] s h a l l

r e v i s e t h e r e g u l a t i o n s u n d e r t h i s p a r a g r a p h t o e n s u r e t h a t
t r a n s p o r t a t i o n f

u e l s o l d o r i n t r o d u c e d i n t o c o m m e r c e i n t h e U n i t e d S t a t e s

. . . , o n a n a n n u a l a v e r a g e b a s i s , c o n t a i n s a t l e a s t
t h e a p p l i c a b l e v o l u m e o f r e n e w a l f u e l

. . . , d e t e r m i n e d i n

a c c o r d a n c e w i t h s u b p a r a g r a p h ( B )

. . . . ”

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i )

.9

advi s ed that “[t] he primary approa ch for proposal that [i t had] identified to date would be to incre ase the 2010 biomass-based diesel require ment by 0.5 bill i o n g allons and allow 2009 biodiesel and rene wable diesel RI Ns to be used t o meet this combined 2009/2010 require ment.” Id. “Such an ap proac h to biomass-based diesel,” EPA explained, “would provide a simil ar incentive for biomass-based diesel use in 2 0 0 9 as would have

occur red had [EP A] been able to imple m ent the standard for 20 0 9.” Id. “While obliga ted parties would not need to demonstrate compliance with the combined 2009/2010 biomassbased diesel standard until the end of the 2010 compliance period under this approa ch,” EPA advised that “it would behoove them
to ac q u i re the nece ssary RI Ns repr esenting biodiesel and

rene wable diesel in 2009 in prepa ration for their 2010 compliance demonstration.” Id.

On May 26, 20 0 9
, EPA published a notice of proposed rulemaking incorporating the EI SA’s chang es to t h e renewable fuel p ro g ram into a modified reg ulatory scheme (her einaf ter ref err ed to as RFS2). Regulation of Fuels and Fuel Additives: Changes to Rene wable Fuel St a n d ard Program
, 74 Fe d. Reg

. 24,904 (May 26, 2009) (“N PRM”); see id. at 24,957. EPA stated that the proposed RFS2 prog ram was based on its experience with the RFS1 prog ram, “u t iliz ing and building on the same prog rammatic structure cre ated to implement the curr ent [R FS1]
prog ram.” Id. at 24,909. Thus, while “[t] he proposed
reg ulations make a number of chang es to the curr ent Renewa ble Fue l Standard prog ram,” the RFS2 prog ram would “re tain[]
many elements of the compliance and tra ding sy stem alrea dy in place .” Id. at 24,904. EPA proposed combining t he 2009 and 2010 biomass-b as ed diesel statutory volume require ments to

cre ate one 2010 standard, and allowing obliga ted parties to demonstra t e their compliance with the 2010 biomass-based diesel standard on Fe bruar y 28, 2011, see id. at 24,959. EPA also indicated that it would reta in the RI N sy stem develope d in RFS1,10

as modified to acc ommodate the additional rene wable fuels and other chang es made in the E I SA, see id. at 24,910. This
approa ch, EPA explained, was “in keeping with [i ts] o v er all intent fo r R FS1 — to desig n a flexibl e and enfor cea ble sy stem that could continue to opera te eff ectively reg ardle ss of the level of re newa ble fuel use or marke t c onditions in the transporta tion fuel sec tor.” Id. at 24,909.

Th e NPRM stated that the revised reg ulations would take eff ect J anuar

y 1, 2010. Id. at 2 4
, 913. EPA advised, howeve r, that it was unable t o p ro m ulga te the revised reg ulations by the statutory date, Dec ember 19, 2008. S ee i d. EPA pointed specific ally to delay s cause d by “the addition of [t he g ree nhouse
g as] complex lifecy cle assessments to the deter mination of elig ibilit y of rene wable fuels [to meet the standar ds for the f our fuel cate g ori es ], the extensive analy sis of impacts [being] conduct[ed] for the highe r re n ew able fuel volumes, the various complex chang es to the reg ulatory prog ram [relating to the RI Ns and I T technolog y ] that require close collabora tion with stakeholder s, an d v ar ious statutory limit ations such as

. . . a 60 day Congr essional revie w period for all signific ant action.” Id. 1 6

T h e C o n g r e s s i o n a l R e v i e w A c t r e q u i r e s a p e r i o d o f 6 0 d a y s 1 6
f o r c o n g r e s s i o n a l r e v i e w o f a “ m a j o r r u l e

. ” 5 U

. S

. C

. § 8 0 1 ( a ) ( 3 ) ( 2 0 0 6 )

. A “ m a

j o r r u l e ” i s d e f

i n e d

, a s r e l e v a n t , a s a n y r u l e t h a t t h e O f f i c e o f M a n a g e m e n t a n d B u d g e t f i n d s h a s r e s u l t e d i n o r i s l i k e l y t o

r e s u l t i n

- -

( A ) a n a n n u a l e f

f e c t o n t h e e c o n o m y o f $ 1 0 0
, 0 0 0
, 0 0 0 o r

m o r e ; ( B ) a m a

j o r i n c r e a s e i n c o s t s o r p r i c e s f o r c o n s u m e r s , i n d i v i d u a l i n d u s t r i e s , F e d e r a l

, S t a t e , o r l o c a l g o v e r n m e n t

a g e n c i e s , o r g e o g r a p h i c r e g i o n s ; o r ( C ) s i g n i f

i c a n t a d v e r s e e f

f e c t s o n c o m p e t i t i o n , e m p l o y m e n t , i n v e s t m e n t , p r o d u c t i v i t y , i n n o v a t i o n , o r o n t h e a b i l i t y o f U n i t e d S t a t e s

- b a s e d e n t e r p r i s e s t o c o m p e t e w i t h f o r e i g n

- b a s e d11

EPA aler ted obliga ted parties, much as it had in the 2008 Notice, that alt h oug h “[f]or the rema inder of 2009, the curr ent RFS1
reg ulations would apply ,” “in anticipation of the biomass-based diesel standar d proposed f or 2010, oblig ated parties m ay find it in their best interest to plan acc ording ly in 2009.” Id. at 24,908.

EPA promulg ated the final revised reg ulations on Fe bruar y 3, 2010 and posted notice of the 2010 standard s on its website the same day

, and published the Fi n al R ule in the Fe dera l 1 7 Reg ister on Marc h 26, 2010. The Final Rule made few chang es to the NPRM. Th u s , o b l i gated parties wer e require d to use

1 8

e n t e r p r i s e s i n d o m e s t i c a n d e x p o r t m a r k e t s

.

I d

. § 8 0 4 ( 2 ) ( 2 0 0 6 )

. T h e t e r m “ r u l e ” h a s t h e m e a n i n g g i v e n i n

s e c t i o n 5 5 1 w i t h e x c e p t i o n s n o t r e l e v a n t h e r e

. I d

. § 8 0 4 ( 3 )

.

S e e E P A R e g u l a t o r y A n n o u n c e m e n t : E P A F i n a l i z e s 1 7
R e g u l a t i o n s f

o r t h e N a t i o n a l R e n e w a b l e F u e l S t a n d a r d P r o g r a m f o r 2 0 1 0 a n d B e y o n d ( F e b

. 2 0 1 0 )

, h t t p : / / w w w

. e p a

. g o v / o m s / r e n e w a b l e f u e l s / 4 2 0 f 1 0 0 0 7

. p d f ; h t t p : / / w w w

. e p a

. g o v / o m s / w h a t s n e w

. h t m

. ( F e b

. 3
, 2 0 1 0 )

.

F o r e x a m p l e , t h e F i n a l R u l e a d j u s t e d t h e v a l u e o f t h e 1 8
b i o m a s s

- b a s e d d i e s e l v o l u m e r e q u i r e m e n t “ u p w a r d b y a f a c t o r o f 1

. 5
, t h e E q u i v a l e n c e V a l u e f o r b i o d i e s e l

, ” t o e n s u r e t h e m a n d a t e d g a l l o n s

w e r e u s e d

. R e n e w a b l e F u e l S t a n d a r d P r o g r a m ( R F S 2 ) S u m m a r y a n d A n a l y s i s o f C o m m e n t s : C h a p t e r 3
, M a j o r E l e m e n t s o f t h e P r o g r a m R e q u i r e d U n d e r E I S A 3

. 6

. 2 ( F e b

. 2 0 1 0 )

. E P A i n t e r p r e t e d t h e E I S A
t o r e q u i r e t h e b i o m a s s

- b a s e d d i e s e l v o l u m e s b e m e t o n l y w i t h

r e n e w a b l e f

u e l s t h a t d i s p l a c e f

o s s i l

- b a s e d d i e s e l

. S e e i d

. T h e b i o m a s s

- b a s e d d i e s e l s t a n d a r d f o r 2 0 1 0 w a s p r o j e c t e d i n t h e N P R M
t o b e

. 7 1 %
, w h i l e i t w a s s e t i n t h e F i n a l R u l e a t 1

. 1 0 %

. S e e N P R M
, 7 4 F e d

. R e g

. a t 2 4
, 9 1 5 ; F i n a l R u l e , 7 5 F e d

. R e g

. a t 1 4
, 6 7 5

. E P A

t r e a t e d t h e b i o m a s s

- b a s e d d i e s e l v o l u m e r e q u i r e m e n t a s a d i e s e l

v o l u m e , n o t a n e t h a n o l

- e q u i v a l e n t v o l u m e ( w h i c h i s t h e b a s i s f o r t h e

e q u i v a l e n c e v a l u e s )

, a n d a d j u s t e d i t s p e r c e n t a g e s t a n d a r d b y a f a c t o r12

1.15 billion g allons of biomass-b as ed diesel based on the combined volume require ments for 2009/2010, with a defe rred compliance date. The Final Ru l e also set the final 2010
perc entag e standards for cellulosic biofuel, advanc ed biofuel, and total rene wable fuel based on the statutory tables of applicable volumes for those fuels, in view of available volumes. 75 Fe d. Reg

. at 14,675. Obligated parties wer e require d to apply these p erc entag e standards to their 2010 production or importation of g asoline and diesel fu el to calc ulate their

rene wable volume obliga tion for 2 0 1 0

. Id. at 14,676. As a transition measure, o bliga ted parties wer e allowed to use RI Ns
g ener ated u n d er the RFS1 prog ram in 2009 and in the first part of 2010 to meet the 2 0 1 0 RFS2 rene wable volume obliga tions,

even though these RFS1 RI Ns may have been g ener ated for fuel that did not meet the EI SA’s new g ree nhouse g as re duction and

rene wable biomass require ment s

. Id. at 14,723, 724. Wit h

cer tain limit ati o n s , parties also could us e 2008 RI Ns to comply with the 2010 bio m as s -b ased diesel standard. Id. at 14,719. 1 9

o f 1

. 5 ( c h a n g i n g i t f

r o m

. 7 1 % t o 1

. 1 0 % )

. E P A e x p l a i n e d i n t h e F i n a l
R u l e t h a t “ [ t ] h e n e t r e s u l t i s a b i o m a s s

- b a s e d d i e s e l g a l l o n b e i n g w o r t h 1

. 0 g a l l o n s t o w a r d t h e b i o m a s s

- b a s e d d i e s e l s t a n d a r d

, b u t 1

. 5 g a l l o n s t o w a r d t h e o t h e r [ f

u e l ] s t a n d a r d s

. ” 7 5 F e d

. R e g

. a t 1 4
, 7 1 6

. B e c a u s e t h i s w a s t h e f

i r s t t i m e a p e r c e n t a g e s t a n d a r d w a s s e t f o r b i o m a s s

- b a s e d d i e s e l a n d b i o m a s s

- b a s e d d i e s e l c o n t i n u e s t o b e w o r t h 1

. 5 g a l l o n s f o r

a l l o f t h e o t h e r f

u e l s t a n d a r d s , t h e F i n a l R u l e m a d e n o c h a n g e i n

e q u i v a l e n c e v a l u e s f

o r b i o d i e s e l f

r o m t h e R F S 1 r e g u l a t i o n s

. F u r t h e r , b e c a u s e t h e b i o m a s s

- b a s e d d i e s e l s t a n d a r d c h a n g e d o n l y t o a c c o u n t f o r t h e 1 : 1 e q u i v a l e n c e v a l u e , t h e b i o m a s s

- b a s e d d i e s e l s t a n d a r d i n t h e F i n a l R u l e d o e s n o t m e a n i n g f u l l y d i f f e r f r o m t h e p r o p o s e d s t a n d a r d i n t h e N P R M

.

U n d e r t h e F i n a l R u l e , o b l i g a t e d p a r t i e s c a n c a r r y o v e r 5 7 % 1 9

o f t h e i r 2 0 1 0 o b l i g a t i o n

. T h e r e m a i n i n g 4 3 % r e p r e s e n t s t h e p o r t i o n o f

t h a t o b l i g a t i o n n e c e s s a r y t o e n s u r e u s e o f t h e 2 0 0 9 a p p l i c a b l e v o l u m e ,
a n d m u s t b e s a t i s f

i e d i n 2 0 1 0

. 7 5 F e d

. R e g

. 1 4
, 7 1 9

.13

The compl i ance date for the combined 2009/2010 volume require ment was Fe b ruary 28, 2011, the end of the 2010 compliance y ear

. Id

. at 14,676. The effe ctive date of t he Final Rule was J uly 1, 2010
, “the start of the first [reporting ] quarte r following completion of the statutori l y require d 60-day Congr essional Review period” for a “major rule.” Id

. at 14,675. 2 0

EPA explained i n t h e prea mble that, in contra st to the alterna tives proposed by commenter s, it had adopted the combined 2009/ 2 0 1 0 approa ch beca use it “more closely
repr esent[ed] what would have occur red if [EP A] had been able
to implement the 0.5 bill[ ion] g al[lon] require ment in 2009.” Id.
at 14,719. This was, EPA stated, “a rea sonable exercise of [i ts] authority under section [7545] (o)( 2) to issu e reg ulations that

ensure that the volumes for 2 0 0 9 ar e ultimately used, even though [EP A was] u n ab le to issue final reg ulations prior to the 2009 compliance y ear .” Id. at 14,718. EPA observe d that “the defic it car ry over provision provides a conce ptual mecha nism for this approa ch, since it would have allowed obl i gated parties to defe r compliance with any or all o f t h e 2009 standards until 2010.” Id. at 14,718. 2 1

S e e s u p r a n o t e 1 6

. 2 0

B y n o t i c e o f M a y 1 0
, 2 0 1 0
, E P A
, r e s p o n d i n g t o c r i t i c a l 2 1

c o m m e n t s , p u b l i s h e d a “ d i r e c t f i n a l r u l e ” t o a m e n d t h e R F S 2 p r o g r a m

r e q u i r e m e n t s , w i t h d r a w i n g p r o v i s i o n s r e g a r d i n g d e f i n i t i o n o f t e r m s , t h e t e c h n i c a l r e q u i r e m e n t s f o r g e n e r a t i n g a n d c o d i n g o f R I N s a n d

t r a n s a c t i o n s i n v o l v i n g R I N s , a n d t h e r e q u i r e m e n t s f o r a f u e l t o b e

c o n s i d e r e d a b i o g a s f

o r c o d i n g p u r p o s e s

. R e g u l a t i o n o f F u e l s a n d F u e l A d d i t i v e s : M o d i

f i c a t i o n s t o R e n e w a b l e F u e l S t a n d a r d P r o g r a m , 7 5 F e d

. R e g

. 3 7
, 7 3 3
, 3 7
, 7 3 3 ( J u n e 3 0
, 2 0 1 0 )

. P e t i t i o n e r s d o n o t r e l y o n t h e s e c h a n g e s i n c h a l l e n g i n g t h e F i n a l R u l e

.14

II.

Petitioners contend that the Final Rule vi olates the clea r statutory mandate in 42 U.S.C. § 7545(o)( 2)(B ) that the biomassbased diesel require ment for 2010 “shall” be 0.65 billion g allons by imposing a combined 2009/2010 r equire ment of 1.15 billion
g allons. Congr ess’ use of the word “shall” has a clea r meaning

, they maintain, citing Lopez v. Dav is , 531 U.S. 230, 241 ( 2001), for the proposition that “shall” imposes “discre tionless obliga tions.” Having missed the statutory deadline of Dec ember 19, 2008 by which Congr es s d i rec ted that EPA “shall” publish the revised reg ulations for the 2009 require ment, petitioners conclude that EPA lacke d authority to incre ase the 2010 volume requirement to include the 2009 volume require ment. I n thei r view, Congr ess’ s p ecific direc tive for 2010 overr ides EPA’s
g ener al rulema k i n g authority

, and nothing in the defic it

car ry over provis i o n sug g ests that EPA has authority to 2 2

car ry over a rene wable fuel require ment from 200 9 i n t o 2010. Put otherwise by intervenor s repr esenting the biodiesel industry and ethanol produc er s, petitioners urg e that beca use the EI SA
p ro v ides that EPA “shall” issue reg ulations by Dec ember 1 9
, 2008 and “shall” publish the rene wable volume standard b y November 30 of the prior y ear , “EPA’s failure to do so require s it to ignor e its obliga tions under [t he EI SA] t o ensure that the renewable fuel require ments for 2009 and part of 2010 are satisfied.” I ntvrs.’ B r. 13. EPA offe rs two re sponses, pointing
to its mandate under section 7545(o)( 2)(A) (i) to “ensur e” that “at least” the statutory volumes are used, and to the rea sonablene ss of its response to missing the statutory deadlines.

We beg in with t h e text of the statute to deter mine whether Congr ess has spoken direc tly to the prec ise issue. See generally Barnhart v. Sigmon Coal Co., Inc.
, 5 3 4 U.S. 438, 450 (2002);

4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 5 ) ( D ) ; s e e s u p r a n o t e 3 ( 2 0 0 5 A c t )

. 2 215

Chevron USA v. NRDC
, 467 U.S. 837, 842 (1984); Engine Mfrs. A s s’n v. EPA
, 88 F.3d 1075, 1084 (D.C. Cir. 1996). Se ct i o n 7545(o)( 2)(A) (i) provide s that EPA

shall promulg ate reg ulations to en s u re that transporta tion fuel sold or introduced into commerc e in
t h e United States

. . . , on an annual aver ag e basis

, contains at least the applicable volume of rene wable fuel, advanc ed biofuel, cellulosic biofuel, and biomassb as ed d i es el, deter

min ed i n ac co rd an ce wi t h subpara g raph ( B)

. . . .

42 U.S .C. § 7545(o)( 2)(A) (i) (emphasis added)

. The “ordinary

or natura l me aning ,” Bailey v . United States

, 516 U.S. 137, 145 (1995) (interna l citation omitted), of t h e wo rd “ensur e” is “to make sure, [or] cer

tain,” M E R R I A M -W E B S T E R ’ S C O L L E G I A T E D I C T I O N A R Y 386 (1 0th ed. 1993). Congr ess thus deleg ated authority to EPA to make cer tain that the 2009 appl i ca b l e volume of eac h ty

pe of rene wable fuel is sold or introduced into

commerc e. Fur

ther, as EPA observe s, p eti tioners’ contention that Congr ess has not deleg ated authority to EPA to use any thing other than the 0.65 billion g allons of biom as s -b as ed diesel in setting the 2 0 1 0 s tandar d — i.e., that the g ener al authority in section 7545(o)( 2)(A) (i) cannot incre ase the 20 1 0 statutory amount set in section 7 5 4 5(o)( 2)(B )(i)( I V) — overlooks the phrase “a t l east” and the ambig uity it cre ates reg arding EPA’s deter mination of the 2010 standar d for biomass-ba sed diesel. 2 3

E P A a n d i n t e r v e n o r s a l s o r e l y o n 4 2 U

. S

. C

. 2 3 § 7 5 4 5 ( o ) ( 2 ) ( A ) ( i i i )

, a s a m e n d e d i n 2 0 0 7
, w h i c h p r o v i d e s :

R e g a r d l e s s o f t h e d a t e o f p r o m u l g a t i o n , t h e r e g u l a t i o n s p r o m u l g a t e d u n d e r c l a u s e ( i )

– ( I ) s h a l l c o n t a i n c o m p l i a n c e p r o v i s i o n s a p p l i c a b l e t o

r e f i n e r i e s , b l e n d e r s , d i s t r i b u t o r s , a n d i m p o r t e r s , a s16

Petitioners object that EPA is sug g esting for the first time on appea l that the statutory text is ambig uous and, conseque ntly

, the
court owes no defe renc e to this post hoc rationale

, citing City of Kansas City v. HUD
, 923 F.2d 188, 192 (D.C. Cir. 1991). They maintain that the statutory text must be interpre ted so it does not conflict with other statutory provisions, see, e.g. , R icci v. DeStefano

, 129 S. Ct. 2658, 2674 (2009), and that the clea r text and statutory

structure of the EI SA undermine EPA’s position. They also sug g est that the phrase “a t l ea st” can “re adily ” be interpre ted to avoid a conflict with the specific v o lume require ments (impl icitly appea ring to ag ree that the phrase is ambig uous) by interpre ting “a t l ea s t” to mean that “tra nsportation fuel contains no less and no more than the applicable volume.” Reply Br

. 7 (empha sis in orig inal). Fur ther, they continue, the ref

ere nce to “subpar ag raph (B )” i n section 7545(o)( 2)(A) (i) confirms that the “at least” p h rase does not authorize EPA to disreg ard the provisions of subpara g raph (B)

, wher ein the “shall” direc tive is found for the an n u al volume
requ i re ments. They note that Congr ess used clea r statutory lang uag e in the waiver provi sion to g rant EPA authority to

a p p r o p r i a t e , t o e n s u r e t h a t t h e r e q u i r e m e n t s o f t h i s p a r a g r a p h a r e m e t ; b u t ( I I ) s h a l l n o t

– ( a a ) r e s t r i c t g e o g r a p h i c a r e a s i n w h i c h

r e n e w a b l e f

u e l m a y b e u s e d ; o r ( b b ) i m p o s e a n y p e r

- g a l l o n o b l i g a t i o n f o r t h e

u s e o f r e n e w a b l e f

u e l

.

C l a u s e ( i )

, a s a m e n d e d b y t h e E I S A
, r e f e r s t o r e g u l a t i o n s t o b e p r o m u l g a t e d o n e y e a r a f t e r A u g u s t 8
, 2 0 0 5 a n d t h e r e v i s e d r e g u l a t i o n s t o b e p r o m u l g a t e d n o t l a t e r t h a n o n e y e a r a f t e r D e c e m b e r 1 9
, 2 0 0 7

. P e t i t i o n e r s r e p l y o n l y t h a t E P A p r o p e r l y d i d n o t r e l y o n t h i s p r o v i s i o n i n p r o m u l g a t i n g t h e F i n a l R u l e b e c a u s e i t d o e s n o t p r o v i d e a u t h o r i t y f o r E P A t o i n c r e a s e t h e 2 0 1 0 s t a t u t o r y v o l u m e o f b i o m a s s

- b a s e d d i e s e l

.17

decr ease the statutory v o l u m e require ments in particula r circ umstances but omitt ed any simil ar pr ovision to gra nt EPA 2 4 the authority

to increa se the 2010 biom ass-ba sed di esel volume require ments.

Congr ess did not state in the EI SA what wou l d h appen if EPA failed to meet the statutory deadline for promulg at i n g t he revised rene wable fuel reg ulations on the incre ased 2009 volume require ments. Although it had provi d ed in the 2005 Act that a defa ult standard would apply i n 2006 if the initial reg ulations

wer e not promulg ated by the s tatutory deadline of Aug ust 8, 2006, Co ng ress included no simil ar provision when it expanded 2 5 the rene wable f

uel prog ram in the EI SA. Neither did it provide that the 2009 volume require ments should be forg one if EPA did
not promul g ate the revised reg ulations “by one y ear ,” or Dec ember 19, 2009. Simi larly it made no such provision if the 2010 standard dea d l i n e was missed. Prece dent from the Suprem e C o u rt and this court instructs, howeve r, that wher e there are less drastic reme dies available for an ag ency ’s failure
to meet a statutory deadline, courts should not assume Congr ess intended for the ag ency to lose its power to act. See, e.g. , Brock

v. Pierce County
, 476 U.S. 253, 260 (1986). Petitione rs ’
response , that EPA cann ot ignor e that the volume require ment set by Congr ess for 2010 is 0.65 billion g allons, fails to addre ss this prece dent and is unsupported by the ca se law.

Contrary to the cor e o f petitioners’ position, the Supreme Court has declined to trea t a statutory direc tion that an age n cy “‘sha ll’ act within a specifie d time, without more, as a jurisdictional limit prec luding action later.” Barnhart v. Peabody Coal Co.
, 537 U.S. 149, 158 (2003) (citing Brock

, 476 U.S. 253);

S e e s u p r a n o t e 1 4

. 2 4

S e e s u p r a n o t e 6

. 2 518

see also Dolan v. United States
, 1 3 0 S. Ct. 2533, 2538–41 (2010). I n Barnhart

, the Court held that an initial assig nment of

a coal industr y retire e elig ible for benef its to an opera

ting
company or rela ted en t ity responsible for funding the benef its

wa s v al i d althoug h made afte r the statutory date by which the Commi ssioner of Social Security “shall” make the assig nment. The Court observe d that “[i] t misses the point simply t o argue that the [st atutory date] was ‘manda tory ,’ ‘impera tive,’ or a ‘dea dline,’ as of c ourse it was, howeve r unrea listi c the mandate
may have been.” Id. at 157. C iting Brock

, the Court noted that it had “expressed reluc tance ‘to conclude that ever y failure of an ag ency to observe a proce d u ral require ment voids subsequent
ag ency ac t i on, espec ially when important public rig hts are at stake.’” Id . at 158 (quoting Brock , 476 U.S. at 260). The Court had summarized its positi on a dec ade e arlier : “‘if a statute does
not specify a conseque nce for n o ncompliance with statutory timing provisions, the fede ra l courts will not in the ordinary

course impose their own coer cive sanction.’” Id

. at 159 (quoting United States v. Jame

s Daniel Good Real Property
, 510 U.S. 43, 63 (1993))

. Additionally

, the Co u rt noted, the statute at issue

was enact ed afte r Brock was decide d, when “Cong ress was presumably awa

re that we do not rea dily infer cong ress i o n al i n t en t to limit an ag ency ’s power to g et a mandatory job d o n e

mere ly from a specific ation to act by a cer tain time.” Id

. at 160. The Court found nothing in the statutory text to support the conclusi o n t hat the Commi ssioner lacke d authority to act afte r the date passed, and nothing in the st ructure , purpose, and leg islative history

to the contra

ry

. Id. at 161.

Brock

, 476 U.S. 253, is both illust rative and instructive. The Comprehensive Educa tion Training Act (“CETA” ) provided that the S ec re tary of L abor “shall” issue a final deter mination as to the m isuse of C ETA funds by a gra nt rec ipient within 120 day s of rec eiving a com plaint. 29 U.S.C. § 816(b) (Supp.V 1976) (re peale d 1982). Pierce County objected that it was prejudice d19

wh en the final deter

mination occur

red afte r 120 day s. Upo n examining the statute and its leg isla t ive history

, the Supreme Court conclude d that Congr ess did not inte n d t he “somewha t incong ruous result” t h at the Secre tary would lose authority to

rec over misspent funds 120 day s afte r lear ning of the misuse. Id.
at 258. Observing that the harm to the Fe dera l Trea sury was “a
matter

. . . of interes t t o ev ery citizen,” id. at 262, the Court instructed that when “ther e are less drastic reme dies available for failure to meet a statutory deadline, courts should not assume that Congr ess intended the ag ency to lose its power to act.” Id.
at 260. I n explain i n g i t s “re luctan[ce] to conclude that ever y failure o f an ag ency to observe a proce dural require ment voids subsequent ag ency

action,” id. , the Court ref err ed to “‘the g rea t principle of public policy

, applicable to all go v er n m ents alike, which forbids that the public interests s h o u ld be prejudice d by the neg lige nce of the officers or ag ents to whose car e they are confide d.’” Id. (interna l c itations omitted). The Supreme Court applied Brock ’s teac hing in Gene ral Motors Corp. v. United States , 496 U.S. 530, 542 (1990), upholding EPA’s authority to bring an enfor ceme nt action under the Clean Air Act afte r the statutory deadline had passed. Lopez
, 531 U.S. at 241, on which petitioners rely

, addre sses a differ ent statutory issue and casts no doubt on this precede nt.

I n keeping with Supreme Court prec edent, this court in Linemaster Switch Corp. v. EPA
, 938 F.2d 12 9 9 (D.C. Cir. 1 991), upheld EPA’s listi ng of hazardous waste sites afte r t h e statutory deadline had passed. See 42 U.S.C. § 9605(c) (1) (1986). EPA had deve loped the new hazardous ra

nking sy stem (“H RS”) almost 29 months afte r the statutory deadline. Be tween the listi ng deadline and the eff ective date of the HRS, EPA added 71 sites to the National Priorities L ist, using the old HRS criter ia. Observing that the provision imposing the deadline included no conseque nces for failure to comply with it, the court declined to resolve the statutory ambig uity throug h resor t to defe renc e under20

Chevron

, 467 U.S. 837, stating “it would indeed be odd to conclude that Congr ess implicitl y entrusted a lag g ard ag ency with the authority to de vise a reme dy for its own untimeliness,” Linemaster Switch

, 938 F.2d at 1303. I nstead, the court deter mined for itself what Congr ess woul d have intended in

enac ting a statute “to ensure that an amende d [l isting] would ‘ac cura tely assess[] the rela tive deg ree of risk’” prese nted by sites potentially subject to being l i s ted. Id. (interna l citation omitted). The court upheld EPA’s au t hority to act afte r the statutory deadline had passed, looking to t h e leg islative history that indicated “the strong p u b l ic interest in EPA’s ong oing identification of s ites for

. . . listi ng , combined with Congr ess’

acc ommodatio n of the private interests potentially harme d by [i nacc urate listi ng s] and its contemplation of ci tiz en suits as a

reme dy for EPA non-c ompliance [with deadlines].” Id.

This prec edent f

rom the S upreme Court and our court thus makes clea

r that in the fac e of cong ressional silence in the EI SA

on the eff

ect of EPA’s d elay in promulg ating the revised
reg ulations, we should not presume Congr ess intended EPA would lose authority to act upon missing statutory deadlines but
must deter

mine, see Barnhart

, 537 U.S. at 161, without defe rring
to post hoc arg uments of counsel, see Motor Vehicle Mfrs. Ass’n

v. State Farm Mut. Auto. Ins. Co.
, 463 U.S. 29, 50 (1983), what Congr ess would have intended when EPA mi s s ed a statutory deadline in the EI SA. The self-e vident p u rp o s e o f the EI SA permits EPA’s action in promulg ating the Final Rule in order “to

ensure ” the volume of biomass-based diesel require d for 2009 is
not forg one. Congr ess enac ted the EI SA to expand t he

rene wable fuel prog ram under the 2005 Act in order “to incre ase the production of clea

n rene wable fuels.” Pub. L

. No. 110–140, 121 Stat. 1492. I t tied this expansion to, among other things, the nation’s secur ity

, see id.

, a “matter

. . . of interest t o ev ery citizen,” as harm to the Fe dera l Trea sury was in Brock

, 476 U.S. at 262. See also NPRM, 73 Fe d. Re g. at 2 4 ,916. By including21

the authorizing phrase “at least” Congr ess also signa led its intent that volumes not be reduc ed, at least not in the first deca de of the

rene wable fuel p ro gram. The structure of the statute and the absenc e of a default standar d for 2010 further more sugg est that Congr ess envisioned a smooth transition throu g h the revised

rene wable f

uel re g ulations, from the 2005 Ac t’s rene wable f uel
prog ram (RFS1) to the E I S A’ s expansion of it (RFS2). Under standably

, perha

ps, there thus is scant leg islative history for the E I SA.

The rulemaking rec ord sug g ests, moreove r, that the deadlines in the EI SA for promulg ating the revised reg ulations and the 2010 standard wer e likely unrea listi c. See Barnhart

, 537 U.S. at 157. The President s igne d the EI SA into law on Dec ember 19, 20 0 7

. Final revised reg ulations wer e due in a y ear

. Yet the EI SA included sever al “new
, complex provisions.” NPRM, 74 Fe d

. R eg

. at 24,909. A stated purpose of the EI SA

was “to promote rese arc h on and deploy g ree nhouse g as captur e and storag e options.” Pub. L

. No. 110–140
, 1 2 1 Stat. 1492. EPA noted that the provision on the gre en h ouse g as impact of

rene wable fuels require d “a compre hensive evalua tion of

rene wable fuels, as well as of g asoline and diesel, on the basis of their lifecy cle emissi o n s , ” NPRM, 74 Fe d. Reg

. at 24,909, including “dire ct and indirect emissions” and “sig nificant emissions from land use chang es,” id. By May 26, 2009, EPA had conducte d its a

naly ses, but beca

use lifec y cle analy sis wa s a

new p art of the rene wable fuel prog ram, EPA deter mined it should solicit public and expert com m en t i n addition to the formal comment period on the proposed rule, and intended to do

so at a forthcoming public workshop and by peer revie ws of key components of its analy sis, all befor e the final rule was adopted. See id.

Under the circ umstances, Congr ess’ purpose in expanding the rene wable fuel prog ram under t h e E I SA is better serve d by22

EPA’s approa ch in the Final Rule than it would be by forg oing the 2009 applicable volume require ment as petitioners propose. Congr ess require d a biomass-based diesel p ro gram beg inning J anuar y 1, 2009, wi t h a v o lume mandate of 0.5 billion g allons, and it direc ted EPA to “ensur e” that volume would be u s ed i n 2009. I t al so direc ted EPA to “ensur e” that “at least” the set volumes wer e used eac h y ear

. EPA’s 2 0 0 9 / 2 0 1 0 solution to

acc ount for its delay ref

lects C ong ress’ vision in expanding t h e

rene wable f

uel prog ram without rende ring nug atory the EI SA’s
rest ri cti ons on EPA’s authority to revise the volume require ments as such. See W hitman v. Am. Trucking Ass’ns
, 531 U.S. 457, 484–85 (2001). I t seems highly unlikely that in 2007 Congr ess intended in enac ting the EI SA that E P A’s failure timely t o i s sue the revised reg ulations or the 2010 standard

wou l d l ead to the drastic and “somewha t incong ruous result,” Brock

, 476 U.S. at 258, that petitioners urg e, namely prec luding EPA from ensuring that both the 2009 and 2010 applicable volumes of biomass-based d i esel are eventua lly sold or introduced into commerc e. As EPA sug g ests, “such a result

seems flatly contra

ry to Congr ess’ intent and would turn ag ency delay into a windfall for the reg ulated entities.” Respt.’s Br

. 31.

P eti tioners’ arg uments to the contra ry are unpersua sive

. They maintain that n o t hing in the EI SA’s structure indicates EPA can incre ase the applicable volume of biomass-based diesel above 0.65 billion g allons for 2010, and that the g rant of express aut h o rity to waive applicable volumes is limit ed by specific criter ia. But EPA reli es n o t on g ener al structure but on its
express authority under section 7545(o)( 2)( A) (i). See 75 Fe d. R eg. at 14,718. Congr ess mandated EPA to “ensur e” t h at obliga ted parties sell or introduce into commerc e the 2009 applicable volumes of biomass-based diesel and the only question is how EPA may exercise that authority when it misses the statuto ry deadline for promulg ating the implementing
reg ulations. Nothing in the waiver provision sug g es t s any thing23

neg ative about EPA’s auth o ri ty to ensure 2009 applicable volumes are used, eve n if EPA acts after the statutory deadline,

a situation not addre ssed in the waiver pro v i s i o n

. I ndeed in terve nors sug g est that the restric tions in the waiver provision “re inforce [] how serious Congr ess was about compliance with [t he EI SA’s] annual volu

me r e q u ir e me n ts , a

nd further establishes that EPA could not ignor e the 2009 manda te.” I ntvrs.’ B r. 20.

L ikewise, petitioners’ focus on Congr ess’ use of the word “shall” i n t h e tables setting the 2009 and 2010 volumes overlooks the authority Congr ess g rante d to E P A to ensure compliance with those volumes by providing that EPA ensure t h at “at least” the applicable volume is used eac h y ear

. They offe r no explanation why the s ame use of “shall” in co n n ection with the 2009 volume require ment means nothing, while its use for 2010 mea

ns so much.

I n urg ing that by d elineating the y ear s in which EPA can specify an ap plicable volume “Cong ress reinfor ced the conclusion that E PA is not authorized to disreg ard Congr ess’s specific i n s t ru cti on that [EP A] ‘shall’ impose a 0.65 billion
g allon biomass-based diesel m andate in 2010,” Petrs.’ Br

. 25 (empha sis in the orig inal), petitioners c rea te a stra w man. EPA is not asser

ting authority to establish any ap p l i ca b le volume it considers appropr iate; it disclaimed such authorit y when that
sug g estion was made, see RFS2 Summary and Analy sis of Comments, Section 3.6.2. Rather, EPA i n corpor ated into the 2010 standard the mandated 2009 applicable vo l u m e of

rene wable f

uel that otherw ise would not be used.

Petitioners also maintain that the defic it car ry ove r p rovision,

as a “conc eptual mec hanism,” 75 F ed. Reg

. at 14,718, is not an express authorization for EPA to co m b ine two y ear s of applicable volumes. I nterve nors sug g est this puts form over substan ce

. EPA, in any event, considere d the defic it car ry over24

provision, which g ener ally p ermit s obliga ted parties to defe r compliance with one y ear’s obliga tions to the following y ear , only as a model to suppor t by analog y the rea sonablene ss of the
approa ch it adopted for satisfy ing the statutory direc tive to “ensur e” use of the 2009 volumes where t h e rene wable fuel standard was not published until 2010. See id. By not rely ing on the defic it car

ry over require ments, EP A aff orded obliga ted parties more time for the 2009/2010 volume in the event they did not actually

purcha se and use the require d volumes of biodiesel in 2009. Id. at 14,719. Thus, intervenors note, petitioners are better off under the Final Rule th an t h ey would be had EPA implemented the EI SA’s expanded rene wable fue l p rogra m on time. As in t er v en ors sug g est, under EPA’s approa ch the 2010
statuto ry v o lume rema ins 0.65 billion g allons, as EPA mere ly postponed the complianc e date for the sta tutory 2009 volume.

The case s on which petitioners rely are in ap p o site. I n Friends of the Earth, Inc. v. EPA
, 446 F.3d 140, 142 (D.C. Cir. 2006), the court held that EPA lacke d authority to set seasona l or annual loads for discharg e standards for cer tain pollutants when the Clean Water Act mandated “daily ” loads. I n American Petroleum Institute v. EPA
, 52 F.3d 1113, 1119 (D.C. Cir 1995), the court sim i l ar l y held that nothing in the Clean Air Act g ave EPA authorit y t o require a perc entag e of the ox y g en in ref ormulated g asoline come from rene wable source s. Neither of these situations is compar able to the insta nt case wher e EPA is following Congr ess’ direc tion to “ensur e” the mandated fuel volumes are met. I n those case s, unlike here

, there was no g ap in the statute for EPA to fill. Petitioners’ relianc e on the court’s observa tion in NRDC v. Thomas

, 8 0 5 F.2d 410, 435 (D.C. Cir. 1 9 8 6), that “two wrong s do not make a rig ht,” thus misses the mark.

We there fore hold that the EI SA authorized EPA to apply in 2010 the v o lume require ment for biomass-based diesel that25

Congr ess established for 2009. Absent Congr ess’ provision f or

a loss of authority as a result of delay

, the purpose and structure of the EI SA are contra indicat i o n s o f a cong ressional intent to divest E P A of authority to act when it missed, due in part to

car ry ing out the EI SA’ s d irec tives, the statutory deadlines for

re vising the RFS1 reg

ulations and setti ng biomass-based diesel standards f

or 2009 and 2010.

III.

Petitioners also contend that by imposing rene wable fue l standards that beca

me eff ective in J uly 2010 but that apply to 2 0 1 0 as a whole, the Final Rule is impermissibly retroa ctive. They po int to the definition of “rule ” in the Administrative Procedur e Act as “the whole or a part of an ag ency statement of
g ener al or particula

r ap p l i cability and future effect, ” 5 U.S.C. § 551(4) (empha sis added)

, and to the “dee ply ro oted” presumption that “‘the leg al effec t of conduct should ordinarily be assessed under the law that exis ted when t h e conduct took place ,’” Landgraf v. USI Film Products

, 511 U.S. 244
, 2 6 5 (1994) (interna l citatio n omitted). They note the Supreme Court’s admonition that “[e]ven wher e some substant i al justification for retroa ctive rulemaking is prese nted, courts should be reluc tan t to find such authority absent an express statutory g ra n t

. ” Bowen v. George town Univ. Hosp.
, 488 U.S. 2 0 4
, 2 08–09 (1988). EPA responds that, even assuming the Final Rule has retr o active eff ects, Congr ess expressly and impliedly authorized this result by direc ting EPA to “ensur e” 2 6 the specifie d rene wable fuel volume require ments are s old or intro d u ce d into commerc e on an aver ag e basis, and also by requiring EPA to do so “re g ardle ss of the date of promulg ation” 2 7

S e e s u p r a n o t e 1 5

. 2 6

S e e s u p r a n o t e 2 3

. 2 726

of the nece ssary implementin g reg ulations. To the extent the Final Rule may be retroa ctive, we hold that EPA did not exceed its authority

under the EI SA.

A

. I n deter mining whether a statute or regula tion has
retroa ctive eff

ect, the court considers among other things “whe ther it would

. . . impose new dutie s with respe ct to transac tions alre ady completed.” Landgraf

, 511 U.S. at 280; see Boniface v. U.S. Dep’ t of Homeland S ec

. , 6 1 3 F.3d 282, 288 (D.C. Cir. 2010). This court h as rec og nized the distinction betwee n a rule that imposes new s anctions on past conduct, wh ich is retroa ctive and invalid unless specific ally authoriz ed

, and one that mere ly “upsets expectations,” which is seconda rily
retroa ctive and invalid only if arbitra ry and capr icious. See Nat’l Cable & Telecomm s. Ass’n v. FCC
, 567 F.3d 659, 670–71 (D.C. Cir. 2009). Landgraf

, on which petitioners rely

, makes a simil ar distinction for statutes, stating that “[a] statute does not operate ‘re trospectively ’ mere ly beca use it is applied i n a case arising from conduct anteda ting the statu t e’ s enac tment,

. . . or upsets expectations based in prior law.” 511 U.S. at 269 & 270 n.24 (interna l citation omitt ed).

Petitioners contend that the Final Ru le is impermissibly
retroa ctive beca

use as of J uly 1, 2010, when t h e Final Rule beca me eff ective, they wer e subjected to new duties or disabiliti es reg arding past transac tions when they wer e require d
to obtain RI

Ns to demonstrate their compliance with the fo ur

rene wable fuel st andar ds based on their purchase or production of ty pes of fuel that wer e finally identified in the Final Rule, see 75 Fe d

. R eg. at 14,676. They note that althoug h the 2009

rene wable fuel s tandar d was (timely) published in the 2008 Notice, 73 Fe d. Reg

. at 70,644– 45, EPA did not publish separ ate standards for biomass-based diesel, advanc ed biofuels, or cellulosic biofuels until the NPRM, 74 Fe d. Reg

. at 24,915, and27

then adopted some chang es with r eg ard to f uel cate g ories in the Final Rule, 75 Fe d. Reg

. at 14,675. T h ey m ai ntain that having until Fe bruar

y 28, 2011 to obt ai n RI Ns does not cure the
retroa ctivity problem beca use “it is the production or importation of transporta tion fuel that trig g ers the obliga tion [t o] acc umulate RI Ns.” Petrs.’ Br

. 19. Consequently

, petitioners state, “[p] rior to the promul gat ion of t he [ F]inal [R ]ul e, obli g ated parties l acke d

cer tainty reg arding what rene wable fuels EPA would consider to be compliant with RFS2 require ments (such as [gre enhouse g as] thresholds established throug h lifecy cle an al y sis).” Petrs.’ Br

. 32. L ikewise they “lac ked assura nce that R I

Ns they might

acc umulat e p ri o r to the issuance of a final rule would qualify under the RFS2 prog ram.” Id.

I n the prea

mble, EPA stated that t h e Fi n al Rule was not retroa ctive beca

use its approa ch was forwa rd looking beca

use compliance with a

ny new require ments would be deter mined in the spring of 2011. I t also stated that the Final R u l e d o es “n ot chang e in any way the leg al obliga tions or require ments that apply prior to [t he Final Rule’s] eff ective date.” 75 Fe d. Reg

. at 14,676. E P A does not defe nd this position on appea l, arg uing ins t ead that, assuming there wer e retroa ctive eff ects, it had authority to eng ag e in re troac tive rulemaking

.

I nterve nors, howeve r, suppo rt EPA’s reg ulatory position that the Final Rule is not retroa ctive, at least in a primary sense. They contend that “ [o] bliga

ted par ties wer e fully awa

re of their statutory duty to acquir e rene wab le fuels if they participa ted in the domestic marke t in 2009 or 2010,” and “[ t ] o t he extent the [R FS2] reg ulations impair the value of past barg ains or alter their fut u re leg al eff

ect (which is the crux of [p] etitioners’
retroac t ivity alleg ation), they are not ‘re troac tive’ within the meaning of the law that [p] eti t i o n ers cite.” I ntvrs.’ Br

. 25. I nterven ors point out that the 2010 rene wable volume require ment s we re s et by the EI SA in 2007, not in the RFS228

reg ulat i o n s, and that, contra ry to petitioners’ asser

tion that the 2010 ren ewable volume obliga tions cre ate new obliga tions for
transac tions occur

ring befor e the Final Rule took eff ect, the law

as it exis ted since J anuar y 1, 2009 is th e R FS1 reg ulatory
prog ram under the 2005 Act, as amende d in 2007 by the EI SA.

Retroac tivity as define d in Landgraf

, as i nterve nors note, “turns on ‘the nature and extent of the chang e in the law and the deg ree of connec tion be tween the opera tion of the new r ule and

a re levant past event.’” I ntvrs.’ Br. 25 (citing 511 U.S. at 270). The EI SA se t f

orth the minimum annual volumes for eac h y ear , identified produce rs and importers of transporta tion fuel as obliga ted par ties subject to those require ments, and define d transporta tion fuel to include both g asoline and diesel fuel. I n 2 8 intervenor s’ view, petitioners’ objections that thei r m embers “l acked cer

tainty ” and “lac ked assura nce” about the scope o f their obliga tion s under the EI SA “all but undoes their
retroa ctivity theory ” beca use these objections do not show petitioners lacke d notice of their obliga tions to fulfill the volume

T h u s , i n t e r v e n o r s n o t e , 2 8

[ e ] v e n [ p ] e t i t i o n e r s ’ h y p o t h e t i c a l f l e e t i n g d i e s e l i m p o r t e r

–

w h o i m p o r t e d a m i l l i o n g a l l o n s o f d i e s e l a n d q u i t t h e b u s i n e s s b e f o r e t h e [ R F S 2 ] r e g u l a t i o n s w e r e f i n a l i z e d i n 2 0 1 0 a n d w h o

m u s t n o w a c q u i r e s o m e r e n e w a b l e f u e l s

– c a n n o t a s s e r t a l e g i t i m a t e e x p e c t a t i o n t h a t i t s t r a n s a c t i o n w o u l d n o t b e s u b j e c t
t o t h e R e n e w a b l e F u e l S t a n d a r d

.

I n t v r s

. ’ B r

. 2 6 n

. 8

. S e e P e t r s

. ’ B r

. 3 3

– 3 4

. T h e E I S A a p p l i e d t o d i e s e l i m p o r t e r s a n d “ p u t t h e m o n n o t i c e o f t h e i r o b l i g a t i o n s u n d e r t h e

s t a t u t e , ” t h e o n l y e x c e p t i o n s t o t h e s e r e q u i r e m e n t s i n 2 0 0 9 a n d 2 0 1 0 b e i n g , i n t e r v e n o r s n o t e , f o r s m a l l r e f

i n e r i e s

. I n t v r s

. ’ B r

. 2 6 n

. 8 ( c i t i n g 4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 9 ) )

. F u r t h e r , i n t e r v e n o r s n o t e , E P A p r o v i d e d

n o t i c e a n d m e t w i t h t h e p e t r o l e u m i n d u s t r y t h r o u g h o u t t h e r u l e m a k i n g p r o c e s s

. S e e i d

. ( c i t i n g 7 5 F e d

. R e g

. a t 1 4
, 6 7 3 )

.29

mandates. Id. at 27. I ndeed, in Landgraf the Supreme Cou rt sug g ested that the “fa

miliar considerations of fair no t i ce,

rea sonable relianc e, and settled expectations offe r sound
g uidance ” on retroa ctivity

. 511 U.S

. at 270. Cases l ike Bowen
, 488 U.S. 204, and National Mining Ass’n v. Departme nt of Labor

, 292 F.3d 849 (D.C. Cir. 2002), are distinguishab l e, as i nterve nors point out, as instances in which an ag ency “complete ly reve rsed the status quo an te.” I ntvrs.’ Br

. 27. I nterve nors also point to industr y co m ments indicating some obliga ted parties in fac t beg an prepa ring for their 2 0 10 obliga tions, citing comments by petitioners, Ex x on, and Chevron, and demon strating that the rene wable fuel volume is “simply a for m u l a (the require d volume divided by the amount of applicable transporta tion fuel estimated to b e sold) that can

eas i l y be estimated by obliga ted parties.” Id

. 27–28. To 2 9 intervenor s, the fac t that EPA had “to further define cer tain require ments reg arding what RI Ns to purcha se,” doe s not show the Final Rule is retroa ctive beca use “the final rene wable volume obliga tions are based on obliga tions previously cre ated by statute and issuing [st andar ds] without revision prior to November 30 is
not a prer equisite to EPA’s mandate to ensure the entire volumes

are met.” Id. at 28.

I n N a t i o n al Cable

, the court reje cted a retroa ctivity ch alleng e to a rule barr ing cable opera tors from enter ing exclusivi ty contra cts for multi-unit d welli ng s and forbidding enfor ceme nt of such contracts executed befor e the rule was

S e e f o r m u l a s f

o r c a l c u l a t i n g t h e p e r c e n t a g e s t a n d a r d s , E P A 2 9
M e m o r a n d u m o n C a l c u l a t i o n o f t h e R e n e w a b l e F u e l S t a n d a r d f o r G a s o l i n e a n d D i e s e l ( A p r

. 3 0
, 2 0 0 9 )

. I n t e r v e n o r s e x p l a i n t h a t i s s u a n c e

o f t h e f i n a l r e n e w a b l e f

u e l s t a n d a r d b y N o v e m b e r 3 0 o f t h e p r i o r y e a r

s i m p l y a l l o w s E P A t o r e l y o n t h e m o s t r e c e n t e s t i m a t e s o f n e x t y e a r ’ s f u e l p r o d u c t i o n a n d u s e

. S e e 4 2 U

. S

. C

. § 7 5 4 5 ( o ) ( 3 ) ( A ) ; I n t v r s

. ’ B r

. 2 8

.30

adopted. There it was arg ued that the ag ency ’s decision to apply its rule to exis ting contrac ts amounted to “‘dire ctly re t ro active’ action barr ed by the APA[] .” 567 F.3d at 670 (interna l citations omitted). Alterna tively

, it was arg ued that the rule had “har mful, seconda rily retroa ctive eff

ects that the [agen cy ] failed to

co nsider.” Id. The court was unpersua ded, holding th at “t h e [age ncy ’s] action has only ‘future eff ect’ as t h e AP A and our prec edents use that term.” Id. Noting that “[t] he exclusivi ty ban
p urports to alter only the prese nt situation, not ‘the pas t l ega l
conseque nces of past actions,’” the court emphasized that it ha s “re peate dly made clea

r that an ag ency order that only ‘upsets expectations based on prior law is not retroa ctive.’” Id. (interna l citations omitted). The ag ency ac t i on mere ly “impaire d the future value of past barg ains but has not rende red past actions illega l or otherwise sanctionable .” Id

. T h e court quoted from Chemical W

aste Managem ent v. EPA
, 869 F. 2 d 1 526, 1536 (D.C. Cir. 1989), wher e the court had observe d that “[i] t is often the cas e t h at a business will underta ke a cer tain course of conduct based on the cu rr ent law, and will then find its expectations frustra ted when the law chang es.” 567 F.3d at 670. I n Chemical W

aste , the court had further observe d th at “[t] his has never been thought to constitute retroa ctive lawmaking

, and indeed most economic re gu lation would be unworka ble if all laws disrupting prior expectations wer e deeme d suspect.” 869 F.2d at 1536. By parity of rea soning, the court in National Cable held that “[s] uch expectations, howeve r leg itimate, cannot furnish a sufficie nt basis for identify ing impermissibly
retroa ctive rule s.” 567 F .3d at 670.

Additionally

, intervenor s maintain, the Fina l Rule doe s not make pa st c onduct illega l or newly sanctionable for at least two

rea sons

. Fi rst , in the transition from RFS1 to RFS2, EPA allowed obliga ted parties “cr edit for rene wable fuel purcha sed in 2009, and protec t[ ed] any vested rig hts in cre dits (or RI Ns) alre ady purcha sed.” I ntvrs.’ Br

. 30; see 75 Fe d. Reg . at 14,719,31

724. There is n o ch an ge. As in 2009, EPA deter mined 3 0 obliga ted parties will continue t o rec eive 1.5 equivalent cre dits for eac h g allon of biodiesel, including biomass-based diesel. See
supra n o te 18. Petitioners’ claim, then, that under the RFS2

re gu l at ions the biodiesel RI Ns are valued at only 1 g allon of

rene wable fuel wher eas the 2009 biodiesel RI Ns wer e worth 1.5
g allons for eac h g allon of biodiesel, ignor es t h e eq uivalence provided by the bi omass-base d diesel st andar d

. See supra note 18. Fur ther, EPA applied this same 1

. 5 credit to the advanc ed biofuels require ment, “dete rmining that the 2010 biomass-based diesel require ment ‘will aut o m atically fulfill the advanc ed biofuel standard, g iven the ener g y -base d Equivalenc e Values for biodi es el and rene wable diesel.’” I ntvrs.’ Br

. 30–31 (quoting Renewa b l e Fue l Standard Prog ram (RFS2) Summary and Analy sis of Com ments at 3.6.2); see supra note 18. Second,

P e t i t i o n e r N P R A h a d c o m m e n t e d : 3 0

T o b e f

a i r t o c o m p a n i e s t h a t r e l i e d o n E P A ’ s s t r o n g l y

w o r d e d a d v i c e a n d t o m a i n t a i n t h e r e g u l a t e d i n d u s t r y ’ s

c o n f i d e n c e i n E P A ’ s w r i t t e n w o r d

, [ E P A ] n e e d s t o p r e s e r v e t h e a b i l i t y t o u s e p r i o r

- y e a r d i e s e l R I N s f o r b i o m a s s

- b a s e d d i e s e l c o m p l i a n c e r e g a r d l e s s o f h o w a n d w h e n t h e p r o g r a m f i n a l l y r o l l s o u t

. T o d o o t h e r w i s e i s t o s t r a n d c a p i t a l o r

o p e r a t i n g e x p e n s e

. C o m p a n i e s t h a t f o l l o w e d [ E P A ’ s ] a d v i c e

s h o u l d n o t b e p u n i s h e d f o r a c t i n g i n g o o d f

a i t h

. A l s o a t r i s k i s E P A ’ s o f

t e n

- u s e d c o n t e n t i o n t h a t r e g u l a t e d p a r t i e s k n o w

w h a t i s c o m i n g a n d s o h a v e t i m e t o p r e p a r e f o r c o m p l i a n c e i n

e x c e s s o f w h a t i s p r o v i d e d b e t w e e n f i n a l A g e n c y a c t i o n a n d

e f f e c t i v e d a t e

. I f E P A ’ s w r i t t e n a d v i c e i n t h i s c a s e c a n n o t b e

r e l i e d u p o n , r e g u l a t e d p a r t i e s c a n n o t p o s s i b l y b e e x p e c t e d t o d o a n y c o m p l i a n c e p l a n n i n g u n t i l f i n a l a c t i o n i s c o m p l e t e

.

C o m m e n t s o f t h e N a t i o n a l P e t r o c h e m i c a l & R e f i n e r s A s s o c i a t i o n o n E P A ’ s P r o p o s e d C h a n g e s t o t h e R e n e w a b l e F u e l S t a n d a r d R u l e s a t 1 2 ( S e p t

. 2 5
, 2 0 0 9 ) ( e m p h a s i s i n o r i g i n a l )

.32

althoug h the Final Rule chang ed EPA’s proposed deter mination

as to which rene wable fuels will qualify for eac h mandate, “those deter minations apply solely to rene wable fuel produce d (and thus purcha sed) afte r J uly 1, 2010,” I ntvrs.’ Br

. 31 (citi ng 75 Fe d. Reg

. at 14
, 8 7 7 ), and “all RI Ns g ener ated in 2010 will be valid for meeting the 2010 standards,” 75 Fed

. Reg

. at 14,684. P et i tioners’ contra

ry sug g estion, that the Final Rule “attac hes

new conseque nces to 2009 transac tions ” b y changing the fuels that qualify to g ener ate RI Ns, is in co rre ct. Petrs.’ Br

. 35. I nterve nors conclude obligat ed parties that did not purcha se biodiesel in 2009 (o r for the first half of 2010) unrea sonably relied on the assu m p t i o n that EPA would not require the biomass-based die sel levels to be met.

I nterve nors acknow ledg e, howeve r, that to the extent petitioners conte n d th e RF S2 r e g u lations aff

ect their expectations and the future value of past barg ains, their objectio n is to seconda ry retroa ctivity

, see Nat’l Cable

, 567 F.3d at 670–71; see also Bowen
, 488 U.S. at 220 (Scalia, J
., concur ring ). I nterve nors respond that this objection is overc ome by the rea sonablene ss of EPA’s approa ch in the F inal Rule.

Petitioners resist cate g orizing their retroa ctivity challe n g e as confine d to seconda

ry retroa ctivity on two g roun d s

. First, petitioners reply that “[r]etroactive rules are not limit ed to those that rende r past actions ‘ill eg al’” but include “laws that impose

new obliga tions on completed transac tions.” Reply Br

. 17. They point, howeve r, only to their hy pothetical diesel importer without claim i n g that either they or their members include such a company or disputing intervenor s’ analy sis of the state of the law prior to J uly 1, 2010. See supra note 28. Second, p eti tioners point out that t h e E I SA is not self-e x ecuting and require d revisions to the RFS1 reg ulation s p romulg ated under the 2005 Act. This is evide n t t o s o m e extent from the plain text of the EI SA and, indee d, EPA acknow ledg ed that “[w]i th very few33

exceptions, the new EI SA requ irements are not eff ective until such time as EPA issu es final reg ulations to implement them,” 2008 Notice, 73 F ed. Reg . at 70,643.

I t is unnece ssary for the court to resolve whether petitioners have thus s h o wn t h at the leg al obliga tions for pre- J uly 1, 2010 production or importation chang ed to their detriment u n d er the Final Rule. I f petitioners are corr ect that as of J uly 1, 2010 they

wer e subject to new duties or disabiliti es reg arding past transac tions, any primary retroactive eff ects wer e implicitl y authorized under the EI SA and EPA rea sonabl y balanc ed any retroa ctive ef

fec ts ag ainst the benef

its of apply ing the RFS2
reg ulations to the full calenda r y ear

.

B. I n Sierra Club v. W

hitman

, 285 F.3d 63, 68 (D.C. Cir. 2002), this court observe d that althoug h “[t] he rele vant provisions of the Clean Air Act contain no lang uag e sug g esting that Congr ess intended to g ive EPA the unusual abil i t y to implement rules retroa ctively ,” “[t] here may be an exception for situations in which the ‘statute prescribes a deadline by which particula r rules must be i n eff

ect’ and the ‘ag ency misses that deadline.’ ” T h e internal quotation was to Mr. J ustice Scalia’s

concur ring opinion in Bowen
, 488 U.S. at 224–25, which observe d additionally that the retroa ctivity mu s t b e “ r e a s onable.” Id. at 224. This court has “tre at[ed] J ustice Scalia’s concur ri n g opinion as substantially authoritative, though n o t i n g that ‘[t] he Bowen majority

. . . neither embra ced nor reje cted J ustice Scalia’s view.’” Celtronix Telemetry

, Inc. v. FCC
, 272 F.3d 585, 588 (D.C. Cir. 2001) (citing an d q u o ting Bergerc o Canada v. U.S. Treasury Dep’ t , 129 F.3d 189, 192–93 ( D.C. Cir. 1997)). The court in Sierra Club conclude d that retroa ctive application would not be rea sonab l e beca use “[r]etroactive relief would likely impose larg e costs on the States

. . . even though they wer e34

not on notice at the tim e. ” 2 8 5 F. 3d at 68. A contra ry conclusion is war

rante d in the instant case.

EPA had clea

r albeit implicit authority u n d er the EI SA to apply both the 2009 and 2010 volume require ments in the 2010

ca lendar y ear in order to achie ve the statutory purpose

. T h e structure of the EI SA demonstrates that Congr ess anticipated the
p o s s i b ility of some retroa ctive impacts in the first y ear of t h e expanded rene wable fuel prog ram. Cf. Bowen
, 488 U. S

. at 209–11. Congr ess set volume require ments for the entire cale ndar y ear even t h oug h that y ear ’s rene wable fuel standard

was not re quired to be in place until November 30 of the prior
y ear and the revised reg ulations wer e not require d to be in place until Dec ember 19, 2008. Thus, even if the 2009 rene wable fuel standard was in place by November 30, 2008 and the revised
reg ulations had been promulg ated by Dec ember 19, 2008, the final rule w ould not have bee n eff ective until completion of the 60-day Congr essional Review period for a major rule, see supra note 16, at the ear liest Fe bruar y 18, 2009
, o ne and one-ha lf months into the cale ndar y ear

. Yet the revised reg ulations would have applied to all of an obliga ted party ’s production or importation of g asoline or diesel fuel in the 2009 cale ndar y ear

.

As Congr ess structure d the EI SA, then, Congr ess knew that in the first y ear of the expanded rene wable fuel stand ard there could be one and one- half months of retroa ctive eff ect from the eff ective date of the revised reg ulations. I n initially establishing the rene wable fuel prog ram Congr ess was expli citly awa re EPA might miss a st at utory deadline for promulg ating reg ulations. The 2005 Ac t set an Aug ust 8, 2006 deadline but direc ted that those reg ulations would apply to the entire y ear , re gardle ss of when t h e reg ulations wer e is sued ; further

, that if EPA did not 3 1 promulg ate reg ulations by that d at e, then the default rene wable

S e e s u p r a n o t e 4

. 3 135

fuel standard would apply for all of 2006. T he absenc e of a 3 2
compar able de fault provision in the EI SA appea rs explained by the fac t that Congr ess was expanding an exis ting rene wable fuel
prog ram and EPA could, as it did, lea v e i n p l ace the RFS1
reg ulatory prog ram, adjusting it to incorporate the 2009 volume require ment, until the re v ised reg ulations under the EI SA (i.e., RFS2) wer e finalized. See 2008 Notice, 73 Fe d. Reg

. at 70,643. EPA points to section 7545(o)( 2)(A) (iii), supra note 23, and that provision indicates as well Congres s ’ focus on ensuring the annual volume require ment was m et reg ardle ss of EPA delay

. The Final Rule adopts the same approa ch: putting the 2009/2010 volume require ments in place at the ear liest date notwithstanding
ag ency delay

.

Fur thermore

, unlike in W

hitman

, 2 8 5 F.3d at 68, the effec t of the Final Rule’s retroa ctivity d o es not make “the situation

wor s e, ” i d.

, for the obliga ted parties had ample notice that they would need to acc umulate RI Ns to meet the 2010 standards. L ong befor e the Final Rule was published in the Fe dera l Reg ister

on Marc h 26, 2010, the 2008 Notice aler ted obliga ted parties to EPA’s likely approa ch of incre asing the 2010 obliga tion an d allowing 2009 RI

Ns to be cou n t ed in meeting that obliga tion, and advised that it “would behoove [obl iga ted parties] to acquir e the nece ssary RI

Ns

. . . i n 2 0 0 9 i n prepa ration for their 2010 compliance demonstration.” 73 Fe d. Reg

. at 7 0
, 6 4 3

. Simi lar advice was included in the NPRM when the 2009/2010 approa ch

was formally propos ed

. 7 4 Fe d. Reg

. at 24,908. Obligated parties had actua l notice of the 2010 standards when t h ey wer e posted on EPA’s website on Fe bruar y 3, 2010. See NPRA Responds to New Rene wable F uel Standard G uidance for 2010 and Be y ond (F eb. 3, 2010); API Statement on RFS2 Announce ment (F eb. 3, 2010). EPA found that rene wable fuel produce rs and importers continued to g ener ate RI Ns betwee n

S e e s u p r a n o t e 6

. 3 236

J anuar y 1 and J u l y 1, 2010 for fuels qualify ing as rene wable fuels under the R FS1 p ro g ram. 75 Fe d. Reg

. at 14,676. Under the Final Rule, these RI

Ns are available for purcha se and can be used to demonstrate compliance with the 2010 standard, id.

, and

so obliga

ted parties are able to purcha s e R I Ns towards compliance with their 2010 obliga tions during the entire cale ndar
y ear

. And with one limit ed exception, obliga ted parties can car

ry

over a defic it from 2010 into 2011, and they have until Fe bruar y 28, 2011 to dem o n s t rate their compliance with the 2010 standards. See 75 Fe d. Reg . at 14,719; supra note 19.

C. Petitioners respond that the court cannot uphold the Final Rule based on EPA’s post ho c ra tionaliz ation that it is permissibly retroa ctive, as opposed to not b e ing retroa ctive at all. Al t h o ug h petitioners do not seek a rema nd of the Final Ru l e, their position prese nts the question whether a rema nd is requir e d

. See State Farm
, 463 U.S. at 43. During oral arg ument counsel for EPA sug g ested a rema nd is not require d beca

use the question whether the Final Rule was im permissibly retroac tive is a lega l question for the court to de cide and does not involve a policy or judgme nt entrusted to EPA by Co n gress. Ora l Arg ument at 40:50. But in State Fa r m , the Supreme Court, citing SEC v. C h en ery Corp
., 332 U.S. 194, 196 (1947), adopted the sam e approa ch in a rulemaking as in an adjudication to the ex t en t it reje cted the view that the court coul d s u p p ly rea sons for the
ag ency ’s action that the ag ency has not g iven. 436 U.S. at 43. I n the initial Chenery decision, the Supreme Court instructed that when C o ng ress has deleg ated “a deter mination of policy or judgme n t which the ag ency alone is authorized to make and which it has not made

, a judicial judgme nt cannot be made to do service for an administrative judgme nt.” SEC v. Chenery Corp.
, 318 U.S. 80, 88 (1943) (empha sis added)

. I t follows that althoug h it is for the court to decide the leg al question prese nted by petitioners’ retroa ctivity challeng e to the Fina l Rule, the37

ag ency had t o grapple with the question, g iven its delay

, in

rea ching its deter

mination about how it would apply the revised regulations promulg ated pursuant to the EI SA. “[T] he courts may not a cce pt a

ppellate c ounsel’s post hoc rationalizations for
ag ency action.” State Farm , 463 U.S. at 50.

We reje ct petitioners’ position, howeve r, beca use it is based
upon the false premise that EPA did not “c onsider whether the strong considera

tions that weig h ag ainst adopting retroa ctive rules would justify a differ ent course than i t chose.” Reply Br

. 18. The rulemaking rec ord demonstrates that, in reje cting obliga ted p arties’ conce rns about possible retroa ctive eff ects, EPA has fulfilled its obliga tion “to consider the rela tive benef its and burd en s , ” National Cable

, 567 F.3d at 671, in concluding that apply ing the RFS2 standard to the entire 2010 cale ndar y ear

was the course “cle arly

. . . m o s t consistent with [t he] EI SA’s require ment of four differ ent volume mandates for all of cale ndar
y ear 2010,” 75 F ed. Reg . at 14,676.

First, EPA conclude d that there was adequate lead time. “To fac ilitate the volum e o bliga tions being based on the full y ear ’s
g asoline and diesel production, an d t o enable the smooth transition,” the revised reg ulations provided that RI

Ns “that wer e g ener ated under the RFS1 re gu l at ions will continue to be valid for compliance with the RFS2 obliga tions.” 75 Fe d. Reg

. at 14,675. Obligated parties also would have “two months afte r the end of the cale ndar y ear ,” until Fe b ru ary 28, 2011, to demonstrate compliance wi t h their volume obliga tions. Id. at 14,676. EPA noted that there was an adequate supply of RI Ns

av ai lable, and that having the transition from the R FS 1
reg ulatory prog ram o cc u r o n J uly 1, 2010, the start of the first quarte r following completion of the statutoril y require d 60–day Congr essional Review period, would simpli fy rec o r d k e e p in g a nd
repor ting transiti ons to the RFS2 reg ulations. Id. at 14,675. EPA observe d t h at obliga ted parties comply by obtaining the38

appropr iate n u mber of RI Ns from produce rs of rene wable fuel, which is a matter of contra ct or other arr ang ements with

rene wable fuel produce rs or o t h er h olders of RI Ns

. See id. at 14,676. They do not need lead t i m e for construction or investment purposes; they are not chang ing the way they produce
g asoline or diesel; they do not need to desig n or inst al l n ew equipment, or take other actions that require longe r lead time. Id. Although EPA had endorse d a delay ed ef fe cti ve date for the initial re newa

ble fuel prog ram, when the r eg ulatory sy stem was

new and time was neede d to put in place the RI N trac king sy stem and train staff, see RFS1, 72 Fe d. Reg

. at 23,913, EPA noted that

now “[o] bliga

ted parties

. . . have experience implementing RFS1 and the actions n ee d ed to comply [wit h RFS2] are a continuation of these kinds of RFS1 activities.” 75 Fe d. Reg

. at 14,676.

Se co n d, EPA conclude d that obliga ted parties “have

rec eived adequate notice of this oblig ation,” id.

, ref ere ncing the NPRM, EPA’s “discussions with many stakeholder s during the rulemaking ,” and publication of the Final Rule in the Fe dera l Reg ister. Id. I n rea ching its conclusion, EPA also t o o k i nto consideration what was re q u i red for the re- reg istration proce ss

o f RI Ns for 2010 and I T sy stems chang es that woul d b e

nece ssary . See id.

Third, EPA considere d o t h er approa ches and found them problematic. I n the NPRM, EPA soug ht comments on differ ent eff ective dates and reduc tion of the total rene wable fuel standard for 2010. See 74 Fe d. Reg

. at 24,956. Upon consideration of the alt erna tives sug g ested by ref iners and produce rs — fr o m delay ing the eff

ect i v e d ate to 2011 to using an interim rule for 2009 — EPA conclude d these approa ches would cre ate “sig nificant leg al and policy issues” without meeting the volume mandates at the ear liest time. 75 Fe d. Reg

. at 14,718–19. For example

, the sug g estion for an interim rule that put in place a39

new volume require ment wi t h o ut also putting in place the EI SA’s n ew definition of biomass-based diesel rene wable fuel and rene wable biomass would have require d a new proposal with public notice and time for public comment, making it unlikely
any interim rule could have aff ecte d biodiesel demand in 2009. See id. Fur

ther, EPA explained, resour ces applied to the interim rule would have been unavailable for development o f t he final RFS2 rulemaking and undermined EPA’s ability to complete the RFS2 prog ram in time for its implementation in 2010. See id. at 14,719.

Be cause EPA balanc ed the benef its and the burdens attendant to its approa ch

, and considere d the sug g ested alterna tives, a rem an d wo uld serve no purpose. See NLRB v. W ym an-Gordon Co.
, 394 U.S. 759, 765 n.6 (1969); Nat’l Mining Ass’n v. U.S. Dep’ t of Interior
, 251 F.3d 1007, 1014 (D.C. Cir. 2001); see also Mass. Trustees of E. Gas & Fuel

, 377 U.S. 235, 247 (1964). EPA has alre ady adequa tely examined the claimed retroa ctive eff

ects of the Final Rule in deter mining how best to car

ry out Congr ess ’ mandate that it “ensur e” the applicable volume require ment for 2009 is met.

IV.

I n what petiti oners term the “lea dtime” issue, they contend that in order to g ive obliga ted parti es t h e time specifie d by Congr ess to comply with the RFS2 reg ulations, “if the rules take eff ect on J uly 1, 2010, they must be issued by J une 17, and
cannot apply to transac tions completed befor e J uly 1.” Reply Br

. 28. Petitioners note that E P A d el ay ed publication of RFS2
reg ulations and the 2010 standard in the Fe dera l Re gi s t er until Marc h 2 6
, 2010, but imposed obliga tions on transac tions beg inning J anuar

y 1, 2010. There is no meaning fu l d i ffe renc e betwee n this contention, howeve r, and petitioners’ contention that the Fina l Rule is im permissibly retroa ctive.40

L astly

, petitioners contended i n their opening brief tha t the

cre dit and defic it car

ry over provisions require EPA to gi ve p et i tioners “the full statutory compliance period of one y ear t o fulfill eac h y ear ’s volume obliga tions.” Petrs.’ Br

. 39. On reply petitioners retre at to the position that “EPA ignor e[d] the option

. . . of providing a shorter period of time to co mply with a proportionally reduc ed obliga tion, such as six months to comply with 50 perc ent of the annual obliga tion.” R eply Br

. 28. The cited provisions mere ly limit the duration of the cre dits obliga ted parties may g ener ate and establish co n ditions for car ry ing forwa rd deficits. The rulemaking shows EPA considere d other options an d re

j ecte d them. I n any event, the obliga ted parties
repr esente d by petitioners wer e g iven more than a y ear to comply with the Final Rule — from at l ea s t Februar y 3, 2010, when

no t i ce o f the 2010 standards in the Final Rule was posted on EPA’s website and petitioners issue d p ress rele ases indicating familiarity with the Final R u l e, until Fe bruar y 28, 2011, when they will need to show that they have complied with the RFS2
reg ulations for 2010 — and no provision in t h e E I SA require s EPA to create a “ proportionally reduc ed oblig ation.”

Acc ording ly , we de ny

the petitions for re view.