Opinion ID: 4435003
Heading Depth: 3
Heading Rank: 1

Heading: 2007, 2010, and 2017 Point of Obligation

Text: Proceedings In its 2007 regulations implementing the RFS program, EPA designated refiners and importers, but not blenders, as the “appropriate” parties to meet the renewable fuel obligation. 72 Fed. Reg. 23,900, 23,923–24 (May 1, 2007). At the time, those designations were not challenged in court. EPA reaffirmed its designations in a 2010 regulation now commonly known as the “point of obligation rule.” 75 Fed. Reg. at 14,721–22 (codified at 40 C.F.R. § 80.1406(a)(1)). During the 2010 rulemaking, several refiners—including petitioner Valero Energy Corporation—argued that failing to obligate blenders, who combine renewable fuel with fossil fuels, would make the RFS program unworkable. EPA concluded that the program was functioning adequately and that the burdens and disruption from changing the point of obligation would outweigh any 13 benefits. See Summary and Analysis of Comments 3.9.2, Alon J.A. 287–90. Although other aspects of the 2010 regulations were challenged in court, see, e.g., Nat’l Chicken Council v. EPA, 687 F.3d 393 (D.C. Cir. 2012); Nat’l Petrochemical & Refiners Ass’n v. EPA, 630 F.3d 145 (D.C. Cir. 2010), the point of obligation rule was not. On December 14, 2015, EPA promulgated the volume requirements for 2014, 2015, and 2016. Renewable Fuel Standard Program, 80 Fed. Reg. 77,420 (Dec. 14, 2015). In so doing, EPA exercised its general waiver authority to lower the total renewable fuel volumes based on a finding of inadequate domestic supply due to market factors “affecting the ability to distribute, blend, dispense, and consume . . . renewable fuels” at the levels required by statute. Id. at 77,435/2. Among those factors was “the slower than expected development of the cellulosic biofuel industry.” Id. at 77,422. The agency thought an additional “real world constraint[]” was the “E10 blendwall”—the difficulty for most American vehicle engines to run on blends containing more than 10% ethanol. Id. at 77,423. EPA explained that those factors made the statutory requirements “impossible to achieve.” Id. at 77,422/2. This Court later vacated the general waiver on the ground that EPA had misinterpreted the statutory term “inadequate domestic supply” to include demand-side constraints such as the E10 blendwall. See ACE, 864 F.3d at 704–13. On February 12, 2016, sixty days after EPA promulgated the volume requirements for 2014–16, the Alon Petitioners petitioned this Court for review of the 2010 point of obligation rule. These petitions contend that the rule was arbitrary and capricious insofar as it failed to impose the obligation on downstream blenders—the parties petitioners think are best able to comply with it. The petitions assert jurisdiction under the after-arising provision in 42 U.S.C. § 7607(b)(1), which 14 permits otherwise-untimely challenges to a rule if the challenges are “based solely on grounds arising after” the sixtyday deadline for seeking judicial review. The petitioners assert that EPA’s exercise of its general waiver authority in the 2014– 16 volume regulations, and its acknowledgment of the RFS program’s shortcomings as of that time, provided such an afterarising ground. The Alon Petitioners simultaneously petitioned EPA to revise the point of obligation rule. Some of their requests were styled as petitions for a rulemaking. Others were styled as petitions for mandatory reconsideration under 42 U.S.C. § 7607(d)(7)(B), which requires EPA to reconsider a rule if centrally important objections were impracticable to raise during the comment period or “arose after” that period “but within the time specified for judicial review.” The petitions cited the waiver in the 2014–16 volume regulations and EPA’s acknowledgment of program difficulties as grounds supporting mandatory reconsideration. This Court held in abeyance the petitions for review of the point of obligation rule pending resolution of the petitions to revise it. On November 10, 2016, EPA published a proposed denial of the petitions to revise the point of obligation rule. On November 22, 2017, after reviewing more than 18,000 comments on the proposal, EPA denied the petitions. It concluded that the statutory requirements for mandatory reconsideration were not met, so it treated all the filings as petitions for a rulemaking. Denial of Petitions for Rulemaking to Change the RFS Point of Obligation, EPA-HQ-OAR-20160544-0525, at 7 (Nov. 22, 2017) (EPA Denial), Alon J.A. 61. EPA then denied the petitions on the ground that “changing the point of obligation would . . . likely result in a decrease in the production, distribution, and use of [renewable] fuels” and would “do nothing to incentivize the research, development, 15 and commercialization of cellulosic biofuel technologies critical for the growth of the RFS program in future years.” EPA Denial at 8–9, Alon J.A. 62–63. Within sixty days (in December 2017 and January 2018), the Alon Petitioners sought judicial review of that denial, which it cast as a final agency action under section 7607(b)(1). The two sets of petitions—the February 2016 petitions for review of the 2010 point of obligation rule and the 2017–18 petitions for review of EPA’s refusal to reconsider the rule— were consolidated and are now before us.