Opinion ID: 4435003
Heading Depth: 1
Heading Rank: 7

Heading: 2018 Volume for Biomass-Based Diesel

Text: Since 2012, EPA, acting in coordination with the Secretaries of Energy and Agriculture, has calculated the annual applicable volume (also known as the “volume requirement”) for biomass-based diesel based on a holistic, backward- and forward-looking consideration of relevant factors. In particular, it has set the volume requirement “based on a review of the implementation of the program during calendar years specified in the tables, and an analysis of” six statutorily enumerated factors: (1) “the impact of the production and use of renewable fuels on the environment”; (2) “the impact of renewable fuels on the energy security of the United States”; (3) “the expected annual rate of future commercial production of renewable fuels, including advanced biofuels in each category (cellulosic biofuel and biomass-based diesel)”; (4) “the impact of renewable fuels on the infrastructure of the United States”; (5) “the impact of the use of renewable fuels on the cost to consumers of transportation fuel and on the cost to transport goods”; and (6) “the impact of the use of renewable fuels on other factors, including job creation, the price and supply of agricultural commodities, rural economic development, and food prices.” 42 U.S.C. § 7545(o)(2)(B)(ii)(I)–(VI). EPA set the 2018 applicable volume for biomass-based diesel at 2.1 billion gallons, up from 2.0 billion gallons in 2017, 63 and 1.1 billion gallons above a statutory minimum that Congress set to plateau at 1 billion gallons as of 2012. 2017 Rule, 81 Fed. Reg. at 89,798/1; see 42 U.S.C. § 7545(o)(2)(B)(i)(IV), (v). NBB had asked EPA to set the biomass-based diesel volume at 2.5 billion gallons, and now challenges the volume EPA set as arbitrary and capricious and contrary to the Clean Air Act.
Before considering the merits of NBB’s claims, we must satisfy ourselves that NBB has standing to assert them. Respondent-Intervenors, the American Fuel & Petrochemical Manufacturers and the American Petroleum Institute, contend that NBB lacks standing because, they say, it has not shown that the 2017 Rule inflicted a cognizable injury on any of its members. NBB has associational standing here for the same reasons we held it did in National Biodiesel Board v. EPA, 843 F.3d 1010, 1015 (D.C. Cir. 2016) (NBB v. EPA), where EPA’s actions “incentivize[d] . . . compet[ition] with [NBB’s members’] domestic production.” Here, too, NBB’s members “compete with” the other industry players EPA’s rule is designed to affect. Id. at 1016. Recall that biomass-based diesel is a nested subset of advanced and total renewable fuels, such that NBB’s members get (1) a market for compelled buyers of the specified volume of biomass-based diesel, for which they are the exclusive suppliers, plus (2) a market for compelled buyers of advanced and other renewable fuels alongside a broad array of competing suppliers. See supra at 6–8, 11. The 2017 Rule preamble explains that biomass-based diesel “compet[es] for research and development dollars with other types of advanced biofuels,” and that, “[b]y establishing [the biomass-based diesel] volume requirement[] at [a] level[] 64 lower than . . . the expected production of [biomass-based diesel],” EPA was “creating the potential for some competition between [biomass-based diesel] and other advanced biofuels to satisfy the advanced biofuel” applicable volume and providing “incentives for the continued development of” those competitors’ fuels. 81 Fed. Reg. at 89,797; see also EPA Coffeyville Br. 24 (“Above 2.1 billion gallons, biomass-based diesel will have to compete with other types of advanced biofuel.”). Such competition will likely “temper to some extent [biomass-based diesel] prices.” Final Statutory Factors Assessment for the 2018 Biomass Based Diesel (BBD) Applicable Volume, EPA-HQ-OAR-2016-0004-3708, at 10 (Dec. 12, 2016) (Supplemental Assessment), Coffeyville J.A. 533. That is a cognizable injury to NBB’s members. See NBB v. EPA, 843 F.3d at 1015–16; see also Delta Constr. Co. v. EPA, 783 F.3d 1291, 1299 (D.C. Cir. 2015) (per curiam). Though NBB failed to identify any of its members— ordinarily a prerequisite for organizations alleging associational standing, see Summers v. Earth Island Inst., 555 U.S. 488, 497–98 (2009)—that omission is not fatal here because NBB’s members comprise “the entire biomass-based diesel category of the Renewable Fuel Standard[s]” and represent no other interests. Coffeyville J.A. 134. Consistent with “the real purpose of the [standing] inquiry—that is, for the court to be satisfied that the requisite injury really has occurred or will occur in the future to members of the organization[],” Pub. Citizen v. FTC, 869 F.2d 1541, 1552 (D.C. Cir. 1989), there is no need to identify injured members when “all the members of the organization are affected by the challenged activity,” Summers, 555 U.S. at 499 (citing NAACP v. Ala. ex rel. Patterson, 357 U.S. 449, 459 (1958)). Because EPA’s rule subjects the biomass-based diesel industry to increased competition, with anticipated pricing effects, NBB “meet[s] the 65 constitutional prerequisites of injury, causation, and redressability.” NBB v. EPA, 843 F.3d at 1015.
NBB advances two challenges to the applicable volume EPA set for biomass-based diesel: First, that EPA erred in considering the interaction of biomass-based diesel with the yet-to-be established 2018 advanced biofuel applicable volume, and second, that EPA’s consideration of the six statutory factors was arbitrary and capricious and contrary to law. We reject both claims. First, EPA reasonably chose a 2018 biomass-based diesel applicable volume that would “maintain[] support for growth in [biomass-based diesel] volumes” while also encouraging the “development of other advanced biofuels.” 2017 Rule, 81 Fed. Reg. at 89,798/1. Congress directed EPA to consider the lessons learned from its retrospective “review” of the program, apply them in its prospective “analysis of” the six statutory factors, and set a biomass-based diesel volume that will apply fourteen months in the future. See 42 U.S.C. § 7545(o)(2)(B)(ii). EPA’s approach is consistent with the structure and purposes of the statute. Congress set a minimum applicable volume for biomass-based diesel of one billion gallons for each year from 2012 forward, id. § 7545(o)(2)(B)(i)(IV), (v), while specifying statutory minimum volumes for the advanced biofuel category containing biomass-based diesel that grow year by year to 21 billion gallons by 2022, id. § 7545(o)(2)(B)(i)(II), (iii). EPA reasonably concluded that, by nesting biomass-based diesel together with cellulosic (and other unspecified) biofuels within the advanced biofuel category, and specifically charting a higher, steeper, and longer initial growth curve for advanced biofuel, Congress anticipated 66 that production of other types of advanced biofuels could step up to help meet the advanced biofuel volume requirement. See 2017 Rule, 81 Fed. Reg. at 89,797/1. EPA also reasonably concluded that increasing fuel diversity serves one of Congress’s primary goals in establishing the Renewable Fuel Standards program: improving the nation’s “energy independence and security.” See Pub. L. No. 110-140, preamble; see also 2017 Rule, 81 Fed. Reg. at 89,798/3. EPA also reasonably anticipated that enhanced competition in the advanced biofuels market would help “temper to some extent [biomass-based diesel] prices,” Supplemental Assessment 10, Coffeyville J.A. 533, thereby ameliorating Congress’s concern that, with a too-high target volume, the “price of biomass-based diesel fuel” would “increase significantly,” 42 U.S.C. § 7545(o)(7)(E)(ii). And fuel diversity may produce environmental benefits insofar as certain advanced biofuels, such as ethanol from food waste, will “likely have significantly lower impacts on wetlands, ecosystems, and wildlife habitats” than would greater reliance on biomass-based diesel. Supplemental Assessment 6, Coffeyville J.A. 529. NBB’s arguments to the contrary turn on reading the statutory directive that EPA “review . . . the implementation of the program during calendar years specified in the tables,” id. § 7545(o)(2)(B)(ii), to confine EPA’s consideration to biomass-based diesel’s statutory volumes and actual performance, and to prevent EPA from considering other fuel categories or future years. In particular, NBB takes issue with EPA’s consideration of the not-yet-finalized 2018 advanced biofuel applicable volume, which NBB contends led EPA to set the biomass-based diesel volume too low. NBB’s objections are not supported by the text or purpose of the statute. Assuming NBB is right that EPA’s “review of the implementation of the program” consists of a retrospective 67 assessment, the agency must also conduct “an analysis of” six statutory factors. Id. § 7545(o)(2)(B)(ii). And those factors plainly require a prospective assessment—an assessment that would likely miss “important aspects of the problem,” State Farm, 463 U.S. at 43, if it ignored the interaction, now and in the future, of the requirements for all the categories of renewable fuels. See, e.g., 42 U.S.C. § 7545(o)(2)(B)(ii)(I) (requiring an “analysis of” the “impact of the production and use of renewable fuels on,” among other things, “the environment”). Though EPA set the biomass-based diesel requirement lower than NBB wished, Congress did not intend to incentivize growth of biomass-based diesel “at all costs.” ACE, 864 F.3d at 714 (quoting Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 234 (2013)). NBB objects that setting the 2018 biomass-based diesel applicable volume below expected production might lead to a depressed advanced biofuel volume for 2018. But the agency specifically anticipated “that the 2018 advanced biofuel requirement will be larger than the 2017 advanced biofuel volume requirement.” 2017 Rule, 81 Fed. Reg. at 89,798/1. EPA has never set the biomass-based diesel applicable volume at the “maximum potential production” level, id. at 89,799/3, yet the “growing supply of” biomass-based diesel has consistently “allowed EPA to establish higher advanced biofuel” applicable volumes, id. at 89,797/3. EPA opted for “allowing room within the advanced biofuel volume requirement for the participation of non-[biomass-based diesel] advanced fuels” as a reasonable way “to encourage the development and production of a variety of advanced biofuels over the long term without reducing the incentive for [biomassbased diesel] beyond the [biomass-based diesel applicable volume] in 2018.” Id. at 89,797–98. 68 Second, in setting the 2018 biomass-based diesel applicable volume, EPA reasonably compared the advantages and disadvantages of biomass-based diesel to those of other fuels. NBB contends that the statute confines EPA to assessing advantages of biomass-based diesel over petroleum, not considering other renewable fuels, and that the agency failed to “meaningfully” consider the six factors. NBB Br. 9–10. Both arguments miss the mark. NBB suggests that, because the statute “was intended to ‘increase the production of clean renewable fuels’ as a substitute for petroleum fuel,” id. at 21 (quoting Pub. L. No. 110-140, preamble), the only relevant comparison is to petroleum, not to other categories of renewable fuel. But NBB identifies nothing in section 7545(o)(2)(B)(ii) or any other section that requires EPA to assess the performance of a particular renewable solely by reference to petroleum fuel. Its analysis would require us to read the term “renewable fuels” used throughout section 7545(o)(2)(B)(ii) to refer to the single renewable fuel being analyzed, even though the statutory definition of “renewable fuel” includes all types of renewables. See 42 U.S.C. § 7545(o)(1)(J). And if EPA could compare the benefits of each specific fuel only to petroleum, it might be unable to set rational applicable volumes for each specified category of renewable fuel after 2022, when the statute no longer sets any specific volumes. See id. § 7545(o)(2)(B)(iii)– (v). EPA could easily conclude, for example, that each renewable fuel had a lower “impact . . . on the environment” than petroleum fuel, see id. § 7545(o)(2)(B)(ii)(I), but, no matter their differing merits in serving the statute’s goals, the agency would be barred from making relative judgments among renewable fuel categories. NBB also argues that EPA failed to give meaningful consideration to the six statutory factors, and instead “pre69 determined the outcome,” NBB Br. 20, but the record shows otherwise. EPA considered in detail how setting the biomassbased diesel applicable volume at a level higher or lower than 2.1 billion gallons would affect the six statutory factors. See 2017 Rule, 81 Fed. Reg. at 89,798–99. EPA further elaborated its analysis of the factors in an 11-page supplemental memorandum evaluating effects of its proposed biomass-based diesel volume on renewable fuel production rates, the environment, and the economy. See Supplemental Assessment 1–11, Coffeyville J.A. 524–34. EPA concluded that, over the long term, “[a] variety of different types of advanced biofuels, rather than a single type such as [biomass-based diesel], would positively impact energy security . . . and increase the likelihood of the development of lower cost advanced biofuels that meet the same [greenhouse gas] reduction threshold as [biomass-based diesel].” Supplemental Assessment 3, Coffeyville J.A. 526. EPA thus concluded that the statutory factors supported its biomass-based diesel applicable volume. See 2017 Rule, 81 Fed. Reg. at 89,798/3. At bottom, NBB’s objections rest on a policy disagreement: NBB urges that, instead of setting a level that would support continued investment in the biomass-based diesel industry while also encouraging producers of other types of advanced biofuel to compete to satisfy the 2018 advanced biofuel applicable volume at lower cost, EPA should have reserved to biomass-based diesel alone a volume nearer to that industry’s maximum production potential. But NBB’s proposed “simple solution”—that EPA should have “set[] a meaningful [biomass-based diesel] volume” while planning to “increas[e] the 2018 advanced-biofuel volume to provide room for the production of other advanced biofuels when it set that volume a year later,” NBB Br. 23—describes what EPA actually did. A mere disagreement with the particular calibration of a line drawn in the exercise of an agency’s 70 reasonable judgment is no basis to invalidate a rule. Therefore, we deny NBB’s petition.