Oil Industry Challenge to EPA Biofuel Rules Rejected by U.S. Appeals Court

A federal appeals court rejected an oil industry challenge to a new Environmental Protection Agency rule requiring more biofuels in gasoline and diesel, saying the agency properly carried out its mandate on energy independence.

The U.S. Court of Appeals in Washington today turned down claims that regulations on fuel sold in the U.S. were retroactive and that the EPA missed a crucial deadline in setting up the regulation. The appeal was made by the National Petrochemical & Refiners Association and the American Petroleum Institute.

The decision will increase demand for biodiesel beginning next year, said Gary Haer, vice president of sales and marketing at the Renewable Energy Group, a biodiesel manufacturer based in Ames, Iowa.

“This lawsuit was the final piece of uncertainty creating market disruption for the biodiesel industry,” Haer said in a statement.

Ethanol futures on the Chicago Board of Trade were little changed, gaining 0.1 cent to $2.245 a gallon at 1:34 p.m. The ethanol contract has climbed 40 percent in the past six months.

Biodiesel, which is made from vegetable oils or waste grease, costs about $3.28 a gallon in the Midwest, according to data compiled by Bloomberg.

‘Critical Pillar’

“This is an important legal development that upholds a critical pillar of a national energy policy that is intended to wean the United States off of foreign sources of fossil fuels,” Tom Buis, chief executive officer of Growth Energy, an ethanol industry trade group, said in a statement. Growth Energy intervened in the case backing the EPA.

In its 40-page ruling, the three-judge panel said the EPA correctly did what it’s required to do by the Energy Independence and Security Act of 2007, which calls for an expansion of the renewable-fuel program. The rules must be complied with by Feb. 28, 2011.

“This is a disappointing decision,” Patrick Kelly, a senior policy adviser at the American Petroleum Institute, said in a statement. “The decision significantly complicates compliance and may set a dangerous precedent allowing retroactive requirements for past compliance periods.”

Gregory Scott, general counsel of the petrochemical association, said he was still reviewing the opinion and couldn’t immediately comment.

Xochitl Hinojosa, a U.S. Justice Department spokeswoman, declined to comment.

The case is National Petrochemical & Refiners Association v. Environmental Protection Agency, 10-1070, U.S. Court of Appeals for the District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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