EPA Faces Tough Questions From Judges for Slashing Biofuel Quota

  • U.S. appeals court hears arguments over regulator’s decision
  • EPA lawyer pressed by judges, opponents to justify EPA action

Two federal judges expressed skepticism of the U.S. Environmental Protection Agency’s decision to slash quotas for biofuels, signaling the judicial panel may tell the agency to reconsider.

Ethanol producers argued in federal court Monday that the EPA didn’t have the legal authority to cut mandates for the alternatives to gasoline. The agency reduced them from what was prescribed by Congress, saying the transportation fuels market couldn’t absorb the increased quantities of ethanol.

“I understand the difficulty EPA is in here, but the statute doesn’t seem to give EPA the authority to fix everything that is not working right,” U.S. Circuit Judge Brett Kavanaugh told Samara Spence, the government’s attorney. “If this thing is totally screwed up, Congress should fix it.”

Kavanaugh’s colleague, U.S. Circuit Judge Patricia Millett added minutes later, “When you do act, there has to be some framework.” Millett, who asked detailed questions of both sides, was a 2013 selection of President Barack Obama, a Democrat, while Kavanaugh was nominated by Republican President George W. Bush in 2006. The third panel member was another Bush appointee, U.S. Circuit Judge Janice Rogers Brown. She didn’t reveal her inclination during the argument.

Judges’ comments in oral arguments don’t always track with what they eventually decide. A decision is likely months away.

The Renewable Fuel Standard has for years has been a source of contention between petroleum producers and ethanol proponents, including farmers in the corn-rich U.S. Midwest. Discord grew in recent months as billionaire Carl Icahn, a supporter of President Donald Trump, has pushed for changes to the regulation. Traders are hedging bets on whether or not Trump may relax targets for next year, according to Citigroup Inc.

In February, Trump reiterated his support for ethanol in a letter made public at the National Ethanol Conference in San Diego. The industry has also touted its bona fides. The Renewable Fuels Association sent a letter Monday to EPA Administrator Scott Pruitt, highlighting ethanol consumption and also urging the regulator to soon issue the latest program guidelines.

This case concerns actions taken under the Obama administration. EPA cut the quotas for ethanol and other biofuels for the years 2014, 2015 and 2016 from the totals laid out in the 2007 legislation. EPA argued it could do so under a provision allowing it to adapt to a production shortfall. 

There was no shortfall, but the EPA argued that "production" could include the fact that the market couldn’t absorb the additional fuel, Spence said.

Former U.S. Solicitor General Seth Waxman, arguing on behalf of biofuels proponent Americans for Clean Energy was less sparing. The EPA “misunderstood its assignment under the mandate,” he said, adding the agency “screwed up.”

“The salient point here is that EPA agrees there is more than adequate supply,” he said.

The case is Americans for Clean Energy v. Environmental Protection Agency, 16-1005, U.S. Court of Appeals, District of Columbia (Washington).

    Before it's here, it's on the Bloomberg Terminal.