On September 18, 2013, the 9th Circuit Court of Appeals reversed a December 2011 district court ruling and held that California's Low Carbon Fuel Standard (LCFS) does not violate the Dormant Commerce Clause of the U.S. Constitution on its face. The district court had sided with groups from the oil and gas, ethanol, and trucking industries and found that the LCFS violated the Dormant Commerce Clause because the statute gave higher carbon intensity values to out-of-state, Midwest, ethanol, putting that fuel at a disadvantage in California. At the time of the 2011 decision, the district court had also issued a preliminary injunction preventing the California Air Resources Board (CARB) from enforcing the LCFS.
In its decision this week, the appeals court held that the LCFS does not violate the Dormant Commerce Clause on its face, and it remanded to the district court whether the statute violates the clause "in purpose or in practical effect." The appeals court also vacated the preliminary injunction.
It has been reported that the ethanol industry is looking at their legal options in light of the appeals court decision.
The U.S. Environmental Protection Agency (EPA) reportedly has completed its proposed rule setting the 2014 renewable volume obligations (RVO) for obligated parties under the federal Renewable Fuel Standard (RFS). The proposal is now being reviewed by the Office of Management and Budget before being published in the Federal Register, which will open the public comment period. By law, EPA is required to set the following year's RFS RVOs by November 30. The 2013 RVOs were not prepared in final until August of this year, which was likely due to EPA concerns about setting the volumes amidst legal, legislative, and regulatory challenges by obligated parties to the final 2011 and 2012 RVOs.
EPA included language in the final 2013 RFS rule indicating that it may reduce the overall RVOs in its upcoming 2014 RFS rulemaking. Just before EPA issued the 2013 final rule containing this language, leading trade groups representing the oil and gas industry, the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM), filed a joint waiver petition with EPA requesting that the Agency reduce the overall 2014 statutory RVOs to 9.7 percent of the U.S. transportation fuel supply due to what they argue are their blend wall concerns. The joint waiver petition is available online. This week, Valero Energy Corporation, the world's largest independent refiner, also sent in a petition requesting that EPA waive the 2014 RVOs. Valero cited the burdensome and high costs of Renewable Identification Numbers (RIN) needed for RFS compliance.
Several members of the biofuels industry have stated publicly that they believe there are several options that could, at least in part, address the impending so-called blend wall. The Renewable Fuels Association made this point in its letter to EPA urging the Agency to deny the waiver petition. RFA's letter is available online.
On August 28, 2013, the Solid Waste Association of North America (SWANA) and the National Solid Wastes Management Association (NSWMA) sent a letter to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy urging EPA to (1) issue quickly a final rule clarifying how biogenic carbon emissions will be treated under Prevention of Significant Deterioration (PSD) and Title V permitting requirements and (2) determine that biogenic carbon emissions from municipal solid waste (MSW) should be categorically excluded from the new PSD and Title V greenhouse gas (GHG) reporting requirements. A copy of the letter is available online. In July, the U.S. Court of Appeals for the District of Columbia vacated EPA's rule temporarily exempting bioenergy and other biogenic sources of GHG emissions from the new GHG permitting requirements, which has created uncertainty for the industry going forward. BRAG's report on this decision is available online.
In their joint letter, SWANA and NSWMA argue that emissions from the biogenic portions of MSW should be permanently exempted from the new GHG reporting requirements in part based on EPA's recent calculation of the lifecycle GHG analysis of landfill gas as a renewable fuel feedstock. Under this analysis, EPA "assumed that the biogenic portions of MSW (which produce the biogas) pose no land use-related GHG emissions associated with its production and use as a fuel feedstock." In addition, the groups state subjecting the biogenic emissions to the new reporting requirements could deter renewable fuel production and progress on projects designed to promote the beneficial use of landfill gas and energy.
On August 1, 2013, over 100 groups sent a similar letter to EPA urging the Agency to find that bioenergy and other biogenic sources of GHG emissions are carbon neutral for purposes of new GHG permitting requirements under EPA's Tailoring Rule. More information on this letter is available online.
On August 26, 2013, the U.S. Court of Appeals for the District of Columbia Circuit granted a petition by several industry groups, including the American Forest & Paper Association and the National Alliance of Forest Owners, for an extension to file an appeal to the court's recent decision to vacate the U.S. Environmental Protection Agency's (EPA) rule temporarily exempting biogenic sources of greenhouse gas (GHG) emissions from new GHG permitting requirements. For more information on the decision issued in July, please visit online. Groups will now have until 30 days after the U.S. Supreme Court decides whether it will consider several lawsuits challenging EPA's GHG regulations to appeal this biogenic carbon decision.
EPA was scheduled to post a video on its YouTube channel providing an overview of the Agency's plans to regulate GHG emissions from existing power plants. Under President Obama's Climate Action Plan (CAP) announced on June 25, 2013, EPA is directed to propose emissions guidelines for existing power plants by June 1, 2014. EPA's YouTube page is available online.
U.S. House Energy and Commerce Subcommittee on Energy and Power Chair Ed Whitfield (R-KY) has announced that he will hold a hearing on the President's CAP on September 18, 2013. Chair Whitfield, who does not support the CAP, has invited representatives from 13 federal agencies, including EPA, to testify at the hearing. The Subcommittee's press release (available online) states that "we seek to hear from relevant Federal agencies about U.S. climate change policies and the administration's second term climate agenda, and to obtain fuller information regarding the Federal government's past, current, and planned domestic and international activities, climate research programs, initiatives, and new regulatory requirements."
Renewable chemicals are emerging at a fast pace, paving the way for new, innovative, and sustainable biobased products. The renewable chemicals’ market is estimated to reach $83.4 billion by 2018 in applications ranging from transportation and agriculture to textiles and cosmetics. In addition to all the elements great companies need to succeed -- a great product, a great brand, inspiring leadership, and vision -- biobased product companies need to understand how the U.S. Environmental Protection Agency (EPA) occupies a virtual seat at their management table, whether or not they know it.
An article by BRAG in the August 2013 issue of Industrial Biotechnology, available online, lays out the regulatory challenges the Toxic Substances Control Act (TSCA) presents to biobased and renewable chemical products and the rationale behind the formation of BRAG. Through strategic insight into regulatory and legislative issues, collective advocacy on Capitol Hill and before EPA, education and training opportunities, and hands-on guidance from a deep bench of TSCA legal and scientific policy experts, BRAG is removing obstacles to commercialization for its members.
New U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy is working hard this month to carry out the President's Climate Action Plan, which is available online. The plan is designed to "cut the carbon pollution that causes climate change and affects public health." This week, Administrator McCarthy participated in a town hall event at the University of Colorado at Boulder to discuss the plan and EPA's work on new emissions rules for new and existing power plants.
On August 8, 2013, the Fifth District Court of Appeals denied a petition from the California Air Resources Board (CARB) for a rehearing of the case in which the court found on July 15, 2013, that CARB had improperly approved California's Low Carbon Fuel Standard (LCFS) in violation of administrative procedures (more information is available online). The July 15 decision stands and while CARB may continue to implement the LCFS, it must hold a new 45-day public comment period to receive input on the LCFS regulations, including CARB's calculation of indirect land use from the increased use of biofuels.
On July 18, 2013, the Senate voted 59-40 to approve the nomination of Gina McCarthy to lead the U.S. Environmental Protection Agency (EPA). Six Republicans voted for the nomination, including Senators Lamar Alexander (R-TN); Kelly Ayotte (R-NH); Susan Collins (R-ME); Bob Corker (R-TN); and Jeff Flake (R-AZ). McCarthy was sworn in to her new position as EPA Administrator on July 19, 2013.
McCarthy's confirmation came after four months of debate, with several Republicans, including members of the Senate Committee on Environment and Public Works (EPW), opposing her nomination out of protest for the perceived lack of transparency at EPA as the Agency works to issue rules to promote alternative forms of energy and combat climate change. McCarthy's nomination moved forward after one of the key opponents, Senator David Vitter (R-LA), announced his satisfaction that EPA was making progress on this transparency issue.
McCarthy served as the Assistant EPA Administrator for Air and Radiation since 2009. Before that, she served as Connecticut's Environmental Commissioner during which time she played an instrumental role in the development of the Regional Greenhouse Gas Initiative (RGGI). The RGGI is an initiative among nine Northeastern states to reduce harmful greenhouse gas (GHG) emissions in that region. In her new role, McCarthy is expected to work diligently with all stakeholders to issue rules designed to carry out President Obama's new climate change plan. These rules will include new controls on GHG from new and existing power plants, as well as the final 2013 renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS) and the proposed 2014 RFS RVOs.
On July 12, 2013, the U.S. Court of Appeals for the District of Columbia issued its decision in Center for Biological Diversity v. EPA. In a 2-1 decision, the court vacated the U.S. Environmental Protection Agency's (EPA) rule (the Deferral Rule) exempting bioenergy and other biogenic sources of greenhouse gas emissions from new greenhouse gas permitting requirements under EPA's Tailoring Rule for a period of three years. This deferral was meant to allow EPA time to study and develop a proper method of accounting for greenhouse gas emissions from these sources. The court held that EPA did not meet the standards to justify its Deferral Rule under any of the four doctrines it had invoked.
According to EPA, biogenic carbon emissions are "emissions of CO2 from a stationary source directly resulting from the combustion or decomposition of biologically-based materials other than fossil fuels and mineral sources of carbon." Examples of biogenic CO2 include: CO2 generated from the biological decomposition of waste in landfills, fermentation during ethanol production, combustion of the biological fraction of municipal solid waste or biosolids, combustion of the biological fraction of tier-derived fuel, and combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material, among others. Therefore, carbon emissions from some facilities producing biofuels and renewable chemicals could be subject to these new permitting requirements under the Tailoring Rule. The requirements of the Tailoring Rule are triggered when stationary sources meet certain emissions thresholds.
This decision is important for industry and creates uncertainty going forward. Without future legal, legislative, or regulatory action, it appears likely that stationary sources meeting the emissions thresholds under the Tailoring Rule will be subject to the new permitting requirements.