Recent Legal Challenges to EPA's RFS2

By Andrew Anderson and Jess Phelps | August 27, 2010
The U.S. EPA's regulations regarding the expanded renewable fuel standards (RFS2) have recently come under attack from both environmental nonprofits as well as the oil industry. Both challenges could have an impact on the future direction of the biofuels industry and will be closely watched over the coming months as courts begin to wrestle with this complicated and ofttimes contentious rulemaking.

The Environmental Challenge
On May 25, the Clean Air Task Force challenged the RFS2 on behalf of the environmental group Friends of the Earth. This dispute relates back to Congress' expansion of the RFS in 2007, which required EPA to analyze biofuels to ensure that each alternative fuel source provided specified reductions in greenhouse gas (GHG) emissions as compared to conventional fuels. This mandate also required EPA to establish safeguards to protect prairies and other natural ecosystems from being converted to cropland in response to the RFS. In its March final rule, after extensive debate, EPA determined that all existing biofuels—including corn ethanol—achieved the applicable emissions reductions goals as required under the biofuels mandate.

The Clean Air Task Force, however, is now challenging EPA's conclusions regarding the emissions impacts of existing forms of biofuels arguing that "EPA's rule is seriously flawed because it will actually increase greenhouse gas emissions from the transportation sector in the near term." The Clean Air Task Force also argues that EPA failed to consider the "global rebound effect" when analyzing the life-cycle GHG from biofuels. In the Clean Air Task Force's view, the RFS2, by displacing gasoline from the U.S. market, will reduce overall demand for petroleum, which will lead to cheaper petroleum and, in turn, more use and more GHG emissions globally. According to the Clean Air Task Force, if EPA had considered this impact, only a few existing forms of biofuels would have met the emissions reductions requirements. This assertion or allegation has been highly controversial. Lastly, the Clean Air Task Force has also asked EPA to reconsider its assumption that the RFS2 will not cause natural ecosystems to be converted to cropland.

The Oil Industry Challenge
The National Petroleum and Refiners Association and the American Petroleum Institute have also challenged the RFS2, using a more narrowly tailored argument. According to the oil industry representatives, "EPA made the rule effective on July 1, 2010 … while setting unreasonable mandates on refiners that reach back to 2009 for bio-based diesel and to Jan. 1 for the other advanced biofuels." In short, the oil industry believes the retroactive application of the RFS2 is unreasonable and unsupported. To challenge this retroactive application, API filed a legal challenge in the D.C. Circuit Court of Appeals on March 29, shortly after EPA's rules were finalized.

Both challenges could potentially impact the future of the RFS2. Overall, the Clean Air Task Force suit is likely the more serious threat (as the oil industry challenge is limited in scope) but it is questionable whether this suit will be able to gain any traction under the administrative law principle of deference to the agency. Regardless, both suits are worth tracking as the EPA begins to apply the new rules to the biofuels industry.

The authors are attorneys with Faegre & Benson. Andrew Anderson is head of the firm's corporate group in Iowa. Reach him at 515-447-4703 or Jess Phelps focuses on international trade issues involving antidumping and countervailing duty litigation. Reach him at 515-447-4721 or