[00:00:00] Speaker 00: Case numbers 15-1072 and 15-1073. [00:00:07] Speaker 00: National Bioregal Board Petitioner versus Environmental Protection Agency. [00:00:11] Speaker 00: Mr. Killian for the petitioner, Mr. Rosen for the respondent. [00:00:53] Speaker 05: Good morning, Your Honors, and may it please the Court. [00:00:56] Speaker 05: There's a central problem that links together a lot of the arguments that the parties have briefed in this case, and that's where I'd like to start. [00:01:03] Speaker 05: EPA has used its consortium regulations to do something that is broader and fundamentally different than what those regulations were designed to do. [00:01:11] Speaker 05: For instead of shifting the record-keeping requirement that it imposes on individual RIN generators, shifting that to a third party, EPA has fundamentally created a brand new requirement [00:01:22] Speaker 05: that has replaced the record-keeping requirement that applies to everyone else. [00:01:25] Speaker 05: When Congress adopted the Energy Independence Security Act 2007, it defined the term renewable biomass as feedstock that comes from land that was cultivated before December 2007. [00:01:37] Speaker 05: And in EPA's initial round of regulations in 2009 and 2010, [00:01:42] Speaker 05: EPA determined that it is necessary, and that's EPA's word, necessary that RIN generators collect and maintain two types of documents to substantiate this. [00:01:52] Speaker 05: First, they need to collect historical records that show that a particular farm was operating in 2007 and that the land was cultivated at that point. [00:02:01] Speaker 05: And then second, in the present day, RIN generators have to collect transfer documents that show that individual feedstock actually came from that farm, was segregated through the supply chain, and then actually turned into biofuel. [00:02:15] Speaker 05: The idea, and what EPA did, is it provided two ways to comply with this record-keeping requirement. [00:02:19] Speaker 01: So this is your argument that the regulations themselves are invalid, right? [00:02:24] Speaker 05: Uh, no, Your Honor. [00:02:25] Speaker 05: Well, I'm trying to set up the point that this is a rule and that what he did here in this instance is a rule that fundamentally breaks from the written rule that it created several years ago. [00:02:35] Speaker 01: So, is this part of your argument that this particular plan violates the regulation? [00:02:40] Speaker 05: Well, I do think your honor the reason I said challenge to the rule this this fundamental point that EPA has broken with the reg ties together a lot of our arguments both that there should have been notice and comment because the action here was a rule both that the action violates the rule because The regulation itself is quite limited and EPA has expanded that and to the extent any of this is actually authorized by the 2010 reg then we have a new grounds arising after challenge to that can I ask [00:03:07] Speaker 03: I'm speaking just for myself. [00:03:10] Speaker 03: Assume you have standing, assume I don't agree with you, and I'm not saying where I am, but just assume for this question, I don't agree with you on the notice and comment argument, and assume a challenge to the rule is not before me at the moment. [00:03:23] Speaker 03: Just assume all that. [00:03:24] Speaker 03: Under that, you're arguing that what they did is contrary to the rule. [00:03:29] Speaker 05: Correct. [00:03:30] Speaker 03: Okay. [00:03:30] Speaker 03: Explain that. [00:03:31] Speaker 05: Sure. [00:03:33] Speaker 05: And thank you, Judge Kavanaugh. [00:03:34] Speaker 05: What the rule itself is, it provides a mechanism for a third party to collect and maintain records in place of the individuals. [00:03:43] Speaker 05: You can sort of understand the economics behind this. [00:03:46] Speaker 05: Instead of having 100 ring generators reach out to 1,000 different farmers and collect the historical data that shows that their farms were cultivated and operating in December 2007, the group of ring generators can get together and hire one third party to sort of be the middleman. [00:04:01] Speaker 05: and cut down the amount of paperwork that is actually going to be collected in that third party. [00:04:06] Speaker 05: Under the consortium approach, it gets approval from EPA to take the record-keeping obligation away from the individuals. [00:04:13] Speaker 05: But here, it is undisputed. [00:04:14] Speaker 05: And if I could leave the court with one of the most fundamental points of our case, it is undisputed that Carbio members cannot satisfy the individual record-keeping requirement. [00:04:24] Speaker 05: It's on page 905 through 907 of the Joint Appendix. [00:04:27] Speaker 05: It is in the Carbio application itself. [00:04:30] Speaker 05: EPA posed a question to Carbio when the initial application came in and said, how is this proposal you have going to satisfy the record-keeping requirement for finding historical data? [00:04:39] Speaker 05: Carbio said, we can't do that because documents don't exist in Argentina, and because to the extent they do, we do not have the legal or practical ability to request those documents. [00:04:49] Speaker 05: So that's when Carbio proposed this new satellite methodology. [00:04:53] Speaker 05: And to us, that's sort of the fundamental break [00:04:56] Speaker 05: with the consortium approach. [00:04:58] Speaker 05: What Carbio has said is instead of collecting documents from the farmers that show that their farms were operating in 2007, we're going to use satellite data historically and try to drill down to individual tracks of land and determine whether or not... That's an arbitrary, capricious argument. [00:05:15] Speaker 05: I think it's also contrary to the text of the regulations. [00:05:18] Speaker 03: Okay, so assume, and I'm not saying where I am, but assume I'm not with you on that arbitrary and capricious argument for this, that that's just a different way of getting there. [00:05:27] Speaker 03: What text of what regulation do you think is violated? [00:05:31] Speaker 05: Sure, 14, this is 40 CFR 80.1454H. [00:05:36] Speaker 05: H3 requires that the survey program and H3II [00:05:42] Speaker 05: obtain the records and product transfer documents associated with the feedstocks being audited. [00:05:48] Speaker 05: Those records are the historical records that are referred to throughout the regulation that show that the farm was operating in 2007. [00:05:55] Speaker 05: Specifically, under 1454C1, these are the records that show [00:06:02] Speaker 05: that the farm was operating. [00:06:05] Speaker 05: There are various types of contemporaneous records that EPA requires. [00:06:08] Speaker 05: Instead of ex-post affidavits from farmers that say, yeah, sure, I was operating all those years ago, the requirement in the regs is that the farmers or the feedstock suppliers themselves actually have historical records that show they were operating at the time. [00:06:23] Speaker 03: So let me, you're gonna have to go real slow for me on this. [00:06:26] Speaker 03: Okay, your honor. [00:06:28] Speaker 03: So C1, is that where you are? [00:06:30] Speaker 05: C1 is the individual compliance and I can start there. [00:06:34] Speaker 03: That applies to a producer or an importer. [00:06:37] Speaker 05: Correct, and we're dealing with producers here in Argentina. [00:06:42] Speaker 05: IIB. [00:06:46] Speaker 05: The records must be provided by the feedstock producer, traceable to the land in question, and consist of, and then it says one, sales records, et cetera, two, a written management plan for agricultural, civil cultural purposes, three, documentation of land management, and four, evidence of the existence of a road system. [00:07:06] Speaker 05: These are all contemporaneous records as of sort of dated December 2007 or thereabouts to show that a farm was in fact operating at that point. [00:07:16] Speaker 05: And what the consortium approach, which Judge Kavanaugh is subsection H, so subsection C here is the individual compliance approach, what our brief calls map and track, but individual compliance is really what it's driving at. [00:07:29] Speaker 05: What subsection H is is the consortium approach. [00:07:32] Speaker 03: So that's the alternative. [00:07:33] Speaker 03: Correct. [00:07:36] Speaker 03: Just to be clear, if they comply with the alternative, then everything you just said about C doesn't matter, correct? [00:07:40] Speaker 05: Yes, but our argument, Judge Kavanaugh, is that the alternative is fundamentally about shifting the obligation from the individuals to a single third party to reduce cost, not in that shifting to actually change the obligation. [00:07:56] Speaker 05: And that's where we think EPA went awry with the Carbio proposal. [00:08:00] Speaker 01: Because of the use of satellites and stuff? [00:08:02] Speaker 01: Correct. [00:08:03] Speaker 01: Carbio concedes. [00:08:04] Speaker 01: But is there any language in [00:08:06] Speaker 01: in the alternative portion of the regulation that that would violate. [00:08:12] Speaker 05: Yeah, I believe so, Your Honor. [00:08:14] Speaker 01: What would that be? [00:08:15] Speaker 05: First off, satellites are not expressly allowed under H. I understand that. [00:08:20] Speaker 01: I asked you whether there's any language that would... Yes, Your Honor. [00:08:24] Speaker 05: As I was explaining to Judge Kavanaugh, I think H3II and H3IV are the two I'll drill down on. [00:08:31] Speaker 01: What do they say? [00:08:32] Speaker 05: H3... H3II, obtain the records and product transfer documents associated with the feedstocks being audited. [00:08:40] Speaker 05: and HVII, excuse me, 3VII, confirm that feedstocks used to produce RIN-generating renewable fuels meet the definition of renewable biomass as defined. [00:08:51] Speaker 01: And is your position that the satellites are [00:08:55] Speaker 01: not authorized by the regulation or that they aren't adequate to meet this requirement? [00:09:02] Speaker 05: I think our position is somewhat between those two, Judge Tatel, in that it's untested. [00:09:08] Speaker 05: We just don't know whether satellites can be used in this way. [00:09:12] Speaker 05: EPA has been cautious in the use of satellite data in other circumstances, in particular [00:09:17] Speaker 05: I point the court to AEDOT 1457, which is the aggregate compliance approach, the third way that EPA has provided to comply with the renewable biomass definition. [00:09:28] Speaker 05: And in that approach, EPA expressly allows for the use of satellite data. [00:09:32] Speaker 01: I'm just wondering, what I'm wondering about is, okay, assume I sort of have the same suspicion you do about this. [00:09:39] Speaker 01: How can this court, I mean, how can we second guess the agency's judgment about the use of satellites? [00:09:45] Speaker 01: I mean, it's done a huge amount of study. [00:09:47] Speaker 01: It's got a 20-page document in here explaining the technology and how it will work. [00:09:54] Speaker 01: I mean, how would we say [00:09:56] Speaker 01: that that's inadequate. [00:09:58] Speaker 01: And second, isn't it possible, suppose, suppose we were, and again, same caveat, Judge Cavanaugh, I'm not saying what I think, but suppose we were to think that this was okay, and five years from now, or three years from now, it was clear that the satellite data was in fact inadequate, and it wasn't detecting the increase in agricultural land. [00:10:20] Speaker 01: You could challenge it then, right? [00:10:22] Speaker 05: Well, I would hope you'd be able to challenge at that point, Your Honor. [00:10:24] Speaker 01: My point is that we're not locking this in at this point. [00:10:29] Speaker 05: Well, I do question how we're going to be able to determine the inadequacy of the satellite approach given the way that this procedure has played out. [00:10:35] Speaker 05: There's no sort of ongoing public notice and comment like there is under the aggregate compliance approach where I was pointing the court a moment ago. [00:10:42] Speaker 05: Under Section 1457, EPA has created a procedure that for an entire country, if they want to opt out of the record-keeping requirement and use satellite data to show decreasing amount of prop lands, that procedure exists. [00:10:58] Speaker 05: It requires notice and comment, and I'll put an asterisk on that because I think it's very important to explain why notice and comment is necessary under the aggregate approach, but it also requires annual renewals of that that are also subject to notice and comment. [00:11:11] Speaker 05: so that the public can continually monitor the success or not of satellite data. [00:11:17] Speaker 05: Judge Tatel, to your question on satellite data, I don't want to impugn it and say that it is per se impermissible in this context. [00:11:23] Speaker 05: It is untested. [00:11:25] Speaker 05: Satellite data has been used only to demonstrate that in an aggregate sort of big picture sense, the amount of cropland in a country is going down. [00:11:33] Speaker 05: There are errors, as we believe, in sort of the [00:11:36] Speaker 05: There are error rates, and in a big picture analysis, those errors tend to cancel out. [00:11:40] Speaker 05: What's never been done before, never been tested, is the use of satellites to drill down to particular plots of land historically and say, yes, this was a farm, or no, this was a tree. [00:11:51] Speaker 03: Suppose it could do that. [00:11:53] Speaker 03: I know you disagree. [00:11:55] Speaker 05: I don't want to disagree. [00:11:57] Speaker 05: I just think it's an open question. [00:11:58] Speaker 05: Right. [00:11:59] Speaker 05: Got it. [00:11:59] Speaker 03: Suppose it could do that. [00:12:01] Speaker 03: Would there be a violation of the reg? [00:12:03] Speaker 05: As written, yes, because we believe the reg requires that the records, and those are the records that are referred to in C1 that I read to your honor earlier, the maps and the historical records, actually be obtained by this third party. [00:12:17] Speaker 05: And I'll point the court again to page 905 of the Joint Appendix. [00:12:21] Speaker 05: EPA itself posed this question to Carbio during the application process. [00:12:25] Speaker 05: The question says, please demonstrate – it says, we think your way bill method is going to be adequate, but please demonstrate how you're going to collect the records that are required under C-1. [00:12:35] Speaker 05: And Carbio says, we can't. [00:12:38] Speaker 05: And that's why we're proposing the satellite method. [00:12:40] Speaker 05: And in our view, Your Honors, that's what turns this into a rule that requires notice and comment rulemaking. [00:12:45] Speaker 05: As the APA says, if an agency wants to amend or repeal a rule, then it needs to engage in a rulemaking. [00:12:53] Speaker 05: And I think there are four reasons I'd like to tell the court why this is much more a rule than a license or an order as the agency has contended. [00:13:01] Speaker 05: As I've been trying to explain, we think that this is a fairly sharp break from the very narrow purpose that EPA created for this consortium approach. [00:13:10] Speaker 05: Instead of simply shifting the burden, EPA has fundamentally changed the burden and created a brand new method of compliance that has never been tested. [00:13:18] Speaker 05: Not even in the advance notice of proposed rulemaking in 2009 was something like this suggested. [00:13:23] Speaker 05: So to now squeeze it through the consortium approach, we think, is a fundamental break with the rule that requires rulemaking. [00:13:30] Speaker 05: Second, this is purely prospective. [00:13:32] Speaker 05: And under the APA's definition of a rule, something with future effect is a definition of a rule. [00:13:38] Speaker 05: And in this court's decision in the National Association of Home Builders case, which we cite in our reply brief, the court was posed [00:13:47] Speaker 05: Excuse me, confronting a question whether a nationwide permit under the Clean Water Act was a rule. [00:13:52] Speaker 05: The Army Corps of Engineers argued that it was a license. [00:13:55] Speaker 05: This court rejected that and said, no, it's a rule because it's prospective and it applies to the entire country of the United States. [00:14:02] Speaker 05: Well, that leads to my third point. [00:14:03] Speaker 05: This is a rule because of its scope. [00:14:06] Speaker 05: Carbio represents 95% of the biodiesel production capacity in Argentina right now. [00:14:13] Speaker 05: And this rule has effects not only for those members, but also for the feedstock distributors who aren't members, for the feedstock suppliers and farmers who are further down. [00:14:22] Speaker 05: This could not be a more national rule that allows every production biodiesel producer in Argentina to generate RINs without maintaining the records that are required of everyone else. [00:14:33] Speaker 05: And finally, the last reason why this is more a rule than an order is that it leaves substantial issues open for further resolution. [00:14:42] Speaker 05: An adjudication – sure, Judge. [00:14:44] Speaker 01: Well, can I finish your sentence? [00:14:45] Speaker 01: I want to change the subject. [00:14:46] Speaker 05: Okay. [00:14:47] Speaker 05: An adjudication resolves on discrete facts and comes to resolution on issues. [00:14:52] Speaker 05: Here, EPA has not decided what the go zones are, what the no-go zones are, or what even the methodology will be for that. [00:14:59] Speaker 05: That is all to be decided later on, and that sort of lack of resolution on core issues is indicative of a rule and not an order. [00:15:07] Speaker 01: So I want to ask you just two quick questions about your other argument that this plan is deficient because it doesn't include importers? [00:15:16] Speaker 01: Yes, Your Honor. [00:15:18] Speaker 01: So, number one, isn't it true that [00:15:22] Speaker 01: importers that are not covered by this plan are bound by the individual reporting requirements of C1. [00:15:31] Speaker 05: To the extent that they are generating RINs themselves, that's correct. [00:15:35] Speaker 05: But they would not be generating RINs themselves if the RINs are generated by the producers. [00:15:39] Speaker 05: It's an either-or situation. [00:15:41] Speaker 01: But the importers, the fact that importers aren't covered doesn't create some sort of gap. [00:15:48] Speaker 05: I disagree with that, I think, for this reason. [00:15:50] Speaker 05: It is critical to Congress's definition of renewable biomass, not only that the feedstock come from land that was cultivated in December 2007, [00:16:04] Speaker 05: but that that feedstock remains segregated from non-qualifying feedstock, and that after turned into renewable fuel, that renewable fuel remains segregated. [00:16:13] Speaker 05: And when importers are left out of the audits and surveys, as they are on a cardio proposal, there's no guarantee that the segregation is going to continue after the biofuel leaves the production facility in Argentina and then comes to the importers in the United States. [00:16:30] Speaker 01: Whereas in the individual record keeping... But the individual tracking [00:16:34] Speaker 01: I mean, they're required to, they have to retain data. [00:16:40] Speaker 01: They do. [00:16:40] Speaker 01: Indicating the land where it came from. [00:16:42] Speaker 01: And that's what they don't have to retain anymore. [00:16:43] Speaker 01: They have to have all the bills of lading. [00:16:45] Speaker 01: In other words, they have to have a complete paper trail. [00:16:48] Speaker 05: And that's what they don't have to have under the Carbio approach. [00:16:51] Speaker 01: The individual producers own the wheat. [00:16:53] Speaker 01: But that wasn't my question. [00:16:54] Speaker 01: I agree with you about that. [00:16:55] Speaker 01: They don't need that paper trail under the Carbio proposal. [00:16:57] Speaker 05: Correct. [00:16:57] Speaker 01: But an importer that's not covered by the Carbio proposal will have to have that paper trail. [00:17:02] Speaker 05: It won't be able to get it. [00:17:04] Speaker 05: The importer needs the paper trail if he or she is generating the RINs. [00:17:09] Speaker 05: Let's talk about importers who aren't generating the RINs. [00:17:12] Speaker 05: They need to know, should I segregate this fuel or can I mix it with other fuel? [00:17:18] Speaker 05: There is no documentation they can request from the RIN producer to tell them whether to segregate or not because that documentation is no longer being kept. [00:17:27] Speaker 05: Carbio isn't getting it, Robertson Control Union isn't getting it, and the individuals aren't getting it. [00:17:31] Speaker 05: And that's why it's important to audit those importers. [00:17:34] Speaker 01: So EPA also says – and they're responding to your argument that it doesn't include importers. [00:17:40] Speaker 01: One of their other – one of the agencies' other arguments is that if you look at the whole regulation, that the reason it's importers are not included here – don't have to be – is because of the possibility that the United States might someday no longer be an aggregate producer, in which case [00:18:02] Speaker 01: It could develop a plan under this alternative, and there wouldn't be any importers. [00:18:09] Speaker 05: I don't think I follow that argument, Your Honor. [00:18:11] Speaker 05: If the United States loses its agri-profinance approach, we'll still have domestic biofuel producers. [00:18:16] Speaker 01: But there's no importers. [00:18:17] Speaker 01: That's why there wouldn't be an importer in the plan. [00:18:20] Speaker 01: There would only be producers. [00:18:22] Speaker 05: Well, there will always be the possibility, I believe, I understand, of importers to the extent that we have fuel coming from Canada or Argentina. [00:18:29] Speaker 01: No, no, no. [00:18:31] Speaker 01: It's fuel produced in the United States. [00:18:33] Speaker 01: Correct. [00:18:33] Speaker 05: That's right. [00:18:35] Speaker 05: I take your honest point. [00:18:36] Speaker 05: I understand. [00:18:36] Speaker 01: I just got it out of the EPS group. [00:18:39] Speaker 05: I understand that argument now. [00:18:40] Speaker 05: And I think my answer to that is it may be a null set. [00:18:43] Speaker 05: when there is an aggregate approach that is applied to a domestic consortium, and they'll set in the sense of they don't need to survey importers because there's no importers in the supply chain. [00:18:52] Speaker 05: But EPA could not have been clearer in its reg when it required visits and audits, not just of the production facilities, but it says and the import facilities. [00:19:00] Speaker 01: Well, but elsewhere in the regulation it says importers or. [00:19:03] Speaker 05: Yeah, it may seek, but only to the extent it's RIN-generating. [00:19:06] Speaker 05: And I guess that's a difference. [00:19:07] Speaker 05: The RIN-generating, it's either RIN-generating producers or RIN-generating importers may apply for the consortium approach. [00:19:15] Speaker 05: But once either of them does, then you have to visit the facilities of both the importers, whether or not they're RIN-generating. [00:19:23] Speaker 03: That's the and. [00:19:24] Speaker 03: The and has been changed to or, is your argument. [00:19:27] Speaker 05: And EPA concedes that, and it's brief. [00:19:29] Speaker 05: Yeah, they claim that they have discretion. [00:19:31] Speaker 01: That's H2O2, right? [00:19:33] Speaker 05: Yes, and it's also in H3, your honor. [00:19:37] Speaker 05: H3I. [00:19:38] Speaker 01: Hold on a minute. [00:19:42] Speaker 01: In double I, that one's a problem. [00:19:52] Speaker 01: They've changed that and to an or. [00:19:54] Speaker 01: But in triple I, it says, [00:19:58] Speaker 01: representative of all renewable fuel producers and importers in the survey area. [00:20:06] Speaker 01: And if that were the United States, there wouldn't be any importers in the survey area. [00:20:12] Speaker 01: I just want to identify what the issue is here. [00:20:18] Speaker 05: word problem here seems to be in double I correct and they have changed that to a more yes in they've changed it in two double I and in three I there's also the same conduct feedstock audits of renewable fuel production and import facilities is in three I as well there's two ends they've turned and the practical fact so I understand this of changing the ends to the or [00:20:42] Speaker 05: is that in this instance, importers will not be surveyed to determine whether or not they're accurately and correctly segregating the fuel that they receive from Argentina. [00:20:53] Speaker 05: The biodiesel, and they won't themselves be able to request documentation from the producers to say, hey, show me that this actually came from qualifying feedstock and came from qualifying lands, because that documentation doesn't exist. [00:21:07] Speaker 05: And they won't be able to get it from the individual producers. [00:21:09] Speaker 05: They won't be able to get it from Robertson Control Union. [00:21:12] Speaker 05: They won't be able to get it from Carbio. [00:21:14] Speaker 05: In the individual compliance mechanism, they always have that ability to check for themselves. [00:21:20] Speaker 05: And now that disappears with just a reliance on the satellite data. [00:21:24] Speaker 05: So we think that the audit is a critical component of assuring quality, that the fuel coming into the United States does, in fact, meet Congress's definition of renewable violence. [00:21:36] Speaker 05: Thank you, Your Honors. [00:21:45] Speaker 06: Good morning. [00:21:45] Speaker 06: Perry Rosen from the Department of Justice, with me is Sue Staley from EPA. [00:21:51] Speaker 06: We certainly and strongly believe that the petitioner has no standing in this case, but... Well, assuming you don't agree with you. [00:21:58] Speaker 01: Well, at least speaking for myself. [00:22:00] Speaker 01: Speaking for me, too. [00:22:01] Speaker 01: Okay. [00:22:01] Speaker 01: I'm sorry? [00:22:01] Speaker 01: Does Judge Brown have a question about that? [00:22:03] Speaker 01: No. [00:22:04] Speaker 01: Okay. [00:22:05] Speaker 01: Why don't you go on to something else? [00:22:06] Speaker 06: Okay. [00:22:07] Speaker 06: Okay. [00:22:08] Speaker 06: Addressing the issues that Mr. Killian raised, these are simply alternative paperwork record-keeping requirements. [00:22:17] Speaker 06: There's no requirement that one has to match the other. [00:22:20] Speaker 01: The requirement, what it says... Well, it has to be as effective. [00:22:22] Speaker 06: It has to be as effective. [00:22:25] Speaker 06: Let's go through, and Mr. Killian is right, there are different documents that are kept in Argentina than there are in the United States. [00:22:31] Speaker 06: So the list of certain documents needs to be looked at a bit differently, and that's what happened in this Carbio application process. [00:22:39] Speaker 06: So here's what's required if you compare individual tracking and the Carbio group tracking. [00:22:45] Speaker 06: and whether the Carbio group tracking satisfies the same quality assurance. [00:22:49] Speaker 06: In the group tracking, it has to be an independent audit of feedstocks. [00:22:53] Speaker 06: There's no audit done in individual tracking by any third party. [00:22:56] Speaker 06: The auditor has to be approved by the EPA. [00:23:00] Speaker 06: There's no auditor to approve in individual tracking. [00:23:03] Speaker 06: EPA must do approve the whole survey process and how it works. [00:23:07] Speaker 06: No such requirement in individual tracking. [00:23:09] Speaker 06: It requires satellite imagery showing forested areas that show ground cover. [00:23:16] Speaker 01: There's no such requirement. [00:23:17] Speaker 01: The council's argument is that the satellite imagery can't substitute for the detailed document trail, which doesn't exist in Argentina. [00:23:30] Speaker 06: And there's no basis for that. [00:23:31] Speaker 06: The only thing that's required in individual tracking is a map showing the outline of the farmland. [00:23:37] Speaker 06: The satellite tracking [00:23:38] Speaker 06: which includes down to the level of showing ground covers. [00:23:42] Speaker 06: You can actually look at these satellite pictures. [00:23:44] Speaker 06: This is a technical process with experts used. [00:23:47] Speaker 06: We use it in our wetlands cases, for instance, to determine whether there were wetlands before they were destroyed. [00:23:53] Speaker 06: You can analyze these satellite images, which is a very costly process that they're going through here. [00:23:58] Speaker 06: to determine different ground covers. [00:24:01] Speaker 06: You can look at a picture and say, hey, so as far as they're... They say it's not tested yet. [00:24:06] Speaker 03: It's not too uncertain for you to be able to rely on this to comply with it. [00:24:10] Speaker 06: As is set forth in the Carbio application, as EPA confirms, it's used in courts throughout this country and throughout the world, satellite imagery. [00:24:19] Speaker 01: EPA has satellite imagery experts... Well, I trust it's used, but is it used for this purpose? [00:24:23] Speaker 06: Does it have the kind of refinement that could... I don't think... No one has used this group tracking process, including, by the way, Carbio itself has not used this process. [00:24:34] Speaker 06: Oh, that's his point. [00:24:35] Speaker 06: But the analysis, EPA analyzed the 20-page report and so forth, [00:24:42] Speaker 06: and looked at that set, and its determination was this was a reasonable way to do that, combined with the other documentation they provide, such as the way bills which show the transportation of the feed stock. [00:24:58] Speaker 06: There are site visits that are required in the Carbio Approval to the farm where the feed stock's coming. [00:25:04] Speaker 06: There's no such requirement in individual tracking. [00:25:07] Speaker 06: There are quarterly desk audits of the feed suppliers, and the feed suppliers have to submit documents. [00:25:13] Speaker 01: Can I ask you a question? [00:25:14] Speaker 01: I'm just trying to think about the way you're analyzing this. [00:25:18] Speaker 01: Why are you comparing this to the individual tracking? [00:25:21] Speaker 01: Isn't the question whether or not the plan, the Carbio plan satisfies the alternative? [00:25:28] Speaker 01: tracking alternative method? [00:25:30] Speaker 01: Isn't that the question here? [00:25:32] Speaker 06: That is one of the questions. [00:25:36] Speaker 01: We're assuming for purposes of this argument that their challenge to the regulation itself is too late. [00:25:43] Speaker 01: So the only question is, is the EPA's approval of the cardio plan, does that comply with the alternative method? [00:25:51] Speaker 01: So I'm just asking, why do you keep comparing it to the individual tracking? [00:25:56] Speaker 06: Because their main argument about why it didn't comply with the regulation is that it doesn't have the same quality assurance as individual tracking. [00:26:06] Speaker 01: Well, an alternative is called alternative because it's an alternative, right? [00:26:09] Speaker 01: That's correct. [00:26:10] Speaker 01: OK. [00:26:12] Speaker 01: And the alternative system must be at least as effective, correct, as individual tracking? [00:26:17] Speaker 06: Correct. [00:26:18] Speaker 01: OK. [00:26:19] Speaker 01: I mean, maybe I'm missing something here, but it seems to me you would want to tell us why your argument would be that the approval, that the Carbio Plan satisfies the alternative method. [00:26:33] Speaker 01: That whatever the alternative method is, it's in the regulation, that the Carbio Plan satisfies that, right? [00:26:40] Speaker 06: That's correct. [00:26:41] Speaker 06: Okay. [00:26:42] Speaker 01: So council argues that it doesn't because for two reasons. [00:26:48] Speaker 01: He says one, EPA has conceded that the kinds of data required under the individual tracking plan are not available and that the satellite technology is untested and can't supply that. [00:27:04] Speaker 01: That's number one. [00:27:05] Speaker 01: And number two, they argue that it excludes, it doesn't cover importers. [00:27:09] Speaker 01: And both of those go to the question of whether or not the Cardio Plan satisfies the alternative method. [00:27:18] Speaker 06: The alternative group, group tracking method. [00:27:20] Speaker 01: Yeah. [00:27:20] Speaker 01: So what are your responses? [00:27:23] Speaker 01: Do you agree that that's the way we should look at this? [00:27:25] Speaker 06: Yes, as to those claims, yes. [00:27:28] Speaker 01: Okay, so why don't you tell me your response to those two arguments. [00:27:32] Speaker 06: Okay, as to the importer issue, as the court pointed out, there is some language where it says the producer and importer. [00:27:44] Speaker 06: But the whole provision, subsection H, talks about applying that subsection H alternative tracking, group tracking, to any foreign or domestic renewable producer or ring generating importer. [00:27:58] Speaker 06: It's an either or. [00:27:59] Speaker 06: It can apply to either one. [00:28:01] Speaker 03: Under the... But it says and. [00:28:03] Speaker 03: That's the problem. [00:28:04] Speaker 03: And so what we were trying to assess in asking your opposing counsel was, [00:28:12] Speaker 03: Is there a gap if you only have it at one and not the other? [00:28:16] Speaker 03: And he explained, yeah, there is a gap. [00:28:18] Speaker 03: If you're not doing it at the import facilities, you're missing various things that could be important to maintain the quality control for the program. [00:28:28] Speaker 03: So there is a difference when you do or instead of and, and your response to that is, [00:28:34] Speaker 06: There is no gap. [00:28:36] Speaker 06: This is just the record-keeping provision. [00:28:39] Speaker 06: And it's entirely written to ensure the use of qualified lands upstream, from everybody upstream, from the farmer, to the silos, to the crusher, to the producer, to the party that creates the RIN, which in this case is the producer. [00:28:54] Speaker 03: Your point, I think, is that if you're not doing it, then again, correct me if I'm wrong, because you know more about the facts. [00:29:03] Speaker 03: If you're not doing it at the import facilities, there's at least a risk that the program is not being complied with in the way that it's supposed to be complied with. [00:29:15] Speaker 03: And that's speaking very generally. [00:29:19] Speaker 06: Okay. [00:29:19] Speaker 01: Let me just flush that out, because that's my question, too. [00:29:22] Speaker 01: I think what I heard counsel say was that the importer, he agrees that the importer will be covered by the individual tracking. [00:29:31] Speaker 01: but that the data that the importer collects under the individual tracking program will not assure anyone that, well, will not provide the assurance required by the overall regulation. [00:29:54] Speaker 06: Well, that's the responsibility of the importer, and there are other provisions that deal downstream, with all of the parties downstream, including the obligated parties, the refiner who use these fuels. [00:30:05] Speaker 06: They all have to certify that the biofuel that they're using came from qualified biomass, which in this case includes qualified land. [00:30:17] Speaker 06: They're all subject to large penalties for not doing that. [00:30:20] Speaker 01: In fact, that's why... You're talking about the importer's obligations under individual tracking, right? [00:30:26] Speaker 06: and under other provisions. [00:30:28] Speaker 06: All the way through the process, certifications need to be made that under section 80.1464b15, they have to certify that feedstocks meet the definition of renewable biomass in section 80.1401, which means it comes from qualified land. [00:30:48] Speaker 06: There are inspections and audits that are allowed by EPA. [00:30:53] Speaker 06: There are significant penalties for violating these certifications. [00:30:57] Speaker 06: They must keep records under 1454B. [00:31:01] Speaker 06: They have to keep records that show that it came from qualified land. [00:31:05] Speaker 03: In the regulation, just to go to H202, conducted at [00:31:16] Speaker 03: Renewable fuel production and import facilities presumably EPA wrote that in the regulation this was important to have the compliance survey [00:31:31] Speaker 03: conducted at both places, or else there could be a problem. [00:31:37] Speaker 03: And my question is, I understand why it's essential to have it at the production facility, but isn't it also essential, or at least this regulation would suggest it's also essential to have it at the import facility? [00:31:50] Speaker 06: If you look at the regulation as a whole, and even this provision as a whole, there's no documents required that would establish, that would continue this process upstream. [00:32:01] Speaker 06: There were no comments submitted about how do we do this upstream after it leaves our hands. [00:32:07] Speaker 06: It leaves the producer's hands and is sold to the importer. [00:32:11] Speaker 06: The importer then has his own responsibilities under these separate provisions. [00:32:15] Speaker 06: But the determination and all the paperwork is there to ensure that this came from renewable... So your point then, I think, is that this is just this use of the word in... [00:32:28] Speaker 01: in little i2, little 2, conducted at renewable fuel production and import facilities. [00:32:37] Speaker 01: That A.I. [00:32:38] Speaker 01: was meant, it's just a mistake, it was meant to be in ore. [00:32:43] Speaker 06: It should have been in ore because again when you start out the provision it talks about [00:32:47] Speaker 03: The answer to that is because when you're talking about foreign biofuels, either the producer [00:33:06] Speaker 06: or the importer can be the RIN generator. [00:33:09] Speaker 06: And in the case of the RIN generator, then those obligations apply to the importer. [00:33:15] Speaker 06: All of these requirements. [00:33:17] Speaker 03: So that's why, in your point, is when the RIN generator is the producer, it doesn't matter. [00:33:25] Speaker 03: Everything you need is taken care of, and therefore you don't bend the oar, to put judge tales, makes sense. [00:33:32] Speaker 06: That's exactly right. [00:33:36] Speaker 06: And turning back to the requirements of subsection H and why all these are met, they're very general requirements. [00:33:48] Speaker 06: They set out [00:33:54] Speaker 06: The surveys should be conducted by an independent party, which is being done here, an independent third party. [00:34:09] Speaker 06: They should be representative of the different producers, which is the case here. [00:34:16] Speaker 06: This is under H2, and the annual compliance survey and what's required. [00:34:24] Speaker 06: And then it requires the surveyor to do certain things, like get documentation from the feedstock producers, from everyone along the chain upstream to the producer, and do audits on a regular basis. [00:34:42] Speaker 01: Does EPA audit [00:34:46] Speaker 01: the Cardio Plan over time? [00:34:49] Speaker 06: EPA has the ability to audit the plan over time. [00:34:53] Speaker 06: EPA receives the documentation. [00:34:55] Speaker 06: Another major difference showing why this group tracking is at least as good as individual tracking is all this documentation, which by the way has to be kept in a database, so all these reports [00:35:07] Speaker 06: audited on a quarterly from feedstock providers that it came from this land are audited on a quarterly basis, those go into larger audits in an electronic database, and then the auditor has to produce a report to EPA every year. [00:35:22] Speaker 01: None of that happens under individual track. [00:35:26] Speaker 01: You're now making your argument that this is better than the alternative plan. [00:35:29] Speaker 01: And my question is, does it comply with the alternative method? [00:35:33] Speaker 01: So suppose, for example, the reason I ask the question about continuing auditing is everybody agrees that the satellite usage for this purpose is untested. [00:35:46] Speaker 01: I mean, that doesn't mean it's wrong. [00:35:47] Speaker 01: It's just nobody's ever used it for this. [00:35:51] Speaker 01: Suppose in a couple years it becomes clear that there is more additional land beyond what was being used in 07, being used for this in Argentina. [00:36:06] Speaker 01: What would EPA do about that? [00:36:09] Speaker 01: And more important, could someone [00:36:12] Speaker 01: come to EPA and say, this is not succeeding because the satellite data is insufficiently precise and it's not catching the expansion of agricultural land in Argentina. [00:36:23] Speaker 06: Absolutely. [00:36:24] Speaker 06: Under subsection H, this group tracking, EPA has the right to void immediately, first of all, any party that doesn't submit the required documentation. [00:36:35] Speaker 01: Oh, that wasn't my question. [00:36:36] Speaker 06: And B, let's say the satellite tracking doesn't play out. [00:36:39] Speaker 06: EPA has the right to void this approval immediately, if it proves simply ineffective. [00:36:47] Speaker 01: I understand that, but how would American producers, namely the petitioner here, how would they know, would they have a way of knowing independently [00:37:01] Speaker 01: whether the satellite system was not succeeding. [00:37:04] Speaker 06: Yes, because on an annual basis, under the group plan, as opposed to the individual plan, under the group plan, a report has to be submitted to EPA with all of this information. [00:37:16] Speaker 06: The sole purpose of that report is to establish that each of these participants in the Carbio Plan are using [00:37:24] Speaker 06: biofuels from qualified land. [00:37:26] Speaker 06: And that's a public document that's subject to public review. [00:37:29] Speaker 01: OK, I don't want to push the point. [00:37:30] Speaker 01: Maybe I just don't understand the technology enough. [00:37:33] Speaker 01: But how would EPA know whether the satellite imagery is accurately telling us that [00:37:47] Speaker 01: agricultural land in Argentina that wasn't used in 07 isn't being used today. [00:37:55] Speaker 01: In other words, if the imagery is itself insufficient, how would we know it's insufficient? [00:38:01] Speaker 06: What other way would we have to... The imagery is not insufficient. [00:38:05] Speaker 06: It's just a pure allegation here based on nothing other than... [00:38:09] Speaker 06: It hasn't been tested. [00:38:10] Speaker 06: EPA made a determination to which, as you know, on a technical issue, they're entitled to a pretty substantial difference. [00:38:17] Speaker 01: I've written opinions that say that. [00:38:19] Speaker 06: I got that. [00:38:21] Speaker 06: That this is more than sufficient. [00:38:22] Speaker 06: And it's explained in the report in the Carbio application about how this works. [00:38:28] Speaker 06: It goes down certain levels. [00:38:30] Speaker 06: You can literally look at these photographs and see was this forested or not. [00:38:35] Speaker 06: They need new satellite imagery every year, so you go back and check the farmland every year. [00:38:40] Speaker 06: That's part of the requirement. [00:38:41] Speaker 06: But it goes down to much further levels than that. [00:38:44] Speaker 06: You can use this analysis to determine the specific ground cover that was out there. [00:38:50] Speaker 01: Okay, thanks. [00:38:53] Speaker 01: Thank you. [00:38:54] Speaker 06: Seeing my time is up, I just want to emphasize that this is a record-keeping requirement. [00:39:00] Speaker 06: There's probably no area where EPA is entitled to more deference than how to apply that. [00:39:07] Speaker 06: There are no statutory directives here under this statute about how it should apply record-keeping requirements, or even that there should be a record-keeping requirement. [00:39:17] Speaker 01: Okay, thank you. [00:39:18] Speaker 01: Does Mr. Killian have any more time? [00:39:21] Speaker 01: You can take two minutes, Mr. Killian. [00:39:25] Speaker 05: Thank you, Your Honors. [00:39:25] Speaker 05: I'll make two, maybe three points. [00:39:27] Speaker 05: First, Judge Tatel, in your questioning to Mr. Rosen, I do want to be pushed back a little bit. [00:39:33] Speaker 05: We believe there are two independent requirements in the regulation that are not being complied with. [00:39:38] Speaker 05: Your Honors, phrasing of the regulation took all of our arguments and said that they essentially go to the quality assurance requirement. [00:39:44] Speaker 05: We believe that that is a requirement in section 1454H, but there is an additional requirement for the records to be maintained. [00:39:52] Speaker 05: The record-keeping requirement under 3II is a separate and distinct requirement from the requirement that the [00:39:59] Speaker 05: consortium approach achieve the same level of quality as the individual approach. [00:40:05] Speaker 05: So we think that there are two distinct requirements and the failure to keep records is not just relevant to quality but also a technical but I think important separate requirement. [00:40:17] Speaker 05: Your Honor also asked a question about how this can be tested in the future. [00:40:22] Speaker 05: The truth is we won't know. [00:40:24] Speaker 05: We don't have access to the foreign lands. [00:40:26] Speaker 05: EPA doesn't have access to what's going on in Argentina. [00:40:30] Speaker 05: And that's the whole reason why EPA has allowed notice and comment for aggregate compliance petitions under Section 1457. [00:40:36] Speaker 05: EPA doesn't have expertise in foreign agriculture or foreign land use. [00:40:41] Speaker 05: It doesn't have jurisdiction over the foreign land or even the foreign supply chains. [00:40:45] Speaker 05: And the satellite data question is complicated. [00:40:48] Speaker 05: It is untested at this point. [00:40:51] Speaker 05: We think it could potentially be useful. [00:40:53] Speaker 05: But even when these reports that Mr. Rosen mentioned are filed in a few years, we're not going to have access to those because they're going to be as secret as this process that just happened. [00:41:02] Speaker 05: So in our view, Your Honors, we think that the approval here was invalid. [00:41:07] Speaker 05: We would like notice and comment on the ability to use it. [00:41:09] Speaker 03: What about the Andor, the response on the Andor? [00:41:12] Speaker 05: So to that, Judge Kavanaugh, we believe that the government is sort of slight of hand a bit here. [00:41:22] Speaker 03: They're saying when the rins aren't generated by the importer, I think I'm phrasing that correctly. [00:41:29] Speaker 05: That's right. [00:41:30] Speaker 05: H requires the audit of the entire supply chain from the farmers all the way through the importers, no matter who is generating the RINs. [00:41:43] Speaker 05: And I would point to the court to the first paragraph of H, it refers to any foreign or domestic renewable fuel producer or RIN-generating importer. [00:41:52] Speaker 05: That's an important adjective, RIN-generating import. [00:41:55] Speaker 05: Importer all the other references in here to importer don't depend on whether or not the importer is generating rinse So did you do something else? [00:42:09] Speaker 05: No, just that we wish to have the decision vacated your honors. [00:42:13] Speaker 01: All right great Mr. Rosen, could you come back up here for a second? [00:42:21] Speaker 03: I just want to make sure I have your response on the H [00:42:25] Speaker 03: three little two point, obtaining the records and product transfer documents associated with the feedstock being audited. [00:42:36] Speaker 03: You know what I'm talking about? [00:42:38] Speaker 03: So when Mr. Killian just got back up, he wanted to emphasize that point, and I don't think we talked about that point. [00:42:46] Speaker 03: So that's H, so that's 1454 H three little two. [00:42:56] Speaker 06: Right, and it requires the auditor's surveyor to obtain those documents, and the Carbio Plan does that. [00:43:03] Speaker 06: It requires the feedstock suppliers to submit the documents to the auditor and for the auditor to review those documents. [00:43:13] Speaker 01: Well, we can ask Mr. Killian this question, but I thought I heard him say that EPA has conceded that those documents don't exist. [00:43:23] Speaker 01: Is that not true? [00:43:24] Speaker 06: No. [00:43:26] Speaker 06: Carbio pointed out that the types of documents in the individual tracking process [00:43:33] Speaker 06: are different types of documents than they keep in Argentina. [00:43:36] Speaker 06: And that in Argentina, they could have different types, a separate set of documents, combined with the satellite imagery, which would effectively do more in establishing the origin. [00:43:47] Speaker 01: But would it satisfy the language that Judge Kavanaugh just quoted to you? [00:43:51] Speaker 01: Is that your point? [00:43:52] Speaker 01: Yes. [00:43:52] Speaker 01: That those actually exist. [00:43:53] Speaker 01: They're just not. [00:43:55] Speaker 01: They're different, is that your point? [00:43:57] Speaker 06: They're different, and that's explained throughout the Carbio approval and in EPA's response. [00:44:01] Speaker 06: For instance, they're called these weigh bills which show the transportation. [00:44:05] Speaker 06: They show the exact same thing that the list of potential documents in individual tracking show. [00:44:10] Speaker 06: And those documents are available and in the audit and in the reports sent to EPA. [00:44:16] Speaker 01: Okay. [00:44:18] Speaker 01: Mr. Keeling, what do you think about that? [00:44:20] Speaker 05: As I mentioned to the court at the beginning, there are two types of records that need to be kept. [00:44:32] Speaker 05: The historical records that show contemporaneously was this farm operating in 2007. [00:44:37] Speaker 05: than the current records that show a transfer from that plot of land to the ring generator. [00:44:42] Speaker 05: The way bills that Mr. Rosen is discussing are the current transfer documents, which are mentioned in H3II after the end, records and transfer documents. [00:44:52] Speaker 05: That's all the way bill shows. [00:44:53] Speaker 05: The record is the contemporaneous historical record that the farm was operating in 2007, and as Carvio says on page 905, 906, [00:45:01] Speaker 05: With respect to this, and they walk through all four of the items and see, Carbio is not able to explain how any of its records will satisfy the evidentiary requirements of these subsections for the following reasons. [00:45:12] Speaker 05: And then for two pages concedes that those records just don't exist and says, so we're going to use satellites. [00:45:17] Speaker 05: Thank you, Your Honor. [00:45:23] Speaker 01: Thank you. [00:45:23] Speaker 01: Case is submitted.