[00:00:00] Speaker 00: Case number 22-1210 et al. [00:00:03] Speaker 00: Sinclair Wyoming Refining Company LLC and Sinclair Cassidy Refining Company LLC petitioners versus Environmental Protection Agency. [00:00:12] Speaker 00: Ms. [00:00:12] Speaker 00: Dawson for the petitioners American Fuel and Petrochemical Manufacturers. [00:00:16] Speaker 00: Mr. Homestead for all other obligated party petitioners. [00:00:20] Speaker 00: Mr. Perdue for the biofuel petitioners. [00:00:22] Speaker 00: Ms. [00:00:22] Speaker 00: Kimball for the respondents, refiners arguments regarding volume requirements and percentage standard formula. [00:00:28] Speaker 00: Ms. [00:00:29] Speaker 00: McCasker for the respondents, all of biofuels arguments and supplemental standards. [00:00:33] Speaker 00: Mr. Borgato for the intravenous API and AFPM. [00:00:38] Speaker 02: Good morning council. [00:00:40] Speaker 02: Ms. [00:00:40] Speaker 02: Dawson, please proceed when you're ready. [00:00:44] Speaker 04: Good morning, Your Honors, and may it please the Court, Elizabeth Dawson, presenting today on behalf of the obligated party petitioners regarding the majority of the issues brief, after which my co-counsel, Mr. Holmstead, will address the issue of using 2015 and 2016 RINs for compliance with the supplemental standard. [00:01:01] Speaker 04: I'd like to reserve one minute of my time for rebuttal. [00:01:04] Speaker 04: In promulgating the 2022 renewable fuel standard, EPA was finally forced to grapple with what obligated parties have known all along. [00:01:12] Speaker 04: The RFS program simply cannot achieve Congress's lofty goals. [00:01:16] Speaker 04: But Congress anticipated this might be the case and included in the RFS program a reset provision requiring EPA to promulgate new applicable volumes based on a review of how the RFS program has worked in the real world. [00:01:31] Speaker 04: Despite this mandate, EPA continued to increase renewable fuel requirements for 2022 to unprecedentedly high levels, disregarding the statutory criteria in favor of a policy of significant growth. [00:01:46] Speaker 04: In addition to this error, EPA also promulgated a rule reallocating hypothetical future small refinery exemptions onto non-exempt obligated parties, and further erred in a misguided attempt to respond to this court's remand in Americans for Clean Energy versus EPA by promulgating an additional 250 million gallons of renewable fuel requirements in response. [00:02:09] Speaker 04: But as the court reminded in Americans for Clean Energy versus EPA, Congress did not intend to pursue its goal of increased renewable fuel generation at all costs. [00:02:19] Speaker 04: Because EPA lost sight of this fact, EPA erred, and the court should grant obligated parties. [00:02:28] Speaker 04: First, I'd like to address how EPA misapplied the reset criteria. [00:02:32] Speaker 04: And to do so, it's useful to remember how we got here. [00:02:35] Speaker 04: So the Clean Air Act set presumptive annual volumes of most renewable fuels through 2022, but provided EPA multiple authorities to waive those volumes under a number of circumstances. [00:02:45] Speaker 04: Congress also realized that if EPA found itself using these waivers and waiving volumes by a certain amount, 50% in one year or 20% for two consecutive years, the statutory tables would need to be modified going forward. [00:02:58] Speaker 04: That threshold was crossed for cellulosic and advanced biofuel in 2010 and for total renewable fuel in 2019. [00:03:04] Speaker 04: So now, instead of operating under this structure where EPA is trying to reach the goals that Congress set, EPA has to promulgate new volumes [00:03:13] Speaker 04: based on a review of the implementation of the program during calendar years specified in the tables and analysis of a number of criteria as set forth in 754502B2 of the Clean Air Act. [00:03:26] Speaker 04: But instead of applying these criteria in view of how the program has worked out and in view of the fact that the reset provision has been triggered, [00:03:35] Speaker 04: EPA instead chose to continue the policy of increasing renewable fuel use at all costs. [00:03:43] Speaker 04: EPA used the criteria to justify even higher volumes, higher than the original volumes assigned for 2020, before the pandemic forced EPA to reassess. [00:03:52] Speaker 04: And to reach this result, EPA committed a foundational error. [00:03:55] Speaker 04: EPA returned to those statutory tables as a baseline for its analysis instead of looking to the implementation of the program as Congress constructed when the reset provision is activated. [00:04:06] Speaker 04: This makes no sense since reaching the reset requirement already means that the statutory tables have missed the mark. [00:04:12] Speaker 04: So EPA improperly put its sum on the scales in favor of higher applicable volume. [00:04:16] Speaker 04: This error is only increased when considering that EPA promulgated this rule for 2022 six months late. [00:04:23] Speaker 04: EPA was supposed to promulgate this rule 14 months before the year started by October of 2020. [00:04:29] Speaker 04: And in the past, EPA has considered actual fuel consumed when promulgating late. [00:04:36] Speaker 04: This year, instead, EPA looked to just the first three months to project forward, but didn't recognize that it was issuing the rule with half a year over. [00:04:45] Speaker 04: Lastly, EPA failed to explain how it justified these heightened requirements when the reset criteria required looking at the impacts of these requirements in prioritizing increased renewable fuel. [00:04:55] Speaker 04: For example, EPA looked to increase the renewable fuel requirements to prompt infrastructure to develop. [00:05:03] Speaker 04: And really, the criteria required EPA to look at the impacts of renewable fuel on infrastructure and the ability of infrastructure to reach the goals. [00:05:13] Speaker 04: In sum, in promulgating these higher-than-ever volumes, EPA misapplied the factors that Congress intended to return the RFS program to reality. [00:05:21] Speaker 04: Now, turning from those projections to the formula for turning those projections into presented standards, EPA can't defend its decision to reallocate hypothetical future exemptions to non-exempt obligated parties. [00:05:32] Speaker 04: In doing so, the agency, in its own words, codified speculation and prejudgment. [00:05:37] Speaker 04: First, EPA identifies no statutory authority for this action. [00:05:40] Speaker 04: There is none. [00:05:41] Speaker 04: As both EPA and obligated parties have argued before this court, the statute nowhere authorizes the approach the agency took here. [00:05:48] Speaker 04: So, EPA can't cobble together silence with a general direction to ensure that applicable volumes are met to overcome the specific statutory language that prescribes how EPA is to treat smaller finery exemptions. [00:06:00] Speaker 04: Second, even if that authority exists, EPA hasn't sufficiently explained why something it once thought was nigh impossible is now the best reading of the statute. [00:06:08] Speaker 04: Indeed, this change in policy makes even less sense in this reset posture, where EPA was required to promulgate the applicable volumes with 14 months lead time. [00:06:17] Speaker 04: So the idea that it could possibly accurately project future exemptions in that scenario is risible. [00:06:23] Speaker 11: Finally, in a turn to- Did you say risible? [00:06:25] Speaker 04: Yeah, I did. [00:06:26] Speaker 11: Okay. [00:06:27] Speaker 11: That's strong medicine, but we'll take it. [00:06:30] Speaker 11: Can I just ask on this one, what do you think EPA should have done with the small refiner exemptions? [00:06:38] Speaker 11: I thought what they did was they took something that previously was limited to exemptions that had already been granted. [00:06:47] Speaker 11: and then expanded it to encompass exemptions that they projected would be granted so as to get a more accurate picture of the total amount that's going to be off the table because of the smaller finer exemptions. [00:06:59] Speaker 11: Am I understanding the factual terrain correctly? [00:07:01] Speaker 11: That's correct. [00:07:02] Speaker 11: And then is your view that [00:07:04] Speaker 11: You just can't take small refiner exemptions out of the mixed period, regardless of whether you're talking about ones that have already been granted and ones that have been projected or that actually the error wasn't adding on to the ones that have already been granted, the ones that are projected. [00:07:19] Speaker 04: Well, Your Honor, in this rule, EPA only promulgated a rule addressing future projected exemptions. [00:07:25] Speaker 04: The past exemptions had been part of the rule, and that is beyond challenge in this particular rulemaking. [00:07:31] Speaker 11: But in terms of your theory, you think that the EPA wasn't allowed to do what it did with respect to the projections? [00:07:39] Speaker 04: Well, the statute certainly does not allow EPA to project forward in the future. [00:07:43] Speaker 11: Is your claim about what the statute disallows EPA to do also something that would prevent EPA from taking into account the small refiner exemptions that have already been granted? [00:07:56] Speaker 04: Well, the statute does not speak to that either. [00:07:58] Speaker 04: Again, we can't challenge that in this rulemaking. [00:08:01] Speaker 11: Theoretically, the answer is yes. [00:08:03] Speaker 11: You're not drawing a distinction, in other words, between EPA's ability to take into account small refiner exemptions on a projected basis and EPA's taking into account the exemptions that have, in fact, already been granted. [00:08:18] Speaker 04: Correct, Your Honor, because the statute only speaks to one way to account for smaller refinery exemptions, and that's to make adjustments to account for the use of renewable fuel during the previous calendar year by smaller refineries that are exempt. [00:08:29] Speaker 04: And that is not the provision that EPA has invoked here to authorize what it's doing. [00:08:33] Speaker 04: I see that I'm out of time. [00:08:35] Speaker 04: I'd just briefly like to cover the last issue. [00:08:37] Speaker 04: So in a belated attempt to respond to this court's partial remand of the 2016 standard in Americans for Clean Energy, EPA added 250 million gallons of a supplemental requirement onto the 2022 standard. [00:08:49] Speaker 04: But in addition, the statute speaks not to this possibility, and EPA can't hide behind the court's decision, which should not require the agency's approach. [00:08:56] Speaker 04: So for all of these reasons, we believe the court [00:08:58] Speaker 09: Isn't it a fair implication of the ACE remand that it did intend some requirement to be imposed? [00:09:08] Speaker 09: And if not, as it was done, what would be the preferable way? [00:09:13] Speaker 04: Well, EPA had several options as it took the standard back that it could have employed. [00:09:18] Speaker 04: Because the court didn't, the court, what the court did in Americans for Clean Energy was, [00:09:23] Speaker 04: dispute and disagree with EPA's reading of inadequate domestic supply. [00:09:29] Speaker 04: The court didn't conclude that it was wrong looking at all the facts for EPA to waive those 500 million gallons. [00:09:37] Speaker 04: So EPA could have taken another look at the record and in its statutory authority. [00:09:41] Speaker 04: And for example, used the cellulosic waiver, which it had not invoked to the tune of 380 million gallons, and then decided whether there was a way to address the 120 million or to exercise some other waiver authority. [00:09:53] Speaker 04: But it just didn't take that time. [00:09:54] Speaker 04: It just saw 500 million, split it in half, and added it to 2022 and now to 2023. [00:10:02] Speaker 09: And if its determination was that, absent the authority that it misread, that the [00:10:10] Speaker 09: obligations should be met. [00:10:13] Speaker 09: You're not arguing for reopening 2016. [00:10:15] Speaker 09: I mean, they did divide it in two years to try to make it less onerous. [00:10:21] Speaker 09: Other than your argument that they should have retroactively exercised cellulosic waiver, how else should they have dealt with this? [00:10:29] Speaker 04: They could have invoked the inadequate, I'm sorry, the severe economic harm waiver, which had been a possibility back in at the time of the rulemaking. [00:10:39] Speaker 04: Or it could have considered whether the 250 gallons made sense in light of the fact that it was issuing a reset rule where it was supposed to look at the overall picture of the implementation of the program. [00:10:54] Speaker 09: So your basic argument is figure out some way not to require it. [00:10:58] Speaker 09: I'm sorry? [00:10:58] Speaker 09: Figure out some other authority under which to not require that that 500 million gallons be met. [00:11:04] Speaker 04: Correct. [00:11:04] Speaker 04: This is just a completely unreasoned adding back in what it believed this court said it erroneously. [00:11:11] Speaker 11: And I think you said they exercised the recess authority. [00:11:13] Speaker 11: They don't think they exercised that reset authority, right? [00:11:16] Speaker 04: No, EPA did exercise its reset authority in 2022. [00:11:20] Speaker 11: But as to the 500, as to the ACE remand? [00:11:23] Speaker 04: As to the 250, EPA divorced that from the reset. [00:11:27] Speaker 04: So when EPA addressed the reset factors as to the 20.63 billion gallons, but then added on this 250 million gallons and didn't include that in its conception of the reset. [00:11:38] Speaker 09: So why wouldn't the right remedy for that be a remand for them to fold that 250 million gallons [00:11:45] Speaker 04: in and run the analysis again. [00:11:48] Speaker 04: Well, Your Honor, we think they need to take an entirely new look at how they promulgated the 2022 rule because they looked at it with a view to increasing the renewable fuel obligations instead of looking at what was realistic. [00:11:59] Speaker 09: But that is a possible- But had they done that, had they folded it in with the 20 whatever billion gallons, you wouldn't have a claim, would you? [00:12:08] Speaker 04: And done the analysis. [00:12:10] Speaker 04: Well, we would still think that EPA would have to justify its ability to roll 250 million gallons from 2016 into 2022, which it just didn't justify. [00:12:19] Speaker 09: Well, it spent a lot of time talking about where to put it. [00:12:24] Speaker 04: Well, they considered other options, but we submit that they did not actually fairly consider the other things they could have done to address the remand instead of just adding it onto 2022. [00:12:36] Speaker 04: and now I'll either manner of my time to Mr. Homestead. [00:12:39] Speaker 02: Okay, thank you. [00:12:40] Speaker 04: Thank you. [00:12:41] Speaker 05: Mr. Homestead. [00:12:52] Speaker 05: May I please record? [00:12:53] Speaker 05: Jeff Homestead here to address just one issue. [00:12:56] Speaker 05: If the supplemental standard is upheld, an obligated party should be able to meet it by using valid RINs that could have been used for 2016 compliance [00:13:07] Speaker 05: The only reason for the supplemental standard is to make up for 250 million gallons of under compliance in 2016. [00:13:17] Speaker 05: But some companies still hold valid RINs that could have been used for 2016 compliance, but were not. [00:13:23] Speaker 05: These RINs represent roughly 39 million gallons of over compliance in 2016. [00:13:28] Speaker 09: In some cases, you refer to them as valid RINs, but the RINs by their nature, they expire. [00:13:35] Speaker 05: Right, they are expired. [00:13:37] Speaker 09: So they represent an actual, you know, they've been separated because they represent an actual use of them. [00:13:44] Speaker 05: That's correct. [00:13:44] Speaker 05: When I refer to valid, that means that they represented, each one represented a gallon of renewable fuel that was used during 2016. [00:13:53] Speaker 05: And I should explain, some companies submitted these very RINs for 2016 compliance and then got them back from EPA when EPA belatedly granted their small refinery exemptions. [00:14:04] Speaker 05: But by the time EPA returned the RINs, the RINs were worthless. [00:14:07] Speaker 05: They couldn't be used for 2016 compliance. [00:14:10] Speaker 05: Since these RINs represent renewable fuel that was actually produced and used in 2016, commenters on the rule argued that they should be allowed to use those RINs to comply with the supplemental standard. [00:14:24] Speaker 05: EPA offers just two reasons for rejecting this approach. [00:14:28] Speaker 05: First, EPA argues that, quote, this is not permissible under existing RFS regulations. [00:14:36] Speaker 05: But this is just silly. [00:14:37] Speaker 05: Imposing a supplemental standard wasn't allowed under EPA's regulations until EPA issued a rule to do so. [00:14:45] Speaker 05: In the same rule, EPA should have allowed companies to use valid but unused RINs to comply with the supplemental standard. [00:14:53] Speaker 05: The only other reason that EPA offers is a speculation that some of the unused RINs may not be valid. [00:15:00] Speaker 05: This might be true, but there is absolutely no reason to believe that anyone would unlawfully use invalid RINs now when they chose not to do so in 2016. [00:15:09] Speaker 09: I mean, when you say that it's silly to argue that it's not permissible under existing regulations, it's one thing to do a year-specific [00:15:23] Speaker 09: remedy or set standards. [00:15:27] Speaker 09: It's another thing to change the nature of RINs. [00:15:33] Speaker 05: But the commenters pointed out that they would not need to change the nature of RINs. [00:15:37] Speaker 05: Commenters actually explained a very simple way that EPA could do this by allowing companies that had valid RINs that were unused to meet a 2016 supplemental standard instead of a 2022 supplemental standard. [00:15:51] Speaker 05: EPA never explained anywhere in its response comments why that wouldn't work. [00:15:55] Speaker 09: Well, the EPA said it would be entirely unadministrable, but they did address that. [00:15:59] Speaker 05: No, no, it doesn't address the proposal that we actually made. [00:16:02] Speaker 05: They created this straw man that makes it look like it would be very difficult, but it would not be difficult. [00:16:08] Speaker 05: As commenters explained, an EPA could do what it's done in other cases, including a case that it was required to do in the Ninth Circuit when a court said that when a company was stuck with unused rins, they could use replacement rins, which would essentially replace the expired rins with current vintage rins. [00:16:27] Speaker 05: So they had easy ways to do this, but they just chose not to. [00:16:33] Speaker 05: Thank you, counsel. [00:16:36] Speaker 11: We'll now hear from the biofuels petitioners for their set of challenges. [00:16:42] Speaker 02: Mr. Perdue? [00:17:09] Speaker 03: May it please the court, William Perdue on behalf of the biofuels petitioners. [00:17:13] Speaker 03: I'd like to reserve three minutes for rebuttal. [00:17:16] Speaker 03: In the final rule, EPA set the required cellulosic volumes too low based on a misreading of the cellulosic waiver provision. [00:17:24] Speaker 03: In particular, when calculating the projected volume available, EPA failed to include volumes of cellulosic biofuel that are reflected in carryover. [00:17:33] Speaker 03: I'd like to start with the text of the cellulosic waiver provision. [00:17:39] Speaker 03: That provision requires EPA, when the waiver is triggered, to reduce the required cellulosic volume down to both the projected volume available during that calendar year. [00:17:52] Speaker 03: The party's dispute about that language is actually very narrow. [00:17:56] Speaker 03: EPA agrees with us that the projected volume available means the projected volume of cellulosic biofuel that is available to be counted towards compliance with the obligated parties volume obligations. [00:18:09] Speaker 03: That's on page 25 of EPA's brief. [00:18:13] Speaker 03: EPA also agrees that obligated parties can show compliance by retiring carryover. [00:18:19] Speaker 03: And EPA also agrees that all RINs, including carryover RINs, represent actual physical volumes of cellulosic biofuel that have been produced or imported. [00:18:30] Speaker 03: The only distinction is that carryover RINs represent fuel that was produced or imported last year, not this year. [00:18:39] Speaker 03: But that distinction makes no difference to obligated parties when they are retiring RINs to show compliance. [00:18:47] Speaker 03: By retiring carryover rins, obligated parties can count fuel that was produced or imported last year towards compliance with their volume obligations this year. [00:19:00] Speaker 03: So the question in this case really is, when projecting the volume of cellulosic biofuel that is available for compliance during 2020, for example, does EPA have to include all of the cellulosic biofuel is available for compliance during 2020, even if some of that volume was produced or imported during 2019? [00:19:21] Speaker 03: And that question should answer itself. [00:19:24] Speaker 03: The projected volume available means all of the projected volume available. [00:19:28] Speaker 09: Although under 75-45071, the provision starts talking about projected volume of cellulosic biofuel production. [00:19:42] Speaker 09: And then later, it talks about the projected volume available. [00:19:47] Speaker 09: Why isn't it at least reasonable to read the projected volume [00:19:51] Speaker 09: available with reference to the introductory clause, talking about projected volume produced, projected volume of cellulosic biofuel production. [00:20:04] Speaker 09: So I mean, the difference, it seems to me, between EPA's position and yours is you're talking about what's available for compliance, and it's talking about what's available in the sense of having them produced. [00:20:17] Speaker 09: So their view is impermissible? [00:20:19] Speaker 03: Yes, it is impermissible. [00:20:20] Speaker 03: And I'd like to clarify. [00:20:22] Speaker 03: The interpretation you began by referencing the projected volume of cellulosic biofuel production at the beginning of that provision, having the projected volume available refer back to that, that is the intervener's position. [00:20:38] Speaker 03: That is not PA's position. [00:20:41] Speaker 03: EPA, in EPA's view, two things have to be true about this volume during the calendar year. [00:20:48] Speaker 03: Take 2020, for example. [00:20:50] Speaker 03: It has to be available for compliance. [00:20:52] Speaker 03: Everybody, EPA and we agree about that. [00:20:56] Speaker 03: And it has to be produced or imported in that year. [00:21:01] Speaker 03: or going to the intervener's interpretation. [00:21:06] Speaker 03: So their view is that the words at the end of this paragraph refer back up to the words at the very beginning. [00:21:14] Speaker 03: But that is, if EPA, if Congress wanted to refer back [00:21:20] Speaker 03: have the projected volume available to refer back to the projected volume of cellulosic biofuel production, it would have just repeated the same term, projected volume of cellulosic biofuel production, or it would have used shorthand like such projected volume of production. [00:21:38] Speaker 03: What Congress would not have done if it was referring back to production is introduce a new term, projected volume available, that uses a new word, available, that is not contained in the original term that Congress is supposedly referring back to, projected volume cellulosic biofuel reduction. [00:21:59] Speaker 11: You don't think it's possible that the reason Congress didn't use the exact same terminology [00:22:03] Speaker 11: is that they didn't want to leave EPA without any discretion in the matter. [00:22:07] Speaker 11: They wanted to use a term that gave the EPA discretion on whether to treat the term as coextensive with production or to do what you'd rather have them do, which is to take into account the carryover. [00:22:18] Speaker 03: I think available means available. [00:22:19] Speaker 03: I think there are three different volumetric terms in this paragraph. [00:22:25] Speaker 03: There's the projected volume of cellulosic biofuel production. [00:22:29] Speaker 03: There's the applicable volume of cellulosic biofuel. [00:22:34] Speaker 03: And there's the projected volume available. [00:22:37] Speaker 03: So if taking those in order, it's basically the projected volume produced. [00:22:43] Speaker 03: And then there's volume required. [00:22:45] Speaker 03: And then there's the volume available. [00:22:47] Speaker 03: I think the most textually faithful reading of that term is of those terms is each of those is referring to a different thing. [00:22:56] Speaker 09: Another way of reading it though is that there is in the first clause projected and applicable and in the later clause project applicable and projected and that the projected is talking about production and the applicable is talking about compliance. [00:23:14] Speaker 09: So when you get down to the sentence that we're parsing here, [00:23:18] Speaker 09: or the clause, the administrator shall reduce the applicable volume of cellulosic biofuel required compliance to the projected volume available produced. [00:23:29] Speaker 03: So EPA's reading is that it is the projected volume available for compliance. [00:23:34] Speaker 03: They agree with us about that. [00:23:36] Speaker 03: They just believe that in effect, EPA is adding a limitation into the statute. [00:23:41] Speaker 03: They believe that what the statute really means is the projected volume available and produced or imported during that calendar year. [00:23:51] Speaker 03: I think maybe I can use an example that's on page six to seven of a reply brief to try to illustrate how EPA's interpretation works and why it is inconsistent with the statute. [00:24:04] Speaker 03: So consider two gallons of cellulosic biofuel. [00:24:07] Speaker 03: One gallon is produced on January 1, 2020, and it generates a vintage 2020 REN. [00:24:12] Speaker 03: The other gallon is produced one day earlier on December 31, 2019, and it generates a vintage 2019 carryover. [00:24:21] Speaker 03: Other than that, there's no difference between these two gallons. [00:24:24] Speaker 03: They sit in the factory for a few days. [00:24:27] Speaker 03: It takes them a few weeks to filter through the distribution system. [00:24:30] Speaker 03: And eventually, they're combusted in a consumer's vehicle on the same day sometime in 2020. [00:24:38] Speaker 03: Both of those volumes are physically available to obligated parties. [00:24:43] Speaker 03: Both of those volumes are physically available to consumers during 2020. [00:24:47] Speaker 03: The RINs that are generated by both of those gallons are available to be retired towards compliance with 2020 volume obligations. [00:24:59] Speaker 03: But EPA counts only one of those RINs, one of those gallons in the projected volume available. [00:25:06] Speaker 03: But there's just no basis for that distinction in the statute. [00:25:11] Speaker 03: But the statute. [00:25:12] Speaker 09: It has taken a lot of care in its rules to limit rents to the existing year and one carryover year to allow carrying over of deficits to meet in the following year. [00:25:28] Speaker 09: And your reading is equating [00:25:33] Speaker 09: last year's rent and this year's rent, which EPA is taking care not to do. [00:25:38] Speaker 09: And I guess its main argument in the rulemaking is this would require basically bottom out the rent bank. [00:25:48] Speaker 09: And I understand you think that's not a legitimate objective, but it is a [00:25:54] Speaker 09: different, very different treatment of prior year rins. [00:25:59] Speaker 03: I think our only point about prior year rins is that they are, everybody agrees with us that they are available to be retired to show compliance. [00:26:08] Speaker 03: True enough. [00:26:10] Speaker 03: And the statute says available, these rins are available. [00:26:13] Speaker 03: So really, you can think about the volume available for compliance is by definition equal to the number of RINs that are available to be retired. [00:26:26] Speaker 03: That's just what RINs are. [00:26:27] Speaker 03: They're a record-keeping system to track of which volumes of fuel are available to be counted towards compliance. [00:26:37] Speaker 03: Fish Pillard, you also asked about this issue of drawing down the RIN bank. [00:26:42] Speaker 03: And I think it gets to a broader point, which is that we believe our interpretation is really the only one here that gives effect to Congress's choices about how to stabilize the cellulosic market, both on the supply side and on the demand side. [00:26:59] Speaker 03: So on the supply side, to deal with the problem of insufficient supply, Congress created cellulosic waiver credits. [00:27:08] Speaker 03: These credits are illiquidity. [00:27:10] Speaker 03: I think that's undisputed. [00:27:12] Speaker 03: When those credits are available, cellulosic wins will never be too scarce or too expensive for obligated parties to be able to comply with their cellulosic obligations. [00:27:23] Speaker 03: They can just buy cellulosic waiver credits. [00:27:26] Speaker 03: But insufficient supply is just one side of the coin. [00:27:30] Speaker 03: There's also insufficient demand. [00:27:34] Speaker 03: And under our reading, and only our reading, Congress addressed the problem of insufficient demand as well. [00:27:40] Speaker 03: Specifically, Congress directed EPA to set the required cellulosic volume at the projected volume available for the clients. [00:27:49] Speaker 03: That ensures that demand is high enough to soak up all of the volume that is available for compliance. [00:27:58] Speaker 03: Insufficient demand is not just a theoretical problem. [00:28:01] Speaker 03: It really actually happened in 2018 and 2019. [00:28:05] Speaker 03: over a multi-year period, there was a buildup of the carryover RIN bank, and cellulosic RIN prices crashed from $3 down to about $0.50. [00:28:16] Speaker 03: And our interpretation takes dead aim at that problem. [00:28:21] Speaker 03: It addresses that problem directly. [00:28:24] Speaker 03: EPA automatically would have set demand high enough to soak up all of the extra supply in the form of those carryover [00:28:35] Speaker 03: So EPA stresses this idea of compliance flexibility. [00:28:40] Speaker 03: We understand that's a real issue, but Congress addressed it specifically and in detail in the provision dealing with cellulosic waiver credits. [00:28:50] Speaker 03: But EPA's interpretation leaves the program with no way to deal with the problem of insufficient demand. [00:28:55] Speaker 03: And if there's insufficient demand, that's a big problem for this program, because the whole point of the program is to incentivize production by having sufficient demand and having that demand increase year over year. [00:29:08] Speaker 03: So our interpretation is the only one that has automatic stabilizers in both directions, so that supply and demand stay in balance. [00:29:19] Speaker 02: Thank you, Council. [00:29:21] Speaker 02: We're from EPA's Council now. [00:29:34] Speaker 02: Skimble. [00:29:36] Speaker 06: Good afternoon. [00:29:37] Speaker 06: May it please the court? [00:29:38] Speaker 06: I'm Department of Justice Trial Attorney Kerry Kimball here today on behalf of the EPA. [00:29:42] Speaker 06: With me is my colleague Caitlin McCusker, also from DOJ, and also Susan Staley from EPA. [00:29:48] Speaker 06: Ms. [00:29:48] Speaker 06: McCusker and I will be dividing our time today. [00:29:50] Speaker 06: I will address refiners arguments regarding the 2022 volume requirements. [00:29:55] Speaker 06: I will then address refiners arguments regarding EPA's reaffirmance of the revision of the percentage standard formula. [00:30:01] Speaker 06: And my colleague Ms. [00:30:02] Speaker 06: McCusker will address all of biofuels arguments as well as the supplements. [00:30:07] Speaker 06: Thank you. [00:30:09] Speaker 06: EPA reasonably set and fully explained the 2022 volume requirement for total renewable fuel and advanced biofuel under its reset authority. [00:30:18] Speaker 06: EPA used the structure of renewable fuel volumes Congress set forth in the statute. [00:30:23] Speaker 06: 36 billion and modified those volumes from 36 billion for total renewable fuel down to 20.63 for total and from 21 billion gallons for advanced fuel down to 5.63 billion gallons for advanced. [00:30:38] Speaker 06: EPA did that with consideration of both the implementation of the program and also the statutory factors. [00:30:47] Speaker 06: The statute sets forth both qualitative assessments like environmental impacts, infrastructure development, and social impacts, job creation, and rural economic development, and also more quantitative assessments like consumer costs of transportation fuel and other factors. [00:31:02] Speaker 06: Notably, the statute leaves EPA full discretion to determine both how to assess each of these factors and how to weigh them against each other. [00:31:10] Speaker 06: As this court has explained, when the statute does not state what weight to give, what weight should be accorded to the relevant factors and instead gives EPA discretion to make those determinations, EPA has given considerable discretion to weigh and balance the various factors required by the statute. [00:31:30] Speaker 10: Here, EPA can- [00:31:32] Speaker 10: unlimited though. [00:31:34] Speaker 10: That's correct. [00:31:35] Speaker 10: And so you have your RIA has this very striking chart at the beginning and it seems very thorough in listing out costs and benefits. [00:31:51] Speaker 10: It's also very striking in that it contains exactly two numbers. [00:31:57] Speaker 10: One is the benefit [00:31:59] Speaker 10: of increased energy security, which you quantify it 294 million. [00:32:04] Speaker 10: Another is the cost of increased fuel, which you quantify at seven billion with a B. So where and you know the other [00:32:16] Speaker 10: The other huge one is obviously greenhouse gas emissions, for which you give an illustration and you sort of ask us to ignore it, but you sort of ask us to consider it. [00:32:32] Speaker 10: Where in EPA's analysis do you, what's the rationale for saying that the [00:32:39] Speaker 10: 294 million and other benefits outweigh the seven billion and many other costs. [00:32:48] Speaker 06: At JA 24 to 26, EPA explained how it balanced the factors and it explained that the qualitative factors like the production of consumer fuel and the necessity to incentivize the program or incentivize renewable fuels. [00:33:06] Speaker 10: You said it. [00:33:08] Speaker 10: You said we've looked at all of these and we think one side outweighs the other. [00:33:13] Speaker 10: But where's the explanation? [00:33:15] Speaker 10: And the best I could find is this. [00:33:19] Speaker 10: Bottom of 24 is Decelli-Lossack, and you say some factors, such as fuel cost, cut in one direction, others, such as climate change, cut in the other, and we believe one outweighs the other. [00:33:38] Speaker 10: And that's a statement of the conclusion of the balancing. [00:33:41] Speaker 10: It's not a rationale. [00:33:43] Speaker 06: So throughout 24 to 26, EPA explained that it placed a lot of emphasis on the structure that Congress set up. [00:33:51] Speaker 06: So Congress set up a structure that was nested and started with the cellulosic and then advanced and then total. [00:33:59] Speaker 06: And it retained that structure. [00:34:02] Speaker 06: and retain that structure so that it was maintaining the structure while also considering all of the factors. [00:34:12] Speaker 06: And when considering all of the factors, it considered the production of renewable fuels, considered that production was directly in line with what it was proposing as the volume for the reset. [00:34:25] Speaker 06: It also considered that more social benefits like rural economic development and job development and the incentivizing of the infrastructure for advanced biofuels and for total renewable fuels, that all of those factors weighed in favor of not reducing the volumes more. [00:34:52] Speaker 10: Maybe, but I mean, your own chart shows, I don't know, one, two, three, four, seven, 10 to 15 costs, which are on the other side, most of which are environmental costs. [00:35:16] Speaker 10: What's the rationale for ignoring impacts [00:35:20] Speaker 10: impacts on air quality, biofuel production, impacts on wetlands, ecosystems and wildlife, land use change, impacts on soil and water quality from biofuel, food stock production, impacts on water quantity, et cetera. [00:35:37] Speaker 06: PPA is certainly not ignoring those factors. [00:35:40] Speaker 06: It's considering all... Fair enough. [00:35:42] Speaker 10: What's the rationale for saying that all of that is outweighed by [00:35:48] Speaker 10: reduced greenhouse gas emissions or the 294 million in increased energy security benefits. [00:35:58] Speaker 06: And also the production of the renewable fuels and the incentivizing of the structure. [00:36:04] Speaker 06: The whole point of the statutory scheme is to incentivize renewable fuels. [00:36:09] Speaker 06: So reducing beyond and renewable fuels have always been more costly than conventional fuels. [00:36:15] Speaker 06: So always there has been a monetary cost to this program. [00:36:19] Speaker 06: And EPA explains that maintaining that structure, maintaining congressional intent was important. [00:36:26] Speaker 06: And so there wasn't a justification for decreasing the volumes even more down below where fuels are being produced. [00:36:38] Speaker 06: which also gets to my colleague's point regarding the retroactive nature of the rule. [00:36:45] Speaker 06: The 2022 rule was partially retroactive, and EPA explicitly considered what volumes had been produced in that rule. [00:36:53] Speaker 06: It considered the fact that there had been substantial increase in production of or increase in generation of RINs in 2022 versus 2020 and 2021, which is expected because the pandemic [00:37:05] Speaker 06: the volume should be upheld. [00:37:16] Speaker 06: I'll move on to the formula unless there are further questions on the volume. [00:37:22] Speaker 06: EPA also reasonably reaffirmed its provision of the percentage standard formula to address projections of all fuels expected to be exempted through small refinery exemptions. [00:37:32] Speaker 06: Pursuant to its statutory mandate to determine and publish annual percentage standards that ensure that the volume requirements are met, the formula takes volume requirements for each fuel type and divides it by the total fuel subject to the RFS regulation. [00:37:46] Speaker 06: Since inception of the program, EPA has removed an amount of fuel projected to be exempted for small refinery exemptions at the time of the rule from the total fuel in the denominator. [00:37:58] Speaker 06: As we approach 2020, EPA was granting more and more small refinery exemptions after the grant rule, and the percentage standard formula was no longer meeting, was no longer ensuring that the volume requirements were met. [00:38:14] Speaker 06: that the way to best achieve the statutory mandate to ensure that the volume requirements were met, to project the fuel that would be exempted using the policy in place and to do so on an annual basis, in order to ensure that all fuel that's in the denominator is fuel that's in the RFS system. [00:38:39] Speaker 06: Because EPA fully explained this rationale, so the standard formula should be upheld. [00:38:44] Speaker 06: If the court has no further questions, then I'll turn it over to my colleague. [00:38:51] Speaker 02: Thank you, counsel. [00:39:01] Speaker 01: Ms. [00:39:01] Speaker 02: McCusker. [00:39:02] Speaker 01: Good morning, Your Honors. [00:39:03] Speaker 01: I'm Caitlin McCusker from the Department of Justice here on behalf of EPA. [00:39:07] Speaker 01: I wanted to start with the biofuels producers' arguments, then I can turn to the supplemental standards. [00:39:12] Speaker 01: With respect to the cellulosic waiver, EPA interpreted the phrase projected volume available during that year, during that calendar year, as it always has, to include actual fuel, not credits representing fuel from the prior year. [00:39:27] Speaker 01: That interpretation is consistent with the plain language of the statute and the statute's purpose and structure. [00:39:32] Speaker 01: And this exact distinction is the one that this court recognized in ACE. [00:39:36] Speaker 01: There's a distinction between actual fuel and credits that represent that fuel. [00:39:41] Speaker 01: A word about my colleague. [00:39:43] Speaker 09: How so? [00:39:44] Speaker 09: Can you give us just a little bit more practicality? [00:39:47] Speaker 09: Because surely Mr. Perdue is right that a RIN is a RIN in the sense that it only comes in being if fuel is produced. [00:39:57] Speaker 01: Sure. [00:39:58] Speaker 01: And this goes to my colleague's notion that we agree that the fuel has to be available for clients. [00:40:04] Speaker 01: We do agree that the actual fuel needs to be RIN generating fuel. [00:40:08] Speaker 01: We are not reading in a limitation to the statute that's not there. [00:40:12] Speaker 01: The phrase itself limits itself to the projected volume available during that calendar year. [00:40:18] Speaker 01: That's where the difference comes in. [00:40:19] Speaker 09: Well, it's available. [00:40:20] Speaker 09: It's just not projected to have been first made available during that calendar year, to be produced during that calendar year. [00:40:27] Speaker 01: The fuel that the VRIN represents, though, is from the prior year. [00:40:31] Speaker 01: Yeah, no, I get that. [00:40:32] Speaker 09: I'm just looking at the language and trying to push back on [00:40:37] Speaker 09: on your reading. [00:40:38] Speaker 09: So you don't agree, it sounds like Mr. Producer, you don't agree with the interveners that equate the volume of cellulosic biofuel production in the first clause with the projected volume available during the calendar year. [00:40:56] Speaker 01: EPA didn't resolve that statutory question whether those two terms could be ensured to mean the same thing. [00:41:03] Speaker 01: But I do think that my colleagues point that the earlier projection referring to actual fuel is illustrative that when we're talking here, we're again talking about fuel and not credits representing fuel. [00:41:18] Speaker 01: The biofuels interpretation would have this word require EPA to include RINs, which would functionally eliminate the RIN bank. [00:41:24] Speaker 01: This court has observed that the RIN Bank is of vital importance to the RFS program and the renewable fuels market. [00:41:30] Speaker 01: Their policy arguments also missed the mark. [00:41:33] Speaker 01: There's no support for them in the record, and in any case, they're not a reason to rewrite the statute. [00:41:38] Speaker 11: With respect to your reliance on ACE, because I take the point that their ACE also construed something that's somewhat analogous, but then that didn't have the textual features that the other side is relying on to make the argument that there's a difference between [00:41:55] Speaker 11: cellulosic biofuel production and projected volume available. [00:42:00] Speaker 01: I'm sorry, could you repeat that question? [00:42:03] Speaker 11: Yeah, so you rely on ACE for the proposition that there was a similar issue that came up in ACE that had to do with whether you count [00:42:12] Speaker 11: the rents, they carry over rents. [00:42:16] Speaker 11: And if you apply that same analysis here, then EPA's interpretation would prevail. [00:42:22] Speaker 11: And I guess what I'm saying is, but that issue in ACE didn't involve the same statutory language that is involved here. [00:42:30] Speaker 11: And the argument that's being made under the statutory language that's involved here is that there's two phrases that matter. [00:42:36] Speaker 11: One is projected volume of cellulosic biofuel production. [00:42:39] Speaker 11: And the other is projected volume available. [00:42:42] Speaker 11: And they're different. [00:42:42] Speaker 11: And your resolution ends up equating them. [00:42:49] Speaker 01: Well, I think that it's not necessarily the case that they're equivalent. [00:42:52] Speaker 01: EPA hasn't always been consistent in how it's interpreted the projected volume of cellulosic production. [00:42:59] Speaker 01: Sometimes it's suggested that it may not include imports, which would be a difference between the two firms. [00:43:05] Speaker 01: But I think going back to ACE, the analogy between the two statutes is that, first of all, they're both involving EPA's effort to establish annual volumes for the year. [00:43:18] Speaker 01: Neither of the provisions mentions credits, which if Congress wanted to include credits, it knew how to reference those credits which are promulgated or initially set up in paragraph five of the statute. [00:43:33] Speaker 01: They didn't make any mention to that. [00:43:35] Speaker 01: And it's true, there are some differences between the statutes, but I think those textual differences, ACE supports observance of the fact that the market doesn't pursue market, or the statute doesn't pursue market forcing at all costs, and the critical importance of RINs to the program, that rationale applies with equal force to the statutory provision here. [00:43:56] Speaker 09: You're also talking about the supplemental requirement? [00:43:59] Speaker 09: Yes. [00:44:00] Speaker 09: So you say in the final rule that the total renewable fuel obligation for 2022 is 20.87 billion gallons, the 20.63 plus the 250 million gallons for the supplemental standard. [00:44:15] Speaker 09: But the assessment under the reset authority only considers the 20.63 billion gallon amount. [00:44:25] Speaker 09: Why shouldn't the reset authority analysis have been applied to the entire [00:44:32] Speaker 01: So EPA promulgated the supplemental standard pursuant to a different statutory authority and a different rationale. [00:44:42] Speaker 01: With respect to the interplay between the supplemental standard and the reset analysis, I'll note at the outset the petitioners haven't challenged the reset analysis on this basis. [00:44:53] Speaker 01: The reset analysis required EPA to balance a multitude of factors and establish an appropriate volume for the year. [00:44:59] Speaker 01: That's what EPA did. [00:45:02] Speaker 01: The supplemental standard was an effort to respond to this court's remand in ACE. [00:45:07] Speaker 01: EPA's authority to do that was based on its original authority to promulgate standards in the first instance. [00:45:14] Speaker 01: And so, EPA viewed these as separate exercises. [00:45:17] Speaker 01: And although it ensured that both standards were feasible and achievable, it kept its analyses separate. [00:45:24] Speaker 09: Is it reasonable to subject obligated parties that weren't even in the market in 2016 to the supplemental obligation in 2022? [00:45:35] Speaker 01: Your honor, EPA felt that it had to take a concrete step to address this court's remand. [00:45:40] Speaker 01: Any approach that it considered would have imposed some burden on some obligated parties. [00:45:45] Speaker 01: Reopening 2016 compliance would have been particularly difficult and likely infeasible because it would have involved unwinding years of compliance. [00:45:55] Speaker 01: It's also true that obligated parties have since exited the market, meaning that if EPA had imposed this as a retroactive 2016 standard, it would have been setting up the program to either fall short or would have had to redistribute that obligation across other obligated parties. [00:46:13] Speaker 01: So EPA just felt that that wasn't a good option. [00:46:15] Speaker 01: And in fact, that the approach it took was better mitigated. [00:46:20] Speaker 09: Why not just max out the cellulosic waiver authority? [00:46:25] Speaker 01: EPA did look at that. [00:46:28] Speaker 01: And it found that the application of either the general waiver or the discretionary component of its cellulosic waiver wasn't supported by the record. [00:46:37] Speaker 01: In particular, with hindsight, we know that the 2016 market outperformed. [00:46:41] Speaker 01: That means it generated 800 million excess RINs. [00:46:44] Speaker 01: So the notion that the 2016 market conditions would support application of either of those waivers is unfounded. [00:46:51] Speaker 01: And it looked at the market in 2022 and determined that [00:46:54] Speaker 01: the volumes that was both feasible and achievable. [00:46:58] Speaker 10: Ask your colleague about cost and benefit of the 22 volumes, and she rightly [00:47:07] Speaker 10: defended them as the agency wants to push the outer limits. [00:47:13] Speaker 10: And renewable fuel is good under this scheme, more renewable fuel is better. [00:47:18] Speaker 10: And you even said that the volumes you're setting are higher than what the market has produced. [00:47:29] Speaker 10: I mean, if you're saying all of that to set a very aggressive volume level, it just seems really tough to then say, like, completely divorced from any, all of that, we're gonna just add in this other obligation, the amount of which has nothing to do with what's feasible for 22. [00:47:55] Speaker 01: Well, I don't know that we'd agree that it was an aggressive volume that we set under the reset factors for total renewable fuel. [00:48:02] Speaker 01: Is that what we thought was an appropriate volume, but it wasn't a maximum achievable volume. [00:48:07] Speaker 01: And EPA did do a feasibility and achievability analysis for the supplemental standard. [00:48:13] Speaker 01: and the Total Renewables Standard and found that the market. [00:48:16] Speaker 10: Sorry, you said we acknowledge the implied conventional volume is higher than the volume of these fuels projected and consumed in the US in 2022. [00:48:27] Speaker 10: Yes. [00:48:29] Speaker 10: All of that is before you get to this additional obligation. [00:48:33] Speaker 01: Yes, your honor. [00:48:34] Speaker 01: My understanding is that the data that they were looking at when they were setting the 2022 total volume was based on the growth that they were already seeing in the market. [00:48:42] Speaker 01: So I don't think it was aggressive by any means. [00:48:48] Speaker 01: I wanted to say a word about my colleague's suggestion that EPA could have allowed the use of 2015 and 2016 RINs. [00:48:57] Speaker 01: That's not the case. [00:48:58] Speaker 01: Doing so would have been inconsistent with the statute. [00:49:01] Speaker 01: Paragraph O5C provides that RIN spans have a lifespan of 12 months. [00:49:07] Speaker 01: Allowing the use of 2015 and 2016 RINs would have been contrary to that. [00:49:11] Speaker 01: Moreover, EPA explained at JA 533 to 34 that it couldn't confirm that the RINs that people had in their accounts were valid. [00:49:23] Speaker 01: And so the representation that those RINs necessarily represent actual fuel or over compliance is not one that EPA would agree with. [00:49:31] Speaker 09: You don't mean valid as in unexpired because of course they were all expired. [00:49:35] Speaker 09: So what is the validity concern? [00:49:37] Speaker 01: So EPA, the way the program works is on a buyer beware system. [00:49:42] Speaker 01: When obligated parties retire rins, they are responsible for ensuring the validity of those rins. [00:49:50] Speaker 01: It's not unusual that parties would have older vintage rins in their accounts. [00:49:55] Speaker 01: And sometimes that happens because they determine that they're not valid. [00:49:58] Speaker 01: They don't actually represent fuel. [00:50:00] Speaker 01: And so they don't trade them any further. [00:50:03] Speaker 01: They don't use them for compliance. [00:50:05] Speaker 01: They just kind of sit in the system. [00:50:06] Speaker 01: And EPA explained that it didn't, given the passage of time, have the ability to go back and confirm the validity of it. [00:50:12] Speaker 09: Can you just give me just like a little illustration of what would be the source of an invalid rent? [00:50:19] Speaker 09: Just some scenario or example. [00:50:22] Speaker 09: Sure. [00:50:22] Speaker 01: A party could hold a RIN for fuel that was ultimately exported. [00:50:25] Speaker 01: And that RIN would no longer be valid. [00:50:28] Speaker 01: It should be retired upon being exported. [00:50:31] Speaker 01: But if it wasn't, it would just sit in the account. [00:50:34] Speaker 01: And a party wouldn't likely use that for compliance. [00:50:38] Speaker 09: With the passage of time, it's just harder to check on. [00:50:41] Speaker 09: Correct. [00:50:43] Speaker 11: What's the reason not to back out, once again, [00:50:47] Speaker 11: the obligated parties that didn't exist in 2016. [00:50:52] Speaker 01: I think just administrative possibility, EPA and also consistency with the sort of theory of what EPA was doing, which is that it was imposing a 2022 standard. [00:51:05] Speaker 01: It was using the gas and diesel projections for the year that it used for the 2022 standards otherwise. [00:51:14] Speaker 01: And it just would have been, I think, inconsistent if it had backed out certain obligated parties. [00:51:20] Speaker 09: put disproportionate burden on the remaining parties is one thing you had mentioned. [00:51:26] Speaker 01: Correct. [00:51:26] Speaker 01: I was speaking about that if they had gone back to 2016, but I think that general concept would be true here, too. [00:51:34] Speaker 01: I just wanted to say, I see I'm out of time, but one quick word about the reset, which is that there's no dispute that EPA conducted a reset analysis for the cellulosic biofuel. [00:51:46] Speaker 01: The argument amounts to basically that the reset analysis is required to come out in the same way as the cellulosic waiver analysis. [00:51:55] Speaker 01: That's not what the statute says. [00:51:57] Speaker 01: It doesn't incorporate the scope of the other waivers in its framework, even if that's what led to its triggering. [00:52:04] Speaker 01: Thank you, Your Honor. [00:52:05] Speaker 01: I appreciate your time. [00:52:06] Speaker 01: And for those reasons, we think that all the questions should be today. [00:52:09] Speaker 02: Thank you, counsel. [00:52:10] Speaker 02: Mr. Bregato. [00:52:19] Speaker 08: Good afternoon, Your Honors, and may it please the court. [00:52:21] Speaker 08: Thomas Bregato on behalf of the American Petroleum Institute and American Fuel and Petrochemical Manufacturers. [00:52:28] Speaker 08: Our position is that the phrase projected volume available unambiguously refers to actual physical cellulosic biofuel produced during the calendar year that is available for compliance and not credits carried over for a prior year. [00:52:42] Speaker 08: I think there are three textual indicators and statute that compel that confusion. [00:52:47] Speaker 08: So looking at the statute, first says projected volume of cellulosic biofuel production. [00:52:53] Speaker 08: Nobody disputes that that refers to actual physical cellulosic biofuel production during the year. [00:53:00] Speaker 08: Then it goes on to say, projected volume available. [00:53:04] Speaker 08: We think that the repeated use of projected volume is key, shorthand. [00:53:08] Speaker 08: It's referring back to the same projected volume referred to in the first clause of this provision. [00:53:14] Speaker 08: Now it's true that there's an additional word here, that word's available. [00:53:18] Speaker 08: but it serves a different purpose than the ones that one biofuels petitioner suggest. [00:53:22] Speaker 08: The word available requires EPA to conduct an evaluation of whether the projected biofuel is actually available to be used for compliance. [00:53:31] Speaker 08: There are circumstances such as when fuels exported are not used for transportation fuel, which makes it not available. [00:53:38] Speaker 08: So available serves a narrowing function, not an expanding function as biofuel petitioners contend. [00:53:45] Speaker 08: Second textual clue. [00:53:46] Speaker 08: The term volume is used four times in this sentence. [00:53:49] Speaker 08: Projected volume, minimal applicable volume, applicable volume, and projected volume. [00:53:55] Speaker 08: The first three, undisputed, all refer to actual physical volumes of fuel. [00:54:00] Speaker 08: The fourth one would be an anomaly. [00:54:02] Speaker 08: There's no explanation as to why it should be construed to include credits in addition to actual physical fuel. [00:54:10] Speaker 11: It is actual physical fuel. [00:54:12] Speaker 11: It's just from a different year, right? [00:54:14] Speaker 08: Well, it's not. [00:54:15] Speaker 08: If you look at biofuel petitioners brief, they say that the rins reflect physical fuel. [00:54:21] Speaker 08: They're not themselves physical fuel, and our contention would be that the rins do not fall within the definition of volume, because everywhere in the statute, and this is a third point, [00:54:31] Speaker 08: Everywhere in the statute where the term volume is used, it's referring to actual physical fuel, not credits. [00:54:37] Speaker 08: When Congress refers to credits, it says credits. [00:54:39] Speaker 08: And it does that plenty of times throughout the statute. [00:54:42] Speaker 08: So we think that trying to ram in credits into the word volume on its own is textually not supported by the structure of the statute. [00:54:51] Speaker 08: And these additional textual clues make that conclusion clear. [00:54:55] Speaker 08: Just a quick word about the court's decision in ACE. [00:54:59] Speaker 08: I think the case here is even stronger than an ACE, that credits don't count. [00:55:03] Speaker 08: An ACE at issue is the word supply, and supply is not a commonly used term. [00:55:09] Speaker 08: fuel standard statute. [00:55:10] Speaker 08: The court had no problem concluding that supply referred to supply of renewable fuel and not supply of renewable fuel plus credits. [00:55:19] Speaker 08: We have a similar situation here. [00:55:20] Speaker 08: It's just with the term volume. [00:55:22] Speaker 08: And as I've explained, volume is consistently used to refer to actual fuel and not credits. [00:55:28] Speaker 08: So the case here, I think, is even clearer than an ACE. [00:55:31] Speaker 08: That volume cannot be construed to include credits, can only be interpreted as referring to actual fuel produced during the calendar year. [00:55:37] Speaker 11: Can I just ask you this one question? [00:55:38] Speaker 11: So the last phrase is projected volume available. [00:55:42] Speaker 11: One thing that Congress could have done is instead of used available, they could have used produced. [00:55:47] Speaker 11: And then it would have been a direct equivalence between the first phrase for any calendar year for which the projected volume of cellulosic biofuel production, that would have been projected volume produced. [00:55:59] Speaker 11: But you think that it was intentional actually not to use produced and to use available because they meant to do something narrower than what's produced. [00:56:07] Speaker 08: Correct, Your Honor. [00:56:07] Speaker 08: Congress intended to account for a situation where biofuel would be produced, but for some reason not ultimately be available for compliance purposes. [00:56:16] Speaker 08: Again, that could be if the fuel was exported or if the fuel was not used for transportation. [00:56:21] Speaker 08: So available serves as a check basically against overestimating the amount of fuel that would actually be available for use for compliance purposes. [00:56:29] Speaker 11: And would that not also apply to the first two [00:56:33] Speaker 11: cellulosic biofuel production, would there not have also been the felt need to exclude from that figure the stuff that's unavailable for compliance? [00:56:41] Speaker 08: Well, in the first use of the phrase, we think it's a broader use because it's just asking about what's produced. [00:56:49] Speaker 08: That phrase is not asking about whether the production is, in fact, going to be eligible for RFS compliance purposes. [00:56:56] Speaker 11: But yeah, I guess then what I'm asking is, does that make sense? [00:56:59] Speaker 11: If Congress is saying, in a situation in which blank is less than the statutory amount, then go and reduce it. [00:57:09] Speaker 11: Does it make sense to think of blank as everything that's been produced? [00:57:14] Speaker 11: Or would it make more sense to think of blank as only that which has been produced and is available? [00:57:20] Speaker 08: But I think the text supports the conclusion that it's everything that's been produced. [00:57:24] Speaker 08: And I think that's in part because it's supposed to be a pretty technocratic decision with respect to the first clause. [00:57:30] Speaker 08: EPA is making its decision based on an energy information administration estimate. [00:57:35] Speaker 08: And the EIA is not in the business of determining whether fuel is eligible or not. [00:57:40] Speaker 08: So you have this first more technocratic determination of what is produced, and then you go on to this EPA expertise decision of whether it's actually available in the second clause. [00:57:53] Speaker 02: Thank you, counsel. [00:57:54] Speaker 08: Thank you. [00:57:59] Speaker 02: Dawson, I think you asked for one minute. [00:58:01] Speaker 11: We'll give you one minute. [00:58:04] Speaker 09: Before we start, can I ask you a question about the statute forbids the imposition of redundant obligations [00:58:10] Speaker 09: on any person. [00:58:12] Speaker 09: that's what we're talking about. [00:58:13] Speaker ?: Um. [00:58:13] Speaker 09: 0 3 C one. [00:58:13] Speaker 09: Can you give me example of what that's referring to? [00:58:16] Speaker 04: So your honor, EPA has not definitively interpreted that provision through our understanding, but we believe that the reallocation framework does run a foul of this provision in that if EPA is wrong, if EPA projects exemptions that don't end up getting, uh, exempted, then you have the [00:58:41] Speaker 04: a small refinery or any refinery complying with the same obligation twice. [00:58:46] Speaker 04: It just means effectively that EPA set the standard to apply. [00:58:50] Speaker 04: Turning to the two quick points on rebuttal. [00:58:53] Speaker 04: First, to clear up any confusion, we did raise the issue that EPA had to apply the reset supplemental on brief page 35 and clearing up confusion on EPA's part reply brief page 18. [00:59:06] Speaker 04: And the second point is, as just Judd Katz has pointed out, excuse me, [00:59:10] Speaker 04: EPA's explanation of the disparity between the costs and benefits leaves something to be desired. [00:59:15] Speaker 04: And ultimately, the rationale is simple, that it just wanted to increase renewable fuel. [00:59:19] Speaker 04: But that ignores entirely the circumstances animating the reset. [00:59:25] Speaker 11: Thank you, counsel. [00:59:27] Speaker 11: Mr. Perdue, we'll give you two minutes, because we added time for the position that's acute contrary to yours. [00:59:34] Speaker 11: So we'll give you two minutes to respond to that. [00:59:36] Speaker 11: Thank you. [00:59:37] Speaker 03: EPA and the interveners try to frame this case as being a dispute about the volume of what? [00:59:42] Speaker 03: Volume of fuel versus volume of... That's not what this case is about. [00:59:47] Speaker 03: We agree with EPA that volume here means the volume of RIN-generating fuel. [00:59:55] Speaker 03: The question is, is it all of the RIN-generating fuel or just some of it? [01:00:00] Speaker 03: Do you think it's all of the fuel that generates RINs that can be retired in the relevant year? [01:00:05] Speaker 03: whether they're present year, present year vintage or carryover. [01:00:08] Speaker 09: Or all of the wind generating fuel that was produced in the year. [01:00:13] Speaker 03: But let me address that directly, I think. [01:00:15] Speaker 03: So the statute's got three terms, three volumetric terms, and all of them are different. [01:00:22] Speaker 03: There's the projected volume of cellulosic biofuel production, there's the volume of cellulosic biofuel required, and there's the projected volume available. [01:00:32] Speaker 03: Congress used three different terms because it was talking about three different things. [01:00:35] Speaker 03: And I think it's important to emphasize that EPA does not believe that the last term is a subset of the first. [01:00:43] Speaker 03: That's not their position. [01:00:44] Speaker 03: That's the intervener's position. [01:00:46] Speaker 03: It's not EPA's. [01:00:47] Speaker 03: That's because in EPA's view, the first term is production, and in EPA's view, the last term includes net imports. [01:00:57] Speaker 03: So, net imports are not a subset of domestic production. [01:01:02] Speaker 03: You've got to include net imports, and for exactly the same reasons that you include net imports, you should include carryover rates. [01:01:08] Speaker 03: They are available for compliance. [01:01:10] Speaker 03: That's as simple as that. [01:01:12] Speaker 03: The last thing I want to say is just a word about ACE. [01:01:14] Speaker 03: It was brought up multiple times. [01:01:17] Speaker 03: ACE involved a different statutory provision with different statutory text as applied to a different [01:01:24] Speaker 03: fuel category. [01:01:26] Speaker 03: Ace contains some general discussion about carryover rins, but all this court actually concluded in that case is that it was within the EPA's discretion under the discretionary general waiver for EPA to consider the possibility that without a rin bank [01:01:44] Speaker 03: um, obligated parties might have no way to comply with the total renewable fuel obligation. [01:01:51] Speaker 03: Um, that just has no application here where this, this provision of the statute is mandatory. [01:01:56] Speaker 03: Um, and because of cellulosic waiver credits, you can't have a situation where obligated parties are simply unable to comply. [01:02:03] Speaker 03: Cellulosic waiver credits mean they can't comply. [01:02:07] Speaker 02: Thank you, council. [01:02:07] Speaker 02: Thank you to all council. [01:02:09] Speaker 11: We'll take this case under submission.