[00:00:01] Speaker 01: Case number 23-1248, Coalition for Renewable Natural Gas Petitioner versus Environmental Protection Agency. [00:00:09] Speaker 01: Mr. Ellis for the petitioner, Ms. [00:00:11] Speaker 01: Kimball for the respondent, statutory authority for the biogas regulations, Mr. Poporo for the respondent, arbitrary and capricious and procedural challenges. [00:00:27] Speaker 04: May it please the court, Jonathan Ellis on behalf of the Coalition for Renewable Natural Gas. [00:00:32] Speaker 04: The renewable fuel standard is unique among EPA's regulatory programs. [00:00:36] Speaker 04: Rather than command and control, the RFS is designed to act as a market forcing mechanism to incentivize the creation of renewable fuels and the environmental benefits that come with them. [00:00:48] Speaker 04: For a decade after EPA permitted renewable natural gas to participate in that program, the design worked. [00:00:54] Speaker 04: The creation of RNG increased fourfold on the back of substantial investments by the regulated community. [00:01:00] Speaker 04: Today, transportation fuel created from RNG accounts for nearly all cellulosic biofuels that were created in the RNG program or our FEST program. [00:01:10] Speaker 04: And there have been no reported incidents of fraud. [00:01:13] Speaker 04: We're here this morning because several unlawful changes in the biogas reforms threaten that success. [00:01:20] Speaker 04: In the biogas reforms, EPA almost completely rewrote the regulatory program for RNG. [00:01:25] Speaker 04: It rewrote the rules for how parties register, test, record, and report their activities, and how they create and separate the credits for renewable fuels, called rents, all to guard against the potential for fraud. [00:01:37] Speaker 04: Now, to be clear, to the extent those requirements roughly align the production and regulation of RNG with other renewable fuels, we don't take issue with them. [00:01:48] Speaker 04: Importantly, that includes the use of the EPA's Moderated Transaction System, or RENS created from RNG, and replacing the need for our EPA to review a complicated set of related contracts to verify the proper creation and retirement of RENS from RNG. [00:02:06] Speaker 04: In several respects, however, the biogas reforms [00:02:09] Speaker 04: went well beyond the regulatory requirements that EPA imposes on the creation of other renewable fuels and beyond any reasonable fraud protective measures. [00:02:18] Speaker 04: Although I'm happy to address any aspect of our challenge this morning, I'd like to focus the court on three components of the biogas reforms that we find most problematic. [00:02:27] Speaker 04: First, the direct regulation of biogas producers. [00:02:31] Speaker 04: Second, the prescriptive continuous measurement requirements for biogas producers and RNG producers. [00:02:37] Speaker 04: and third, the annual pipeline quality testing requirements. [00:02:42] Speaker 04: First, the direct regulation of biogas producers. [00:02:46] Speaker 04: EPA claims authority for the direct regulation of these entities based on their responsibility and obligation under section 02A1 to ensure that RFS volume obligations are met. [00:02:59] Speaker 04: But 02A3 tells EPA specifically who is to be the subject of compliance regulations under that provision. [00:03:07] Speaker 04: It is the obligated parties, the refiners, the distributors, importers and blenders of transportation fuel, not dairy farmers, and cities and counties operating landfills and municipal wastewater facilities. [00:03:18] Speaker 05: So if the statute didn't have clause three, would you agree that clause one, which essentially says EPA shall ensure that the renewable fuel targets are met, [00:03:29] Speaker 05: Would that naturally be read to include the ability to regulate anybody in the production chain, including biogas producers? [00:03:36] Speaker 04: I still think we have concerns about how far that goes. [00:03:38] Speaker 04: It's a vague term and I don't think that that you could read that to reach back the entire production chain all the way. [00:03:44] Speaker 04: I take it on EPA's reading to the trash I put outside my door that's eventually going to be in the production chain here. [00:03:52] Speaker 04: But I don't think that's really an issue here because of the O2A3, which tells EPA exactly who it's supposed to regulate there. [00:04:01] Speaker 05: Absolutely. [00:04:03] Speaker 05: The idea is that it at least seems to me that you're asking us to read subclause three as creating a limitation on power. [00:04:12] Speaker 05: And I'm just wondering how you get there with the words that it uses. [00:04:15] Speaker 05: So it says shall contain. [00:04:18] Speaker 05: It does not say shall only contain. [00:04:22] Speaker 05: you know, shall regulate these parties but not others. [00:04:24] Speaker 05: So how do we, why should we read it as a limitation on EPAs otherwise applicable? [00:04:29] Speaker 04: Yeah, so two answers to that, Your Honor. [00:04:31] Speaker 04: The first is I think, you know, this is the idea that it has to be a floor or it's a floor, not a ceiling. [00:04:36] Speaker 04: And I don't think that can work. [00:04:38] Speaker 04: I mean, what the provision says goes on to say. [00:04:40] Speaker 04: is that it shall contain compliance provisions applicable to refiners, lenders, distributors, and importers, quote, as appropriate. [00:04:48] Speaker 04: And so it doesn't even require EPA to regulate those entities. [00:04:51] Speaker 04: So the idea that it is a floor doesn't make a great deal of sense. [00:04:55] Speaker 04: The second thing I'd point out is that I don't think that this court's decision in heeding [00:05:00] Speaker 04: AC and refrigeration distributors dealt with a very similar problem there. [00:05:04] Speaker 04: And in fact, it dealt with the same word, insure. [00:05:07] Speaker 04: And what the court said there was not that the separate provisions in the act really were used in exclusive language, but that they told EPA there how to insure, and there was that HFCs did not exceed a cap on production. [00:05:24] Speaker 04: And in the light of that, in light of that specific direction to EPA about how to insure, [00:05:29] Speaker 04: They couldn't rely on the vague term, the vague of insure to go beyond that and implement complementary compliance regulations. [00:05:36] Speaker 02: Now, EPA- Under that reading, are they not allowed to regulate auditors? [00:05:42] Speaker 04: So under that, I think they have additional authority under 05, Your Honor. [00:05:46] Speaker 04: That's the provision that allows them and requires them to create a credits program. [00:05:52] Speaker 04: And so I think there they have long regulated R&G producers, for example, who are generating the rents and other entities who are separating the rents, who are engaged and interacting with those credits. [00:06:04] Speaker 04: They haven't relied on that authority here, and for good reason, because in the biogas reforms, they require only R&G producers to create those RINs, and they do not allow biogas producers to do so. [00:06:15] Speaker 02: But R&G producers aren't on this list either, so they can't regulate them. [00:06:19] Speaker 02: They can't impose any compliance provisions on them, apart from [00:06:23] Speaker 02: The rent process is that your position. [00:06:26] Speaker 04: That's right. [00:06:27] Speaker 04: I mean apart from the rent process when they're touching touching the rim process when they're creating this room process that may be true and there may be, you know, I don't there may be other places where they can identify authority, but this is not the regulation you're challenging here. [00:06:43] Speaker 02: doesn't implicate, it's hard to figure out since RINs drive this whole process, how they are not implicated at every stage just as well, at least at this end of the entire process. [00:06:55] Speaker 02: I'm not talking about the consumer or the gas pump. [00:06:58] Speaker 02: But it's hard, it seemed like an awfully difficult line to say that what they did here was a compliance provision and the compliance provisions can't include compliance with the RIN process. [00:07:12] Speaker 04: So I think that if they're gonna regulate, rely on 05 when they have not here, they need to tie it to the RIN process. [00:07:20] Speaker 04: They haven't tried to do that. [00:07:21] Speaker 04: And I think it would be, I think there has to be a line. [00:07:23] Speaker 02: That RIN documentation, it's not only sort of the trading system it creates, but it is a way of tracking the fuel as it goes through the process to make sure as things get co-mingled in pipelines and they need to make sure that what comes out of [00:07:42] Speaker 02: landfill and goes into pipes into the renewable gas producer and comes out at the end of another pipeline is the renewable fuel and wasn't mixed with something else. [00:07:55] Speaker 02: And so they have to part of the way you have to have compliance provisions [00:08:00] Speaker 02: overlap with anyone who's involved in the regeneration process so they can make sure they can ensure the requirements, the production of the required amounts of renewable fuel are met. [00:08:12] Speaker 02: It seems to me like a very artificial [00:08:15] Speaker 02: distinction. [00:08:16] Speaker 04: So two points on that, your honor. [00:08:18] Speaker 04: Again, the biogas producers are not involved in the rain generation program. [00:08:23] Speaker 02: No, they are not. [00:08:24] Speaker 02: But renewable producers are and they're not on the list either. [00:08:27] Speaker 04: Correct. [00:08:28] Speaker 04: And that's why we are not disputing the the regulations here of the RNG producers who create but they're not on the list. [00:08:34] Speaker 02: There's no producers on this list. [00:08:36] Speaker 04: Right. [00:08:36] Speaker 04: So let me try this again, because I must I was not unclear. [00:08:39] Speaker 04: I think there are there's two sources of authority we're pointing to here. [00:08:43] Speaker 04: Right. [00:08:43] Speaker 04: We are identifying one is O2A3. [00:08:47] Speaker 04: So the compliance regulations go to the obligated parties. [00:08:51] Speaker 04: That's the only that O2A1 is the only authority that relied on here. [00:08:56] Speaker 04: The other is O5, that's a separate bucket of authority. [00:08:59] Speaker 04: They have not invoked that here and they haven't attempted to, but if they did, we think that they could justify the regulations of the RNG producers because they have to regulate and they have to provide for the creation of the rents and the RNG producers are creating rents. [00:09:14] Speaker 02: But you're requiring us to make a reading that would say they can only do it under that provision and they cannot [00:09:23] Speaker 02: Maybe they could do it all there, but they cannot invoke the 2A1 authority at all as to renewable, under your reading, because I know you're a step earlier on the biocast producers, but producers are not on the list in section three, or romenet three. [00:09:43] Speaker 02: They're not on the list. [00:09:44] Speaker 02: So they can't rely, I think that's right. [00:09:45] Speaker 02: They can't be done it, but if that's needed to ensure [00:09:49] Speaker 02: that the amount of fuel and only renewable fuel that's properly labeled as such gets through, and say for some reason they didn't need to do it as part of the RIN process, you'd say they just can't do it. [00:09:59] Speaker 04: I'd say they could do it under 05. [00:10:01] Speaker 04: I'm not sure why it matters, which one they invoke. [00:10:03] Speaker 04: I think they can regulate. [00:10:05] Speaker 04: We're not disputing that they can and have regulated RNG producers. [00:10:08] Speaker 04: And I think there's an important point here, because going to your sort of how do they do this point, this is what they've done since the initiation, the creation of the RFS program. [00:10:16] Speaker 04: They have always regulated. [00:10:18] Speaker 04: the renewable fuel producer. [00:10:20] Speaker 04: And they've done that under 05. [00:10:22] Speaker 04: They've done that in the creation of the rents. [00:10:24] Speaker 04: And they have never reached back to the feedstock producer. [00:10:27] Speaker 04: And outside of the biogas reforms, they still do not. [00:10:29] Speaker 04: And so you say they have to be able to ensure that the biogas is created or the renewable fuel is created from a renewable biomass. [00:10:37] Speaker 04: And I agree with you, Your Honor. [00:10:39] Speaker 04: But they've done that elsewhere by regulating the renewable fuel producer and requiring that entity, who is actually engaged in the creation of renewable fuels, [00:10:47] Speaker 04: Biogas producers are dairy farmers and landfills and counties and cities who are not engaged in this process. [00:10:54] Speaker 05: Under the prior regime, the biogas producers were certainly at least indirectly affected, right? [00:10:59] Speaker 05: They had to provide information or hopefully some kind of assurance to the RNG producers about what they're providing them, didn't they? [00:11:06] Speaker 04: And so in the prior regime, whoever was going to generate the rent had to provide that documentation. [00:11:11] Speaker 04: And yes, in instance, they would ask for the biogas producer to help them, the contract partner, to actually provide that. [00:11:18] Speaker 04: But can you tell us why? [00:11:20] Speaker 05: I understand it's much more burdensome now. [00:11:23] Speaker 05: But why is it materially different now? [00:11:26] Speaker 05: Because I think on EPA's telling, they're still saying it is entirely voluntary, whether you want to be a biogas producer that provides biogas for the RFS program. [00:11:36] Speaker 05: And so when you do, you're going to have to now register and provide all of this information before you were providing [00:11:43] Speaker 05: some lesser information to others now just provided directly to the EPA. [00:11:48] Speaker 04: Right. [00:11:48] Speaker 04: So I think the voluntary nature of this actually cuts against them pretty in a fundamental way. [00:11:53] Speaker 04: Right. [00:11:53] Speaker 04: So it's true. [00:11:55] Speaker 04: They had to provide some information. [00:11:57] Speaker 04: Biogas producers, these landfills and cities and counties had to provide some documentation to the RNG producer. [00:12:03] Speaker 04: But EPA ozone numbers indicate that they have increased the compliance costs on those landfills, dairy farmers, 59 times in this regulation. [00:12:11] Speaker 04: That's a meaningful burden for somebody who's not in the business of renewable fuel production. [00:12:15] Speaker 04: And the reason that matters, the reason that cuts against EPA and not for them, is that this is a market forcing mechanism. [00:12:22] Speaker 04: The whole program is designed to incentivize the creation of renewable fuels. [00:12:26] Speaker 04: If the biogas is not collected from the landfills and the dairy farms and sent to be this productive use, then it's going to be used for flaring. [00:12:33] Speaker 04: It's going to go into the atmosphere as a potent natural gas. [00:12:36] Speaker 02: It sounds more like a policy argument because you said once they choose to be part of the renewable fuel production system, [00:12:45] Speaker 02: That's the only time they have to comply with these regulations, which are ensuring it's the appropriate, sorry, fuel stock or feed stock, whatever you call it, waste stock. [00:12:54] Speaker 02: It's an appropriate source for renewable fuel. [00:12:59] Speaker 02: That's what they're obligated to do only if they choose to. [00:13:01] Speaker 02: So it's only if they choose to get into this system that they have to do it. [00:13:05] Speaker 04: Sure. [00:13:06] Speaker 04: So I think it is relevant. [00:13:07] Speaker 02: If there are policy concerns that's gonna dissuade people, then that's on EPA. [00:13:12] Speaker 04: So I think it is relevant to the statutory question because I think that's that we have to read the statute in a way that complies with Congress's goals. [00:13:19] Speaker 04: And that's that is certainly one of the goals. [00:13:22] Speaker 04: But we also have an arbitrary capricious challenge here, Your Honor. [00:13:26] Speaker 04: And I think it's important to note this is unreasonable burden and they don't impose it on any other feedstock producer. [00:13:32] Speaker 04: So they say, we can only get this information from the biogas producer. [00:13:36] Speaker 04: We can only check the renewable biomass with them. [00:13:39] Speaker 04: But that's not what they do for biodiesel. [00:13:41] Speaker 04: Biodiesel has a soybean farmer, has a soybean oil crusher, and then has a biodiesel producer who takes that soybean oil and turns it into a renewable diesel or biodiesel. [00:13:52] Speaker 04: And they don't regulate the soybean oil crusher. [00:13:54] Speaker 04: They don't regulate the soybean farmer. [00:13:56] Speaker 04: They still manage to figure out that that is the only source. [00:14:00] Speaker 04: I'm sorry, the only source for that biodiesel for renewable diesel. [00:14:05] Speaker 04: I believe the Soviets are the only source. [00:14:06] Speaker 04: It's not true for ethanol. [00:14:08] Speaker 02: No, but it's corn. [00:14:10] Speaker 02: But I think there's there's there's lots of different feedstocks that can be used that waste that will produce. [00:14:19] Speaker 02: biogas in a generic sense, there's only certain types of that that they want to come into the system. [00:14:24] Speaker 02: And that's why they have to have this regulation to make sure it's the right type of biogas producer that's essentially hooking up to the renewable fuel producer. [00:14:34] Speaker 04: So I'm not sure that explains why you couldn't ask for that documentation from the renewable fuel producer. [00:14:40] Speaker 02: They suggest that they can't. [00:14:41] Speaker 02: Is it any better if EPA obligates the renewable fuel producer to require the biogas producer to provide this information? [00:14:51] Speaker 02: How is that any less of a burden? [00:14:53] Speaker 04: Because it doesn't include monthly reporting mechanisms. [00:14:57] Speaker 04: It doesn't include annual audits. [00:14:58] Speaker 04: It doesn't include three-year engineering reviews. [00:15:00] Speaker 04: It doesn't include a liability for messing up those compliances. [00:15:04] Speaker 04: It doesn't include continuous measuring and prescriptive requirements for taking out your gas analyzers and installing. [00:15:11] Speaker 02: I thought you just said there's no question that whatever information EPA thinks it needs to ensure that it's getting [00:15:19] Speaker 02: the right feedstock into the system, it could require the renewable gas producer to demand that same information from the biogas producer. [00:15:30] Speaker 04: It could require them to get the documentation that that's true. [00:15:34] Speaker 02: That documentation could be exactly what they're asking for here. [00:15:37] Speaker 04: Well, I think we'd be back here if they tried to impose the exact same burdens. [00:15:41] Speaker 02: But you wouldn't have your statutory art. [00:15:43] Speaker 04: Uh, we may not. [00:15:44] Speaker 04: I think, you know, there are ways in which they're trying to circumvent the limits on their authority by, you know, through someone else. [00:15:49] Speaker 02: Under Romanet 3 here can be requiring these parties to impose identical burdens on biogas producers. [00:16:00] Speaker 02: I don't think they want, they want to play. [00:16:02] Speaker 04: I think the obligated parties need to verify that they have met the volume obligations. [00:16:07] Speaker 04: I think EPA can require the obligated parties to do that. [00:16:10] Speaker 02: And O5. [00:16:11] Speaker 02: Three here is not just about meeting your fuel obligations. [00:16:16] Speaker 02: It's about meeting your fuel obligations with the right stuff and the right process stuff. [00:16:21] Speaker 02: That's what the compliance provisions are. [00:16:23] Speaker 02: And so I'm back to saying, if they could say to you, renewable fuel producer, [00:16:28] Speaker 02: Don't let anything into your pipes and don't transport anything down to a pipeline or a truck or whatever you're using. [00:16:33] Speaker 02: It hasn't first been verified by a biogas producer. [00:16:38] Speaker 02: Who does? [00:16:40] Speaker 02: testing, auditing, and all the other compliance provisions you were referencing. [00:16:46] Speaker 02: If they can do that, then what's the difference between just doing it directly? [00:16:50] Speaker 04: They did that before. [00:16:52] Speaker 04: And what EPA admits, their own numbers suggest, that the burden they're imposing on biogas producers has increased 59-fold because of that. [00:17:00] Speaker 02: I understand that. [00:17:00] Speaker 02: But what I'm saying is, if EPA requires the renewable fuel producers to impose that exact same burden that they're just imposing directly, [00:17:12] Speaker 02: There's no difference. [00:17:13] Speaker 04: Again, that's a different situation. [00:17:15] Speaker 04: We may be back with the statutory argument about them trying to circumvent the limits on their authority. [00:17:19] Speaker 04: But that's not the situation we have here. [00:17:21] Speaker 04: They are imposing direct regulation. [00:17:23] Speaker 04: And if you look at compare the two regular programs, so subpart M of the regulations. [00:17:30] Speaker 04: is the renewable fuel standard programs. [00:17:32] Speaker 04: That's the normal way that they regulate and that they comply and they ensure that renewable biomass is met and they ensure that it's used as transportation. [00:17:40] Speaker 04: It doesn't directly regulate the feedstock producers. [00:17:42] Speaker 04: It just doesn't. [00:17:43] Speaker 04: It doesn't have a section for it. [00:17:44] Speaker 04: They created a whole new section in part E that has specific provisions [00:17:48] Speaker 04: that are onerous requirements that are going directly to the bio guest producers and imposing liability directly on them. [00:17:55] Speaker 04: And I think that's a meaningful difference here, meaningful difference from the statutory perspective. [00:17:58] Speaker 04: And I think it's a meaningful difference from the arbitrary and compressive perspective. [00:18:02] Speaker 02: I mean, under the APA... How is it imposed if they opt in? [00:18:05] Speaker 04: I'm sorry? [00:18:06] Speaker 02: How is it imposed if they opt in? [00:18:08] Speaker 04: It is imposed if they want to participate in the program. [00:18:13] Speaker 02: participate, here's the rules of this process. [00:18:16] Speaker 02: And they have to be these rules to meet Congress's goals. [00:18:18] Speaker 02: That's EPA's position. [00:18:20] Speaker 02: You make the point, maybe it's right that people are all going to say, forget it, too much trouble. [00:18:26] Speaker 02: I'm going to do something else with this waste or just let it sit here or burn it off or whatever. [00:18:30] Speaker 02: And that will be a huge problem for EPA to deal with. [00:18:34] Speaker 02: But it doesn't become imposed when you simply say, if you wish to participate in this program and make a lot of money for that waste that's otherwise sitting there, [00:18:43] Speaker 02: There are requirements to make sure it's being done right. [00:18:46] Speaker 04: So I think in a market incentivizing program, a market forcing program, that does make a difference. [00:18:50] Speaker 04: But even if you disagree with me on the statutory analysis. [00:18:53] Speaker 02: What makes a difference if it actually does disincentivize, which is just an empirical question we don't have and that's a policy call for EPA. [00:19:00] Speaker 04: So right, but when you get to arbitrary compressions, one of the fundamental principles of the EPA is explaining at a minimum and providing a reasonable explanation why you're treating similar situated entities differently. [00:19:11] Speaker 04: And I think that's a problem for EPA here. [00:19:13] Speaker 04: I think that's a problem that they don't actually regulate feedstock producers under any other part of this program. [00:19:19] Speaker 04: This is the only one. [00:19:20] Speaker 04: And I don't think that they have faced up to that. [00:19:22] Speaker 04: And I don't think they have provided a reasonable explanation about why that is. [00:19:27] Speaker 05: Well, I don't think they're taking the position that this is the only way they can get the information. [00:19:30] Speaker 05: They're just saying it's the best in the context of this program. [00:19:33] Speaker 04: But why isn't it the best elsewhere, right? [00:19:35] Speaker 04: I mean, even if you look to the end of this program. [00:19:37] Speaker 04: So let's step out. [00:19:38] Speaker 02: Arbitrary and Capricious Rules says agencies have to go in, jump in with both feet. [00:19:43] Speaker 02: They can't start with one area and then work into other areas. [00:19:46] Speaker 02: It's true enough. [00:19:46] Speaker 02: That's pretty well settled. [00:19:47] Speaker 04: But they've got to explain why they're treating it differently. [00:19:50] Speaker 04: It may be that it would be sufficient to explain why this is the one we're going to choose first, because there's been fraud, but there hasn't been any reported incidents of fraud here. [00:19:59] Speaker 02: We're concerned about fraud. [00:20:00] Speaker 02: It's expanding. [00:20:00] Speaker 02: It's growing. [00:20:01] Speaker 02: It's gotten a lot more complicated. [00:20:02] Speaker 02: We're concerned about fraud, if we thought that were a sufficient explanation. [00:20:05] Speaker 02: I know you think it isn't. [00:20:07] Speaker 02: And that would meet this need to explain why they're starting here. [00:20:11] Speaker 04: If you think that's a reasonable explanation for why they're treating bio producers differently. [00:20:16] Speaker 04: I don't I don't actually don't think they are. [00:20:18] Speaker 04: They said that. [00:20:18] Speaker 04: I think what they said is we're going to throw out the old system for that reason and implement a new system, not what we're going to go beyond what we've done elsewhere. [00:20:24] Speaker 04: for those reasons but if you think they did said that and I disagree with that and if you think that's sufficient then then obviously we lose that that angle on the APA challenge I don't think that is sufficient because I don't think that they they they said that and I don't think that they have actually justified that you think they were asked to and therefore required to explicitly acknowledge that they were taking a different approach here than in some of the other programs and then justify that okay [00:20:49] Speaker 05: Yes. [00:20:49] Speaker 05: Can I ask you about the pipe, the third argument you said? [00:20:52] Speaker 05: I know we've been stuck on the first. [00:20:53] Speaker 05: Yes. [00:20:54] Speaker 05: The pipeline specification, I actually think the best way would be if you could just tell us what the crux of that argument is in your view. [00:21:01] Speaker 04: Sure. [00:21:01] Speaker 04: So among the biogas reforms, what they've required is annual testing by RNG producers of the RNG, the renewable natural gas that's interchangeable with fossil natural gas that they're injecting into the pipeline, the commercial pipeline. [00:21:17] Speaker 04: What they said in the rulemaking, they gave two reasons for that. [00:21:20] Speaker 04: The one is fuel quality. [00:21:22] Speaker 04: They need to ensure the fuel quality of the RNG. [00:21:24] Speaker 04: And two, they need to ensure that the RNG can be injected into the pipeline. [00:21:29] Speaker 04: Before this court, I take them to have abandoned the first rationale and focus only on the pipeline specification rationale. [00:21:35] Speaker 04: The problem for that is twofold. [00:21:37] Speaker 04: First, they can't explain why we need to provide annual testing that we meet the pipeline specification when they also require RNG producers to prove that, in fact, the RNG was injected into a commercial pipeline, a regulated commercial pipeline. [00:21:52] Speaker 04: and ren separators to also prove that they withdrew the RNG from the pipeline. [00:21:57] Speaker 04: The statutory requirement here is that RNG is used as a transportation fuel. [00:22:03] Speaker 04: And if it was injected into the pipeline, as a matter of fact, and it was withdrawn from the pipeline, as a matter of fact, and used as transportation fuel, [00:22:11] Speaker 04: It's lost on me why we need to also prove that it could have been injected into the pipeline. [00:22:17] Speaker 04: And one more thought, one more point on that, Your Honor. [00:22:19] Speaker 04: If you look at the regulations, they on their face go beyond just the pipeline specifications. [00:22:25] Speaker 04: They also allow EPA to request any other information, any other testing as a condition of registration. [00:22:31] Speaker 05: So just on the first bit of that, it does seem like the problem you're complaining about, I guess, is redundancy. [00:22:37] Speaker 05: The pipeline, of course, has already tested if they're going to allow our gas in. [00:22:42] Speaker 05: So why do we need to retest and send the results to the EPA? [00:22:45] Speaker 05: And it just doesn't seem that unreasonable to me for the EPA to ask you to send that testing result so it can have its own documentation of what's going into the pipelines itself. [00:22:57] Speaker 04: But the statutory requirement is that it be used as a transportation. [00:23:01] Speaker 04: Not that it can go in a commercial pipeline. [00:23:03] Speaker 04: The next, the regulatory requirement is that it can go into a pipeline. [00:23:07] Speaker 04: And so we've already now, we're two steps removed from the statute at this point. [00:23:11] Speaker 04: And we already have proven twice over that it did go into a pipeline. [00:23:17] Speaker 04: And so beyond that, I think it's hard to explain. [00:23:20] Speaker 04: And it's just, I think, unreasonable and arbitrary to impose unnecessary burdens on RNG producers to do that testing and to report it. [00:23:28] Speaker 05: So the second thing they say in responding to comments is that both so it can get into the pipeline and so that the RNG can be used to produce and be used as transportation fuel consistent with CAA and EPA regulatory requirements. [00:23:42] Speaker 05: Yes. [00:23:42] Speaker 05: Now, that's the argument that you're taking them to have abandoned. [00:23:46] Speaker 04: So I'm not, in the final rule, they also said we're balancing our requirements to sort of measure fuel quality, ensure fuel quality. [00:23:57] Speaker 04: This piece about whether, you know, is it possible to be used as a transportation fuel? [00:24:02] Speaker 04: I'm not sure actually, I guess, if they're relying on that here or not. [00:24:05] Speaker 04: But I would point out that the RIN separator has to prove. [00:24:08] Speaker 05: So that's the question. [00:24:10] Speaker 05: Wouldn't that be a justification that isn't trying to impose a fuel quality standard? [00:24:15] Speaker 05: nor is it just saying, give us the results of your pipeline test. [00:24:19] Speaker 05: It's trying to ensure that it can be used as a transportation fuel. [00:24:24] Speaker 05: So we need to test for these other components on a uniform basis. [00:24:26] Speaker 04: So I think no for two reasons. [00:24:28] Speaker 04: First is the redundancy point already. [00:24:30] Speaker 04: It's not going into the pipeline if it can't. [00:24:32] Speaker 04: And I guess the other redundancy point is that the RIN separator has to document before they can separate the RIN that it was actually used as transportation fuel, that it was withdrawn from the pipeline and then actually used, compressed to CNG or LNG, [00:24:45] Speaker 04: and then used as transportation fuel. [00:24:46] Speaker 04: So we've got the same problem. [00:24:48] Speaker 04: Where we've got documentation that it was used as transportation fuel, that's the statutory requirement. [00:24:53] Speaker 04: And we're imposing additional obligations beyond that for no apparent reason. [00:24:59] Speaker 05: Well, it seems like when you're [00:25:02] Speaker 05: you'd have to say it's been properly injected into the pipeline and then properly used as transportation fuel. [00:25:08] Speaker 05: And the point of EPA asking for this verification is to verify. [00:25:12] Speaker 05: And now you think the concerns about fraud are made up, but if they had some basis for that, again, they're just asking for some maybe redundant verification. [00:25:23] Speaker 04: So the concerns about fraud here have nothing to do with using natural, as far as I know, and nothing in the record, about using natural gas that is not capable of being used as transportation fuel. [00:25:34] Speaker 04: The concerns about fraud are mixing fossil natural gas and renewable natural gas, or in some instances, they say mixing fossil natural gas with biogas. [00:25:45] Speaker 04: That latter makes no sense at all, Your Honors. [00:25:48] Speaker 04: I mean, biogas is about 50% methane. [00:25:50] Speaker 04: Fossil natural gas is about 90 or plus. [00:25:53] Speaker 04: There's no basis to think that would happen. [00:25:55] Speaker 02: Every fine biogas is not going to qualify. [00:25:57] Speaker 02: They don't want to mix with that at the pipeline stage. [00:26:01] Speaker 02: just unrefined biogas, which could be from any feedstock. [00:26:05] Speaker 04: Sure. [00:26:05] Speaker 02: It's not. [00:26:06] Speaker 02: It's not if they don't want it mixed with that. [00:26:08] Speaker 02: There's a reason they've limited the feedstock. [00:26:10] Speaker 04: Absolutely, Your Honor. [00:26:11] Speaker 04: I think that that's right. [00:26:12] Speaker 04: I mean, my point was only that there's no legitimate concern, no plausible concern, that there are parties out there mixing fossil natural gas with untreated, with raw biogas. [00:26:23] Speaker 02: Well, the rationale is these Wrens are really, really, really valuable relative to [00:26:28] Speaker 02: the fuel itself even, let alone the waste that's sitting out there. [00:26:32] Speaker 02: And so people are going to have incentives to bend the rules and try to sneak other forms of gas to get mixed in here. [00:26:40] Speaker 02: And so we're not just going to leave it to the pipeline. [00:26:43] Speaker 02: Congress told us to do the insuring. [00:26:45] Speaker 02: And so we're going to insure upfront. [00:26:47] Speaker 02: We're going to insure on the exit end. [00:26:50] Speaker 02: I'm still having trouble understanding why this is arbitrary and capricious. [00:26:53] Speaker 04: Because that's the situation across the renewable fuel program. [00:26:58] Speaker 04: That's the situation for all renewable fuels. [00:27:01] Speaker 04: And it's only this one, only biogas, that they have decided to regulate the biogas producer directly. [00:27:08] Speaker 04: We don't object. [00:27:08] Speaker 02: They regulated everybody. [00:27:09] Speaker 02: You wouldn't have any of the same. [00:27:11] Speaker 02: You wouldn't have any objection. [00:27:13] Speaker 02: It's simply because they've only begun the biogas. [00:27:17] Speaker 04: So if they regulate everyone, if they regulate or explain why they were doing it, except people treating similarly situated entities differently, obviously, I wouldn't have that argument. [00:27:26] Speaker 04: Now, I would still have the statutory argument, Your Honor, that they have regulated or restricted rent generation to the R&G producer and beyond. [00:27:35] Speaker 02: Right, but this is the same argument then as you made before. [00:27:37] Speaker 02: It's not that it's inherently arbitrary and capricious to check on the way in and check on the way out. [00:27:41] Speaker 02: It's that you just can't do it for one renewable fuel and not others. [00:27:45] Speaker 02: That's your argument. [00:27:45] Speaker 04: I also think it's unnecessary. [00:27:47] Speaker 04: They haven't shown the basis for that. [00:27:50] Speaker 04: They pointed to the concern about potential fraud, but there have been no recorded incidents of fraud. [00:27:55] Speaker 04: You can go look at the rules, sites, their enforcement page, and you can go look at the cases on there. [00:28:01] Speaker 04: None of them have anything to do with biogas. [00:28:03] Speaker 04: They do. [00:28:03] Speaker 04: There are cases with regard to other renewable fuels, but none have to do with renewable natural gas. [00:28:08] Speaker 04: And so I think if you were going to take a rational approach to where we're going to implement these additional fraud protective measures, you would do it in a case where they're in an instance in an industry where there has been reported incidents of fraud, not here where they admit there has been no reported incidents of fraud. [00:28:24] Speaker 02: I just had one last question. [00:28:25] Speaker 02: You complain about the compliance date, but they say it's the date you asked for. [00:28:29] Speaker 04: So we have two dates, most of the July 1 date, which we did object to in the January 1, 2025 date. [00:28:37] Speaker 04: I think importantly on that point, we objected to that along with a bunch of other owners' obligations they imposed, including the continuous measurement requirements that we haven't had a chance to talk about this morning. [00:28:49] Speaker 04: They didn't change those. [00:28:50] Speaker 04: and they imposed additional obligations. [00:28:53] Speaker 04: I think that's what makes the January 1 date problematic. [00:28:55] Speaker 02: You say when you suggested January 1, 2025, that's conditioned on you not having these onerous obligations or that you think that's an appropriate compliance date? [00:29:02] Speaker 04: I think what we said is at least January 1, 2025. [00:29:05] Speaker 04: I don't know that we explained the specifics to say. [00:29:07] Speaker 04: And everything we say here in our other comments, we assume that you would take some. [00:29:12] Speaker 02: Why are you not a stop from challenging now? [00:29:14] Speaker 04: I'm sorry? [00:29:15] Speaker 02: Why are you not a stop from challenging it now? [00:29:18] Speaker 02: You said at least January 1. [00:29:19] Speaker 02: I said fine, we'll give you January 1. [00:29:21] Speaker 04: Because the premise of our request for January 1, of at least January 1 of 2025. [00:29:27] Speaker 02: At least means that date will work for me. [00:29:31] Speaker 02: I think the premise was that we have to get everything else we want to. [00:29:34] Speaker 04: I think we've got to get. [00:29:35] Speaker 04: There are some. [00:29:36] Speaker 04: I mean, the continuous measurement requirements are a particular problem here. [00:29:40] Speaker 04: There are others. [00:29:40] Speaker 02: You didn't make that explicit when you said at least January 1, 2020. [00:29:43] Speaker 04: I do not believe we made that explicit. [00:29:45] Speaker 04: I'm not aware of a requirement to do that. [00:29:48] Speaker 02: OK. [00:29:49] Speaker 02: Thank you very much. [00:29:49] Speaker 02: Thank you. [00:29:50] Speaker 02: We'll give you a few minutes for rebuttal. [00:29:51] Speaker 02: Thank you. [00:29:56] Speaker 02: Kimball, you're just addressing statutory authority. [00:29:58] Speaker 02: Is that right? [00:30:01] Speaker 02: That's correct, Your Honor. [00:30:05] Speaker 03: May I please the court? [00:30:06] Speaker 03: I'm Department of Justice trial attorney, Kimmery Kimball, here today on behalf of EPA. [00:30:10] Speaker 03: EPA has a statutory mandate under 42 USC 75-45-02A1 to promulgate regulations that ensure transportation fuel sold or introduced into commerce [00:30:22] Speaker 03: in the United States contains the requisite amount of renewable fuel. [00:30:25] Speaker 03: And the statute further provides that renewable fuel is only fuel coming from qualifying biomass. [00:30:31] Speaker 03: Therefore, the statute requires EPA to ensure that renewable fuel actually does come from that biomass. [00:30:38] Speaker 05: So if you're right, why isn't subsection three superfluous? [00:30:43] Speaker 03: I'm sorry, why isn't subsection three what? [00:30:46] Speaker 05: What is the purpose of O2A3? [00:30:49] Speaker 03: O2A3. [00:30:50] Speaker 05: O2A3-1 on your reading. [00:30:53] Speaker 05: Why isn't that superfluous? [00:30:55] Speaker 03: Romanet 3 is not, I'm sorry, O2. [00:30:58] Speaker 05: Sorry, the provision that says the regulations shall contain compliance provisions applicable to refineries, blenders, distributors, and importers, so forth. [00:31:06] Speaker 05: I've been thinking that is clause 3. [00:31:09] Speaker 05: Why isn't that superfluous if EPA can also regulate other entities? [00:31:15] Speaker 03: Because in Roman at three, what Congress said was you have to ensure that the obligated parties, that the people who have to ensure the volumes meet all of the components of the paragraph. [00:31:28] Speaker 03: And so the EPA has interpreted that to be primarily about volumes. [00:31:36] Speaker 03: It's not about what the renewable fuel is. [00:31:40] Speaker 03: Sorry, go ahead. [00:31:43] Speaker 05: As Mr. Ellis pointed out, it says, shall contain compliance provisions applicable to these obligated parties as appropriate. [00:31:53] Speaker 05: And that sort of seems obvious just based on clause one. [00:31:56] Speaker 05: If all it means is you can regulate those people, but you can also regulate others. [00:32:02] Speaker 05: I'm not sure I understood your answer. [00:32:04] Speaker 03: So clause one doesn't specify anything about the obligated parties. [00:32:08] Speaker 03: It says the EPA has to ensure overall in this program that the fuel introduced contains the requisite amount of renewable fuel. [00:32:17] Speaker 03: And then Congress further specified what that renewable fuel can be. [00:32:20] Speaker 03: In subsection three, Congress said, when you promulgate regulations, you have to at least promulgate regulations that address this group of people. [00:32:29] Speaker 02: It doesn't say at least so. [00:32:30] Speaker 02: It doesn't have including language. [00:32:33] Speaker 03: It says it must contain and elsewhere in the statute when it says contain, contain means that plus something else. [00:32:39] Speaker 03: So for example, in the volume requirements, contain means whatever it's referring to plus something else. [00:32:46] Speaker 03: So for example, in the volume requirements, it says it must contain the requisite amount of renewable fuel, but it's not that it has to be exclusively renewable fuel. [00:32:56] Speaker 03: It's renewable fuel plus whatever else. [00:32:59] Speaker 03: Contained in this statute is used to say. [00:33:02] Speaker 02: The question is not so much contained as compliance provisions applicable to. [00:33:05] Speaker 02: It's to whom compliance provisions are applicable. [00:33:11] Speaker 02: That's the critical language. [00:33:12] Speaker 02: And they list everybody but producers. [00:33:19] Speaker 03: Everybody except renewable fuel producers, you mean? [00:33:22] Speaker 02: producers, period, biogas producers or renewable fuel producers. [00:33:25] Speaker 02: Producers are just noticeably absent from this list. [00:33:28] Speaker 02: This isn't sort of a list that there's going to be seven other things that aren't covered and including list. [00:33:34] Speaker 02: It seems to say compliance provisions under the regulations under Romanat 1, the compliance provisions shall be applicable too. [00:33:42] Speaker 02: And then starts with refiners. [00:33:46] Speaker 02: flows right past producers. [00:33:48] Speaker 02: They knew there were producers, biogas producers and renewable fuel producers, and yet they're off the list completely. [00:33:54] Speaker 03: EP has understood those compliance provisions to be referring to the volume requirements, the volume compliance provisions. [00:34:01] Speaker 03: So they have to meet the specified amount of fuel in each year. [00:34:06] Speaker 02: And then you agree this doesn't apply to producers? [00:34:09] Speaker 02: Sorry? [00:34:10] Speaker 02: Do you agree Romanet 3 is not a source authority to impose compliance provisions on renewable fuel producers? [00:34:18] Speaker 02: That's correct. [00:34:19] Speaker 02: It's not? [00:34:19] Speaker 03: That's correct. [00:34:20] Speaker 03: Romanet 3 applies to obligated parties. [00:34:22] Speaker 03: EPA's authority to regulate renewable fuel producers comes from Romanet 1. [00:34:27] Speaker 03: which refers to the requirement to. [00:34:30] Speaker 02: This says regardless of the date of the regulations promulgated under clause one, it shall contain those regulations in clause one shall contain compliance provisions [00:34:45] Speaker 02: that apply to obligated parties. [00:34:47] Speaker 03: Right. [00:34:48] Speaker 03: So Roman at one covers the whole program and Roman at three says of all of the of the provisions that you have the regulations that you promulgate, you must have compliance provisions for the refiners letters and or [00:35:02] Speaker 03: And importers, but it doesn't preclude EPA from regulating renewable fuel producers and in this in the structure preclude you from imposing compliance provisions to ensure volume requirements. [00:35:17] Speaker 02: Volume requirements, including that it be the right stuff statutorily. [00:35:21] Speaker 03: on producers. [00:35:22] Speaker 03: So I think those are two very different things like volume requirements and ensuring that it and ensuring that biomass is what is resulting in volume. [00:35:29] Speaker 02: They care about what the volume of what they can't make sure some volume comes out at the end is not what this program is about. [00:35:36] Speaker 02: It has to be a volume of very specific thing and that is renewable fuel from the very feedstocks that Congress allows. [00:35:44] Speaker 02: So that can't possibly be [00:35:47] Speaker 02: that this doesn't mean compliance with the process of making sure that we get the renewable fuels that we want and not other types of fuels, whatever the volume. [00:36:00] Speaker 03: So Romanet 3 provides that the refiners, blenders, and importers have to comply with the volume requirements, which I take your point includes that it be the correct volume. [00:36:13] Speaker 03: Right. [00:36:16] Speaker 03: Going back to what the renewable, that the renewable fuel has to contain the requisite, or has to be produced from the biomass, that's a function of romenet one plus the definition of what renewable fuel is and what renewable biomass is. [00:36:31] Speaker 03: It's part of the structure of the statute as a whole. [00:36:35] Speaker 02: I know you want to treat one as freestanding, but three says who will bear the compliance provisions [00:36:47] Speaker 02: four regulations promulgated under number one. [00:36:50] Speaker 02: You can't sort of say that one is this freestanding authority if one reads three to say, these are the folks that shall bear the compliance provisions for regulations under Roman at one. [00:37:05] Speaker 02: You can't break them apart. [00:37:08] Speaker 03: Except that it only says that the compliance provisions have to have to contain provision. [00:37:13] Speaker 03: I'm sorry, it says that the regulations have to contain provisions for those entities, but it doesn't say that it exclusively compliance provisions. [00:37:22] Speaker 02: That are applicable to. [00:37:25] Speaker 02: So it's not just compliance provisions as to whom they will be applicable. [00:37:30] Speaker 02: And producers, you can't just have compliance provisions. [00:37:33] Speaker 02: They have to be applicable to these folks. [00:37:36] Speaker 02: And when they list everybody who's involved in the process that they want compliance provisions to apply to, and they leave out one, and that is producers. [00:37:46] Speaker 02: How do we know that's just not a deliberate decision by Congress that compliance provisions for regulations under Roman out one will not apply to producers? [00:37:55] Speaker 02: They skip right over them and go right to refiners, lenders, importers, distributors. [00:37:59] Speaker 03: Because there's no way to enact the rest of the statute. [00:38:04] Speaker 03: There's no way to ensure any of the definitions are met without also looking at the renewable fuel producers. [00:38:12] Speaker 02: Since the beginning of the program, EPA has regulated the renewable fuel producers because you have to ensure- They say they would do that under the RIN program, not under one here, not under 281. [00:38:23] Speaker 03: EPA has never claimed authority under the RIN provision as its exclusive authority to regulate the renewable fuel producers. [00:38:31] Speaker 03: EPA has always claimed that authority under Romanet 1. [00:38:35] Speaker 02: Are there any cases as you have it? [00:38:37] Speaker 02: I'm sorry, any cases where what? [00:38:39] Speaker 02: You may have claimed it. [00:38:40] Speaker 02: Is any case held that you have it? [00:38:42] Speaker 03: I'm not aware of any case in which that's been challenged and come to a decision. [00:38:48] Speaker 02: Is there anybody off this list [00:38:51] Speaker 02: that would be relevant for compliance provisions to ensure volume requirements other than producers? [00:38:57] Speaker 02: Did they leave anyone else off this list? [00:39:00] Speaker 02: An illustrative list, or you think this is an exhaustive list? [00:39:04] Speaker 03: Well, I think that Romanette 3 sets a floor for who the compliance provisions, meaning the volume requirements, apply to. [00:39:11] Speaker 03: Who else would it be? [00:39:12] Speaker 03: Producers? [00:39:13] Speaker 02: Who else? [00:39:15] Speaker 02: Well, so I mean- That's in floor, so that usually assumes there's more on top. [00:39:18] Speaker 03: So it would be who else? [00:39:21] Speaker 03: So in renewable fuel production, there are renewable fuel producers. [00:39:26] Speaker 03: Under the current system, there are also biointermediate producers. [00:39:29] Speaker 02: They may have different producing jobs, but producers. [00:39:35] Speaker 02: That's correct. [00:39:37] Speaker 02: It's really weird for Congress to set a floor that lists everybody that they want to cover, except one. [00:39:46] Speaker 03: But the rest of the statute and the definition of renewable fuel and the requirement that EPA ensure that that fuel includes renewable fuel and that renewable fuel is produced from qualifying biomass requires EPA to regulate renewable fuel producers. [00:40:04] Speaker 03: If it were the case that EPA could only regulate the obligated parties, refiners, lenders, and importers, then there would have been no reason to include any requirements on biogas at all because biogas never gets to a refiner. [00:40:18] Speaker 03: Biogas is put onto a renewable natural gas pipeline. [00:40:21] Speaker 03: It's taken off by a compressed natural gas producer and compressed directly into what goes into a natural fuel vehicle. [00:40:29] Speaker 03: There's no step in that process. [00:40:31] Speaker 03: How do I get you to answer the question? [00:40:32] Speaker 02: Their theory is it's fine to regulate renewable fuel producers as part of the RIN authority, right? [00:40:41] Speaker 02: You can't get the RIN road attached unless you do A, B, C, D, and E. [00:40:45] Speaker 02: So that's how you get to do renewable fuel producers. [00:40:49] Speaker 03: What's wrong with that? [00:40:49] Speaker 03: There's nothing in the statutory text that limits EPA's authority in that manner. [00:40:54] Speaker 03: There's nothing in 05 that says EPA can only regulate the REN producer. [00:40:58] Speaker 03: 05 doesn't refer to the REN producer in any way. [00:41:01] Speaker 02: Is there any rate in which it is not statutorily sufficient to do renewable fuel producer regulation under other statutory authorities and not under three? [00:41:12] Speaker 02: Can the program work? [00:41:16] Speaker 02: if you can regulate renewable fuel producers under other statutory authority. [00:41:23] Speaker 03: Romanette, one is the... Under other statutory authority, the REN program. [00:41:29] Speaker 03: Well, the REN program requires EPA to set up this credit program, but there's nothing in that provision that says who EPA regulates under that program. [00:41:38] Speaker 02: Right, there's no limitations on whoever, anyone who's in the REN program and renewable fuel producers are part of the REN program, right? [00:41:44] Speaker 02: Hey, renewable fuel producers are a part of the REN program, it's true. [00:41:48] Speaker 02: Oh, you definitely regulate them there. [00:41:49] Speaker 02: I'm just asking why it wouldn't be sufficient to say that the REN program is your sufficient authority for regulating renewable gas producers, renewable fuel producers there. [00:42:02] Speaker 02: And then the extent you have regulations under Romanet 1, those can only be applied to the later steps in the process, the refiners, not down the line. [00:42:12] Speaker 02: That's not how EPA has conceptualized the statute. [00:42:16] Speaker 02: Because you keep going, the scheme won't work. [00:42:18] Speaker 02: I'm asking whether the scheme will work. [00:42:20] Speaker 03: Well, I think it's difficult to say because EPA has not conceptualized its authority in that manner. [00:42:28] Speaker 02: I will say, though, if the answer to me can be that the program won't work if it's read that way. [00:42:33] Speaker 02: But it doesn't seem like you can say that, actually. [00:42:36] Speaker 03: Well, I don't think I can say whether or not EPA has authority under 05 to regulate renewable fuel in a sufficient manner in order to ensure that it contains the requisite amount of biomass, because EPA didn't rely on that authority in this rulemaking. [00:42:54] Speaker 03: And I don't know to what extent it has considered [00:42:57] Speaker 03: whether the RIN program itself is sufficient to provide statutory authority. [00:43:02] Speaker 02: This is the first time EPA has ever used this authority under 2A1 or 1 and 3 to regulate producers, renewable fuel producers. [00:43:16] Speaker 03: Just under 1, but it has always regulated producers under that statutory provision. [00:43:22] Speaker 03: EPA has always considered that to be the source of its authority to regulate renewable fuel producers. [00:43:27] Speaker 02: And so you read three as not limiting, not words of limitation because? [00:43:33] Speaker 03: Because it just says that EPA must, or EPA should put forward regulations that contain compliance provisions for that group, but that that's not. [00:43:42] Speaker 02: It doesn't say some regulations, it says regulations promulgated under clause one. [00:43:47] Speaker 02: Right, but it says. [00:43:48] Speaker 02: Maybe that is just some of the regulations, not all the regulations. [00:43:51] Speaker 03: that sets the floor for what regulations they provide. [00:43:55] Speaker 03: EPA had to at least provide regulations that set compliance provisions on the obligated parties, but that through the statutory framework as a whole, EPA has to be able to regulate the renewable fuel producer. [00:44:11] Speaker 03: And for biogas specifically, that has to include the ability to regulate biogas. [00:44:17] Speaker 03: Because biogas is unique in this program in that the biogas producer gives the renewable gas producer just biogas and not the biomass itself. [00:44:28] Speaker 03: And so the renewable gas producer doesn't see the biomass at any point. [00:44:36] Speaker 03: So EPA has to be able to regulate the biogas producer in order to comply with its obligation to ensure that the renewable fuel came from the requisite biomass. [00:44:49] Speaker 02: Thank you very much. [00:45:12] Speaker 06: May it please the court. [00:45:13] Speaker 06: My name is Alex Papurro, appearing on behalf of the United States Environmental Protection Agency of the addressing the remaining issues. [00:45:20] Speaker 06: To address a point raised by petitioner today, petitioner claims that EPA's regulation of biogas producers is arbitrary because they're like, EPA is not doing things like they're doing in other aspects of the program. [00:45:34] Speaker 06: What petitioner ignores is that biogas producers and RNG generated from biogas is different than other aspects of the program. [00:45:41] Speaker 06: To take an example that we referenced in our brief, petitioner claims that EPA is attempting to regulate a feedstock provider here. [00:45:49] Speaker 06: That's not the case. [00:45:51] Speaker 06: In the example provided in the brief, petitioner explained that this would be like trying to regulate the corn farmer. [00:45:58] Speaker 06: Whereas today petitioners explaining that the regulation here is different because EPA is only supposed to regulate the party that converts the feedstock into renewable fuel. [00:46:10] Speaker 06: But here there's an extra step in the process. [00:46:13] Speaker 06: The feedstock goes to a biogas producer. [00:46:15] Speaker 06: the biogas producer oversees the digestion of that feedstock which turns into biogas and then later has to be upgraded into renewable natural gas. [00:46:24] Speaker 05: Council that might be a good explanation and it's the explanation on page 42 of your brief but there's not a citation to the record and so I think what you need to tell us is a reason why this explanation wasn't [00:46:38] Speaker 05: either somewhere in the rulemaking where EPA gave the explanation you just did or a reason EPA wasn't required to give that explanation. [00:46:47] Speaker 05: And it's are you leaning towards the ladder or is there something in the record you can point us to? [00:46:54] Speaker 06: EPA provided, we believe EPA provided a reasonable explanation here for regulating biogas producers. [00:47:02] Speaker 06: The difference between the other aspects of the program, I don't have a record site ready today, but EPA explained in other aspects of the record that it's regulating biogas producers because they directly oversee the production of biogas from feedstock, for example, [00:47:20] Speaker 06: At Joint Appendix 547 to 49, in the response to comments, EPA explains that biogas producers are directly responsible for overseeing the generation of biogas from renewable feedstock. [00:47:33] Speaker 06: And that is the reason why EPA needs to directly oversee them in this program and enforce compliance provisions, because biogas producers [00:47:42] Speaker 06: are the party that's responsible for the information that determines whether the renewable natural gas that is used as the source of fuel in this program derives from a renewable source? [00:47:52] Speaker 05: Yeah, I guess the question I'm struggling with is that's, as you've suggested, is different from whether there was a compare and contrast done explicitly by the agency. [00:48:02] Speaker 05: And there might be, maybe it wasn't teed up well enough for EPA. [00:48:08] Speaker 05: I don't have the answer to that either. [00:48:11] Speaker 05: But it seems to me you need to have an explanation of why you weren't required to give a comparison and this explanation of why you can regulate biogas producers but not corn farmers, why you weren't required to give that explanation. [00:48:37] Speaker 06: to the extent that the court's asking whether EPA has the authority to regulate the corn farmer. [00:48:48] Speaker 05: Mr. Ellis's argument proceeded as if huge issue in this rulemaking was why are you regulating the biogas producer, but not the corn farmer. [00:48:58] Speaker 05: And it seems undisputed. [00:48:59] Speaker 05: There was no explanation why you're regulating the biogas producer and not the corn farmer. [00:49:05] Speaker 05: And if everything I've said so far is right, that would be a big problem for you. [00:49:09] Speaker 06: We don't agree, Your Honor. [00:49:11] Speaker 06: We don't know that the requirements here require EPA to provide a compare and contrast with other elements of the program. [00:49:18] Speaker 06: We believe EPA is required to provide a reasonable explanation for regulating the parties that are at issue in this rulemaking. [00:49:24] Speaker 06: And EPA did so. [00:49:25] Speaker 06: It explained that biogas producers oversee the production of biogas from feedstock. [00:49:31] Speaker 06: It explained that these parties do provide information that EPA needs to determine that the rinse generated from renewable fuels [00:49:38] Speaker 02: are provided here but if there's if every biofuel producer process is going to have the same question we got to ensure that it's the appropriate source why doesn't EPA have to say why it was picking on biogas [00:50:00] Speaker 06: EPA did explain here that biogas is a complicated program, that it's one step removed from the feedstock here, and that the reason for implementing these regulations... More complicated than the other biofuels? [00:50:12] Speaker 06: Yes, Your Honor. [00:50:14] Speaker 06: Why? [00:50:15] Speaker 06: Because the other biofuels are that when you process, let's say, corn into fuel ethanol, that's one step, and when you process the corn, [00:50:23] Speaker 06: you get the ethanol that's used as fuel. [00:50:25] Speaker 06: That party, as Petitioner concedes, is regulated because they're the one producing the fuel from the feedstock. [00:50:33] Speaker 06: Here, the party that's producing the fuel, the RNG producer who is the ring generator under this program, does not oversee the digestion from where the feedstock originally came from. [00:50:44] Speaker 06: There, that's the biogas producer. [00:50:46] Speaker 06: In some cases, those may be the same party. [00:50:48] Speaker 06: But in cases where they're a separate party, the way EPA would previously oversee them was to have the party submit contract information and reports that it obtained from the downstream party. [00:50:59] Speaker 06: But here, EPA has determined that it's appropriate to obtain feedstock, obtain the [00:51:10] Speaker 06: obtain the information directly from the biogas producer, because they're the ones that oversee it. [00:51:15] Speaker 06: They're the ones that need to comply with the requirements and provide that information. [00:51:18] Speaker 06: Oversee what? [00:51:19] Speaker 06: Oversee the production of biogas from feedstock. [00:51:23] Speaker 06: So they're not simply selling trash to a renewable fuel producer, and they're the ones that turn in the fuel. [00:51:30] Speaker 06: They actually oversee a conversion process that later goes to an RNG producer. [00:51:34] Speaker 06: an R&G producer gets the biogas, can't take the biogas and say, this comes from a waste product or corn or something else. [00:51:45] Speaker 06: The party that oversees that process is the biogas producer here. [00:51:51] Speaker 05: Can I ask you about the pipeline testing requirements? [00:51:54] Speaker 05: As I understand it, one of their points is that EPA has required testing for components that are not [00:52:03] Speaker 05: necessarily in whatever an individual pipeline would test for and then you haven't sufficiently explained why that requirement has been imposed. [00:52:12] Speaker 05: What's the response to that? [00:52:13] Speaker 06: So the regulation does provide so EPA does provide that pipeline that RNG producers have to provide testing that demonstrates that RNG can be placed onto a pipeline. [00:52:25] Speaker 06: There is a specific exception in the regulation itself. [00:52:28] Speaker 06: That's a 40 CFR section 80.135 D5 and D6 Romanet 5. [00:52:36] Speaker 06: That provision provides that if [00:52:39] Speaker 06: about RNG producer claims that a pipeline doesn't require testing of other elements or you know that a test does not require a pipeline producer to RNG producer to demonstrate that certain elements are required for that pipeline. [00:52:53] Speaker 06: They can request an alternative testing process. [00:52:57] Speaker 05: And that operates as an exception to what's required in 80.155 B. [00:53:00] Speaker 06: 80.155 [00:53:07] Speaker 06: the provides for the specific test that the pipe that the RNG producer has to provide. [00:53:13] Speaker 06: They have to run those tests in order to follow those methods to do the tests. [00:53:19] Speaker 05: So the actual. [00:53:21] Speaker 05: So I think their complaint is, for example, you tell us to, I'm going to mangle this, I'm sure, test for siloxanes. [00:53:28] Speaker 05: But some pipelines don't require testing for siloxanes based on the type of folks they're working with. [00:53:35] Speaker 05: Are you saying that they can ask for a waiver that would allow that producer not to test for siloxanes? [00:53:42] Speaker 05: Yes, your honor. [00:53:43] Speaker 05: OK. [00:53:46] Speaker 06: And to address some of their concerns regarding that, why? [00:53:50] Speaker 05: Can I ask one other question about this? [00:53:51] Speaker 05: So it initially seemed odd to me that you have a list of things that must be tested for, but not, at least that I could find, standards that they have to meet. [00:54:01] Speaker 05: Is that because all EPA is doing is comparing these test results to the pipeline requirements that have to be separately reported? [00:54:11] Speaker 05: What are you comparing the test results to? [00:54:13] Speaker 06: The test results are meant to show that so the party, the RNG producer, when they register with EPA to say, I want to get into the program to generate RINs, they have to provide the pipeline specifications for which they are putting the product onto the pipeline. [00:54:27] Speaker 06: These regulations to [00:54:29] Speaker 06: clarify, and I know this is a long-winded explanation, but [00:54:34] Speaker 06: In the pathway to which these requirements apply, they apply to RNG producers who generate RINs through uploading onto a commercial pipeline. [00:54:43] Speaker 06: So when they register to do that, they have to provide EPA with the pipeline specifications. [00:54:48] Speaker 06: So saying, here's what the pipeline requires. [00:54:50] Speaker 06: And then when they register, they're telling the EPA, not only through the engineering reviews that we require, do we have a facility that's capable of doing this, but we are in fact capable of upgrading biogas [00:55:01] Speaker 06: into renewable natural gas that can get onto a pipeline. [00:55:04] Speaker 06: So it's a demonstration at registration to show that the party has a business being in the program. [00:55:13] Speaker 05: And when you get the annual testing results, you are measuring that against whatever the pipeline specifications are to double check. [00:55:22] Speaker 05: So EPA requires that information. [00:55:24] Speaker 05: So yes, it's OK. [00:55:26] Speaker 06: I see. [00:55:27] Speaker 06: All right. [00:55:29] Speaker 02: Thank you very much, Constance. [00:55:30] Speaker 02: Thank you, Your Honor. [00:55:32] Speaker 02: We'll give you three minutes. [00:55:44] Speaker 04: Thank you. [00:55:44] Speaker 04: It's just a few points in rebuttal. [00:55:47] Speaker 04: First on the statute, I think I heard my friends say that they are not relying on 05 in this rulemaking to confirm that. [00:55:53] Speaker 04: That's not the rulemaking. [00:55:54] Speaker 04: I'm not surprised, but I think it's confirmed. [00:55:56] Speaker 04: So that means they have to rely on 02A1. [00:55:59] Speaker 02: I think they rely on that. [00:56:01] Speaker 02: applies to generation of credits by persons that refine, blend or import. [00:56:08] Speaker 02: So I understand how producers fit under there. [00:56:10] Speaker 04: So I understand that provision to allow for the creation of the credits that are ultimately, and the creation of the credits, I don't think I've ever seen an explanation of this, so this is my understanding of it, is it happens when you separate the ran at the end of the process. [00:56:26] Speaker 04: And then the generation happens by the RNG producers. [00:56:29] Speaker 02: That's been, or the renewable fuel producers, that's been the way that they have- The generation in the statute is by any person that refines, blends, or imports. [00:56:39] Speaker 02: They don't mention producers here either. [00:56:41] Speaker 04: So I think that the way they have, again, I'm sort of- Your theory is that they can regulate renewable fuel producers. [00:56:47] Speaker 02: Your theory is that they can regulate under this provision. [00:56:52] Speaker 02: It doesn't list producers just like 3 doesn't list producers. [00:56:55] Speaker 04: But it does allow specifically for the creation of credits for those obligated parties. [00:57:01] Speaker 04: And I think that the way that they've set up the system from the get-go [00:57:04] Speaker 04: is that the renewable fuel producer is the one who generates the rent that's ultimately separated and then regulate that way. [00:57:09] Speaker 02: If you look at the RFS rule... Congress lists in the statute regulations of persons that refine, blend, or import. [00:57:21] Speaker 02: That concludes the authority to regulate [00:57:25] Speaker 02: producers, if they're part of the generation process. [00:57:29] Speaker 04: I think there's an important difference in language in O2A3 and O5. [00:57:33] Speaker 04: O2A3, you're right, provides for regulations to contain compliance provisions applicable to the obligated parties, as you noted, Your Honor. [00:57:43] Speaker 04: O5 says to provide for the generations of an appropriate amount of credits by a person. [00:57:51] Speaker 04: They've provided for that appropriation, that generation of credits by this RIN system that allows you to then generate the RIN at the beginning when you produce the renewable fuel. [00:58:01] Speaker 02: It says who can generate the RINs. [00:58:03] Speaker 02: That's what I'm trying to get to. [00:58:04] Speaker 02: I'm sorry? [00:58:05] Speaker 02: It says who can generate the RINs. [00:58:07] Speaker 02: No, it says who can. [00:58:07] Speaker 02: The designers, plans or reports. [00:58:09] Speaker 04: It says who can regulate, who can have the credits, who can generate the credits. [00:58:13] Speaker 04: I think the credits, I think you have to generate a RIN and then separate a RIN. [00:58:19] Speaker 04: And that's the credit that you can then trade. [00:58:21] Speaker 02: And in fact, you've also got to show that- So what is this mandatory language that says anyone or producers or assures me that producers can generate the RIN in the first place? [00:58:32] Speaker 04: So I think 05 is the best I have the thing I will back you up that what I'll what I'll mention producers anywhere so they can add to that point. [00:58:39] Speaker 04: This is the way they've always done it and they did it before Congress amended RFS one to make RFS to they regulate they probably get this system they announced they're doing it under 05 and encourage you to look at the. [00:58:50] Speaker 04: rulemaking for RFS 1, and then Congress amends the statute, including amending 05, and does not say anything about, does not question the process that EPA had just set up under 05 to generate these rents. [00:59:03] Speaker 02: I think that that is a- They say that they had always been regulating producers, renewable fuel producers under 1, 2A1 or 1A2, sorry, let me get the page, under 2A1. [00:59:19] Speaker 02: I know I've been doing it under one. [00:59:22] Speaker 02: And Congress didn't change that. [00:59:23] Speaker 04: That's not how I read the rulemaking record, Your Honor. [00:59:25] Speaker 04: I would look at 71 Federal Register 55552. [00:59:29] Speaker 04: They expressly cite 05 in the very first RFS-1 rule when they set up the credit program. [00:59:36] Speaker 04: And 71 Federal Register 55557 that talks about how their R&G producer is going to have to have the auditing done to show that the requirements are met when they generate the rent. [00:59:47] Speaker 04: That's what they did from the outset. [00:59:48] Speaker 04: That's what Congress ratified. [00:59:51] Speaker 04: If I could return to a couple other points, Your Honor, I wanted to just point out that O2A1, or A3 rather, you pointed out that it says shall contain applicable to the obligated parties. [01:00:04] Speaker 04: It goes further than that, tying it back to O2A1. [01:00:08] Speaker 04: At the end of O2A3, it says you can promulgate these regulations, quote, to ensure that the requirements of this paragraph are met. [01:00:18] Speaker 04: So that's the way you ensure oath to a three tells you that's the way EPA is supposed to ensure. [01:00:25] Speaker 04: I think that implicates this court's discussion in heating AC and refrigeration that says to ensure is to make certain sure certain and safe. [01:00:33] Speaker 04: So Congress tells EPA to ensure [01:00:35] Speaker 04: But all it said was the agency should guarantee that result. [01:00:39] Speaker 04: The rest of the statute tells them how to ensure. [01:00:42] Speaker 04: That's what O2A3 does and we don't think that they can rely on O2A1 in the absence of that to expand their authority. [01:00:52] Speaker 04: The last thing I'll say on the statute, she said, excuse me, I'm over. [01:00:56] Speaker 04: So I'll wrap this up. [01:00:58] Speaker 04: She said, you asked, will it work? [01:00:59] Speaker 04: It does work. [01:01:00] Speaker 04: It has worked. [01:01:01] Speaker 04: It works this way for every other renewable fuel producer. [01:01:04] Speaker 04: And I don't think they've provided any explanation for why they departed to here. [01:01:09] Speaker 04: One last point. [01:01:10] Speaker 04: You asked your honor about if this was a point in the rulemaking. [01:01:13] Speaker 04: J.A. [01:01:14] Speaker 04: 369. [01:01:14] Speaker 04: Kinder Morgan raised this point. [01:01:16] Speaker 04: J.A. [01:01:17] Speaker 04: 438. [01:01:17] Speaker 04: We raised this point that they shouldn't be treating biogas producers differently than the other producers. [01:01:23] Speaker 02: Thank you very much.