By Katherine Rollins
Ms. Rollins graduated from the University of Notre Dame in 2009 with a B.A. in English and Art History. This summer she will be clerking at Vinson & Elkins in Houston. She expects to receive her J.D. from the Texas School of Law in May 2012.
In early 2010, the Environmental Protection Agency (EPA) published final regulations pursuant to the 2007 Energy Independence and Security Act (EISA). These regulations modified and expanded upon the Energy Policy Act of 2005, which required that certain volumes of renewable fuel be included in the gasoline sold in the United States each year. The National Petrochemical and Refiners Association and the American Petroleum Institute (“Petitioners”) challenged these regulations on the grounds that they violated EISA statutory requirements, were impermissibly retroactive, and disregarded statutory lead time and compliance provisions. However, in National Petrochemical and Refiners Ass’n v. Environmental Protection Agency, the D.C. Court of Appeals declined the petitions for review on all counts.
The new EPA regulations under EISA differed slightly but significantly from the regulations promulgated under the Energy Policy Act of 2005. The Energy Policy Act of 2005 required that certain volumes of renewable fuel be included in the gasoline sold in the United States each year, and “obligated parties – refiners, importers, and blenders of gasoline – had to show that they had introduced a required volume of renewable fuel into the domestic gasoline pool each year.” The regulations also provided for a credit trading program to allow obligated parties to meet these renewable fuel requirements in the most cost-effective manner. The 2010 regulations under EISA increased the volume requirements for renewable fuels on the whole and added new volume requirements for several specific types of renewable fuels (including advanced biofuels, biomass-based diesel, and cellulosic biofuels). The EISA regulations also changed the definition of renewable fuel in order to clarify these new categories of fuel, but the credit trading program was left in place without substantial modification. Although EISA required EPA to promulgate the new regulations by December 19, 2008, EPA did not post notice of the final revisions to the regulations until February 3, 2010, and the revised regulations were published in the Federal Register on March 26, 2010. The publication of the final regulations was delayed by the combination of extensive research required by EISA, the complex regulatory modifications, and a 60-day Congressional review period. As a result of the delay, EPA provided obligated parties until February 28, 2011 to comply with the 2009/2010 volume requirements and allowed them to use credits generated under prior regulations to meet the 2010 renewable volume obligations.
The Petitioners first argued that the 2010 regulations violated the statutory mandate of EISA and that as a result EPA lacked the authority to increase the renewable fuel volume requirements and implement a transition volume requirement for 2009/2010. Petitioners point to the language of EISA, which provides:
Not later than 1 year after December 19, 2007, [EPA] shall revise the regulations under this paragraph to ensure that transportation fuel sold or introduced into commerce in the United States…, on an annual average basis, contains at least the applicable volume of renewal fuel… determined in accordance with [other provisions of EISA].
Petitioners argue that since the EPA missed the explicit statutory deadline set out by Congress in EISA, EPA lost their authority to later promulgate the 2010 regulations under EISA. EPA responded to this challenge by emphasizing that Congress did not indicate what would happen if EPA missed the deadline (provisions which are common in other statutes, including the 2005 Energy Policy Act) and that such a deprivation of authority would contradict the purpose of EISA. Furthermore, Supreme Court precedent in similar statutory interpretation cases conflicts with the Petitioners’ interpretation of EISA. In several cases, including Barnhart v. Peabody Coal and Brock v. Pierce County, the Supreme Court has “expressed reluctance to conclude that every failure of an agency to observe a procedural requirement voids subsequent agency action, especially when important public rights are at stake.” Since the missed deadline was only a procedural matter and the later regulations were in furtherance of an important public policy, the Court of Appeals held that EPA did not lose the authority to promulgate regulations under EISA after December 19, 2008 absent a specific declaration from Congress.
Petitioners also argued that the 2010 regulations under EISA were impermissibly retroactive. EPA defended its actions by reasoning that even if the 2010 regulations had retroactive effects on the 2009/2010 renewable fuel volume requirements, “Congress had expressly and impliedly authorized this result by directing EPA to [implement EISA]… regardless of the date of promulgation of the necessary implementing regulations.” EPA argued that if the 2010 regulations did have retroactive effects, EPA was authorized to make such regulations and took care to minimize those effects. The Court of Appeals agreed with EPA, finding that the express language of EISA indicated that Congress anticipated these new regulations would have some retroactive effect since the earliest date that the regulations could have been published was February 2009 (taking into account the 60 day review window after their anticipated publication in December 2008). Furthermore, the Court of Appeals found that the regulations did not invalidate any of the obligated parties’ previous bargains, provided for a smooth transition to the new EISA standards without requiring excessive immediate investment by the obligated parties (largely as a result of the carried over credit-trading program), and were accessible to the obligated parties throughout the rulemaking process. Therefore, the Court of Appeals declined to review the 2010 regulations on the basis of their retroactive effect because EPA had already examined the issues thoroughly and had decided how to best implement Congress’s policy initiatives in EISA.
Finally, Petitioners argued that the 2010 regulations disregarded statutory lead time and compliance provisions. The Court of Appeals dismissed these two arguments quickly at the end of their opinion, holding that there was no meaningful difference between the “lead time” argument and the retroactivity claim, and that obligated parties were sufficiently protected by being given over a year to comply with the new regulations. Therefore, the Court of Appeals denied all of Petitioners’ claims for review of the 2010 EPA regulations pursuant to EISA.
Nat’l Petrochemical and Refiners Ass’n v. Envtl. Protection Agency, No. 10-1070, 2010 U.S. App. LEXIS 25896 (D.C. Cir. Dec. 21, 2010).