## Facts

- Congress’s Renewable Fuel Standard (RFS) under the Clean Air Act requires EPA to set annual renewable fuel volume obligations for transportation fuel, including cellulosic biofuel and other advanced biofuels.
- For 2012, EPA issued a final rule setting the cellulosic biofuel applicable volume by projecting 8.65 million gallons (10.45 million ethanol-equivalent gallons) of cellulosic biofuel production.
- The Energy Information Administration projected a lower 2012 cellulosic biofuel production volume (6.9 million gallons).
- EPA stated it relied on multiple inputs, including the EIA projection, industry information, EPA’s assessment, and comments.
- The American Petroleum Institute (API) petitioned for review, arguing EPA’s cellulosic projection was unlawfully inflated and would force compliance with “phantom” fuel, and also challenging EPA’s refusal to reduce the 2012 advanced biofuel volume.

## Issues

1. Whether EPA’s 2012 cellulosic biofuel production projection was arbitrary and capricious because it was not a neutral estimate of likely production.
2. Whether EPA acted unlawfully by declining to reduce the 2012 applicable volume of advanced biofuel despite an expected cellulosic shortfall.

## Decision

- The court granted the petition in part and denied it in part.
- The court vacated and remanded EPA’s 2012 cellulosic biofuel standard, holding EPA’s projection methodology was unreasonable under the statute and arbitrary and capricious under the APA.
- The court upheld EPA’s decision not to reduce the 2012 advanced biofuel volume and denied API’s petition on that issue.

## Legal Principles

- When a statute directs an agency to set a standard based on a “projection” of production, the agency must use a neutral, evidence-based methodology aimed at estimating likely output, not an aspirational target designed to induce industry growth.
- An agency may consider multiple data sources and is not necessarily bound to adopt another agency’s estimate, but any departure must be supported by reasoned analysis consistent with the statutory command to project likely production.
- Regulatory requirements that effectively penalize regulated parties for nonproduction of a mandated commodity may be arbitrary if the governing statute contemplates adjustments to reflect realistic production constraints.
- Where the statute grants discretion to maintain or adjust related volume requirements (such as advanced biofuel), a court will uphold the agency’s choice if the agency reasonably explains that statutory conditions for adjustment are not met and the record supports availability of qualifying fuel.

## Conclusion

The D.C. Circuit held that EPA exceeded its authority by setting the 2012 cellulosic biofuel requirement using an upward-tilted, non-neutral projection that could compel compliance for fuel unlikely to exist, but it sustained EPA’s refusal to reduce the separate 2012 advanced biofuel volume based on EPA’s explanation and the statutory structure.


Am. Petroleum Inst. v. EPA, 706 F.3d 474 (D.C. Cir. 2013)