EPA’s projections for cellulosic biofuels have been wildly off course for several years. | POLITICO Staff Court rejects EPA's biofuel mandates

A federal appeals court tossed out the Environmental Protection Agency’s mandates for cellulosic biofuels under the Renewable Fuels Standard, saying the agency erred in its overly optimistic projections for the new energy source.

The U.S. Court of Appeals for the D.C. Circuit sided with the oil industry, saying that EPA rules for cellulosic biofuels were wrong, but it upheld the agency’s refusal to lower the overall volume of advanced biofuels set in the 2012 RFS in a ruling Friday in American Petroleum Institute v. EPA.


EPA sets renewable fuel projections every year that establish the volumes that refiners, importers and blenders must use. For what they don’t — or can’t — buy, industry must purchase credits.

But EPA’s projections for cellulosic biofuels have been wildly off course for several years. The agency predicted production volumes of 5 million gallons, 6.6 million gallons and 8.7 million gallons in 2010, 2011 and 2012, respectively. In reality, no cellulosic biofuels were produced in the U.S. in 2010 and 2011, and only 20,069 gallons were produced in 2012, according to EPA data. All of that was exported, according to the American Fuel & Petrochemical Manufacturers.

Congress commanded EPA to make predictions about “promising technology” in creating the annual RFS. But “while the program as a whole is plainly intended to promote that technology, we are not convinced that Congress meant for EPA to let that intent color its work as a predictor, to let the wish be father to the thought,” Senior Circuit Judge Stephen Williams wrote in the court’s opinion.

Williams was joined in the opinion by judges Janice Rogers Brown and Brett Kavanaugh.

The court said EPA has plenty of latitude in making its own projections and to differ from lower-volume predictions made by the Energy Information Administration. But the opinion charges that “EPA’s methodology for making its cellulosic biofuel projection did not take neutral aim at accuracy.”

Instead, according to EPA comments to API cited by the court’s opinion, the agency hoped to establish a realistic volume level but also to balance its uncertainty with “the objective of promoting growth in the industry.”

EPA has the legal right to set its standards based on future technologies with a mind toward spurring innovation, the court said, pointing to previous deference given to the agency, such as for diesel standards.

But this case is different because EPA was applying pressure to the refiners, who were “captive consumers” that are forced buy the fuel, while a separate group of producers hold the expertise, the facilities and the opportunity to profit, the court said.

“Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers,” the ruling chides.

While the court found the technology for cellulosic biofuels lacking, justices did not agree with API on other biofuel rules and rejected its claim that the agency should have lowered the overall RFS volume for 2012.

In particular, the court cited EPA and EIA projections pertaining to sugar cane ethanol imports and biofuel production capacity. The data suggest that some combination of those biofuels could make up for a shortfall in cellulosic biofuels, the opinion said.

Biofuels generally do not face the same production obstacles as cellulosic biofuels, the court said. And “to the extent that estimates in the record are relatively low, that seems to be based on want of a market, which of course continued pressure will tend to solve,” the opinion said.