Ethanol Litigation: Another Powerful Dissent by Judge Kavanaugh

by Marlo Lewis on January 17, 2013

in Blog, Features

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On Tuesday, the D.C. Circuit Court of Appeals denied by 7-1 a petition for a full-court re-hearing of its 2-1 decision last summer to dismiss litigation challenging EPA’s approval of the sale of E15 at retail motor fuel pumps. E15 is a blend of 85% gasoline and 15% ethanol.

In both decisions, Judge Brett Kavanaugh was the sole dissenter, and both times he trounces the majority on the facts and statutory logic.

In a previous post, I reviewed Kavanaugh’s dissent in the August 2012 decision. Herewith a brief recap:

  • The 2-1 majority held that petitioners — refiners and livestock producers — would not be injured by the EPA’s grant of a waiver authorizing the sale of E15 and thus lack standing to challenge the agency. The majority somehow missed the obvious.
  • There being no commercial substitute for ethanol to meet the ever-increasing production quota established by the Renewable Fuel Standard (RFS), EPA approval of E15 is a de facto mandate on refiners to increase the blend from E10 to E15 — a roughly 50% increase from about 14 billion gallons to 21 billion gallons annually. That will necessarily impose a cost on refiners. 
  • In addition, because virtually all U.S. ethanol is made from corn, approving E15 will increase the demand for and price of corn, imposing a cost on livestock producers, who purchase billions of bushels annually to feed their hogs, cattle, and poultry.
  • Clearly, EPA approval of E15 injures both petitioner groups, so the Court should have reviewed the petitions on the merits.
  • Section 211(f) of the Clean Air Act (CAA) prohibits the EPA from approving the sale of any fuel additive that causes or contributes to the failure of emission control systems in any vehicle manufactured after 1974. 
  • By the EPA’s own admission, E15 can contribute to emission control failures in vehicles manufactured during model years 1975 through 2000.
  • Therefore, the EPA lacks authority to approve the sale of E15.

Kavanaugh’s dissent in Tuesday’s decision reiterates those points but also adds some illuminating refinements.

Although the EPA “did not raise a challenge to the standing of the food producers or the petroleum producers,” the 2-1 majority in August dismissed the case on standing grounds. “The panel determined that the food producers have Article III standing but lack prudential standing because, according to the panel, the food producers are not within the zone of interests under the relevant ethanol-related statute. The panel separately held that the petroleum producers lack Article III standing.” In Kavanaugh’s view, “both groups plainly have standing.”

At this point you may be wondering, what is “prudential standing” and how does it differ from “Article III standing”? Article III of the U.S. Constitution extends (or limits) the judicial power to “cases” and “controversies.” As interpreted by the Supreme Court, this means plaintiffs have standing only if they can demonstrate an injury that is fairly traceable to the defendant’s challenged action. The doctrine of prudential standing is murkier, but basically means courts for prudential reasons may also refuse to adjudicate some claims. In the present case, the majority held that the food producers’ claimed injury does not fall within the “zone of interests” protected by the Clean Air Act provisions establishing the RFS program.

Kavanaugh finds the majority’s opinion incorrect for either of two alternative reasons. First, the “EPA chose not to challenge the food producers’ prudential standing – in other words, because EPA accepted that the food producers were within the zone of interests and therefore an aggrieved party – that issue has been forfeited and is no longer part of the case.”

Second, the “food producers’ case for being within the zone of interests is especially strong here because Congress expressly took account of the interests of food producers, among others, in this ethanol-related statute” [see Clean Air Act § 211(o)(7), which allows the EPA to waive the RFS blending requirements when those would severely harm the economy of a state, region, or the United States].

The 2-1 majority ruled that the petroleum refiners are not injured and hence lack Article III standing to challenge the EPA’s approval of E15. That is ridiculous. In Kavanaugh’s more polite words:

But the petroleum producers are directly regulated parties; and as the Supreme Court has said, when a party “is himself an object of the action” at issue, “there is ordinarily little question that the action” has “caused him injury, and that a judgment preventing” the action “will redress it.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561-62 (1992). Indeed, EPA did not even challenge the petroleum producers’ Article III standing, recognizing at oral argument that the petroleum producers’ standing was “self-evident.” Tr. of Oral Arg. at 30. . . .EPA did not raise Article III standing no doubt because it fully understands how this program actually works, and EPA appreciates that the combination of the statutory renewable fuel mandate and EPA’s E15 waiver will obviously force petroleum producers to refine and sell E15. . . . In fact, the ethanol producers who sought the E15 waiver specifically argued to EPA that the E15 waiver was “necessary” for petroleum producers to meet the renewable fuel mandate. What better evidence do we need?

In short, plaintiffs have standing, the Court should review the case on the merits, the “evidence is undisputed” that approving E15 sales will “cause failure of emissions standards in cars manufactured through 2000,” and, thus, the “EPA’s action simply cannot be squared with the statutory text.”

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