On July 12, the D.C. Circuit Court of Appeals vacated the Environmental Protection Agency (EPA)’s biogenic Deferral Rule, a decision that could have significant impacts for Minnesota’s ethanol, biomass and pulp and paper industries, among others. Center for Biological Diversity v. EPA, No. 11-1101 , slip Op. (D.C. Cir. July 12, 2013).

Biomass Pellets (Source: Deutsches Pelletinstitut, viewed at www.millicentmedia.com/)

Biomass Pellets (Source: Deutsches Pelletinstitut, viewed at http://www.millicentmedia.com/)

In 2010, EPA issued the so-called “Tailoring Rule,” regulating Greenhouse Gas emissions from stationary sources under the Clean Air Act’s PSD and Title V permit programs, but adjusting (or “tailoring”) the statutory thresholds to avoid having to regulate millions of sources. 75 Fed. Reg. 31,514 (June 3, 2010).  Shortly after the Tailoring Rule, EPA, in recognition of the complexity and uncertainty in determining the carbon impact of biogenic sources—those that combust that various types of biomass instead of fossil fuels—issued a rule postponing regulation of biogenic carbon dioxide sources for three years, until July 21, 2014). 76 Fed. Reg. 43,490 (July 20, 2011).

In vacating the Deferral Rule as arbitrary and capricious, the D.C. Circuit rejected EPA’s three bases for delaying regulation of biogenic sources. First, the Court held that EPA had failed to articulate what would constitute “full compliance” as required under the “one-step-at- a-time” doctrine; second, EPA did not carve out the narrowest of exemptions for biogenic sources under the “administrative necessity” doctrine; and third, EPA’s own attorneys acknowledged that the agency’s reliance on the “de minimis” doctrine was not justified. The Court did not reach the question of whether the three-year deferral is contrary to the mandates of the CAA.

The Court’s decision leaves a wake of regulatory uncertainty. For example, under the Deferral Rule, biogenic carbon dioxide sources constructed during the three-year deferral period were permanently exempted from the PSD permitting requirement. However, with the Court’s vacatur, it is as if the Deferral Rule never existed. Where exactly this leaves biogenic sources constructed in reliance upon the rule is currently unclear.  Industry groups such as the American Forest & Paper Association and the  American Wood Council have called upon EPA to promptly pass a new rule regarding the greenhouse gas emissions of biogenic sources.