A San Francisco federal appeals court July 15 said the US Environmental Protection Agency must reconsider a request by California Gov. Gray Davis (D) and the California Air Resources Board to waive the oxygenate requirement in reformulated gasoline.
"The EPA abused its discretion in refusing to consider and weigh the effect of the proposed waiver on particulate matter pollution along with its effect on ozone levels," the US Court of Appeals for the 9th Circuit said.
The court granted the state's petition that EPA reconsider their request; the three-judge panel also vacated EPA's June 2001 order.
An EPA spokesperson said the agency is reviewing the opinion and "no decision has been made considering further judicial review of this case."
Two years ago, EPA rejected California's petition to obtain a waiver of the 2 wt % oxygen requirement for RFG. The state sought the waiver after it decided to ban the oxygenate methyl tertiary butyl ether.
MTBE and ethanol are in practice the only two commercially attractive oxygenates now available to fuel suppliers. MTBE is generally less expensive and easier to ship than fuel ethanol on the US west and east coasts. But groundwater contamination concerns associated with MTBE have led California and several other states to take action to remove the additive from the motor fuel pool.
By 2006, a total of 16 states plan to have MTBE bans in place, according to American Petroleum Institute data. A pending Congressional proposal would lift the current oxygenate requirement but install a "renewable" fuels standard so ethanol markets would be protected.
RFA reaction
Ethanol producers said they were pleased by the court's decision. The Renewable Fuels Association said that although the court told EPA it must reconsider California's waiver request, the ruling "affirms EPA's conclusion that ethanol-blended gasoline will not increase ozone formation in California and that the EPA's decision to deny California's request for a waiver from the RFG oxygenate requirement is supported by law and science.
"Even as the court agreed ozone would not be increased by using ethanol, a majority of the court did feel that EPA should have studied the impact of the waiver on particulate matter (PM). EPA, having concluded ozone would not be harmed, chose not to evaluate the impact on PM," said RFA Pres. Bob Dinneen. "We are very confident that when EPA evaluates the impact of the waiver request on PM, it will support its previous decision to deny the waiver.
"The transition from MTBE to ethanol in California is nearing 80% completion and has gone very smoothly. The wholesale price of ethanol-blended gasoline has been consistently below that of MTBE-blended gasoline. In short, the use of ethanol in California is a huge success," Dinneen said.
Others' reactions
Refiners and environmental groups also welcomed the decision but rejected RFA's view that the court validated ethanol's purported environmental benefits.
Refiners said they were hopeful the court's decision would force EPA and other decision-makers in Congress to study the economic and environmental impacts of an ethanol mandate more carefully.
Bob Slaughter, president of the National Petrochemical & Refiners Association, said the court decision "struck a blow" for good government.
"EPA erred in short-circuiting the necessary review of the waiver request. The court is to be congratulated for insisting on due process for the (gasoline) consumers of the nation's largest state, and especially for its air quality concerns. This is not the last word in the case, but we hope it is enough to make the US Senate and House reconsider their hasty, but so far provisional, support for a national ethanol mandate. Certainly the whole nation's gasoline supply and environmental quality deserve as much consideration as this court is requiring before EPA can impose such a mandate on California," Slaughter said.
Frank O'Donnell, executive director of the nonprofit environmental group Clean Air Trust called the Bush administration decision to deny an oxygenate waiver "yet another example of the Bush administration distorting science to achieve a political objective." O'Donnell added that "today's decision is a victory for clean air and good news for breathers in California and other states like New York that are facing a de facto ethanol mandate as MTBE use is phased out."
It will take time before the ultimate victor is known.
Frank Maisano, spokesperson for the Oxygenated Fuels Association, a MTBE producer group, said that the court placed no time limit on EPA's reconsideration of the waiver.
The agency has three possible options, Maisano said.
"What can EPA do? First, they can agree with the Ninth Circuit—and begin reconsideration of the waiver request. Remember, it took EPA over 2 years to decide the issue the first time around," the OFA spokesperson said. "Second, they can seek en banc reconsideration by the Ninth Circuit. Circuit courts impose tough standards on reconsideration, but the decision was 2-1." Maisano cited one judge's dissent that EPA should be owed deference on the PM issue as well: "The full Ninth could be tempted to reconsider." Third, and less likely, the EPA could ask for Supreme Court review, he said. But it is not clear that the case presents the sort of novel legal issue the Supreme Court likes to hear.