In a split decision, a federal appeals court on Aug. 14 denied a petition filed by Poet Biorefining last year challenging guidance issued by the U.S. EPA in May 2019 regarding the registration of corn kernel fiber pathways under the Renewable Fuel Standard.

The EPA in May 2019 published a document providing guidance on how to demonstrate than an analytical method for determining the cellulosic converted fraction of corn kernel fiber co-processed with starch at a traditional ethanol plant satisfies the regulatory requirements needed to generate D3 cellulosic renewable identification numbers (RINs) under the RFS. The guidance pertains to a final rule issued by the agency in July 2014, known as the Pathways II Rule, that specified corn kernel fiber does qualify as a crop residue and is an eligible feedstock for the production of cellulosic biofuel.

A notice posted to the agency’s website states that the intent of the guidance is to explain the agency’s interpretation of its regulatory requirements and to articulate clear criteria for the type of analysis and demonstrations that EPA believes would be an appropriate basis for registration under the program.

A summary provided within the guidance states, “Peer reviews submitted with registration requests for adding the cellulosic pathway for co-processing corn kernel fiber and starch that rely on a non-[voluntary consensus standards body (VCSB)] analytical method to determine the cellulosic converted fraction must not only assess whether it is theoretically possible for the chosen method to measure cellulose accurately, but must also review the data to ensure that the method has actually provided reasonably accurate results. EPA recommends that peer reviews make this demonstration by documenting that the method returns cellulosic values for a representative reference material within 20 percent of the mean value reported for that material by an independent body such as [the National Institute of Standards and Technology]. If the references demonstrate that a party using a non-VCSB analytical method has satisfied the criteria as outlined above in this guidance, the registration application should be approvable, assuming all other registration requirements are met.”

The guidance was criticized by many in the ethanol industry. Growth Energy expressed disappointment in the guidance and said it will stifle innovation for second-generation biofuels. “EPA's guidance changes the rules mid-game on critical pathway approvals for cellulosic ethanol,” said Emily Skor, CEO of Growth Energy, in a statement released in May 2019.

Poet Biorefining filed petitions for review challenging the guidance on July 5, 2019 with the U.S. Court of Appeals for the District of Columbia Circuit and Eighth Circuit Court of Appeals. In a split decision, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit on Aug. 14 denied part of the petition. The challenge before the Eight Circuit Court of Appeals is still pending.

In its challenge before the D.C. court, Poet claimed the guidance is a legislative rule that was invalidly promulgated without notice and comment. Poet also asserted that the guidance conflicts with the Pathways II Rule it purports to interpret and imposes arbitrary requirements that are impossible to meet.

In its decision, the court concluded that Poet’s challenge to the treatment of VCSB-certified methods is unripe because no such method yet exists and Poet’s registration efforts rely on the peer-reviewed alternative. Regarding Poet’s challenge to the guidance’s discussion of peer-reviewed methods, the court held that the guidance announces a final, interpretive rule that lawfully construes the underlying regulation. “We therefore dismiss in part and deny in part the petition for review,” wrote Circuit Judge Pillard in the court’s ruling.

Circuit Court Judge Karen LeCraft Henderson dissented in part to the ruling. While she agreed that the VCSB portion of the guidance is not ripe and that remainder of the guidance constitutes final agency action subject to the court’s review. Henderson, however, said she disagrees with the panel’s conclusion that the guidance is an interpretive rule.

“The guidance’s reference material requirement changes the regulatory scheme to register the in situ biofuel production process by constricting biofuel producers’ ability to show reasonably accurate results to a single possible means that is currently not possible,” Henderson wrote. “This change means that producers like Poet are indefinitely foreclosed from successfully registering that type of biofuel production process. In my view, the guidance is a legislative rule with respect to the reference material requirement because it limits and thus effectively amends the 2014 regulation, 40 C.F.R. § 80.1450(b)(1)(xiii)(B)(3) (codifying the Pathways II Rule). I would ‘invalidate [the guidance] at the outset as never having been subjected to notice and comment.’” As a results, Henderson indicated she would vacate and remand the guidance with respect to its reference material requirement.

“We were disappointed by the ruling and are evaluating all options available to obtain the appropriate D3 registration for our corn fiber pathway,” said a Poet spokesperson on Aug. 17.

The challenge before the Eight Circuit Court of Appeals was filed by Poet Biorefining – Hudson LLC challenging the EPA’s final action denying the facility’s request for registration to generate cellulosic RINs.

The court filing includes a May 7 letter from Assistant EPA Administrator William Wehrum denying Hudson’s registration request. The 13-page letter concludes by noting that the registration filed by the Hudson plant fails to provide a demonstration that the analytical method used to calculate the cellulosic fuel production would produce reasonably accurate results.

Oral arguments for the Eight Circuit Court of Appeals challenge were held June 16. The court has not yet issued a ruling.