POET Biorefining, LLC v. EPA ( 2020 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 11, 2020 Decided August 14, 2020
No. 19-1139
POET BIOREFINING, LLC, ET AL.,
PETITIONERS
v.
ENVIRONMENTAL PROTECTION AGENCY AND ANDREW
WHEELER, ADMINISTRATOR,
RESPONDENTS
On Petition for Review of an Action of the
United States Environmental Protection Agency
Seth P. Waxman argued the cause for petitioners. With
him on the briefs were Brian M. Boynton, David M. Lehn, Paul
Vanderslice, Ethan G. Shenkman, Jonathan S. Martel, William
C. Perdue, and Sally L. Pei.
Paul E. Salamanca, Attorney, U.S. Department of Justice,
argued the cause for respondents. On the brief were Jonathan
D. Brightbill, Principal Deputy Assistant Attorney General,
and Kate R. Bowers, Attorney. Perry Rosen, Attorney, entered
an appearance.
Before: HENDERSON, GARLAND, and PILLARD, Circuit
Judges.
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Opinion for the Court filed by Circuit Judge PILLARD.
Opinion concurring in part and dissenting in part filed by
Circuit Judge HENDERSON.
PILLARD, Circuit Judge: Cellulosic biofuel is a renewable
fuel derived from plant fibers like switchgrass or the husks of
corn kernels, and it produces the least lifecycle greenhouse gas
emissions of the four renewable fuels promoted by the Clean
Air Act’s Renewable Fuel Standard program. See 42 U.S.C.
§ 7545(o)(1). Quantifying how much cellulosic biofuel
companies produce becomes complicated when they make
ethanol from partially cellulosic feedstocks like corn kernels.
Biochemically processing the kernels produces ethanol
representing both conventional biofuel from the starchy
innards and, in some fraction, cellulosic biofuel from the husks.
The challenge is finding an accurate method to measure the
amount of cellulosic biofuel in the homogenous ethanol yielded
by the whole kernels.
Recognizing the difficulty of ascertaining the cellulosic
fraction, the U.S. Environmental Protection Agency (EPA)
adopted a regulation known as the Pathways II Rule, allowing
renewable-fuel producers to use a measurement method
(1) “certified by a voluntary consensus standards body”
(VCSB), or a method (2) “that would produce reasonably
accurate results as demonstrated through peer reviewed
references.” 40 C.F.R. § 80.1450(b)(1)(xiii)(B)(3). EPA soon
noticed what it considered to be troublingly wide variation in
producers’ measurements, so it issued “Guidance on
Qualifying an Analytical Method for Determining the
Cellulosic Converted Fraction of Corn Kernel Fiber Co-
Processed with Starch” (the Cellulosic Guidance, or Guidance)
to explain its interpretation of the applicable regulatory
requirements and clarify the types of analyses and
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demonstrations that might meet them. The Guidance
elaborated the support needed before EPA could deem a
VCSB-certified or peer-reviewed method acceptable under the
Pathways II Rule.
POET Biorefining, LLC, and ten of its operating
subsidiaries (collectively, POET) now petition us for review of
the Cellulosic Guidance, contending that it is a legislative rule
invalidly promulgated without notice and comment, conflicts
with the Pathways II Rule it purports to interpret, and imposes
arbitrary requirements that are impossible to meet. We
conclude that POET’s challenge to the Guidance’s treatment of
VCSB-certified methods is unripe because no such method yet
exists and POET’s registration efforts rely on the peer-
reviewed alternative. As for POET’s challenge to the
Guidance’s discussion of peer-reviewed methods, we hold 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.
I. BACKGROUND
The Clean Air Act’s Renewable Fuel Standard program
charges EPA with increasing the domestic supply of four types
of renewable fuel: cellulosic biofuel, biomass-based diesel,
advanced biofuel, and total renewable fuel (which includes
conventional biofuel that is not one of the three other types).
See 42 U.S.C. § 7545(o). The four fuel types are partially
“nested,” meaning that cellulosic biofuel is a subcategory of
advanced biofuel, which in turn is a subcategory of total
renewable fuel. See Alon Refining Krotz Springs v. EPA, 936
F.3d 628, 635-36 (D.C. Cir. 2019) (per curiam). Each year,
based on annual quotas set for each of the four statutorily
defined renewable fuels, see 42 U.S.C. § 7545(o)(2), EPA
identifies what percentage of the total amount of transportation
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fuel marketed in the United States should consist of each of the
four types, see id. § 7545(o)(3)(B). To meet those goals, EPA
annually requires refiners and importers to introduce each type
of renewable fuel in an amount proportionate to their overall
fossil-fuel business. See 40 C.F.R. § 80.1407(a). EPA uses
Renewable Identification Numbers (RINs) to track the type and
volume of renewable fuels introduced into the U.S. economy.
See id. § 80.1425.
RINs make the Renewable Fuel Standard program credit-
based: Refiners and importers of fossil fuels satisfy their
annual obligations by acquiring and submitting to EPA a
quantity of RINs in requisite proportion to the fossil fuel they
supplied the U.S. transportation market that year. See id.
§ 80.1427(a)(1); see also 42 U.S.C. § 7545(o)(5). The refiners
and importers need not themselves produce or introduce
renewable fuels, but instead can purchase and submit to EPA
the necessary RINs from renewable-fuel producers like POET.
See Ams. for Clean Energy v. EPA, 864 F.3d 691, 699 (D.C.
Cir. 2017). Because RINs play a central role in tracking
individual compliance and the volume of the overall
renewable-fuel market, they must accurately reflect the volume
and type of renewables produced or imported. To promote
accuracy, EPA requires renewable-fuel producers to include
certain information with their applications to generate RINs
and, once registered with EPA, to comply with various
reporting and recordkeeping requirements. See 40 C.F.R.
§ 80.1426(a)(1)(iii).
EPA’s statutory duty to assign each batch of renewable
fuel “an appropriate amount” of RINs, 42 U.S.C.
§ 7545(o)(5)(A)(i), becomes more complicated when a
producer biochemically processes partially cellulosic
feedstocks (like POET’s corn kernels) into ethanol, a fraction
of which the producer asserts is derived from the kernels’ husks
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so appropriately designated as cellulosic biofuel. One
difficulty is the absence of “any ready test that could be used
to identify the amount of a finished fuel that was derived from
cellulosic versus non-cellulosic components,” the relative
amounts of which vary significantly depending on the
producer’s fuel-making process. Regulation of Fuels and Fuel
Additives: RFS Pathways II, and Technical Amendments to the
RFS Standards and E15 Misfueling Mitigation Requirements,
79 Fed. Reg. 42,128, 42,132 (July 18, 2014) (Pathways II
Rule).
Here, POET challenges the procedural and substantive
lawfulness of the Cellulosic Guidance, which explains, in view
of additional data and experience, EPA’s understanding of the
Pathways II Rule’s requirement that any method of measuring
the proportion of cellulosic biofuel must do so with
“reasonabl[e] accura[cy].” 40 C.F.R.80.1450(b)(1)(xiii)(B)(3).
A. Pathways II Rule & Memo
To address the problem of allocating RINs to the portion
of cellulosic biofuel, if any, produced together with
conventional biofuel from partially cellulosic feedstocks like
corn kernels, EPA finalized the Pathways II Rule in July 2014.
See Pathways II Rule, 79 Fed. Reg. at 42,132. Because they
are triple-counted (as reflected in cellulosic biofuel’s position
nested within two larger categories), cellulosic-biofuel RINs
are more valuable than conventional-biofuel RINs both in
terms of satisfying annual regulatory obligations and
generating revenue in the RIN market. See 40 C.F.R.
§ 80.1427(a)(2)-(3) (providing that RINs corresponding to
cellulosic biofuel simultaneously count toward cellulosic
biofuel, advanced biofuel, and total renewable fuel totals, while
conventional-biofuel RINs count only as total renewable fuel).
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In the Pathways II Rule, EPA describes assignment of
cellulosic-biofuel RINs to a portion of the renewable fuel
produced from partially cellulosic feedstocks in terms of what
it calls the “cellulosic converted fraction”—the “portion of the
feedstock that is converted” into cellulosic biofuel through an
applicant’s chosen fuel-making process. 40 C.F.R.
§ 80.1426(f)(3)(vi); see also Pathways II Rule, 79 Fed. Reg.
at 42,132, 42,134. The Pathways II Rule requires that
producers like POET, seeking to register with EPA to begin
generating cellulosic-biofuel RINs from biochemically
processing partially cellulosic feedstocks, identify “[t]he
cellulosic converted fraction (CF) that will be used for
generating [cellulosic-biofuel] RINs.” 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(2). To enable EPA to determine
whether a producer’s cellulosic converted fraction is a
sufficiently reliable basis for EPA to award cellulosic-biofuel
RINs, the Pathways II Rule requires producers to supply the
data “used to calculate the cellulosic CF.” Id.
§ 80.1450(b)(1)(xiii)(B)(3); see also Pathways II Rule, 79 Fed.
Reg. at 42,135.
Establishing the converted fraction of cellulosic biofuel
produced through biochemical processing of partially
cellulosic feedstocks is not straightforward. A producer that
processes partially cellulosic whole corn kernels into
renewable fuel cannot directly measure how much of the
resultant fuel was derived from the cellulose and how much
from the starch. Measuring the proportion of cellulosic biofuel
derived from corn kernels is additionally challenging when the
producer’s conversion process is biochemical rather than
thermochemical, as POET’s is: Whereas a thermochemical
process yields cellulosic biofuel in “proportion[] to the
cellulosic content of the organic fraction of the feedstock
material” from which the fuel is made, biochemical fuel-
making processes “convert different fractions of the cellulosic
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and non-cellulosic carbohydrates to finished fuel.” Pathways
II Rule, 79 Fed. Reg. at 42,134.
In general, EPA estimates (and POET does not dispute)
that some 5-9% of a corn kernel’s total mass is fiber, and that
biochemical processing may convert only about 20% of that
fiber into cellulosic biofuel. See EPA Br. 5-6. By contrast,
EPA estimates that about 70% of the kernel’s mass is starch
and that biochemical processing can convert approximately
88-93% of that starch into non-cellulosic biofuel. See id.
Based on those estimates, it appears that a very small fraction
of the resulting ethanol is cellulosic, with the precise fraction
both difficult to pin down and subject to significant variation
depending on the specific feedstocks used, and the type and
efficiency of the producer’s biochemical fuel-making process.
See Pathways II Rule, 79 Fed. Reg. at 42,134.
Because there is no way of directly monitoring what
proportion of ethanol made from whole kernels derives from
kernel husks, producers must obtain the data necessary to
calculate the cellulosic converted fraction indirectly by
devising some method of assessing the cellulosic content of the
biomass that goes into and is left over from their biochemical
fuel-making process. Recognizing that no easy or universally
accepted method exists, the Pathways II Rule requires
producers to show in their registrations to generate cellulosic-
biofuel RINs that their method accurately measures the
cellulosic output of their fuel-making process. See Pathways II
Rule, 79 Fed. Reg. at 42,132 & n.12, 42,134-35. The Rule
relies on third parties’ expertise to evaluate methodological
soundness, requiring that, when calculating the cellulosic
converted fraction, producers use data that are “representative
and obtained [1] using an analytical method certified by a
voluntary consensus standards body, or [2] using a method that
would produce reasonably accurate results as demonstrated
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through peer reviewed references provided to the third party
engineer performing the engineering review.” 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3). The producer must also describe
how it uses the data produced by its VCSB-certified or peer-
reviewed measurement method to calculate the cellulosic
converted fraction. See id. § 80.1450(b)(1)(xiii)(B)(4).
To accompany publication of the Pathways II Rule, EPA
prepared a memorandum—the Pathways II Memo—discussing
several measurement methods the agency thought might be
sufficiently rigorous “to determine the [cellulosic] converted
fraction” in support of a successful application to register for
cellulosic-biofuel RINs. Id. at 42,132 n.12. One method it
identified is to measure “the starch content of the feedstock and
[of the] residual material after conversion”—the portion of the
incoming feedstock that was not converted to ethanol—to
determine “how much starch was converted to fuel” and then
use that estimate to “determine the cellulosic converted
fraction.” EPA-HQ-OAR-2012-0401-0242, Additional Detail
on the Calculation of the Cellulosic Converted Fraction, and
Attribution of Batch RINs for D-Code Dependent Feedstocks 8
(July 1, 2014) (Pathways II Memo) (J.A. 101). Such an
estimate would presumably rest on the assumption that non-
starch elements in the feedstock going into the fuel-making
process, as well as in the residual material coming out, must be
cellulosic. The parties use “mass closure” to refer to such a
method of measuring all non-cellulosic components of the
inputs and outputs of the producer’s fuel-making process—
“such as starch, lipids, proteins, ash, and free sugars”—and
treating the balance of inputs and outputs as cellulosic. EPA
Br. 13 & n.7; see POET Br. 19.
When releasing the Pathways II Memo, EPA cautioned
that such an indirect method of estimating by process of
elimination the proportion of fiber converted to fuel must
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satisfy regulatory “requirements,” including reasonable
accuracy. Pathways II Rule, 79 Fed. Reg. at 42,132 n.12. To
help EPA assure the integrity of registrations for cellulosic-
biofuel RINs, the Pathways II Rule requires producers to
collect new data and report an updated cellulosic converted
fraction to EPA on a regular basis and in response to significant
data variation. See 40 C.F.R. § 80.1451(b)(1)(ii)(U).
In the years following the Pathways II Rule’s
promulgation, EPA “observed data showing very high
variability in results reported for various facilities for the
cellulosic converted fraction” and received requests from
stakeholders for additional guidance, prompting the agency to
reexamine its approach. Compliance Div., EPA Office of
Transp. & Air Quality, Guidance on Qualifying an Analytical
Method for Determining the Cellulosic Converted Fraction of
Corn Kernel Fiber Co-Processed with Starch 3, 8 (May 2019)
(Cellulosic Guidance) (J.A. 85, 90). To study that variability,
EPA undertook a statistical analysis—a Monte Carlo (random
number) simulation using unspecified industry data—to
examine how converted fractions varied across a range of
possible data. Id. at 9 (J.A. 91).
Around the time EPA conducted its Monte Carlo
simulation, POET applied to EPA to register for cellulosic-
biofuel RINs using the cellulosic converted fraction it
calculated using a peer-reviewed method of quantifying
through mass closure the cellulosic content of the inputs and
outputs of its biochemical process of making renewable fuel
from whole corn kernels. After EPA objected to the large data
variability in POET’s original application, a POET subsidiary
from South Dakota, POET Biorefining–Hudson, LLC,
submitted a revised application.
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B. Cellulosic Guidance & Hudson Letter
On May 7, 2019, POET-Hudson received a letter from
Assistant EPA Administrator Bill Wehrum following up on
POET-Hudson’s meeting with EPA Administrator Andrew
Wheeler (the Hudson Letter). The Hudson Letter explained
EPA’s interpretation of the Pathways II Rule’s requirements,
and its then-current view of the shortcomings in POET-
Hudson’s pending registration application. See Letter from
William L. Wehrum, Assistant Adm’r, EPA Office of Air &
Radiation, to Jeff Broin, Chairman & CEO, POET, LLC (May
7, 2019) (Hudson Letter) (J.A. 107-15). Within a day, the
Compliance Division of EPA’s Office of Transportation and
Air Quality released nationally applicable guidance—the
Cellulosic Guidance—reproducing almost verbatim the
Hudson Letter’s interpretation of the Pathways II Rule. EPA
appended to both the Cellulosic Guidance and the Hudson
Letter the results from its Monte Carlo simulation showing
high variability, so likely unreliability, of data presented under
the Rule.
The parties agree that the Cellulosic Guidance and Hudson
Letter’s discussion of the requirements for VCSB-certified and
peer-reviewed methods of obtaining cellulosic data has several
components, all but one of which deal with what counts as a
reasonably accurate peer-reviewed method. The documents
clarify EPA’s position that a producer cannot demonstrate
“reasonably accurate results” through peer review without
using a “known, representative reference material.” Cellulosic
Guidance at 3 (J.A. 85). A reference material is a sample of
“corn grain biomass” assessed both before and after
biochemical processing that experts have determined contains
a certain amount of cellulose. Id. at 3 n.7 (J.A. 85). A producer
can rely on a reference material with known cellulosic content
to test the accuracy of its own “analytical method” of
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measuring cellulose. Id. at 3 (J.A. 85). Applying the
producer’s analytical method to the reference material to show
how close its method comes to the known result for the
reference material can bolster EPA’s confidence that the same
method can, in turn, accurately measure the cellulosic content
in the producer’s own fuel-making process. See id. at 3 & n.8
(J.A. 85). According to the Guidance and the Letter, any
method thus verified can be a suitable basis on which to assign
RINs. See id. at 5 (J.A. 87).
Recognizing that no “representative reference material” is
yet available, EPA notes that another federal agency, the
National Institute of Standards and Technology (NIST), is
developing “a reference material containing both starch and
cellulose” in known proportions that reflect corn kernels’
composition at various stages in a biochemical fuel-making
process. Id. at 3 (J.A. 85). The documents also clarify that
producers “cannot” show an analytical method to be
“reasonably accurate” under the Pathways II Rule if the method
relies solely on starch-based measurements and then infers the
proportion of cellulose through mass closure. Id. at 4 (J.A. 86).
Instead, the method should “directly” measure cellulose. Id.
Turning to the requirements for VCSB-certified methods,
the Cellulosic Guidance and Hudson Letter acknowledge that
no such method yet exists. See id. at 2 (J.A. 84). Nonetheless,
the documents voice EPA’s skepticism about the ongoing
effort of one VCSB, the American Society for Testing and
Materials (ASTM), to certify a method that “derive[s] the
cellulosic converted fraction by directly measuring the
conversion of starch,” not cellulose. Hudson Letter at 6
(J.A. 112); accord Cellulosic Guidance at 6 (J.A. 88). Given
EPA’s judgment that a solely starch-based method “cannot”
produce accurate results, both the Guidance and the Letter
recommend that, if ASTM votes to certify the method under
12
consideration, producers using that method “should be
prepared to demonstrate” reasonable accuracy in the same way
as they would for a peer-reviewed method. Id.
After discussing how peer-reviewed and VCSB-certified
methods must establish “reasonably accurate” results, the
Hudson Letter proceeds to discuss POET-Hudson’s request to
generate cellulosic-biofuel RINs. POET-Hudson’s peer-
reviewed methodology relied on mass closure to estimate the
cellulosic converted fraction of renewable fuel produced from
biochemically processing corn kernels—measuring “all non-
cellulosic components” and assuming “the remaining fraction
that is not measured is ‘cellulosic.’” Hudson Letter at 7 n.17
(J.A. 113). EPA commended POET-Hudson’s effort to “limit
variability,” but expressed “significant concerns with relying
on reference materials that do not contain both starch and
cellulose.” Id. at 9 (J.A. 115). Because it deemed POET-
Hudson’s proposed method to be incapable of “reasonably
approximat[ing] the amount of cellulose that is actually being
converted into fuel,” EPA explained that it would have to
further evaluate POET-Hudson’s registration request “once a
representative reference material with reportable starch and
cellulosic values has been produced by NIST.” Id.
POET-Hudson petitioned the Eighth Circuit for review of
the Hudson Letter’s consideration of its registration
application. See POET Biorefining – Hudson, LLC v. EPA,
No. 19-2429 (8th Cir. argued June 16, 2020). That petition
remains pending. POET and various subsidiaries, including
POET-Hudson, petitioned for our review of the Cellulosic
Guidance, which they contend is a “nationally applicable” EPA
action that (unlike the adjudication of POET-Hudson’s
application) is reviewable in this court. 42 U.S.C.
§ 7607(b)(1).
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Specifically, POET argues that the Cellulosic Guidance is
a legislative rule improperly promulgated without an
opportunity for notice and comment. Alternatively, even if the
Guidance is a procedurally proper interpretive rule, POET
contends that it substantively conflicts with the Pathways II
Rule by “arrogat[ing]” from third-party reviewers and VCSBs
to EPA the power to decide what constitutes a reasonably
accurate method of measuring a biochemical fuel-making
process’ cellulosic production. POET Br. 45. According to
POET, EPA has exercised that power in a way that, due to the
lack of a VCSB-certified method and a NIST-approved
reference material, leaves producers unable to generate the
cellulosic-biofuel RINs that the Pathways II Rule affords them.
II. JURISDICTION
Before reaching the merits, we must determine whether we
have jurisdiction, which here requires deciding whether
POET’s petition is ripe under Article III of the U.S.
Constitution and whether the challenged EPA Guidance is a
“final” agency action under the Clean Air Act, 42 U.S.C.
§ 7607(b)(1).
A. POET’s Challenge to the Guidance’s VCSB
Discussion Is Unripe
“The ripeness doctrine generally deals with when a federal
court can or should decide a case.” Am. Petroleum Inst. v. EPA,
683 F.3d 382, 386 (D.C. Cir. 2012). We conclude that POET’s
challenge to the Cellulosic Guidance’s discussion of VCSB-
certified methods is unripe, but that the challenge to the
Guidance’s interpretation of the regulatory requirements for
peer-reviewed methods, which EPA has already applied and
which presents a purely legal question, is ripe for our review.
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Constitutional ripeness “is subsumed into the Article III
requirement of standing, which requires a petitioner to allege
inter alia an injury-in-fact that is ‘imminent’ or ‘certainly
impending.’” Id. (quoting Nat’l Treasury Emps. Union v.
United States, 101 F.3d 1423, 1427-28 (D.C. Cir. 1996)).
Standing—and thus constitutional ripeness—is “not evaluated
‘in gross,’” so a petitioner challenging distinct components of
an agency’s guidance must show that we have jurisdiction to
consider each claim. Sierra Club v. EPA, 873 F.3d 946, 951
(D.C. Cir. 2017) (quoting Lewis v. Casey, 518 U.S. 343, 358
n.6 (1996)); see also Del. Dep’t of Nat. Res. & Envtl. Control v.
EPA, 785 F.3d 1, 10 (D.C. Cir. 2015). Nobody disputes that
the Pathways II Rule distinguishes VCSB-certified and peer-
reviewed methods as separate, alternative ways to gain EPA
approval and generate cellulosic-biofuel RINs, so we evaluate
the Guidance’s ripeness as to each method. See 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3); POET Br. 20-21; EPA Br. 16-17.
Because POET has not sought to rely on any VCSB-
certified method, it has no “actual or imminent” injury in fact
that is “fairly traceable to the challenged” interpretation
regarding such methods, so cannot show that portion of its
petition is ripe. Kan. Corp. Comm’n v. FERC, 881 F.3d 924,
929 (D.C. Cir. 2018) (quoting Lujan v. Defs. of Wildlife, 504
U.S. 555, 560 (1992)). “A petitioner that asserts a harm that
may occur ‘some day,’ with no ‘specification of when the some
day will be,’ does not establish its standing.” Id. at 930
(quoting Defs. of Wildlife, 504 U.S. at 564). Uncertainty over
whether, let alone when, a VCSB might approve a method of
obtaining data to calculate the cellulosic converted fraction
renders POET’s challenge to the Guidance’s treatment of
VCSB-certified methods constitutionally unripe. We therefore
dismiss POET’s premature challenge to the Cellulosic
Guidance insofar as it addresses VCSB-certified methods.
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By contrast, the Guidance’s interpretation of the Pathways
II Rule’s requirements for peer-reviewed methods has already
had real-world effects. Most concretely, EPA has relied on the
Guidance in declining to grant POET-Hudson’s application to
register for cellulosic-biofuel RINs using a peer-reviewed
method of obtaining cellulosic data. That part of the petition,
which presents a “purely legal claim in the context of a facial
challenge” to the Guidance, is ripe for our review. Nat’l Ass’n
of Home Builders v. U.S. Corps of Eng’rs, 417 F.3d 1272, 1282
(D.C. Cir. 2005).
B. The Guidance’s Interpretation Is Final Action
The Clean Air Act’s requirement of “final action” tracks
the Administrative Procedure Act’s finality requirement, see
5 U.S.C. § 704, except that—in contrast to APA finality—
“finality is jurisdictional” under the Clean Air Act. Valero
Energy Corp. v. EPA, 927 F.3d 532, 536 (D.C. Cir. 2019). An
agency’s action is final “if two independent conditions are met:
(1) the action ‘mark[s] the consummation of the agency’s
decisionmaking process’ and is not ‘of a merely tentative or
interlocutory nature;’ and (2) it is an action ‘by which rights or
obligations have been determined, or from which legal
consequences will flow.’” Soundboard Ass’n v. FTC, 888 F.3d
1261, 1267 (D.C. Cir. 2018) (quoting Bennett v. Spear,
520 U.S. 154, 177-78 (1997) (alteration in Soundboard
Ass’n)).
“The consummation prong of the finality inquiry requires
us to determine ‘whether an action is properly attributable to
the agency itself and represents the culmination of that
agency’s consideration of an issue,’ or is, instead, ‘only the
ruling of a subordinate official, or tentative.’” NRDC v.
Wheeler, 955 F.3d 68, 78 (D.C. Cir. 2020) (quoting
Soundboard Ass’n, 888 F.3d at 1267). The Guidance
16
consistently speaks in EPA’s voice, setting forth the
“interpretation” and “guidance” of the agency. Cellulosic
Guidance at 1 (J.A. 83). EPA does not dispute that the
Guidance was approved by Assistant EPA Administrator Bill
Wehrum, who was then EPA Administrator Wheeler’s
“principal advisor . . . in matters pertaining to air and radiation
programs,” Cal. Cmtys. Against Toxics v. EPA, 934 F.3d 627,
636 (D.C. Cir. 2019) (quoting 40 C.F.R. § 1.41), and whom we
have described in the context of finality analysis as “no mere
subordinate” within EPA, id.
EPA contends that the Guidance’s explication of how
peer-reviewed methods might be shown to be “reasonably
accurate” does not represent the consummation of agency
decision making because it is “explicitly premised on the
agency’s current understanding of the science, which itself is
expressly recognized as under development.” EPA Br. 32. The
possibility of revision “is a common characteristic of agency
action, and does not make an otherwise definitive decision
nonfinal.” U.S. Army Corps of Eng’rs v. Hawkes Co., 136 S.
Ct. 1807, 1814 (2016); see also Safari Club Int’l v. Jewell, 842
F.3d 1280, 1289 (D.C. Cir. 2016); Nat’l Envtl. Dev. Ass’n’s
Clean Air Project v. EPA, 752 F.3d 999, 1006-07 (D.C. Cir.
2014); Gen. Elec. Co. v. EPA, 290 F.3d 377, 380 (D.C. Cir.
2002); Appalachian Power Co. v. EPA, 208 F.3d 1015, 1022
(D.C. Cir. 2000). Even though agency action taken at scientific
frontiers is especially susceptible to future alteration, that fact
alone does not alone defeat finality. EPA’s considered
Guidance, based on its best scientific understanding at the time,
consummated its decision making regarding which currently
available, peer-reviewed measurement methods are
“reasonably accurate” for the purpose of assigning cellulosic-
biofuel RINs. 40 C.F.R. § 80.1450(b)(1)(xiii)(B)(3).
17
Proceeding to the second question under Bennett,
“whether an agency action has direct and appreciable legal
consequences,” we “pragmatic[ally]” focus on “the concrete
consequences [the] action has or does not have as a result of
the specific statutes and regulations that govern it.” Cal.
Cmtys., 934 F.3d at 637 (internal quotation marks omitted).
The Guidance carries legal consequences because it withdraws
some of the discretion the Pathways II Rule afforded EPA in
evaluating the reliability of peer-reviewed methodologies. In
contrast to EPA’s suggestion at the time of the Pathways II
Rule that producers could “indirectly determine the cellulosic
converted fraction” by measuring “starch content,” Pathways
II Memo at 8 (J.A. 101), EPA has since concluded with the
benefit of additional information that solely starch-based
measurements “cannot ensure that resulting estimates of
cellulosic conversion are reasonably accurate,” Cellulosic
Guidance at 4 (J.A. 86). The Guidance also imposes
obligations by directing applicants for cellulosic biofuel
registration to demonstrate to EPA the reliability of their
methods via a representative reference material. Those
elaborations on what counts as a “reasonably accurate” method
of obtaining cellulosic data, 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3), have concrete consequences for
producers like POET seeking to show EPA that their method
meets the Pathways II Rule’s requirements, see Gen. Elec.,
290 F.3d at 380; Appalachian Power, 208 F.3d at 1023.
The unequivocal language of the Guidance also signals
that EPA has “definitively interpreted” the Pathways II Rule’s
reasonable-accuracy requirement to demand use of a cellulosic
reference material. NRDC v. EPA, 643 F.3d 311, 320 (D.C.
Cir. 2011). For example, the Guidance document declares that
“it is not possible” to assess whether a method satisfies the
regulatory standard—reasonable accuracy—without
evaluating the performance of the method on a “known,
18
representative reference material” that includes cellulose.
Cellulosic Guidance at 3 (J.A. 85). By declaring that achieving
reasonable accuracy is impossible without using such material,
the Guidance makes the “permissibility” of methods not using
a cellulosic reference material a “closed question,” at least for
now. NRDC, 643 F.3d at 320. EPA’s Cellulosic Guidance
“leads private parties . . . to believe that it will declare
[registrations] invalid unless they comply with the terms of the
document.” Appalachian Power, 208 F.3d at 1021.
Indeed, EPA has already applied the Guidance as if it were
binding in the context of the Hudson Letter. The Hudson
Letter’s use of the Cellulosic Guidance to analyze POET-
Hudson’s registration application reinforces the Guidance’s
finality and is properly part of our finality analysis. For
example, we have examined an agency directive’s role in a
separate “permit decision” to conclude it was final. Clean Air
Project, 752 F.3d at 1007. The Hudson Letter explained that,
despite POET-Hudson’s effort to tweak its methodology to
reduce data variability, the company could not register for
cellulosic-biofuel RINs without proving its method’s accuracy
using “a representative reference material with reportable
starch and cellulosic values.” Hudson Letter at 9 (J.A. 115).
The Hudson Letter illustrates the firmness of the Guidance’s
demand that producers use a cellulosic reference material to
show reasonable accuracy.
Contending the Cellulosic Guidance is nonfinal, EPA
unsuccessfully analogizes to Clean Air Act cases in which,
unlike here, challenged guidance did not affect “the amount of
discretion permitting authorities retain,” Sierra Club, 955 F.3d
56, 64 (D.C. Cir. 2020); “d[id] not impose any requirements in
order to obtain” agency approval, Nat’l Mining Ass’n v.
McCarthy, 758 F.3d 243, 252 (D.C. Cir. 2014); and was never
applied in a “binding” manner, Sierra Club, 873 F.3d at 952.
19
EPA also asserts the Cellulosic Guidance is nonfinal because it
“merely interpret[s] existing requirements” instead of “creating
new ones.” EPA Br. 24. But we recently reiterated that an
interpretive rule construing existing law can constitute final
action under 42 U.S.C. § 7607(b)(1) even though, standing
alone, it would lack “the force and effect of law” carried by an
underlying legislative rule or statute. Cal. Cmtys., 934 F.3d at
635 (quoting Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 103
(2015)).
Finally, EPA contends that we need not exercise
jurisdiction over the Guidance because producers like POET-
Hudson can still petition regional circuits to challenge
individual RIN registration decisions based on the Guidance.
That argument proves too much. The Clean Air Act
“specifically provides for ‘preenforcement’ review” of
nationally applicable actions like the Guidance even if parties
could also seek review in connection with individual
adjudications. Whitman v. Am. Trucking Ass’ns, 531 U.S. 457,
479-80 (2001) (construing 42 U.S.C. § 7607(b)(1)). In contrast
to the cases EPA cites, there is no alternative judicial-review
provision applicable here that might suggest we should not
exercise jurisdiction under section 7607(b)(1). Cf. Cal. Cmtys.,
934 F.3d at 639 (holding guidance to be nonfinal under
section 7607(b)(1) in view of section 7661d’s judicial-review
regime); Valero, 927 F.3d at 538 (similar, in view of the
opportunity for review under section 7604(a)(2)). The
substantial investment, research, and development required to
generate cellulosic biofuels compliant with the Renewable Fuel
Standard program underscores why the prospect of eventual
review of an application disapproval is no reason to deny here
the opportunity for pre-enforcement review the Act provides.
As in Appalachian Power, “[t]he short of the matter” here
is that the Guidance’s interpretation of the Pathway II Rule’s
20
peer-review requirements “is final agency action, reflecting a
settled agency position which has legal consequences both for”
EPA officials allocating RINs and “for companies like those
represented by petitioners” who must obtain EPA approval to
generate RINs. 208 F.3d at 1023. Having confirmed our
jurisdiction over the Cellulosic Guidance’s treatment of peer-
reviewed methods of obtaining cellulosic data, we proceed to
review the merits of its interpretation.
III. MERITS
The first step in our merits analysis is to determine whether
the Guidance is a legislative rule or an interpretive one, because
if it is legislative we must invalidate it at the outset as never
having been subjected to notice and comment. See 42 U.S.C.
§ 7607(d) (incorporating 5 U.S.C. § 553(b)); NRDC, 955 F.3d
at 85. Only if the Guidance is an interpretive rule need we
address petitioners’ substantive challenge to the Guidance as
contrary to the Pathways II Rule it purports to interpret.
A. The Guidance is an Interpretive Rule
“[T]he critical feature of interpretive rules is that they are
issued by an agency to advise the public of the agency’s
construction of the statutes and rules which it administers.”
Perez, 575 U.S. at 97 (internal quotation marks omitted). In
contrast to legislative rules, which “effect[] a substantive
change in existing law or policy,” interpretive rules “clarify a
statutory or regulatory term, remind parties of existing
statutory or regulatory duties, or ‘merely track[]’ preexisting
requirements and explain something the statute or regulation
already required.” Mendoza v. Perez, 754 F.3d 1002, 1021
(D.C. Cir. 2014) (quoting Nat’l Family Planning & Reprod.
Health Ass’n v. Sullivan, 979 F.2d 227, 237 (D.C. Cir. 1992)).
To decide whether a rule is interpretive or legislative, we look
to the rule’s “language” and “ask whether the agency intended
21
to speak with the force of law,” including “whether the agency
has published the rule in the Code of Federal Regulations and
whether it explicitly invoked its general legislative authority.”
Guedes v. Bureau of Alcohol, Tobacco, Firearms & Explosives,
920 F.3d 1, 18 (D.C. Cir. 2019) (per curiam) (internal quotation
marks omitted); see also Gen. Motors Corp. v. Ruckelshaus,
742 F.2d 1561, 1565 (D.C. Cir. 1984) (en banc). We also
consider whether the challenged rule comports with or changes
the text of whatever prior rule it professes to interpret. See,
e.g., Perez, 575 U.S. at 103-04.
The Cellulosic Guidance could hardly be clearer that it
interprets the regulatory requirement that biofuel producers’
methodologies yield “reasonably accurate results as
demonstrated through peer reviewed references.” 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3). The title, “Interpretation of the
‘Reasonable Accuracy’ Requirement,” identifies the function
of the Guidance: to explain what the Pathways II Rule requires
when a company seeks to show the accuracy of its peer-
reviewed method of measuring how much of its ethanol
produced from whole corn kernels derives from cellulosic
material in support of its registration for cellulosic-biofuel
RINs. Cellulosic Guidance at 2 (J.A. 84). Without ever
invoking EPA’s legislative authority or deviating from the
Pathways II Rule’s text, it explains how biofuel producers must
“demonstrate[]” their method’s reasonable accuracy using “a
known, representative reference material” capable of
producing a “true value” of the renewable fuel’s cellulosic
content against which accuracy can be reliably assessed. Id.
at 3 & n.8 (J.A. 85). In short, the Guidance interprets the
“reasonable accuracy” regulatory requirement in light of
EPA’s accumulated experience in this particular context.
By “deriv[ing] a proposition from an existing document
whose meaning compels or logically justifies the proposition,”
22
the Guidance’s discussion of peer-reviewed methods qualifies
as an interpretive rule. Mendoza, 754 F.3d at 1021 (quoting
Catholic Health Initiatives v. Sebelius, 617 F.3d 490, 494 (D.C.
Cir. 2010)). Indeed, here the EPA has not even shifted its
policy objective: The agency remains committed to issuing
RINs to biofuel producers who can show with reasonable
accuracy what portion, if any, of the fuel they make from
partially cellulosic feedstocks actually derives from the
cellulosic material. The Guidance does no more than account
for data, accumulated since EPA issued the Pathways II Rule
and Memo, suggesting that previously contemplated
measurement methods are inaccurate. In spelling out what
EPA believes it means to “produce reasonably accurate results”
under the Pathways II Rule, thereby aiding industry to steer
clear of demonstrated measurement problems, 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3), the agency cannot fairly be said to
have substantively amended the regulation.
To the extent that the Cellulosic Guidance is a “new” and
more detailed articulation of the Pathways II Rule’s
requirements for peer-reviewed methods, POET Br. 39, POET
errs in asserting that such limited novelty makes the Guidance
a legislative rule. If an agency’s interpretation were a
legislative rule simply because it drew “crisper and more
detailed lines than the authority being interpreted,” then “no
rule could pass as an interpretation of a legislative rule unless
it were confined to parroting the rule or replacing the original
vagueness with another”—a regime we have squarely rejected.
Am. Mining Cong. v. MSHA, 995 F.2d 1106, 1112 (D.C. Cir.
1993). Rules that are fairly drawn from underlying statutes or
regulations may articulate even relatively detailed legal
obligations without thereby becoming legislative rules subject
to notice and comment.
23
We have, time and again, upheld interpretive rules that
narrow or remove leeway afforded to regulated parties under a
prior interpretation. Examples include a Program Policy Letter
of the Mine Safety and Health Administration specifying the
minimum opacity a chest X-ray needs to count as a reportable
diagnosis under mine-safety regulations, see id.; a section of
the Medicare Provider Reimbursement Manual advising how
the Medicare statute and regulations work in particular
reimbursement claims, see Shalala v. Guernsey Mem’l Hosp.,
514 U.S. 87, 97-99 (1995); a new Federal Communications
Commission order explaining how an existing order regarding
portability would apply to wireless telephone carriers, see Cent.
Tex. Tel. Co-op., Inc. v. FCC, 402 F.3d 205, 213-14 (D.C. Cir.
2005); and a letter from the Federal Aviation Administration’s
deputy counsel explaining how to calculate pilots’ required rest
periods under an FAA regulation imposing flight-time
limitations, see Air Transp. Ass’n of Am., Inc. v. FAA, 291 F.3d
49, 56 (D.C. Cir. 2002). The common thread running through
the cases is that even a consequential, “conduct-altering” rule
remains interpretive so long as it can “fairly be viewed as
interpreting—even incorrectly—a statute or regulation.” Cent.
Tex., 402 F.3d at 212, 214.
Requiring EPA to undertake notice and comment
whenever it refines an interpretation of its rules or statutory
authorities would discourage the agency from synthesizing and
documenting helpful and reliable advice like the Cellulosic
Guidance. “[I]nformal communications between agencies and
their regulated communities . . . are vital to the smooth
operation of both government and business.” Indep. Equip.
Dealers Ass’n v. EPA, 372 F.3d 420, 428 (D.C. Cir. 2004).
After all, “[t]he agency that wrote the regulation will often have
direct insight into what that rule was intended to mean” in a
given context and “how it was supposed to apply to some
problem.” Kisor v. Wilkie, 139 S. Ct. 2400, 2412 (2019)
24
(plurality opinion of Kagan, J.) (internal quotation marks
omitted). Guidance offering “convenient notice” of an
agency’s interpretation of a statute or regulation it administers
is often preferable to leaving regulated parties and the public to
piece together interpretive strands reflected in individual
adjudications. Am. Mining Cong., 995 F.2d at 1112. The
Cellulosic Guidance’s discussion of what it means under the
Pathways II Rule to demonstrate reasonable accuracy through
peer review is the sort of clarifying elaboration interpretive
rules legitimately provide.
POET asserts that the Cellulosic Guidance “repudiates or
is irreconcilable with” the Pathways II Rule, so must be a
legislative rule. POET Br. 39 (quoting Ass’n of Flight
Attendants-CWA v. Huerta, 785 F.3d 710, 718 (D.C. Cir.
2015)). We conclude, however, that EPA’s reasoned
elaboration of what it means to demonstrate a peer-reviewed
method’s reasonable accuracy is consistent with the Pathways
II Rule, and nothing like the kind of stark “volte face”
necessary to support POET’s argument. Nat’l Family
Planning, 979 F.2d at 235 (quoting Homemakers N. Shore,
Inc. v. Bowen, 832 F.2d 408, 412 (7th Cir. 1987)). Indeed, an
agency may work even a “fundamental change in its
interpretation of a substantive regulation,” and yet the result
may still constitute an interpretive rule that does not require
notice and comment. Perez, 575 U.S. at 101 (internal quotation
marks omitted). At bottom, EPA’s interpretation of
“[a]ccuracy” to mean “how closely the measured value
approximates its true value,” and its call for a reference
material capable of supplying that true value, Cellulosic
Guidance at 3 n.8 (J.A. 85), interprets the Pathways II Rule’s
reasonably-accuracy requirement. POET’s argument that the
Cellulosic Guidance reads the Pathways II Rule incorrectly
relates not to the Guidance’s classification as an interpretive
rule, but to its substantive merits.
25
Our disagreement with our dissenting colleague over
whether the Cellulosic Guidance is an interpretive or legislative
rule is relatively limited: The dissent concludes that the
Guidance is in part a legislative rule—only “with respect to the
reference material requirement.” Dissent at 1. Because no
representative reference material presently exists, see
Cellulosic Guidance at 3 n.7 (J.A. 85), the dissenting opinion
argues that EPA substantively changed the regulation by
“clos[ing] a regulatory pathway opened by the Pathways II
Rule,” Dissent at 7. There is no substantive change: The
Pathways II Rule authorizes RIN registrations for cellulosic
biofuel only in “certain circumstances,” 79 Fed. Reg.
at 42,132—namely, where producers utilize a measurement
method that obtains “reasonably accurate results,” 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3). EPA is under no obligation to
approve applications that fail to meet this requirement, or to
bend the science behind “reasonable accuracy” to ensure that
producers are permitted to register. Certainly, if EPA took a
view of “reasonable accuracy” contrary to that of “100
cellulosic fuel experts,” Dissent at 6, its interpretation might be
arbitrary. That counterfactual is not before us here, where the
record includes unquestioned data and ample scientific support
for EPA’s doubts that an analytical method’s accuracy can be
established without a representative reference material. More
fundamentally, differences of expert opinion would go to the
substantive merits, to which we now turn.
B. The Guidance’s Interpretation Is Reasonable
POET challenges the Cellulosic Guidance’s construction
of the Pathways II Rule as “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law,” in
violation of the Clean Air Act. 42 U.S.C. § 7607(d)(9)(A).
“The arbitrary and capricious standard is deferential; it requires
that agency action simply be ‘reasonable and reasonably
26
explained.’” Cmtys. for a Better Env’t v. EPA, 748 F.3d 333,
335 (D.C. Cir. 2014) (quoting Nat’l Tel. Coop. Ass’n v. FCC,
563 F.3d 536, 540 (D.C. Cir. 2009)). The parties dispute the
precise level of deference EPA enjoys as the author of the
Guidance and the regulation that it interprets, but because we
conclude that EPA’s interpretation is valid even under the less
deferential “power to persuade” standard, Christopher v.
SmithKline Beecham Corp., 567 U.S. 142, 150 (2012) (quoting
United States v. Mead Corp., 533 U.S. 218, 228 (2001)), we
need not resolve their dispute.
The Pathways II Rule’s requirement that biofuel producers
show that their methods of obtaining cellulosic data “would
produce reasonably accurate results as demonstrated through
peer reviewed references provided to the third party engineer
performing the engineering review at registration,” 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3), limits EPA to approving methods
that have been favorably peer reviewed. Contrary to POET’s
contention, however, the Pathways II Rule does not
“unambiguously delegate[]” reasonable-accuracy
determinations to third-party engineers and peer reviewers.
POET Br. 42. To the contrary, the regulation requires
producers, supported by the specified professional analyses, to
“demonstrate[]” to EPA that their methods of determining the
cellulosic fraction of their biofuel are reasonably accurate.
40 C.F.R. § 80.1450(b)(1)(xiii)(B)(3).
Peer-reviewed references and the accompanying third-
party engineer’s report “must be submitted and accepted by
EPA” before producers can register the corresponding RINs.
Id. § 80.1450(b). Confirming that the agency retains the
decisive role in choosing whether to “accept[]” peer reviewers’
conclusions, id., EPA explained that the Pathways II Rule’s
peer-review requirement “allow[s] EPA to verify that the
[cellulosic converted fraction] is being applied appropriately
27
for cellulosic biofuel RIN generation,” Pathways II Rule, 79
Fed. Reg. at 42,132. Like an academic journal that
incorporates the results of peer review into the publication
decisions its editorial board makes or a funder that looks to peer
review to guide its grantmaking, EPA required peer review to
help it “verify” methodological soundness without displacing
the agency’s ultimate approval authority or ability to say more
precisely what it is looking for. Id.
POET claims support in the National Technology Transfer
and Advancement Act of 1995 for its view that the Pathways II
rule delegates the reasonable-accuracy determination to peer
reviewers. But the provision POET cites, which directs federal
agencies to “use technical standards that are developed or
adopted by voluntary consensus standards bodies,” Pub. L.
No. 104-113, § 12(d)(2), 110 Stat. 775, 783 (1996) (codified at
15 U.S.C. § 272 note), deals with agencies’ interactions with
VCSBs, not their use of peer-reviewed methods—and even that
directive is subject to agencies’ direction, interests, and goals.
POET also points to EPA’s general policy on peer review, but
that policy supports EPA’s position, not POET’s, insofar as it
explains that peer review helps “ensur[e] that the EPA’s
decisions rest on sound science and data,” not that the peer
reviewers’ determinations are themselves deemed to be EPA’s.
EPA Sci. & Tech. Pol’y Council, Peer Review Handbook
§ 1.3.1, at 25 (4th ed. Oct. 2015). Nor does the Guidance
reduce peer reviewers to “mere fact checkers of a mathematical
test,” POET Br. 42; rather, the Guidance aids effective peer
review by articulating benchmarks for reviewers’ assessments
whether a producer’s method can accurately measure the
cellulosic yield of its particular fuel-making process on a
consistent basis.
Congress requires EPA to ensure RINs are
“appropriate[ly]” assigned. 42 U.S.C. § 7545(o)(5)(A)(i). The
28
regulation at issue explicitly preserves EPA’s authority to
decide whether to “accept[]” a “demonstrat[ion]” that a peer-
reviewed method produces reasonably accurate results.
40 C.F.R. § 80.1450(b). In that role, EPA appropriately issued
the Cellulosic Guidance to help peer reviewers and applicants
identify the kinds of data that EPA has determined are required
in registrations for cellulosic-biofuel RINs. The Guidance
explains what EPA deems necessary to verify the accuracy of
producers’ claims as to the quantity of fuel they derive from the
small cellulosic portion of their corn-kernel feedstocks, as
opposed to the larger starch component. In sum, we are
unpersuaded by POET’s contention that the Pathways II Rule’s
peer-review requirement somehow forces EPA into
unquestioned deference to peer reviewers’ conclusions and
prevents it from requiring applicants to comply with its own
understanding of reasonable accuracy.
POET next contends that three interpretations within the
Guidance are arbitrary: that producers must demonstrate their
method’s accuracy both in theory and in fact; that producers
must use a representative reference material to prove their
method’s accuracy; and that producers cannot rely on methods
that measure a fuel’s cellulosic content by process of
elimination—i.e., through mass closure. POET refers to those
three interpretations as the Demonstration Requirement, the
Reference Material Requirement, and the Mass Closure
Prohibition. (POET understands the Demonstration and
Reference Material Requirements also to “mandat[e]” that a
measurement method “actually yield[] results within 20% of
the known quantities of starch and cellulose in a representative
reference material,” but makes clear it is not “separately
challeng[ing] that 20% standard.” Reply Br. 8 n.1.) We
conclude that all three survive arbitrary-and-capricious review.
29
Demonstration Requirement. The Cellulosic Guidance’s
Demonstration Requirement interprets the regulatory
obligation on producers to show how their method “would
produce reasonably accurate results as demonstrated through
peer reviewed references.” 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3). The Guidance construes that
language to direct peer reviewers to evaluate both “the
potential performance” of their method and “the accuracy of
the results of that method.” Cellulosic Guidance at 3 (J.A. 85).
Because “demonstrate” ordinarily means “[t]o show . . . by
operation, reasoning, or evidence,” Animal Legal Def. Fund,
Inc. v. Perdue, 872 F.3d 602, 616 (D.C. Cir. 2017) (quoting
Black’s Law Dictionary 432 (6th ed. 1990)), not merely to
predict or hypothesize, EPA reasonably reads the regulatory
requirement of “demonstrated” accuracy to require peer
reviewers to pass on both the theoretical soundness of a
producer’s method, and whether its application “has, in fact,
yielded a calculation of the cellulosic converted fraction that is
reasonably accurate,” Cellulosic Guidance at 3 (J.A. 85).
POET reads the regulation’s use of conditional language—
requiring that analytic methods “would produce reasonably
accurate results,” 40 C.F.R. § 80.1450(b)(1)(xiii)(B)(3)
(emphasis added)—to stop short of calling for review of any
results actually produced by the method. We understand the
form “would produce” simply to reflect that producers seek
peer review before they obtain EPA approval to generate RINs
in compliance with the regulation. We are unpersuaded that
the regulatory text bars EPA from requiring reviewers to
examine data demonstrating a method’s accuracy in practice.
The Demonstration Requirement permissibly interprets
“demonstrated” in line with its ordinary meaning.
Reference Material Requirement. The Cellulosic
Guidance interprets accuracy to mean “how closely the
30
measured value approximates its true value.” Cellulosic
Guidance at 3 n.8 (J.A. 85). The Guidance explains that
“accurately measuring how much of a cellulosic feedstock is
converted into fuel” requires testing the measurement method
on a “representative reference material,” id. at 3 (J.A. 85), to
see how closely the method’s results approach such a
material’s known “cellulosic value,” id. at 3 n.6 (J.A. 85). The
Guidance’s conception of accuracy parallels what EPA
understands accuracy to mean in other environmental
programs. See, e.g., 40 C.F.R. § 72.2 (defining “Flow meter
accuracy” and “Monitor accuracy” by “the closeness of the
measurement . . . to the reference value”); id. § 80.47(a)(2)
(“Accuracy means the closeness of agreement between an
observed value from a single test measurement and an accepted
reference value.”); id. § 194.22(c)(1) (conceiving of “Data
accuracy” as “the degree to which data agree with an accepted
reference or true value”). The Guidance further observes that
the absence of a known value against which to measure
accuracy has caused unacceptable data variability, as
manifested both in producers’ reporting and EPA’s own Monte
Carlo simulation. See Cellulosic Guidance at 3-4 (J.A. 85-86).
POET seizes on EPA’s acknowledgment that NIST has not
yet made available the only suitable reference material
identified in the Guidance, arguing that its current
unavailability makes the requirement “impossible to fulfill and
thus . . . arbitrary and capricious” under our decision in
Alliance for Cannabis Therapeutics v. DEA, 930 F.2d 936, 940
(D.C. Cir. 1991). This case is readily distinguishable from
Cannabis Therapeutics, however, where we invalidated an
agency’s interpretation of a provision in the Controlled
Substances Act, 21 U.S.C. § 812(b)(2)(B), that created a
seemingly permanent Catch-22: Parties seeking to reclassify
marijuana as a Schedule II drug needed to show that marijuana
“enjoys general ‘availability’ or ‘use,’” but had to make that
31
showing during a period when marijuana remained a
Schedule I drug, which by definition is not generally available.
930 F.2d at 940. The challenge posed by the Guidance’s
Reference Material Requirement, by contrast, flows not from
intractably contradictory agency directives, but the ongoing
effort to develop a suitable reference material that, once
complete, will provide a path forward. Unlike the legally
unachievable marijuana “general availability” requirement,
ability to meet the Reference Material Requirement awaits
scientific development by NIST or some other entity of a
reference material capable of supplying a known, standard
value against which the claimed accuracy of producers’
methods can be tested. There is nothing arbitrary about EPA’s
refusal to approve a methodology to make measurements that
nobody has yet shown can be made with reasonable accuracy.
POET also claims the Reference Material Requirement is
unreasonable to the extent that it is unmet by synthetic
reference materials. Notably, however, neither the Cellulosic
Guidance nor the Hudson Letter’s general discussion disallows
synthetic materials as such, and EPA told us that “the Guidance
does not foreclose a peer reviewer from concluding that the use
of a synthetic reference material is appropriate” and persuading
EPA to that effect. EPA Br. 44. The only discussion specific
to synthetic rather than natural reference materials comes in the
Hudson Letter’s determination that POET-Hudson’s proposed
reliance on a synthetic reference material to validate its analytic
method would not produce the requisite “reasonably accurate
results.” Hudson Letter at 9 (J.A. 115). Because POET’s
petition for review in this case is limited to the Cellulosic
Guidance, with POET-Hudson having separately petitioned the
Eighth Circuit for review of the Hudson Letter, the synthetic-
material issue is not before us and we express no view on it
here. We sustain the interpretation embodied in the Reference
Material Requirement notwithstanding that no reference
32
material capable of establishing a true cellulosic value
currently exists.
Mass Closure Prohibition. Flowing from the same
proposition that ascertaining reasonable accuracy requires
knowing how well a proposed method measures known
cellulosic content, the Mass Closure Prohibition declares that
methods of calculating cellulosic content “based on starch
reference values alone cannot ensure that resulting estimates of
cellulosic conversion are reasonably accurate.” Cellulosic
Guidance at 4 (J.A. 86). Recall that mass closure estimates
cellulosic content indirectly by measuring all non-cellulosic
components of the partially cellulosic inputs and outputs of the
producer’s fuel-making process and assumes the remainders
must be cellulosic (kernel husk inputs on one hand, and
cellulosic biofuel on the other). After five years of observing
a “wide degree of variability in [renewable-fuel producers’]
data” and conducting its own “statistical analysis,” id. at 3-4
(J.A. 85-86), EPA recognized that mass closure’s reliance on a
series of non-cellulosic measurements—each with its own
error rate—has had unacceptably distorting cumulative effects
on the resulting measurement of cellulosic content. EPA’s
Guidance thus concludes that the agency lacks evidence that
indirectly estimating cellulosic content by relying on mass
closure’s process of elimination can accurately measure the
fuel’s relatively small cellulosic content.
While the Cellulosic Guidance’s disapproval of mass
closure methods retreats from EPA’s earlier expressions of
amenability to such methods, see Pathways II Memo at 8
(J.A. 101), agencies are free to shift interpretive positions,
especially where, as here, they do so on a comprehensively
updated record, see Ark Initiative v. Tidwell, 816 F.3d 119,
129-30 (D.C. Cir. 2016). Agencies may change interpretations
without subjecting the new interpretive rule to “notice-and-
33
comment procedures,” Perez, 575 U.S. at 101, or “to more
searching [judicial] review,” FCC v. Fox Television Stations,
Inc., 556 U.S. 502, 514 (2009). EPA made clear when it
promulgated the Pathways II Rule that it was open to, if not yet
convinced of, the prospect that producers could reliably use
mass closure to quantify the cellulosic component of renewable
fuel produced from feedstocks like corn kernels that are
predominantly non-cellulosic. See Pathways II Rule, 79 Fed.
Reg. at 42,132 & n.12; Pathways II Memo at 5-6 (J.A. 98-99).
Informed by the wildly variable data that mass closure methods
have produced in the ensuing years and by its own statistical
analysis, EPA has now reasonably decided to replace the
Pathways II Memo’s unstudied agnosticism with the
Guidance’s evidence-based understanding that mass closure
cannot achieve reasonable accuracy. No further justification is
required.
To the extent POET claims it presented evidence in
connection with POET-Hudson’s application to generate
cellulosic-biofuel RINs that undermines the Mass Closure
Prohibition, both the Guidance and EPA’s briefing make clear
that an individual applicant may gain EPA’s approval of a
method utilizing mass closure if it presents data or scientific
developments that address the general concerns set forth in the
Guidance. See Cellulosic Guidance at 1 (J.A. 83); EPA Br. 48.
In light of that understanding, we uphold the interpretation
embodied in the Guidance’s Mass Closure Prohibition and
leave the Eighth Circuit to determine whether the Hudson
Letter’s individualized consideration of POET-Hudson’s
proposed use of mass closure was lawful.
Throughout its briefing, POET contests various policy
judgments underlying the Cellulosic Guidance’s interpretation
of the Pathways II Rule, such as the wisdom of explaining
criteria that expert peer reviewers must account for, yet “[o]ur
34
review under the ‘arbitrary and capricious’ standard is narrow
and does not permit us to substitute our policy judgment for
that of [EPA].” Maryland v. EPA, 958 F.3d 1185, 1210 (D.C.
Cir. 2020) (per curiam) (quoting Bluewater Network v. EPA,
370 F.3d 1, 11 (D.C. Cir. 2004)). We conclude the Cellulosic
Guidance is an interpretive rule that reasonably explains how
under the Pathways II Rule renewable-fuel producers must
demonstrate that peer-reviewed methods of obtaining
cellulosic data can yield “reasonably accurate results” that
justify EPA awarding them cellulosic-biofuel RINs. 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3).
* * *
In sum, we dismiss the petition for review as unripe to the
extent it challenges the Cellulosic Guidance’s
recommendations for RIN registrations relying on a VCSB-
certified method to support calculation of the cellulosic
converted fraction. We deny the balance of the petition
because POET has not shown that the Guidance’s discussion
of the Pathways II Rule’s registration requirements for peer-
reviewed methods—a discussion that amounts to a final,
interpretive rule—is arbitrary, capricious, or otherwise
unlawful.
So ordered.
KAREN LECRAFT HENDERSON, Circuit Judge, concurring
in part and dissenting in part: I agree with my colleagues that
the VCSB portion of the Guidance is not ripe and that the
remainder of the Guidance constitutes final agency action
subject to our review. I disagree, however, with their
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 1 by constricting biofuel producers’ ability to show
reasonably accurate results to a single possible means that is
currently not possible. 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.” Majority Op. 20
(citing 42 U.S.C. § 7607(d)).
An agency’s characterization of its rule as interpretive,
“while relevant, is not dispositive.” Gen. Motors Corp. v.
Ruckelshaus, 742 F.2d 1561, 1565 (D.C. Cir. 1984) (en banc).
And, although in deciding this question, we look to “whether
the agency ‘intended’” for its action “to speak with the force of
1
The “in situ process” is the “biochemical hydrolysis treatment
where cellulosic and non-cellulosic components of feedstocks (at
least one of which is not predominantly cellulosic) are
simultaneously hydrolyzed to fermentable sugars (e.g., corn starch
and a crop residue).” Regulation of Fuels and Fuel Additives: RFS
Pathways II, and Technical Amendments to the RFS Standards and
E15 Misfueling Mitigation Requirements (Pathways II Rule), 79
Fed. Reg. 42128, 42134 (July 18, 2014). In short, it is a process by
which the cellulosic fiber of a corn kernel is processed
“simultaneously with the starch processing.” POET Br. at 11; see
also J.A. 94.
2
law,” Guedes v. Bureau of Alcohol, Tobacco, Firearms &
Explosives, 920 F.3d 1, 18 (D.C. Cir. 2019) (per curiam)
(citation omitted), agency intent alone is likewise not decisive.
Were it otherwise, an agency could simply label—and intend—
a regulatory overhaul that changes the permissible conduct of
regulated parties as interpretive and avoid notice and comment
requirements. See Appalachian Power Co. v. EPA, 208 F.3d
1015, 1024 (D.C. Cir. 2000) (“It is well-established that an
agency may not escape the notice and comment requirements .
. . by labeling a major substantive legal addition to a rule a mere
interpretation.”). Thus, in determining whether a rule is
legislative or interpretive, we consider the substantive effect of
the rule in question. See Mendoza v. Perez, 754 F.3d 1002,
1021 (D.C. Cir. 2014) (“The court’s inquiry in distinguishing
legislative rules from interpretative rules ‘is whether the new
rule effects a substantive regulatory change to the statutory or
regulatory regime.’” (quoting Elec. Privacy Info. Ctr. v. U.S.
Dep’t of Homeland Sec., 653 F.3d 1, 6–7 (D.C. Cir. 2011)));
Office of Commc’n of United Church of Christ v. FCC, 826
F.2d 101, 105 (D.C. Cir. 1987) (“Since the court reviews not
the label but the agency pronouncement that underlies the label,
it is that pronouncement itself that governs the determination
of its status.”); cf. Strange ex rel. Strange v. Islamic Republic
of Iran, No. 19-7083, 2020 WL 3886202, at *8 (D.C. Cir. July
10, 2020) (“Substance, not name or label, is what matters
here.”).
In conducting this inquiry, we have held that a rule that
“effectively amends” an existing regulation—i.e., a regulation
created by a final rule promulgated through notice and
comment rulemaking—is itself a legislative rule. U.S. Telecom
Ass’n v. FCC, 400 F.3d 29, 34 (D.C. Cir. 2005); see Ass’n of
Flight Attendants-CWA v. Huerta, 785 F.3d 710, 718 (D.C. Cir.
2015) (“[I]f a second rule repudiates or is irreconcilable with a
prior legislative rule, the second rule must be an amendment of
3
the first; and, of course, an amendment to a legislative rule must
itself be legislative.” (quoting Am. Mining Cong. v. MSHA, 995
F.2d 1106, 1109 (D.C. Cir. 1993))). A “volte face” is
unquestionably sufficient to effectively amend a preexisting
regulation, see Majority Op. 24 (quoting Nat’l Family Planning
& Reprod. Health Ass’n v. Sullivan, 979 F.2d 227, 235 (D.C.
Cir. 1992)), but a 180-degree turn is not necessary. Rather,
“[o]ur cases have formulated this ‘effective amendment’ test in
a number of ways,” including by concluding that “‘new
rules that work substantive changes,’ or ‘major substantive
legal addition[s],’ to prior regulations are subject to the APA’s
procedures.” U.S. Telecom Ass’n, 400 F.3d at 34–35 (first
quoting Sprint Corp. v. FCC, 315 F.3d 369, 374 (D.C. Cir.
2003); then quoting Appalachian Power Co., 208 F.3d at
1024). Moreover, as the United States Supreme Court has
explained, “if an agency adopts ‘a new position inconsistent
with’ an existing regulation, or effects ‘a substantive change
in the regulation,’ notice and comment are required.” Id. at 35
(quoting Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 100
(1995)). “Although these verbal formulations vary somewhat,
their underlying principle is the same: fidelity to the
rulemaking requirements of the APA bars courts from
permitting agencies to avoid those requirements by calling a
substantive regulatory change an interpretative rule.” 2 Id.
The Guidance does just that. Its new reference material
requirement effectively amends the 2014 regulation allowing
biofuel producers to utilize the in situ process by indefinitely
foreclosing that process while characterizing its indeterminate
2
Granted, an agency need not provide notice and comment
when it amends an earlier interpretive rule with a subsequent
interpretive rule. See Perez v. Mortg. Bankers Ass’n, 575 U.S. 92,
101 (2015); Majority Op. 24. It must do so, however, if a subsequent
rule labeled as interpretive “effectively amends” an existing
regulation. U.S. Telecom Ass’n, 400 F.3d at 34.
4
halt as an interpretation of the 2014 regulation.
Notwithstanding the EPA’s label, the reference material
requirement is not simply the EPA’s interpretation of what
constitutes “reasonably accurate results” under 40 C.F.R.
§ 80.1450(b)(1)(xiii)(B)(3). Rather, the Guidance changes the
regulatory scheme for the in situ biofuel production process by
indefinitely barring producers planning to utilize that process.
Its reference material requirement forces producers to use a
single approach to demonstrate reasonably accurate results
instead of allowing the producers’ peer reviewers to use their
expertise on how best to demonstrate such results. And
because that single method—the cellulosic reference material
requirement—is not currently possible, see Hudson Letter at 9
(J.A. 115) (“It is EPA’s intention to continue evaluating Poet’s
registration request for coprocessing corn kernel fiber and
starch once a representative reference material with reportable
starch and cellulosic values has been produced by NIST . . . .”
(emphasis added)); EPA Br. at 12; POET Br. at 18, producers
are indefinitely prevented from registering RINs using the in
situ process, in contravention of the Pathways II Rule which
permitted such registration. For these reasons, I believe the
Guidance—to the extent it imposes the reference material
requirement—is interpretive in name (label) only.
As the Guidance explains, “[i]n the 2014 Pathways II Final
Rule, EPA added a pathway for the production of cellulosic
ethanol from corn kernel fiber and promulgated the regulations
necessary to implement this pathway.” Guidance at 1 (J.A. 83)
(footnotes omitted). In the Pathways II Rule, the EPA
explained that, although at the time of the proposed rule, it was
not aware of a “ready test” to determine the amount of fuel
“derived from cellulosic versus non-cellulosic components,”
the comments it received indicated that “there are methods
available for [that] purpose.” 79 Fed. Reg. at 42,132. The EPA
decided to utilize those methods, “believ[ing] it [was]
5
reasonable to require the use of these existing methods under
certain circumstances . . . to verify that the [cellulosic and non-
cellulosic] values . . . are as accurate as possible” and therefore
“requir[ed] the use of these available test methods.” Id. In
other words, the EPA chose to allow the use of existing
methods without defining a specific approach that must be
used—either for the analytical methods themselves or for how
those methods demonstrated reasonably accurate results.
Regarding the latter, the EPA deferred to producers’ peer-
reviewed references in its additional registration requirements
for the in situ process—namely, allowing a producer to use any
non-VCSB method so long as “the method used is an adequate
means of providing reasonably accurate results by providing
peer reviewed references to the third party engineer performing
the engineering review at registration.” Id. at 42,135; see 40
C.F.R. § 80.1450(b)(1)(xiii)(B)(3). Although the EPA has the
ultimate say on whether to accept a particular method for
registration, see Majority Op. 26, the Pathways II Rule did not
tell the peer reviewers how to demonstrate that a method would
produce reasonably accurate results; instead it created a
registration system that gave those reviewers flexibility in
deciding how to do so.
Then, the EPA issued the 2019 Guidance, upending the
registration scheme for producers using the in situ process.
Questioning “the wide degree of variability in the data” it had
reviewed, the EPA concluded that “it is not possible, as a
technical matter, to assess whether a method is accurately
measuring” the cellulosic content of fuel produced via the in
situ method without using “a known, representative reference
material.” Guidance at 3 (J.A. 85). Thus, going forward,
producers (and their peer reviewers) could demonstrate that a
non-VCSB method would produce reasonably accurate results
by using a cellulosic reference material only. The result? The
in situ process pathway is closed.
6
The combination of the registration change wrought by the
Guidance’s reference material requirement for the in situ
process and its effect in indefinitely foreclosing future
registrations amounts, in effect, to an amendment of the 2014
regulation, thus making the Guidance a legislative rule. The
Guidance takes the broad discretion given to peer reviewers to
demonstrate that a method will produce reasonably accurate
results and narrows it to one possible way: comparison to a
cellulosic reference material. “To the applicant reading the
[Guidance] . . . the message is clear: in reviewing applications
the Agency will not be open to considering approaches other
than [the one] prescribed in the [Guidance],” Gen. Elec. Co. v.
EPA., 290 F.3d 377, 384 (D.C. Cir. 2002), notably, an approach
not included in the 2014 regulation,
§ 80.1450(b)(1)(xiii)(B)(3). Without a cellulosic reference
material, a registration application based on an in situ process
is dead on arrival. Although the 2014 regulation placed no
restriction on how producers could show that a method
produces reasonably accurate results, the Guidance “requires
them to conform” to one technique, “that is, not to submit an
application based upon a [different] way.” Gen. Elec. Co., 290
F.3d at 384. For example, even if a producer’s application were
supported by the top 100 cellulosic fuel experts who all
confirmed that the method used would produce reasonably
accurate results, that application would not be considered if it
did not use a cellulosic reference material. 3
3
My colleagues say that if this hypothetical occurred, the
EPA’s interpretation might be “arbitrary” but that would go to the
“substantive merits” of the Guidance. Majority Op. 25. But the
point of the hypothetical involves something greater—what the
Guidance in fact is, i.e., legislative or interpretive. In other words,
the Guidance is clear that no matter the number of experts nor the
how persuasive their analysis supporting an application, a reference
material is required to show that a method produces reasonably
7
The practical effect of this regulatory change is that
producers are indefinitely foreclosed from registering an in situ
process. Because no VCSB-approved method exists,
producers are limited to using non-VCSB methods to register
an in situ biofuel process. But with the addition of the
Guidance’s reference material requirement, producers are
barred from pursuing registration of the in situ process in toto
because the reference material does not yet exist. And no
alternative appears to exist—the Guidance makes clear starch-
based reference materials will not do, see Guidance at 4 (J.A.
86), and the Hudson letter shows that synthetic reference
materials will fare no better, see Hudson Letter at 9 (J.A. 115). 4
Thus, the Guidance closes a regulatory pathway opened by the
Pathways II Rule, leaving producers utilizing the in situ process
in limbo until a reference material requirement is created. The
Guidance’s substantive change and its practical effect do in fact
manifest, in my view, a “stark ‘volte face,’” Majority Op. 24
(quoting Nat’l Family Planning, 979 F.2d at 235) that “runs
180 degrees counter to the plain meaning of the regulation,”
Nat’l Family Planning, 979 F.2d at 235.
Requiring a producer to compare its method to a cellulosic
reference material may well be prudent, especially if the EPA’s
accurate results. That requirement substantively changes the scheme
of the 2014 regulation; it does not simply interpret the regulation,
whether arbitrarily or otherwise.
4
Despite my colleagues’ reliance on the EPA’s assertion in its
brief that “the Guidance does not foreclose a peer reviewer from
concluding that the use of a synthetic reference material is
appropriate,” Majority Op. 31 (quoting EPA Br. 44), nothing in the
Guidance itself suggests that the EPA will accept “approaches other
than what EPA has laid out in the Guidance,” EPA Br. 44. The
Guidance message to producers is plain: use a representative
cellulosic reference material or do not bother applying to register.
See Gen. Elec. Co., 290 F.3d at 384.
8
data questions about the amount of cellulose produced through
the in situ process are accurate. Nevertheless, the EPA is not
free to change its existing regulations to meet those concerns
however it sees fit. It must follow the required procedures.
Because the Guidance’s reference material requirement
effectively amends the 2014 regulation, the EPA was obligated
to promulgate that requirement via notice and comment
rulemaking. That Administrative Procedure Act obligation
(incorporated here under the Clean Air Act) 5 protects regulated
parties, like the producers, by ensuring their input and by
requiring the Agency to consider and respond thereto before it
effects a substantive change in the regulatory framework relied
upon by those parties. 6 See Make The Rd. N.Y. v. Wolf, 962
F.3d 612, 634 (D.C. Cir. 2020) (“[A] central purpose of notice-
and-comment rulemaking is to subject agency decisionmaking
to public input and to obligate the agency to consider and
respond to the material comments and concerns that are
voiced.”). Biofuel producers like POET were entitled to
formally and publicly comment and have those comments
considered and responded to by the EPA before it added a
requirement that substantively amended the 2014 regulation
and indefinitely foreclosed their ability to utilize the in situ
process.
Because the EPA failed to follow that required procedure,
I would vacate and remand the Guidance with respect to its
5
See 42 U.S.C. § 7607(d); 5 U.S.C. § 553.
6
And because the Guidance’s reference material requirement
is more than a “clarifying elaboration,” Majority Op. 23, the ease and
efficiency of “offering ‘convenient notice,’” id. at 24 (citation
omitted), through issuance of a Guidance must yield to lawful
procedure—a procedure designed to keep agency rule-making
transparent and to give regulated parties a seat at the table.
9
reference material requirement. Accordingly, I respectfully
dissent in part.