Loper Bright Looms Large in EPA’s Exempted Renewable Fuel Reallocation Plan 

Earlier this month, a group of Republican U.S. Senators, led by Ted Cruz (Texas) and Mike Lee (Utah), sent a letter to the Environmental Protection Agency (“EPA”) discouraging the agency from moving forward with a proposal to reallocate exempted renewable volume obligations pursuant to the agency’s Renewal Fuel Standard program. Loper Bright figured prominently in the coalition letter and, specifically, the legislators’ argument that Congress’s failure to authorize such reallocation by statute deprived the EPA of authority to do so in the face of statutory silence. 

Background 

EPA regulations introduced during the Biden Administration currently require that all domestic refiners include a minimum volume of renewal fuel in the total amount of fuel they sell. Smaller refiners can be exempted from this regime if compliance would impose a “disproportionate economic hardship.” Over time, the EPA has granted full or partial exemptions, even retroactively, resulting in a substantial volume of renewable biofuel that would have normally entered the marketplace but never did. The treatment of these exempted volumes has proven tricky.   

The practice of reallocation refers to the EPA’s assignment of past exempted volumes to future compliance obligations. Reallocation effectively requires non-exempt refiners to produce and distribute a greater volume of renewable fuels in upcoming years, as a proportion of their total sales, to maintain compliance with the Renewal Fuel Standard program. The EPA’s recent proposed rulemaking on reallocation is particularly contentious, as the Senators’ letter suggests, because the agency is considering a novel partial reallocation approach, which appeals to certain industry stakeholders—namely, traditional large-scale refiners—but not others, such as farmers and biofuel producers. But, on top of that, the retroactive nature of reallocation, and its potentially significant economic impact, raise serious legal concerns. 

Loper Bright and the Senate Letter 

The Cruz-Lee letter starts by highlighting the potential cost-impact for any level of reallocation, although it emphasizes that “smaller market and independent refiners” are likely to be hit hardest. The letter is even more noteworthy for its references to Chevron deference and Loper Bright. In its 2022 Renewal Fuel Standard rule, the EPA explicitly noted its authority for reallocation was based on its “reasonable” construction of the Clean Air Act, which was only defensible under Chevron’s judicial-deference regime: “[W]hile the statute does not specifically require EPA to redistribute exempted volumes . . . this is a reasonable interpretation of our authority under Chevron.” 

The Loper Bright court’s overruling of Chevron, and its requirement that agency action be justified by the best reading of a statute, calls into question the statutory basis for the EPA’s reallocation designs. Disagreement over partial or full reallocation aside, the very practice of redistributing exempt volumes of fuel is legally suspect. Moreover, the EPA’s continued implementation of a Biden-era rule that expressly relies on Chevron deference seems to cut against the guiding principles of President Trump’s deregulatory agenda. Both Executive Order 14219 and the April 9, 2025 presidential proclamation, “Directing the Repeal of Unlawful Regulations,” anticipate Loper Bright will serve as a benchmark for regulatory action.   

Whether the EPA will abide by Loper Bright, or whether any finalized plan on reallocations will survive judicial scrutiny in the inevitable litigation that should ensue, will prove to be an interesting and important metric for measuring the impact Loper Bright on the administrative-law environment. 

Ryan P. Mulvey is senior policy counsel at Americans for Prosperity Foundation.