API today filed suit against the Environmental Protection Agency (EPA) for its handling of the federal Renewable Fuel Standard 2 (RFS2) rule.

In a statement issued this afternoon, API noted that EPA missed Congress's deadline to finalize the rule by a year and a half, combined the 2009 and the 2010 biomass-based diesel volume requirement, and made the rule retroactive to January 1, 2010.

API's statement says:

"While the U.S. oil and natural gas industry recognizes and appreciates the role of ethanol and other biofuels in the fuel marketplace, we are deeply concerned that the Environmental Protection Agency's final RFS2 rule could result in higher consumer costs. By setting retroactive requirements, refiners and ultimately consumers, will be penalized for EPA's inability to get this rule out on time as directed by Congress."

The new rule, which was signed in February and published last Friday, sets the greenhouse gas emissions (GHGs) standard for biodiesels that must be added to the U.S. diesel fuel pool. It also requires refiners to ensure that the diesel pool contains 1.15 billion gallons of biodiesel by the end of this year. Refiners are allowed to count biodiesel that was blended in 2009.

The rule puts refiners in a difficult position. They could have blended a fuel such as soy-based diesel, which initially was not judged as meeting the life-cycle GHG emissions standard, before the standard was finalized. Or they can now blend it into the diesel pool even though they believe EPA is overstepping its legal authority. Failure to comply with the rule can lead to penalties of $37,500 per incident per day.

"We believe this rule unlawful and unfair, and we filed a petition for review in the U.S. Court of Appeals for the District of Columbia to challenge the legality of EPA's actions. EPA made the rule effective on July 1, 2010 while setting unreasonable mandates on refiners that reach back to 2009 for bio-diesel," API says in its statement.

The statement also says "API supports a realistic and workable RFS." The oil and natural gas industry is the largest consumer of ethanol and other biofuels. Nearly 80 percent of all gasoline now produced in the United States contains ethanol.