UPDATED -- The American Petroleum Institute, which represents the petroleum industry, is suing the Environmental Protection Agency, challenging its mandate for the use of 1.28 billion gallons of biodiesel in 2013, a 28% increase from the 2012 requirement.

API filed a lawsuit in the U.S. Court of Appeals for the District of Columbia late Monday.

It also filed a petition for administrative reconsideration of the 2013 biodiesel mandate with EPA. The American Fuel & Petrochemical Manufacturers also filed a petition.

In September, the EPA increased the target volume for biomass-based diesel fuel to 1.28 billion gallons from 1 billion gallons. The 2007 statute creating the Renewable Fuel Standard (which also mandates a certain amount of ethanol use) mandated annual biomass-based diesel volumes of 1 million gallons through 2012, then gave the EPA discretion to set future annual targets.

When the Obama Administration announced the biodiesel volume requirement in August, the National Biodiesel Board applauded the move.

"This was an incredibly important decision, and the Obama Administration got it right," said NBB CEO Joe Jobe. "It will allow biodiesel plants across the country to invest and expand, creating thousands of jobs. At the same time, it sends a strong signal that the U.S. is standing firm behind its commitment to producing clean, American-made energy to strengthen our energy security and break our dependence on petroleum."

The petroleum industry, however, says the EPA went too far.

"EPAs overzealous 2013 biodiesel mandate is unworkable, could raise the costs of making diesel fuel, and should be reduced," said Bob Greco, API group downstream director. "In its final rule, EPA admitted the costs of increasing the biodiesel volume requirement for 2013 outweighed the benefits by as much as $425 million. Furthermore, fraudulent biofuel credits that have plagued the system since last year and have yet to be resolved could inhibit industrys ability to meet EPAs higher biodiesel mandate."

EPAs own data estimates that the cost of increasing the biomass-based diesel mandate will add between $253 million and $381 million to consumers transportation fuel bill in 2013, said AFPM President Charles T. Drevna. The U.S. economy is still struggling and this increase will hurt the millions who rely on transportation fuels.

EPA has uncovered more than 140 million invalid renewable fuel credits, known as RINs, generated by three biodiesel companies, representing between 5% and 12% of the biodiesel market, API contends.

The fraudulent RIN problem is having, and will continue to have, significant impacts on the biodiesel marketplace that make it more difficult for companies to comply with EPAs mandate, Greco said.

"In the category of unintended consequences, EPAs decision will curtail investment in advanced biofuels that compete with biodiesel and will increase carbon emissions in 2013 under the Renewable Fuel Standard," says AFPM's Drevna. "The increase could also negatively impact the price and supply of agricultural commodities, since additional biodiesel feedstocks, such as soybean oil, will be required under the rule."

API's Greco questioned the need for the government to be involved in setting such mandates at all.

"The notion that we need a Renewable Fuels Standard to promote energy independence and security, as the 2007 statute is named, has been turned on its head by the tremendous growth in domestic oil and natural gas," Greco said.

The National Biodiesel Board says the petroleum industry is sending mixed messages.

Its disappointing that the petroleum industry continues to fight advancements toward clean, renewable fuels even as it embraces alternative energy in its marketing," says Anne Steckel, VP of Federal Affairs at NBB.

"The EPA clearly determined, in an independent analysis, that increased biodiesel production is good for the country. Last year alone, our industry supported more than 40,000 jobs, and next year the RFS is projected to save U.S. consumers $120.25 million at the pump.

"Going forward it will help consumers even more by expanding fuel options so that were not so dependent on imported oil and so vulnerable to this endless cycle of price spikes. We would encourage the oil industry to drop these lawsuits and work constructively toward improving our energy security with a mix of traditional and renewable fuels.


Updated 9:30 EST to add comment from National Biodiesel Board