Petition for Writ of Certiorari — Growth Energy, et al., Petitioners v. Calumet Shreveport Refining, L.L.C., et al.

Supreme Court briefMay 20, 2024

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APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

[FILED: November 22, 2023]

————

No. 22-60266

————

CALUMET SHREVEPORT REFINING, L.L.C.; PLACID

REFINING COMPANY, L.L.C.; ERGON REFINING,

INCORPORATED; WYNNEWOOD REFINING COMPANY,

L.L.C.,

Petitioners,

versus

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY,

Respondent,

CONSOLIDATED WITH

————

No. 22-60425

————

WYNNEWOOD REFINING COMPANY, L.L.C.; CALUMET

SHREVEPORT REFINING, L.L.C.; SAN ANTONIO

REFINERY, L.L.C.;

Petitioners,

versus

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY,

Respondent,

CONSOLIDATED WITH

————

No. 22-60433

————

ERGON REFINING, INCORPORATED; ERGON-WEST

VIRGINIA, INCORPORATED,

Petitioners,

versus

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY,

Respondent,

CONSOLIDATED WITH

————

No. 22-60434

————

PLACID REFINING COMPANY, L.L.C.,

Petitioner,

versus

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY,

Respondent.

————

Petitions for Review of Actions of

the Environmental Protection Agency

Agency Nos. 87 Fed. Reg. 24300,

87 Fed. Reg. 34873, EPA-420-R-22-011,

87 Fed. Reg. 34873,

87 Fed. Reg. 34873

————

Before HIGGINBOTHAM, SMITH, and ELROD, Circuit

Judges.

JERRY E. SMITH, Circuit Judge:

Six small refineries1 (“petitioners”) challenge the

EPA’s decision to deny their requested exemptions from

their obligations under the Renewable Fuel Standard

(“RFS”) program of the Clean Air Act (“CAA”). The EPA

denied petitioners’ years-old petitions using a novel CAA

interpretation and economic theory that the agency

published in December 2021. We conclude that the denial

was (1) impermissibly retroactive; (2) contrary to law;

and (3) counter to the record evidence. We grant the

petitions for review, vacate the challenged adjudications,

deny a change of venue, and remand.

A. Statutory and Regulatory Background

In 2005 and 2007, Congress amended the CAA, 42

U.S.C. § 7401 et seq., to establish the RFS.2 That program

mandates annual increases in “applicable volumes” of

four categories3 of renewable fuel for the transportation

sector. Id. § 7545(o)(2)(B)(i)(I)–(IV).

(1) Calumet Shreveport Refining, L.L.C. (“Calumet”); (2) Placid

Refining Company, L.L.C. (“Placid”); (3) Ergon Refining,

Incorporated (“Ergon”); (4) Wynnewood Refining Company, L.L.C.

(“Wynnewood”); (5) The San Antonio Refinery, L.L.C. (“TSAR”);

and (6) Ergon-West Virginia, Incorporated (“Ergon-WV”).

See Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594;

Energy Independence and Security Act of 2007, Pub. L. No. 110-140,

121 Stat. 1492.

(1) renewable fuel; (2) advanced biofuel; (3) cellulosic biofuel; and

(4) biomass-based diesel. 42 U.S.C. § 7545(o)(2)(B)(i)(I)–(IV).

To implement the RFS, Congress delegated to EPA

the authority to (1) set annual renewable fuel percentage

standards and (2) establish an RFS compliance program.

See id. § 7545(o)(3), (7). EPA sets the annual percentage

standards based on the amount of renewable fuel needed

to meet the statutorily stipulated volume requirements in

§ 7545(o)(2). Obligated parties—refiners, blenders, and

importers of transportation fuel—use that annualpercentage standard to determine their volume

obligations for the four categories of renewable fuel. See

40 C.F.R. § 80.1406. Obligated parties must satisfy their

individual volume obligations by the RFS annual

compliance date set by EPA. Id. § 80.1451(f)(1)(i)(A).

EPA tracks obligated parties’ RFS compliance with a

credit-trading program. Credits are called Renewable

Identification Numbers (“RINs”). There are two ways

blenders may acquire RINs: First, they can generate

RINs by blending renewable fuel into conventional fuel.

See id. § 80.1429(b). That’s because RINs are “attached”

to the renewable fuel the obligated party buys for its

blending operation. Once blending has occurred, the RIN

“separates” and exists independently of any batch of fuel.

See id. §§ 80.1425–29. Second, obligated parties can meet

their annual volume obligations by purchasing RINs

from other obligated parties. See generally id.

§§ 80.1425–29; 42 U.S.C. § 7545(o)(5)(B).

RINs are generally fungible—with one catch. A RIN

may be used for compliance only during the calendar

year in which it was generated or the calendar year

following. 40 C.F.R. § 80.1427(a)(6)(i); see also id.

§§ 80.1428(c), 80.1431(a)(iii). For example, a RIN that

was created in 2018 can be used only to meet an obligated

party’s 2018 or 2019 RFS volume obligations. See id.

§ 80.1427(a)(6). Obligated parties demonstrate they

have met their volume obligations—thereby complying

with RFS—by “retiring” their RINs at their annual

compliance demonstration. Id. § 80.1427(a)(1).

Congress, recognizing that RFS might impose disproportionate economic hardship on “small refineries”5 from

RFS, created three exemptions from the compliance

regime:

•

First is the blanket exemption, which automatically exempted all small refineries from RFS until

2011. 42 U.S.C. § 7545(o)(9)(A)(i).

•

Second is the refinery-specific exemption initiated by

the Secretary of Energy. If, after conducting the

statutorily mandated Department of Energy study,

the Secretary determined that a small refinery

was subject to a disproportionate economic

hardship, “the Administrator shall extend the

exemption under clause (i) for the small refinery

for a period of not less than 2 additional years.” Id.

§ 7545(o)(9)(A)(ii).

•

Third, the subparagraph (B) exemption allows

small refineries to “petition the Administrator for

an extension under subparagraph (A) for the

That is not to say that a RIN generated in 2018 becomes

valueless in 2020—RINs do not turn into pumpkins after their

expiration date. An unretired 2018 RIN remains transactable in

2023 to the extent other obligated parties create demand for RINs

that can be used to meet 2018 or 2019 compliance year requirements.

See id. §§ 80.1427(a)(6), 80.1428(c), 80.1431(a).

The CAA defines small refineries as those “for which the

average aggregate daily crude oil throughput for a calendar year (as

determined by dividing the aggregate throughput for the calendar

year by the number of days in the calendar year) does not exceed

75,000 barrels.” 42 U.S.C. § 7545(o)(1)(K).

reason of disproportionate economic hardship.”

Id. § 7545(o)(9)(B)(i). “In evaluating a petition . . .

the Administrator, in consultation with the

Secretary of Energy, shall consider the findings of

the study under subparagraph (A)(ii) and other

economic factors.” Id. § 7545(o)(9)(B)(ii). Further,

“[t]he Administrator shall act on any petition . . .

not later than 90 days after the date of receipt.”

Id. § 7545(o)(9)(B)(iii).

B. Procedural History

This matter involves the last of the three small refinery

exceptions enumerated in the CAA. Petitioners challenge

two EPA actions—each of which adjudicated and denied

multiple exemption petitions (“Denial Actions”): The

first is EPA’s April 7, 2022, action “denying 36 petitions

from 36 small refineries seeking exemption from their

[RFS] obligations for the 2018 compliance year” (“April

Denial”).6 The second is EPA’s June 8, 2022, action

denying “denying 69 petitions from 33 small refinery

petitioners seeking exemption from their [RFS]

obligations for the 2016–2021 compliance years” (“June

Denial”).7

EPA, EPA-420-R-22-005, April 2022 Denial of Petitions for RFS

Small Refinery Exemptions, at 1 (2022); see also April 2022 Denial

of Petitions for Small Refinery Exemptions Under the Renewable

Fuel Standard Program, 87 Fed. Reg. 24,300 (April 25, 2022).

EPA, EPA-420-R-22-011, June 2022 Denial of Petitions for RFS

Small Refinery Exemptions, at 1 (2022); see also Notice of June 2022

Denial of Petitions for Small Refinery Exemptions Under the

Renewable Fuel Standard Program, 87 Fed. Reg. 34,873 (June 8,

2022).

1. The April Denial

On April 7, 2022, EPA published the April Denial—

that is, the agency’s final adjudications rejecting a total

of thirty-six small refinery exemption petitions for the

2018 compliance year. Among those were petitions

submitted by Calumet, TSAR, Ergon, Placid, and

Wynnewood.8 EPA denied those petitions using its

revised interpretation of the subparagraph (B) exemption

provision and RIN-passthrough economic theory.

Notably, the April Denial was not the first time EPA

had evaluated these thirty-six petitions. Indeed, thirtyone of them had been granted by EPA in 2019.9 These

August 2019 grants were subsequently ensnared in

proceedings litigated in the D.C. Circuit unrelated to the

dispute at hand. What is relevant, however, is that EPA

moved for voluntary remand without vacatur to consider

those petitions with regard to the Tenth Circuit’s

“alternate holdings” in Renewable Fuels Ass’n v. EPA

(“RFA”).10 The D.C. Circuit granted EPA’s motion on

December 8, 2021.11 Shortly thereafter, EPA provided

Ergon-WV’s 2018 exemption petition was not adjudicated in the

April Denial.

Memorandum Decision on 2018 Small Refinery Exemption

Petitions from Anne Idsal, Acting Asst. Admin’r, Off. of Air and Rad.

to Sarah Dunham, Dir., Off. of Transp. and Air Qual. (Aug. 9, 2019),

at 2.

948 F.3d 1206 (10th Cir. 2020), rev’d on other grounds sub nom.

HollyFrontier Cheyenne Ref., LLC v. RFA, 141 S. Ct. 2172 (2021)

(“HollyFrontier”) and vacated, No. 18-9533, 2021 WL 8269239 (10th Cir.

July 27, 2021).

RFA v. EPA, No. 19-1220, Doc. 1925942, at 3 (D.C. Cir. Dec. 12,

2021).

notice of its intent to include those previously decided

petitions in the April Denial action.12

2. The June Denial

EPA once again applied its new interpretation and

approach in June 2022 when it denied sixty-nine

exemption petitions for the 2016 through 2021 RFS

compliance years. Among those were petitions from (1)

Calumet for 2019 and 2020; (2) TSAR for 2019, 2020, and

2021; (3) Ergon for 2019 and 2020; (4) Ergon-WV for 2019

and 2020; (5) Placid for 2019 and 2020; and (6)

Wynnewood for 2017, 2019, 2020, and 2021.

EPA’s new interpretation and approach—which it

applied in the Denial Actions—displaced the adjudicative methodology the agency had relied on for over a

decade. In that prior approach, EPA granted and denied

petitions based on DOE’s findings through its application

of the DOE scoring matrix. That scoring matrix—

developed as part of the statutorily-mandated 2011 DOE

study—“was designed to evaluate the full impact of

disproportionate economic hardship on small refiners

and used to assess the individual degree of potential

impairment.”13 But, starting with the April Denial, EPA

has now completely abandoned the scoring matrix.

EPA, EPA-HQ-OAR-2021-0566, SCOPE OF ACTION AND

NOTIFICATIONS (2022).

Off. of Pol’y & Int’l Affs., U.S. Dep’t of Energy, Small Refinery

Exemption Study: An Investigation into Disproportionate Economic

Hardship (2011), at 32 (“2011 DOE Study”).

Instead, EPA now adjudicates petitions using an

approach it announced in a December 2021 publication.14

That approach rests on two components.

First is a revised interpretation of the statutory term

“disproportionate economic hardship” as used in 42

U.S.C. § 7545(o)(9)(A)–(B). Under the agency’s new

interpretation, a small refinery’s disproportionate

economic hardship must be caused solely by RFS

compliance costs.15

Second is a new economic theory. Called “RIN

passthrough,” EPA now theorizes that (A) the “cost of

RINs is the same for all obligated parties, whether the

RINs are acquired by blending renewable fuel or by

buying them on the market” and (B) the “costs of RFS

compliance (i.e., RINs) are passed through in the prices

of refined products.”16

Before us now are petitions for review of EPA’s Denial

Actions. Petitioners contend the Denial Actions are

impermissibly retroactive, contrary to law, and arbitrary

and capricious. For the reasons that follow, we agree.

Accordingly, we vacate and remand petitioners’ exemption

petitions adjudicated in the Denial Actions.

See Notice of Opportunity to Comment on Proposed Denial of

Petitions for Small Refinery Exemptions, 86 Fed. Reg. 70,999 (Dec.

14, 2021).

See EPA, EPA-420-D-21-001, Proposed RFS Small Refinery

Exemption Decision, at 23–26 (Dec. 2021) (“Proposed Denial”).

Id. at 62.

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II.

Before we proceed to the merits of petitioners’

contentions, we must address EPA’s motion to transfer

venue to the D.C. Circuit under 42 U.S.C. § 7607(b)(1).17

The CAA includes a statutory channeling provision

delineating the appropriate venue in which a petitioner may

seek judicial review of agency action:

A petition for review of . . . any . . . nationally

applicable regulations promulgated, or final

action taken, by the Administrator under this

chapter may be filed only in the United States

Court of Appeals for the District of Columbia.

A petition for review of the Administrator’s

action . . . under this chapter . . . which is locally

or regionally applicable may be filed only in the

United States Court of Appeals for the

appropriate circuit. Notwithstanding the

preceding sentence a petition for review of any

action referred to in such sentence may be filed

only in the United States Court of Appeals for

the District of Columbia if such action is based

on a determination of nationwide scope or effect

and if in taking such action the Administrator

finds and publishes that such action is based on

such a determination.

42 U.S.C. § 7607(b)(1).

Determining where proper venue lies under § 7607(b)(1)

requires us to conduct a two-step analysis: At the first

step, we determine whether the challenged agency

action is “nationally applicable” as distinguished from

“locally or regionally applicable.” Id. If nationally

See Order, No. 22-60266 (5th Cir. Oct. 21, 2022) (motions panel

ordering the threshold issue of venue to carry with the merits).

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applicable, our inquiry ends because proper venue exists

only in the D.C. Circuit. But if the challenged action is

“locally or regionally applicable,” we proceed to step two.

That second step begins with the default presumption

that venue is proper in this circuit. See Texas v. EPA, 829

F.3d 405, 419 (5th Cir. 2016) (“Texas 2016”). To overcome

that default presumption, a challenged action must

satisfy two necessary and independent sub-conditions.

Namely, we must determine that (a) the challenged

action “is based on a determination of nationwide scope

or effect” and (b) the Administrator, in taking that

challenged action, “finds and publishes that such action

is based on such a determination.” Only if both subconditions are satisfied is venue proper solely in the D.C.

Circuit.

A. Step One

EPA first avers the Denial Actions are “nationally

applicable” agency actions because they “apply a consistent statutory interpretation and economic analysis to

small refineries nationwide.” The agency analogizes the

Denial Actions to the SIP Calls in Texas v. EPA, where

this court reasoned that the agency’s disapproval of and

call to correct thirteen states’ plans regarding air quality

standards was a “nationally applicable regulation.” No.

10-60961, 2011 WL 710598, at *3 (5th Cir. Feb. 24, 2011)

(“Texas 2011”). The agency contends the Denial Actions,

like the SIP Calls, rest on “a revised interpretation of the

relevant CAA provisions and the RIN discount and RIN

cost passthrough principles that are applicable to all

small refineries no matter the location or market in

which they operate.”

We disagree with EPA’s position. In-circuit precedent

counsels that it is the legal effect—and not the practical

effect—of an agency action that determines whether that

12a

action is “nationally applicable.” See Texas 2016, 829 F.3d

at 419. That is the key distinction between the SIP Call

in Texas 2011 and the Denial Actions in this case. The SIP

Call in Texas 2011 was sufficient—by itself—to change

regulated entities’ legal obligations. It required all

states to apply their “prevention-of-significantdeterioration” programs to “greenhouse-gas-emitting

sources.” 2011 WL 710598, at *1–2. States whose plans

already met that requirement were just as bound as

states with violative plans. See id. at *4–5.

Not so with the “new approach” EPA used in the

Denial Actions. EPA may swear that the new approach

will apply in all future exemption petitions. But it cannot

be said that EPA’s promise to apply its “new approach”—

as described in the Denial Actions—affects the legal

rights, duties, or obligations of any small refinery whose

exemption petitions were not the subject of the April

Denial or June Denial. The agency’s promise is naked—

neither the new interpretation nor the RIN pass through

theory binds EPA in any future adjudication.18

The Denial Actions are not “nationally applicable.”

They are, instead, “locally or regionally applicable.” We

must therefore proceed to the second step.

B. Step Two

We begin step two with the presumption that venue is

proper in this circuit. That’s because we have already

determined, at step one, that the agency action is “locally

or regionally applicable.” See Texas 2016, 829 F.3d at 419.

A challenged action overcomes that presumption if (1) it

is based on a determination of nationwide scope or effect,

EPA unsuccessfully asserts that its new interpretation and

theory are imbued with the force of law and therefore binding on the

agency. See infra part V.

13a

and (2) the Administrator, in taking such action, “finds

and publishes that such action is based on such a

determination.” 42 U.S.C. § 7607(b)(1). EPA claims the

Denial Actions meet both sub-conditions.

We begin with the second sub-condition—whether the

Administrator found and published that such an action

was based on a determination of nationwide scope or

effect. That is easily met, as no party contests that the

Administrator so found and published in each of the

Denial Actions.19

What the parties dispute is the accuracy of the

Administrator’s finding. And that is addressed in the

first sub-condition.

The parties initially skirmish on the applicable

standard of review for the first sub-condition. EPA

asserts that we review its determination under a

deferential standard, but petitioners contend that we

owe no deference at all. Petitioners are correct. As

explained in Texas 2016, we “independent[ly] assess[]”

whether the action is based on a determination of

nationwide scope or effect. 829 F.3d at 420 (citation

omitted).

The agency’s assertion to the contrary finds little

support: All EPA cites to buttress its position is a

nineteen-year-old, non-precedential decision in which

the D.C. Circuit rejected a motion to transfer after it

noted that “the Administrator has unambiguously

determined that the final action . . . has nationwide scope

See 87 Fed. Reg. at 24,301 (“the Administrator is exercising the

complete discretion afforded to him by the CAA and hereby finds

that this final action is based on a determination of nationwide scope

or effect for purposes of CAA section 307(b)(1) and is hereby

publishing that finding in the Federal Register.”); id. at 34,874

(same).

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and effect.” Alcoa, Inc. v. EPA, No. 04-1189, 2004 WL

2713116, at *1 (D.C. Cir. Nov. 24, 2004). That is not

enough, especially given that that same assertion was

subsequently dismissed in Dalton Trucking, Inc. v. EPA,

808 F.3d 875 (D.C. Cir. 2015). There, the D.C. Circuit

characterized EPA’s assertion “that venue in this circuit

is ‘compelled by [its] published determination that an

action would have a nationwide scope or effect’” as

nothing more than a “transparent sleight of hand that

does not persuade.” Id. at 881 (citation omitted).

Consequently, we do not accord deference to EPA’s

determination.

EPA contends, in its motions-stage briefing, that the

Denial Actions were based on a determination of

nationwide scope or applicability” because it made “no

unique or individualized findings as to the ability of any

of the thirty-six petitioning refineries to recover the

costs of RFS compliance” and “did not adjust its

statutory interpretation and economic theory to the

particulars of any specific small refinery, or the region in

which a refinery operates.” We disagree. EPA’s motionsstage characterization of the Denial Actions is flatly

contradicted by the agency’s position on the merits and

the explanations it provided in the Denial Actions:

First, when asked to defend the Denial Actions on the

merits, EPA contends that it “considered each petition

on the merits . . . and individual refinery information.”

That mirrors the Denial Actions that state that EPA

completed a thorough evaluation of the data and

information provided in the SRE petitions,

supplemental submissions, and comments to

determine if any of the petitioners have demonstrated that the cost of compliance with the

RFS is the cause of their alleged DEH and that

such costs are not passed through by that small

15a

refinery to the wholesale purchasers under the

RIN cost passthrough principle.20

Second, EPA admits that, even under its new

approach, there is still a non-zero chance it will grant

small refinery petitions. According to the agency’s

briefing, EPA will grant exemption petitions to small

refineries that provide data and evidence demonstrating

that they faced disproportionate economic hardship

contrary to the facts regarding other small refineries.

EPA’s representations in the Denial Actions and its

position on the merits show that its new interpretation

and RIN passthrough theory without more—fail to

provide the agency with a sufficient basis to adjudicate

exemption petitions. When EPA says it denied petitions

“based on factors and facts common to each petition,” it

also implicitly concedes that there were no refineryspecific facts that would justify the issuance of an

exemption. The agency thus had to verify that each of the

petitions implicated in the Denial Actions did not (1)

present facts contrary to those of other nonexempt small

refineries and (2) demonstrate disproportionate

economic hardship consistent with the statutory

criteria.21 Consequently, the Denial Actions rely on

refinery-specific determinations and are not based on a

determination of nationwide scope or effect.

Because the Denial Actions are neither nationally

applicable nor based on a determination of nationwide

scope or effect, venue is proper in the Fifth Circuit.

EPA, EPA-420-R-22-005, April 2022 Denial of Petitions for

RFS Small Refinery Exemptions (2022), at 23; EPA, EPA-420-R-22011, June 2022 Denial of Petitions for RFS Small Refinery

Exemptions (2022), at 24.

See id.

16a

EPA’s motion to transfer venue to the D.C. Circuit is

denied. We turn to the merits.

III.

The Administrative Procedure Act (“APA”) requires

us to “set aside” agency actions found to be “arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A). Arbitraryand-capricious review requires this court to scrutinize

the record to determine whether the agency has

“examine[d] the relevant data and articulate[d] a

satisfactory explanation for its action including a rational

connection between the facts found and the choice

made.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State

Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983) (cleaned

up). We “may not supply a reasoned basis for the agency’s

decision that the agency itself has not given.” Id.

(quoting SEC v. Chenery Corp. (Chenery II), 332 U.S.

194, 196 (1947)). Instead, “we must set aside” agency

action that is “premised on reasoning that that fails to

account for relevant factors or evinces a clear error of

judgment” as arbitrary and capricious. Univ. of Tex.

M.D. Anderson Cancer Ctr. v. U.S. Dep’t of Health &

Hum. Servs., 985 F.3d 472, 475 (5th Cir. 2021) (cleaned

up).

Petitioners contend the Denial Actions are defective in

three ways: First, they are impermissibly retroactive.

Second, EPA’s interpretation of the CAA is contrary to

law. And third, the agency acted arbitrarily and

capriciously by failing to engage in reasoned decisionmaking.

A. Retroactivity

The 2011 DOE Study and the scoring matrix are the

two factors EPA relied on for over a decade when

deciding whether to grant subparagraph (B) exemption

17a

petitions. But starting with the April Denial, EPA threw

those factors away: Now, the 2011 DOE Study and the

scoring matrix have no bearing on the agency’s decisionmaking process.

Petitioners cry foul—explaining that they had relied

on those two factors when they submitted the exemption

petitions implicated in the Denial Actions. EPA says

petitioners have nothing to complain about. According to

the agency, petitioners (1) have no protectable property

right in subparagraph (B) exemptions and (2) should not

have relied on the approach used in the agency’s prior

adjudications. We disagree with EPA on both points.

Petitioners have a protectable property interest

because the small-refinery exemption is “an entitlement

expressly created by statute,” McDonald v. Watt, 653

F.2d 1035, 1045–46 (5th Cir. Unit A Aug. 1981), which

EPA “shall” grant for any small refinery that shows

“disproportionate economic hardship,” 42 U.S.C. §

7545(o)(9)(B)(ii). The CAA defines the factors EPA must

consider in deciding whether to grant or deny an

exemption, and, once those factors have been satisfied,

the agency is legally obligated to grant such a petition.

See id.

Because petitioners possess a protectable property

interest, we must determine whether the regulation is

impermissibly retroactive. There is no blanket

prohibition against retroactive application of regulation

through adjudication.22 But that power—to regulate

See Chenery II, 332 U.S. at 203–04; Macy’s, Inc. v. NLRB, 824

F.3d 557, 566–67 (5th Cir. 2016); Handley v. Chapman, 587 F.3d 273,

283 (5th Cir. 2009) (Regulation is retroactive where its application

“would impair rights a party possessed when he acted, increase a

party’s liability for past conduct, or impose new duties with respect

18a

retroactively—is limited to circumstances in which

retroactive application would not result in “injury or

prejudice.” Handley, 587 F.3d at 283 (quoting Pac.

Molasses Co. v. FTC, 356 F.2d 386, 390 n.10 (5th Cir.

1966)).

Thus, we must “balance the ills of retroactivity against the

disadvantages of prospectivity.” Microcomputer Tech.

Inst. v. Riley, 139 F.3d 1044, 1050 (5th Cir. 1998).23 And in

conducting such balancing, we accord no deference to the

agency’s determination that its approach should be

applied retroactively, for that determination does not

involve policy considerations delegated to the agency or

require any agency expertise. Id. at 1050–51. “If that

mischief [of prospectivity] is greater than the ill effect of

the retroactive application of a new standard, it is not the

type of retroactivity which is condemned by law.”

Monteon-Camargo v. Barr, 918 F.3d 423, 430 (5th Cir.

2019), as revised (Apr. 26, 2019) (quoting Chenery II, 332

U.S. at 203). Typically, “the ill effect of retroactivity is the

frustration of the expectations of those who have

justifiably relied on a prior rule; the ill effect of

prospectivity is the partial frustration of the statutory

purpose which the agency has perceived to be advanced

by the new rule.” McDonald, 653 F.2d at 1044.

We start the balancing analysis with the ills of

retroactivity. Petitioners justifiably relied on EPA’s past

agency practice when applying for the exemptions at

issue. EPA—for over a decade—consistently used the

2011 DOE Study and scoring matrix to adjudicate smallto transactions already completed.” (quoting Fernandez–Vargas v.

Gonzales, 548 U.S. 30, 37 (2006))).

Balancing occurs “case-by-case,” and this court has previously

rejected the multi-factor balancing tests adopted by other circuits,

see id. (rejecting D.C. Circuit’s five- factor test).

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refinery exemption petitions. That is exactly the kind of

“well established” agency practice that forms the basis

for justifiable reliance. Id. at 1045 (citation omitted).24

EPA “cannot ‘surprise’ [petitioners] by penalizing [them]

for ‘good-faith reliance’ on the agency’s prior positions.”

R.J. Reynolds Vapor Co. v. FDA, 65 F.4th 182, 189 (5th

Cir. 2023) (quoting Christopher v. SmithKline Beecham

Corp., 567 U.S. 142, 156–57 (2012)).

EPA nonetheless maintains that petitioners’ reliance was

unjustifiable because they were—or should have been—

aware of impending changes to agency policy. The EPA

first points to its publication requesting comment on its

proposed interpretation and theory. But that request for

comment was not published in the Federal Register until

December 2021.25 The April Denial adjudicated

exemption petitions submitted in 2018.26 And all of

petitioners’ exemption petitions that were adjudicated in

the June Denial had been submitted before December

2021.27 Thus, all petitioners’ exemptions were submitted

before EPA provided notice in the Federal Register that

EPA insists petitioners couldn’t have justifiably relied on its

prior approach because it wasn’t “announced in an interpretive rule”

or “subjected . . . to notice and comment.” The agency’s position is

cute but wrong. Longstanding and well-established agency practice

need not be officially adopted to form the basis for reasonable

reliance. See id.

See 86 Fed. Reg. at 70,999–71,000.

The April Denial included 2018 compliance-year petitions from

Calumet, TSAR, Ergon, Placid, and Wynnewood.

The June Denial included Calumet, TSAR, Ergon, Ergon-WV,

and Placid’s 2019 and 2020 petitions; TSAR’s 2019, 2020, and 2021

petitions; and Wynnewood’s 2017, 2019, 2020, and 2021 petitions.

TSAR’s 2021 petition was submitted on November 23, 2021, and

Wynnewood’s 2021 petition was submitted on September 23, 2021.

20a

it intended to change its adjudicative methodology.28

EPA’s December 2021 notice and comment publication

does not render petitioners’ reliance unjustifiable.

Next, EPA asserts that petitioners’ reliance was

unjustifiable by June 2021—the month litigation ended

in RFA.29 We disagree with EPA’s assertion that RFA

provided petitioners with notice by June 2021.30

For one, EPA’s expressly states its policy is only to

“provide for exceptions to the general policy” in response

to “decisions of the federal courts that arise from

challenges to ‘locally or regionally applicable’ actions . . .

.” 40 C.F.R. § 56.3(d). A Tenth Circuit decision—no

matter its holding—had no effect on petitioners’ operating

outside that circuit’s boundaries.

Moreover, the initial Tenth Circuit panel opinion—

which held that EPA’s prior approach of finding disproportionate economic hardship allowed the agency to act

“outside the scope of [its] statutory authority” when

“[g]ranting extensions of exemptions based in part on

hardships not caused by RFS compliance”31—was

vacated by a subsequent Tenth Circuit panel.32 That, in

Petitioners, unlike Ant-Man and the Wasp, cannot time travel.

See also Rick and Morty: The Vat of Acid Episode (Comedy Central

May 17, 2020).

See supra note 10 and accompanying text.

Even if we assume arguendo that petitioners had notice by

June 2021, that would affect only TSAR’s and Wynnewood’s 2021

petitions; the other seventeen petitions in this case were filed before

June 2021.

RFA, 948 F.3d at 1254.

3232

Renewable Fuels Ass’n v. EPA, 854 F. App’x 983, 984 (10th

Cir. 2021) (per curiam) (“RFA II”) (“In light of the United States

Supreme Court’s decision in HollyFrontier . . . we previously

recalled our mandate and vacated our judgment in this case.”).

21a

turn, “remove[s] both the res judicata and the stare

decisis effect” from the initial RFA panel opinion. City

Ctr. W., LP v. Am. Mod. Home Ins. Co., 749 F.3d 912, 913–

14 (10th Cir. 2014).

Thus, it is EPA that is being unreasonable when it

blames petitioners for disregarding a vacated holding

that—per EPA’s own regulations—never had any effect

outside the Tenth Circuit. Consequently, petitioners’

continued reliance on EPA’s longstanding and wellestablished practice of adjudicating exemption petitions

based on the 2011 DOE study and scoring matrix was

justifiable till the agency first published notice of its

intent to change its adjudicative methodology in

December 2021.33

We now turn to the other side of the balancing equation

and analyze the disadvantages of prospectivity. See

In its brief, EPA asserts it “indicat[ed] that it would follow” the

RFA holding on the agency’s approach of finding disproportionate

economic hardship “on remand if the Tenth Circuit denied the

motion or did not clarify otherwise.” See EPA’s Motion for

Clarification of the Court’s July 29, 2021 Mandate, RFA II, No. 189533, Doc. 010110564301, at 6–7 (Aug. 19, 2021) (“RFA II Motion”).

For three reasons, that does not change our analysis: First, EPA’s

intent, as stated in its RFA II motion, was limited to the three

exemption petitions in RFA. The only petition in this case that

overlaps with RFA is Wynnewood’s 2017 exemption petition.

Second, EPA stated in its Tenth Circuit motion that it had not

decided “what, if any, impact . . . the unaffected holdings . . . may

have on EPA’s implementation of the RFS program.” Id. at 6; cf.

FTC v. Standard Oil Co., 449 U.S. 232, 240 (1980) (agency’s

“threshold determination that further inquiry is warranted . . . is not

‘definitive’” agency action). Third, it is hardly reasonable to ask

regulated entities to rely on EPA’s statements of future intent made

in the course of litigation. Cf. BNSF Ry. Co. v. Fed. R.R. Admin., 62

F.4th 905, 911 & n.4 (5th Cir. 2023) (discounting post-hoc agency

rationalizations).

22a

Microcomputer Tech. Inst., 139 F.3d at 1050. In other

words, we must determine what benefits are lost if EPA’s

new interpretation and RIN passthrough theory are

applied only to newly submitted exemption petitions.

EPA fails to identify a single benefit of retroactive

application. Intervenors assert retroactive application is

necessary because “withholding the Denials’ effect

would harm the producers of renewable fuel” and

“depress the demand for renewable fuel.” That is absurd.

The exemption petitions in this case concern compliance

years 2017 to 2021. By the time EPA published the

Denial Actions, no producer could have produced RINs

applicable to these petitions, see 40 C.F.R. §§

80.1427(a)(6), 80.1428(c), 80.1431(a), so the Denial

Actions could not have affected the amount of renewable

fuel blended in those past years.

The result of the balancing test could not be more

obvious: There is no legitimate benefit EPA can gain

from retroactive application. On the other hand, retroactive application of EPA’s new adjudicative methodology

harshly penalizes petitioners for their good-faith and

justified reliance on the agency’s prior approach.34 EPA

impermissibly applied its new CAA interpretation and RIN

passthrough theory to petitioners’ years-old exemption

petitions.

B. Contrary to Law

Petitioners contend the Denial Actions are contrary to

law for four reasons.

1. Disproportionate Economic Hardship

See R.J. Reynolds, 65 F.4th at 189 (“Dealing with administrative agencies is all too often a complicated and expensive game, and

players . . . ‘are entitled to know the rules.’” (citation omitted)).

23a

Under EPA’s new interpretation, RFS compliance

costs must be the sole cause of a small refinery’s

disproportionate economic hardship. In other words, a

small refinery will receive an exemption only if it can

show that it has incurred disproportionate RFS

compliance costs. Petitioners insist that that is an

unreasonable construction of the statute. We agree.

The CAA provides small refineries with the ability to

submit a petition requesting an exemption from RFS

“for the reason of disproportionate economic hardship.”

42 U.S.C. § 7545(o)(9)(B)(i). An exemption petition, once

submitted, is evaluated by the Administrator “in

consultation with the Secretary of Energy.” §

7545(o)(9)(B)(ii). In that evaluation, “the Administrator .

. . shall consider the findings of the study under

subparagraph (A)(ii)”— that is, the 2011 DOE Study—

“and other economic factors.” Id.

At dispute is what qualifies as “disproportionate

economic hardship” for a subparagraph (B) exemption.

See id. at § 7545(o)(9)(B)(i). Subparagraph (A) uses that

same phrase twice.35 But neither subparagraph defines

it.

EPA theorizes that disproportionate economic hardship

can only mean RFS compliance costs. It bases that

conclusion on its observation that the phrase, as used in

subparagraph (A), does not identify any cause of

First, in subparagraph (o)(9)(A)(ii)(I), the Secretary of Energy

is instructed to “determine whether compliance with [RFS] would

impose a disproportionate economic harm on small refineries,” the

product of which is the 2011 DOE Study. Second, in subparagraph

(II), which directs the Administrator to extend the initial

subparagraph (A)(i) exemption—the blanket exemption for all small

refineries “until calendar year 2011”—for any small refinery that

“would be subject to a disproportionate economic hardship if

required to comply with [RFS] . . . .”

24a

disproportionate economic hardship other than RFS

compliance costs.36 It thus posits that the statute should

be read to say that RFS compliance costs are the sole

cause of disproportionate economic hardship.37

Petitioners disagree: They instead contend that “disproportionate economic hardship” should be interpreted

more broadly. In their view, a small refinery can experience disproportionate economic hardship for myriad

The reasoning employed here is suspect as well. EPA

interprets two phrases in subparagraph (A)—namely, “would

impose” and “subject to . . . if required to comply”— as creating an

exclusive causal relationship between RFS compliance costs and

disproportionate economic hardship. See § 7545(o)(9)(A)(ii). That is

error because neither provision purports to rule out other causes of

disproportionate economic harm.

EPA asks us to defer to its interpretation under Chevron

U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984). EPA claims Chevron applies because it “undertook notice and

comment before taking the Denial Actions.”

Not so fast. While the agency did subject its interpretation to

notice-and-comment proceedings, it applied that interpretation in

informal adjudication, not notice-and-comment rulemaking or

formal adjudication. See United States v. Mead Corp., 533 U.S. 218,

230 (2001). True, EPA’s decision to engage in informal adjudication

“does not automatically deprive that interpretation of the judicial

deference otherwise its due.” Texas v. United States, 809 F.3d 134,

178 n.160 (5th Cir. 2015) (quoting Barnhart v. Walton, 535 U.S. 212,

221 (2002)), aff’d by an equally divided court, 579 U.S. 547 (2016).

But to qualify for Chevron deference, EPA’s interpretation must

satisfy the Barnhart test, which asks us to consider factors such as

“the interstitial nature of the legal question, the related expertise of

the Agency, the importance of the question to administration of the

statute, the complexity of that administration, and the careful

consideration the Agency has given the question over a long period

of time . . . .” 535 U.S. at 222. We need not decide whether the

Barnhart test is satisfied because EPA’s interpretation fails even

under Chevron. See infra note 43.

25a

causes; it qualifies for the exemption if RFS compliance cost

is one such cause.

We agree with petitioners. EPA’s interpretation is

foreclosed by the statute’s text in two ways:

First, to interpret “disproportionate economic hardship”

as synonymous with “RFS compliance cost” would

render part of subparagraph (B)(ii) a nullity. That

provision stipulates that the Administrator, in evaluating

subparagraph (B) exemption petitions, shall consider (1)

the 2011 DOE study and (2) “other economic factors.” §

7545(o)(9)(B)(ii).

EPA’s

interpretation

“disproportionate economic hardship” leaves no room for

“other economic factors”—it makes the first factor

outcome-determinative for every exemption petition.

But those words “cannot be meaningless, else they would

not have been used.”38 Thus, subparagraph (B)(ii)

contemplates granting exemptions to small refineries

that experience disproportionate economic hardship

attributable to a combination of (1) RFS compliance costs

and (2) economic factors other than RFS compliance

costs.

Second, EPA’s approach to defining “disproportionate

economic hardship” is misguided. The agency relies

heavily on subparagraph (A) to define the phrase. It

justifies its approach on the absence of a definition in

subparagraph (B). EPA’s justification is incorrect.

Though it is true that we presume—absent persuasive

countervailing evidence—that identical words and

phrases “bear the same meaning throughout a text,”39

subparagraph (A) does not define “disproportionate

ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE

INTERPRETATION OF LEGAL TEXTS 174 (2012) (quoting United

States P. Butler, 297 U.S. 1, 65 (1936)).

Id. at 170.

26a

economic hardship” either. And “[w]here Congress does

not furnish a definition of its own, we generally seek to

afford a statutory term ‘its ordinary or natural

meaning.’” HollyFrontier, 141 S. Ct. at 2176 (quoting

FDIC P. Meyer, 510 U.S. 471, 476 (1994)).

“Disproportionate economic hardship,” as ordinarily

understood, includes much more than just RFS compliance

cost. “Disproportionate” modifies “economic hardship.”

For economic harm to be disproportionate, it must be

“inadequately or excessively proportioned.”40 The relevant

comparator—that to which the harm is “proportioned”—

could be the amount other small refineries pay to comply

with RFS. But it could also be factors unrelated to RFS,

such as local economic conditions or refinery-specific

circumstances. For example, “small refineries might

apply for exemptions . . . in light of market fluctuations

and changing hardship conditions.” Holly-Frontier, 141

S. Ct. at 2178. Congress could have—but did not—

enumerate the particular ways in which economic harm

might be “disproportionate.”41 We therefore accord the

phrase disproportionate economic harm its “full and fair

scope,” for “the presumed point of using general words is

to produce general coverage.”42

EPA’s interpretation 42 U.S.C. § 7545(o)(9)(B) is

unreasonable.43 The statute’s text cannot plausibly be

Disproportionate, OXFORD ENGLISH DICTIONARY, tinyurl.

com/32spx2ve.

See, e.g., 26 U.S.C. § 302(b)(2)(C) (delineating in detail when a

“distribution is substantially disproportionate”).

SCALIA & GARNER, supra note 38, at 101.

Chevron deference applies “only if ‘the agency’s [interpretation] is

based on a permissible construction of the statute.’” Huntington

Ingalls, Inc. v. Dir., Off. Of Workers’ Comp. Programs, U.S. Dep’t of

Lab., 70 F.4th 245, 252 (5th Cir. 2023) (quoting Mexican Gulf Fishing

Co. v. U.S. Dep’t of Commerce, 60 F.4th 956, 963 (5th Cir. 2023)).

27a

read to say that RFS compliance costs must be the sole

cause of disproportionate economic hardship.

2. Petitioners’ other reasons that the Denial

Actions are contrary to law.

Petitioners urge that the Denial Actions are contrary to

law for three other reasons. On those claims, we agree

with EPA.

First, petitioners assert the EPA’s interpretation is

unlawful because it was adopted on the agency’s

mistaken belief that it was bound by the alternate

holdings in RFA—a now-vacated Tenth Circuit case

interpreting the relevant statutory provisions. See RFA

II, 854 F. App’x at 984. But the agency record shows that

the EPA adopted RFA’s reasoning because it

“determined that the RFA decision provides the best

reading of the statutory provisions of CAA section

211(o)(9).” That is an independent basis for EPA’s

interpretation, i.e., the agency did not base its interpretation on the idea it was bound by RFA’s alternate

holdings. Thus, EPA’s interpretation did not violate the

Chenery mistake-of-law doctrine. Cf. Teva Pharm.

U.S.A. Inc. v. FDA, 441 F.3d 1, 5 (D.C. Cir. 2006).

Second, petitioners allege EPA impermissibly construed the statute’s requirement that it consult with

EPA’s interpretation falls outside “the range of meanings that could

be plausibly attributed to the relevant statutory language.” Sw.

Elec. Power Co. v. EPA, 920 F.3d 999, 1024 (5th Cir. 2019) (citation

omitted). Consequently, EPA’s interpretation is not entitled to

Chevron deference.

Furthermore, EPA is not entitled to deference under Skidmore

v. Swift & Co., 323 U.S. 134 (1994), because an unreasonable

interpretation of a statute’s text cannot be persuasive. See Texas,

809 F.3d at 178 n.160 (citing Gonzales v. Oregon, 546 U.S. 243, 256

(2006)).

28a

DOE in deciding an exemption petition. In their view,

EPA’s consultation with DOE had to be “meaningful,”

which requires EPA and DOE to—at a minimum—

consult on “whether EPA’s new RIN pass-through

theory was actually correct and applicable to each small

refinery.” Petitioners claim EPA fell short of that

standard with the Denial Actions because EPA merely

asked DOE to “assume the RIN pass-through theory

was correct and an appropriate basis for denying the

hardship petitions.” EPA counters by claiming that it,

along with DOE, has “discretion to determine the shape

of the procedural consultation requirement.”

We agree with EPA. Congress did not define the term

“consultation” as used in the relevant statutory

provision. See 42 U.S.C. § 7545(o)(9)(B)(ii). It only

stipulates the subjects the agencies must cover. We

decline to graft extra-textual procedural requirements

onto that consultation requirement. See Vt. Yankee

Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435

U.S. 519, 525 (1978).

Third, petitioners attest the Denial Actions are

contrary to law because EPA evaluated multiple petitions

simultaneously. Pointing to § 7545(o)(9)(B)’s use of the

terms “a small refinery” and “a petition,” petitioners

claim that the petitions must be examined one at a time.

True, using “a”—an indefinite article immediately followed

with a singular noun— can refer to “one” of something.

But it can also indicate “that there may be two or more

substantial parts.” Comm’r v. Kelley, 293 F.2d 904, 912

(5th Cir. 1961). Without more, petitioners fail to show

that the relevant statutory provisions require EPA to

consider exemption petitions individually. We are

textualists, not literalists.

We conclude the Denial Actions are contrary to law

only because EPA’s interpretation of the CAA

29a

subparagraph (B) exemption provision is unreasonable.

Petitioners’ other claims fail.

C. Arbitrary and Capricious

Petitioners contend the Denial Actions are arbitrary

and capricious because they rely on the RIN-passthrough

theory, which ran counter to the evidence before the EPA.

The APA requires us to “set aside agency action if the

agency . . . ‘offered an explanation for its decision that

runs counter to the evidence before the agency or is so

implausible that it could not be ascribed to a difference in

view or the product of agency expertise.’” Sw. Elec.

Power Co., 920 F.3d at 1013 (quoting State Farm, 463

U.S. at 43) (cleaned up). That includes agency action that

is “premised on reasoning that fails to account for

relevant factors or evinces a clear error of judgment.”

Univ. of Tex. M.D. Anderson Cancer Ctr., 985 F.3d at 475

(internal quotation marks and citation omitted).

Petitioners take issue with EPA’s RIN-passthrough

economic theory—that is, the agency’s conclusion that

the “market-based design of the RFS program and the

RIN-based compliance system have equalized the cost of

compliance among all market participants.” EPA made

two findings to support its RIN-passthrough theory: The

first is that the price per RIN at any given point in time

is identical for all refineries nationwide. The second is

that market prices for fuel and RIN costs correspond,

which means all refineries could offset 100% of their RIN

costs by raising the price of their fuel products, thereby

passing RIN costs along to their customers. Petitioners

claim those two findings are contrary to the evidence

before EPA.

We agree that EPA’s RIN-passthrough theory is

contrary to the evidence. EPA’s second finding—that all

refineries can completely pass on their RIN costs—is so

30a

implausible as applied to petitioners that it cannot be

ascribed to a difference in view or agency expertise. See

Sw. Elec. Power Co., 920 F.3d at 1013 (quoting State

Farm, 463 U.S. at 43).

Petitioners have demonstrated that the local markets in

which they operate are inefficient. Calumet’s exemption

petition, for example, included market price data from

the local “micro-market” it operated in as compared to

Pasadena, Texas. Pasadena is an example of an economically efficient market—that is, a market in which

EPA’s general conclusion about RIN passthrough holds

true—so the price premium for fuel there matches the

market price of RINs. Not so with Calumet’s micromarket: Prices there are lower than in Pasadena, which

means that fuel is discounted by more than the

corresponding RIN market price.

EPA does not seriously engage with petitioners’

refinery-specific market data. The agency’s two

responses are insufficient:

First, EPA’s conclusions about fuel market efficiency

in general do not disprove petitioners’ local market data.

The agency arrived at that conclusion by “examin[ing]

available market data, as well as studies by outside

parties and numerous public comments.”44 That allowed

EPA, EPA-420-R-22-011, June 2022 Denial of Petitions for RFS

Small Refinery Exemptions (2022), at 32. Petitioners’ attempts to

challenge EPA’s conclusions about these studies are not meritorious.

EPA concluded that these studies “on balance . . . provide more

evidence in support of the conclusion that RIN costs are passed

through than evidence to suggest they do not.” Petitioners interpret

those studies differently from how EPA does. But that’s not enough

for us to conclude that EPA’s conclusion is counter to the evidence.

EPA provided a reasonable explanation as to why it questioned the

studies petitioners identified when the agency pointed to potential

methodological infirmities in each. Petitioners’ reply briefing does not

31a

the agency to conclude that “the RIN costs and RIN

discount were fully passed through to wholesale

purchasers and reflected in the market prices of

petroleum fuel and blended fuel . . . .”45 But EPA’s macrolevel analysis about fuel markets only supports a

conclusion that passthrough can occur in fuel markets

generally it does not rule out the existence of inefficient

fuel markets. And those are the markets in which

petitioners operate.

Second, EPA glosses over petitioners’ refinery-specific

data proving they operate in inefficient local markets

that do not allow for RIN cost pass-through. In response

to Calumet’s data, for example, all EPA said was that the

Pasadena market demonstrated “the RIN price is fully

passed through.” That’s not responsive—both

petitioners and EPA agree Pasadena is efficient. The

problem is that Calumet does not operate in Pasadena.

EPA leaves unrebutted petitioners’ actual contention—

that lower sale prices in the micro-market relative to the

efficient Pasadena market prove that Calumet, like other

explain why EPA’s critiques are irrelevant or incorrect. It cannot be

said that petitioners’ studies made it unreasonable for EPA to reach

a conclusion opposite to that held by petitioners.

Additionally, petitioners cite a GAO report that is not in the

administrative record, U.S. Gov’t Accountability Off., GAO-23104273, Renewable Fuel Standard: Actions Needed to Improve

Decision-Making in the Small Refinery Exemption Program (2022).

Generally, we do not review information that was outside the record

when the agency made its decision. See Luminant Generation Co. v.

EPA, 675 F.3d 917, 925 (5th Cir. 2012). Even though the GAO report

is based on evidence available at the time the agency made its

decision, petitioners cannot—and do not—contend that its

conclusions and findings are based solely on data in the record. We

therefore exclude the GAO report from our analysis.

EPA, EPA-420-R-22-011, June 2022 Denial of Petitions for RFS

Small Refinery Exemptions (2022), at 32.

32a

petitioners, cannot pass through the costs of the RINs it

purchases.

EPA’s second finding is also contrary to the evidence

because petitioners are unable to purchase RINs ratably.

Ratable purchasing is an underlying premise of EPA’s

second finding—a refinery must be able to purchase

RINs at the same time they sell fuel in order for the

market price to correspond with the price of RINs.

That’s not an option available to petitioners. Take TSAR

for example: Given the amount of fuel it produces, it

would need to buy 75,000 RINs per day. But a trade size

of 75,000 RINs is “essentially unheard of” in the RIN

market—most RINs are sold in “a clip of ‘1 million’ at a

time.” Indeed, as TSAR explained to the EPA, it can’t

even find a RIN broker willing to transact at such low

RIN quantities.

EPA brushes that evidence aside. In response to

TSAR, the agency merely restates its prior assertion

that “small refineries can enter into contracts with

various RIN brokers to purchase RINs on a ratable

basis.” The agency supports its assertion by dreaming up

a hypothetical contract—filled with unsubstantiated

speculation about terms such RIN clip sale prices and

broker service fees—that TSAR might be able to

negotiate. But EPA never explains why it believes small

refineries can get contract terms like those.

Unsubstantiated agency speculation does not overcome

petitioners’ proven inability to purchase market-rate

RINs ratably.

IV.

Petitioners complain that EPA acted arbitrarily and

capriciously by failing to provide sufficient guidance as

to the information small refineries should submit as part

33a

of their exemption petitions under the agency’s new

interpretation and RIN passthrough theory.

We disagree with petitioners. As a general matter,

courts cannot compel agencies to act.46 Petitioners do not

allege that the CAA expressly requires EPA to issue

such guidance. An agency’s control over its timetables is

entitled to considerable deference.47 That EPA has yet to

make good on its promise to provide further guidance

does not render the agency’s current (lack of) guidance

arbitrary and capricious.

* * * * *

In summary: The challenged Denial Actions are locally

or regionally applicable. EPA’s motion to transfer venue to

the District of Columbia Circuit is DENIED.

The EPA’s denials of petitioners’ small refinery

exemption petitions are impermissibly retroactive.

Furthermore, the agency’s interpretation of the small

refinery exemption petition provisions of the CAA is

contrary to law and arbitrary and capricious as applied to

petitioners’ exemptions. The petitions for review are

GRANTED. The challenged adjudications are VACATED

and REMANDED for further consideration.

See Norton v. S. Utah Wilderness All., 542 U.S. 55, 64 (2004)

(“[A] claim under § 706(1) can proceed only where a plaintiff asserts

that an agency failed to take a discrete agency action that it is

required to take.” (emphases omitted)).

See CHARLES H. KOCH, JR. & RICHARD MURPHY, 4 ADMIN. L.

& PRAC. § 11:50 (Westlaw).

34a

PATRICK E. HIGGINBOTHAM, Circuit Judge, dissenting:

Congress carefully crafted the Renewable Fuel

Standard (“RFS”) program of the Clean Air Act to nudge

the nation toward clean renewable fuel sources1 and

Congress, in light of “the advantages of expeditious and

authoritative review of all national standards in the D.C.

Circuit,” also implemented a judicial review venue

provision that “priorities efficiency” in the form of 42

U.S.C. § 7607(b)(1).2 Today we impermissibly interfere

with these Congressional mandates by finding that venue

is proper in this Circuit, contrary to the text, structure,

and purpose of § 7607(b)(1). I would find that venue is

only proper in the D.C. Circuit, consistent with the

actions of the four other circuit courts that have

addressed this very case, and dissent.

The majority correctly describes the overall mechanics of

the CAA’s venue provision.3 At step one, we determine

whether a final agency action is “nationally applicable,” as

distinguished from a “locally or regionally applicable”

action. If “nationally applicable,” venue is only proper in

the D.C. Circuit.4 If we find that the challenged action is

“locally or regionally” applicable, we proceed to step two.

At this second step, a “locally or regionally applicable”

action must be reviewed in the D.C. Circuit if (1) it is

Pub. L. No. 110-140, 121 Stat. 1492.

41 Fed. Reg. 56767 (Dec. 30, 1976) (Comments of G. William

Frick).

See generally 42 U.S.C. § 7607(b)(1). “Had Congress wanted to

prioritize efficiency, it could have authorized direct circuit-court

review of all nationally applicable regulations, as it did under the

Clean Air Act.” Nat’l Ass’n of Mfrs. v. Dep’t of Def., 583 U.S. 109,

130 (2018).

42 U.S.C. § 7607(b)(1).

35a

“based on a determination of nationwide scope or effect”

and (2) the Administrator “finds and publishes that such

action is based on such a determination”5 The majority

opinion errs at both steps of the venue analysis,

inappropriately finding that venue is proper in this

Circuit.

According to the majority, “[i]n-circuit precedent”

controls the outcome of the venue analysis at step one.

As we are supposedly obliged to look to the “legal

effect—and not the practical effect—of an agency action” to

determine whether the action is “nationally applicable,”

the Denial Actions must be “locally or regionally

applicable” because they do not “change regulated

entities’ legal obligations” for “all states.” With due

respect, this “legal effect” rule runs counter to the text,

structure, and purpose of the CAA’s venue provision.

As a starting matter, the majority’s description of the

“legal effect” rule as in-circuit precedent relies on Texas

2016 to support its assertion. In Texas 2016, both “parties

agree[d] that the [agency action] under review [was] a

locally or regionally applicable action.”6 Whether the “legal”

or “practical” effect of an agency action determines its

scope was not before the Court.7 As a result, the panel’s

statement in Texas 2016 that “[t]he question of

applicability turns on the legal impact as a whole” is

dicta.

Issues with “precedent” aside, this quest reads words into

the statute that are not there. Section 7607(b)(1) refers

only to agency actions that are “nationally applicable.”

Id.

Texas v. EPA, 829 F.3d 405, 419 (5th Cir. 2016) (“Texas 2016”).

Id.

36a

Nowhere does the text of the statute reference or suggest

that Congress intended to distinguish between “legal” and

“practical” effects. Indeed, this part of the statute does

not refer to “effects” at all. The question is one of

“national applicability.”

Not only does the majority read new words into the

statute, but in fashioning its new “legal effect” theory,

they elide Texas 2016’s reference to the plain meaning of

the term “nationwide” and ignore Texas 2011, which also

defines the key terms of the statute by reference to the

words’ plain meaning.8 Instead, we should look to the

plain meaning of “nationally” to understand what

Congress set out to achieve with § 7607(b)(1).

“Nationally” generally means “throughout the whole

nation.”9 As commonly understood, a reasonable person

would measure “nationally applicable” by looking to “the

location of the persons or enterprises that the action

regulates.”10 Applying this definition, the Denial Actions

are here inescapably nationally applicable: they apply

one consistent statutory interpretation and economic

analysis to thirty-six small refineries, located in eighteen

different states, in the geographical boundaries of eight

See Texas v. EPA., No. 10-60961, 2011 WL 710598, at *4 n.4 (5th

Cir. Feb. 24, 2011) (“Texas 2011”).

See Texas 2016, 829 F.3d at 420 n. 22, defining “nationwide” as

“throughout the whole nation.” “National” means “of or relating to a

nation.” Nation, Merriam Webster Dictionary, https://www.

merriam-webster.com/dictionary/national (last visited Nov. 19,

2023); “Nationally” means “in a national manner; as a nation; with

regard to the nation as a whole.” Nationally, Oxford English

Dictionary,

https://www.oed.com/dictionary/nationally_adv?tab=

meaning_and_use#35387357 (last visited Nov. 19, 2023).

Texas 2011, 2011 WL 710598, at *3 (citing New York v. EPA,

133 F.3d 987, 990 (7th Cir. 1998)). See also JOHN F. MANNING, WHAT

DIVIDES TEXTUALISTS FROM PURPOSIVISTS?, 106 COLUM. L. REV.

70, 76 (2006).

37a

different circuit courts. Without the siren song of the war

against the administrative state, they are, for all intents

and purposes, “applicable” across the “nation.”

By applying the plain meaning of “nationally” along

with this Court’s precedents, venue is proper only in the

D.C. Circuit. In Texas 2011, we found an agency action to

be nationally applicable when it applied to only thirteen

states and seven different circuit courts.11 Here, we have

eighteen states within eight different circuits, all facing

the same new statutory interpretation and economic

analysis. In Texas 2020, this Court found that the agency

action in question was “locally or regionally” applicable

because it only applied to four counties within the State

of Texas,12 and to Sierra Club v. EPA, in which we

similarly found that the agency action was not

“nationally applicable” because it dealt exclusively with

a State Implementation Plan (“SIP”) for the State of

Louisiana.13 Even American Road &Transportation

Builders Association v. EPA, which Texas 2016 cites

favorably to fashion its “legal effects” pronouncement,

dealt with the denial of a SIP exclusively applicable to

the State of California.14 Texas 2020, Sierra Club, and

American Road, when compared to the facts of this case

and when the term “nationally applicable” is given its

common sense reading, require transfer of this case to its

proper venue in the D.C. Circuit.

By the majority’s reading of § 7607(b)(1), if the EPA

denied the petitions of small refineries located in every

single U.S. state and territory in one single agency

Texas 2011, 2011 WL 710598, at *3.

Texas v. EPA, 983 F.3d 826, 833 (5th Cir. 2020) (“Texas 2020”).

Sierra Club v. EPA, 939 F.3d 649 (5th Cir. 2019).

Am. Road & Transp. Builders Ass'n v. EPA, 705 F.3d 453, 455–

56 (D.C. Cir. 2013).

38a

action, this denial action would still not be “nationally

applicable” because it does not have any binding “legal

effect” on future hardship petitions. That result simply

defies common sense.

The proffered new rule also “does violence . . . to the

structure and language of the statute.”15 Section 7607(b)(1)

refers to “final agency action,” and the Administrative

Procedure Act defines “agency action” to include both

rulemakings and adjudications.16 Section 7607(b)(1) then

contemplates scenarios, such as this one, in which an

agency may proceed through an “action,” such as an

adjudication, that is of “national applicability.” But as

adjudications lack “legal effect” beyond the parties

involved, they could never be “nationally applicable” as

defined by the majority. Thus, the majority’s “legal

effects” reading of the statute effectively removes all

“adjudications” from the ambit of § 7607(b)(1), contrary to

the plain text of the statute.

Additionally, this “legal effects” rule offers no meaningful guidance to litigants, particularly problematic

when considering that venue provisions should “draw

bright lines to minimize waste and expense of litigation

over whether a case has been brought in the right

court.”17 Its new rule begs the question: even if we were

to require “legal effects,” why do those effects have to be

“future” legal effects? And why are “present” legal

effects, which in this case, are felt over a large swath of

the country, insufficient? The majority’s now re-written

§ 7607(b)(1) then reads:

Smith v. United States, 508 U.S. 223, 240 (1993).

See 5 U.S.C. 551(13).

41 Fed. Reg. 56767 (Dec. 30, 1976) (Comments of G. William

Frick).

39a

[a] petition for review of . . . any . . . nationally

applicable regulations [with future legal effects]

promulgated, or final action taken [minus

adjudications], by the Administrator under

this chapter may be filed only in the United

States Court of Appeals for the District of

Columbia.

Contrary to the majority’s re-working of the statute, I

would simply conduct the venue analysis by applying the

plain meaning of § 7607(b)(1). The EPA’s Denial Actions,

affecting eighteen states within the geographical

boundaries of eight different circuit courts, are nationally

applicable, as they apply one consistent statutory

interpretation and economic analysis to small refineries

nationwide. This should have been the end of the Court’s

venue analysis, and venue is only proper in the D.C.

Circuit.

Alternatively, I would find that the Denial Actions

should be transferred to the D.C. Circuit at step two of

the venue analysis. They were “based on a determination

of nationwide scope or effect” and the Administrator made

and published the required determination. The plain

meaning of the statute’s key terms and this Circuit’s

precedents command this result.

“Determinations” are “the justifications the agency

gives for the action and they can be found in the agency’s

explanation of its action. They are the reason the agency

takes the action that it does.”18 “[T]he agency should

identify the core determinations in the action.”19 Here,

“[b]ecause the statute speaks of the determinations the

See Texas 2016, 829 F.3d at 419.

Id.

40a

action ‘is based on,’ the relevant determinations are

those that lie at the core of the agency action.”20 Section

7607(b)(1), moreover, requires this Court look to the

“scope” or “effect” of the relevant determination and

determine whether it was “nationwide.” In this context,

“[s]cope” means “[t]he area covered by a given activity

or subject,” and “effect” means “[s]omething brought

about by a cause or agent; result.”21 Altogether, this

Court must then look to the core determinations that the

EPA has identified as the justifications for the Denial

Actions, and it must independently determine if they

have nationwide scope or effect.

The EPA identified the two determinations at the core

of the Denial Actions: (1) its new interpretation of the

CAA’s disproportionate hardship provision; and (2) its

economic analysis of the nationwide market for RINs.

The scope and effect of these core determinations are

nationwide, as they are applicable to all small refineries

no matter the location or market in which they operate.

The majority, however, takes issue with the EPA’s

identification of its core determinations. In their view,

the EPA’s core determinations for the Denial Actions are

“flatly contradicted” by the agency’s position on the

merits. The majority faults the EPA for “consider[ing]

each petition on the merits . . . and individual refinery

information.” But there is no contradiction in the EPA

ensuring that its core determinations hold up when

presented with potentially differing data in the individual petitions. While of course the agency considered

and responded to the small refineries’ comments (else,

the action would have surely been arbitrary and

capricious), there can be multiple determinations that

Id.

Id. at 421 n. 20 & 21.

41a

influence an agency’s actions. What the majority ignores

is that for venue purposes, what matters are the EPA’s

core determinations. In the case of the Denial Actions,

these determinations were of nationwide scope and

effect. And because the Administrator made and

published the required determination, venue is only

proper in the D.C. Circuit.

II.

There remains the matter of what our sister circuits

have already done with this exact same case. The Third,

Seventh, and Tenth Circuits transferred the relevant

petitions to the D.C. Circuit, and the Ninth Circuit

dismissed the petitions. No Circuit has kept the case for

itself—until today.

Congress designed § 7607(b)(1) to “prioritize efficiency,”22

and with the majority’s decision today, this Court has

impermissibly interfered with Congress’s stated preference for “centralized review of national issues” over

“piecemeal review . . . in the regional circuits.”23 To these

eyes, its decision looks away from “general congressional

direction in an attempt to do justice,” an unfortunate

overreach this day by my colleagues.24 I must

respectfully dissent.

Nat’l Ass’n of Mfrs., 583 U.S. at 130.

Texas 2011, 2011 WL 710598, at *4.

41 Fed. Reg. 56767 (Dec. 30, 1976) (Comments of G. William

Frick).

43a

APPENDIX B

June 2022 Denial of Petitions for RFS Small Refinery

Exemptions

United States Environmental Protection Agency

Table of Contents

EXECUTIVE SUMMARY ............................................... 1

I. Final Adjudication Summary and Process ................ 5

II. Background..................................................................... 8

A. RFS Program ........................................................... 8

B. Renewable Identification Numbers

(RINs)........................................................................ 9

C. RFS Compliance and RIN Market

Dynamics ................................................................. 10

D. History of SREs ..................................................... 12

III. EPA’s Approach to Determining DEH When

Evaluating SRE Petitions ....................................... 17

IV. EPA Evaluation ......................................................... 20

A. Eligibility to Petition for Extension of a

Small Refinery Exemption................................... 20

1. Definition of Small Refinery .......................... 20

2. Requirement to Have Received Initial

Blanket Statutory Exemption ....................... 21

3. Changed Approach to Eligibility .................. 21

4. Alternative Eligibility Determinations

for Two Refineries ........................................... 23

B. Compliance with SRE Petition

Requirements ......................................................... 24

44a

C. DOE Consultation and EPA

Consideration of the DOE Study ........................ 24

D. Hardship Must Be Caused by RFS

Compliance.............................................................. 27

1. The CAA Requires That DEH Must

Be Caused by RFS Compliance..................... 27

a. The Text of the Statute Provides

That DEH Must Be Caused by

Compliance with the RFS Program........ 27

b. The Purpose of the RFS Program

Supports a Requirement That

DEH Must Be Caused by

Compliance with the RFS Program........ 28

2. DEH and RIN Cost Passthrough ................. 30

a. Assessments of RIN Market

Dynamics ..................................................... 32

b. Economic Principles of RIN Cost

Passthrough ................................................ 33

c. Impacts on Different Market

Participants ................................................ 41

d. EPA Evaluation of Available

Market Data ............................................... 49

3. EPA Responses to Small Refinery

Arguments for Exemption ............................. 59

Alternative Compliance Demonstration

Approach and Proposed Alternative RIN

Retirement Schedule................................................. 71

VI. Denial of Petitions and Judicial Review ................. 72

45a

EXECUTIVE SUMMARY

Small Refinery Exemption (SRE) Denial and Related

Compliance Actions

In this action, the Environmental Protection Agency

(EPA or “the Agency”) is denying 69 petitions from 33

small refinery petitioners seeking exemption from their

Renewable Fuel Standard (RFS) obligations for the

2016–2021 compliance years. This final action

(hereinafter the “SRE Denial”) is a single action, but it is

comprised of the adjudications of 69 SRE petitions.

On December 7, 2021, EPA proposed to deny 65

pending SRE petitions (the “Proposed Denial”) based on

a proposed revision of EPA’s interpretation of Clean Air

Act (“CAA” or “the Act”) SRE provisions. On April 7,

2022, EPA acted on 36 SRE petitions that were

remanded to the Agency by the U.S. Court of Appeals

for the D.C. Circuit on December 8, 2021.1

In this action, EPA is acting on 69 SRE petitions that

remain pending after the April 2022 SRE Denial. EPA

has received and considered all the comments received

on the Proposed Denial and addresses those comments in

this action.

In separate actions, EPA is providing: (1) A supplement to the alternative compliance demonstration issued

“April 2022 Denial of Petitions for RFS Small Refinery

Exemptions,” EPA-420-R-22-006, April 2022 (hereinafter the “April

2022 SRE Denial”). On January 3, 2022, EPA provided notice that

the 36 remanded 2018 SRE petitions were again before the Agency,

and that EPA was expanding the Proposed Denial to include them

and requesting comment on that approach. Memorandum: Scope of

Action and Notification,” EPA-HQ-OAR-2021-0566-0027.

46a

on April 7, 2022, for 31 small refineries whose SRE

petitions EPA initially granted for the 2016–2018

compliance years, but now, on remand, were denied in

this action or the April 2022 SRE Denial; and (2) A notice

of proposed rulemaking for an alternative RIN

retirement schedule for all small refineries for their

renewable volume obligations (RVOs or “RFS obligations”) for the 2020 compliance year.3 Under the June

2022 Compliance Action, EPA has determined that, if it

were to require these 31 small refineries to comply with

their newly created 2016–2018 RFS obligations4 under

the existing compliance scheme, the impact on the RFS

program as a whole, in addition to the impacts on the

individual small refineries, would be unacceptable due to

the unavailability of sufficient RINs to satisfy these new

obligations. Thus, that concurrent action provides an

alternate compliance approach by which these small

refineries can demonstrate compliance with their 2016–

2018 RFS obligations that they otherwise would not be

able to meet.

The Alternative RIN Retirement Schedule NPRM

would provide small refineries with more time to comply

“June 2022 Alternative RFS Compliance Demonstration

Approach for Certain Small Refineries,” EPA-420-R-22-012, June

2022 (hereinafter the “June 2022 Compliance Action”).

“Renewable Fuel Standard (RFS) Program: Alternative RIN

Retirement Schedule for Small Refineries Notice of Proposed

Rulemaking” (hereinafter the “Alternative RIN Retirement Schedule

NPRM”). A pre-publication version of this proposed rule is available

https://www.epa.gov/renewable-fuel-standard-program/pr

oposed-alternative-rin-retirement-schedule-small-refineries.

small refinery’s 2020 RVOs would also include any RIN deficit

carried forward from the 2019 compliance year.

The 2018 RFS obligations were newly created by the April 2022

SRE Denial. The 2016 and 2017 RFS obligations are newly created

by this action.

47a

with their 2020 RFS obligations by creating quarterly

RIN retirement deadlines by which a small refinery

must comply with certain percentages of its 2020 RFS

obligations; it would also expand the range of RIN

vintages that a small refinery could use to demonstrate

compliance with its 2020 obligations. EPA is proposing

this action because small refineries need more flexibility

to comply with their RFS obligations given EPA’s

reasonable delay in deciding SRE petitions and setting

the associated RFS compliance deadlines. This proposed

action initiates a rulemaking that is separate from EPA’s

June 2022 SRE Denial and for which EPA is establishing a

public comment period.

Grounds for the SRE Denial

The Proposed Denial

EPA issued the Proposed Denial in response to the

conclusion of litigation that addressed historical inconsistencies in EPA’s treatment of SREs since 2011. First,

in Renewable Fuels Association v. EPA, the U.S. Court

of Appeals for the Tenth Circuit Court found that EPA

had exceeded its statutory authority by granting

extensions of the SREs held by certain small refineries

and remanded those decisions to the Agency for

reconsideration. The court held that: (1) In granting

exemptions based on economic factors unrelated to

compliance with the RFS program, EPA had exceeded

its statutory authority to exempt small refineries from

their RFS obligations “for the reason of disproportionate

economic hardship [DEH]” because the statute

authorizes EPA to extend exemptions only where RFS

compliance costs are the cause of the small refinery’s

hardship; (2) EPA had acted arbitrarily and capriciously

in granting exemptions without explaining whether and

how the subject SRE grants were consistent with EPA’s

firmly established position that all parties subject to

48a

RFS obligations recover their compliance costs through

a feature of the market EPA identified as “RIN cost

passthrough;” and (3) In order to be eligible to petition

for extension of an SRE, a small refinery needed a

continuous, uninterrupted exemption history beginning

with the CAA section 211(o)(9) blanket statutory

exemption period for small refineries.

Following the Tenth Circuit’s RFA opinion, the small

refinery intervenors in that case appealed only the

holding that, to be eligible for exemption, a small refinery

needed a continuous, uninterrupted exemption history. In

HollyFrontier Cheyenne Refining, LLC, et al. v.

Renewable Fuels Association, et al., the Supreme Court

held that the term “extension” as used in CAA section

211(o)(9)(B) does not include a continuity requirement

and reversed the Tenth Circuit opinion on that issue.

After evaluating this jurisprudence, refinery-specific

materials submitted by many small refineries to support

of their SRE petitions in the wake of the Supreme

Court’s ruling, years of experience and data collected by

implementing the RFS program and SRE provisions,

and our exhaustive analysis of how the RFS credit

market functions, EPA determined that the Tenth

Circuit provided the best reading of the SRE statutory

provisions and issued the Proposed Denial, based on

EPA’s conclusion that small refineries cannot

demonstrate they suffer DEH caused by the cost of

compliance with the RFS program. EPA proposed the

following findings: (1) Regardless of the mechanism by

which any obligated party—including small refineries—

comply with their RFS obligations, RFS compliance

costs are the same for all obligated parties and thus no

party bears RFS compliance costs that are

disproportionate relative to others’ costs; (2) Any

obligated party—including small refineries—recovers

49a

their compliance costs through the market price they

receive when they sell their fuel products and thus do not

bear a hardship created by compliance with the RFS

program; and (3) With no disproportionality and no

economic hardship, there can be no DEH pursuant to the

statute. EPA therefore proposed to revise its CAA

statutory interpretation to extend SREs only to small

refineries whose claimed DEH is caused by the cost of

complying with the RFS program and not by other

factors and to deny 65 pending SRE petitions on this

basis. Further, EPA proposed to deny SRE petitions

submitted by any small refinery that had not received

the initial blanket statutory exemption under CAA

section 211(o)(9).

The Notice-and-Comment Process

Recognizing the complexity of the Agency’s past

implementation of the SRE provisions, recent litigation,

and the significance and potential ramifications of the

proposed changes in SRE interpretations to refineries

and the entire RFS program, EPA requested comment

on the Proposed Denial to ensure that RFS stakeholders

and the public had an opportunity to provide input on the

proposed shift in interpretation of the SRE statutory

provisions, as well as to submit refinery-specific

information related to the proposed SRE petition

denials. EPA chose to undertake a notice-and-comment

process to provide maximum transparency, as we

proposed to address past inconsistencies in SRE

implementation and new case law providing a better read

of the SRE statutory provisions.

As set forth herein, EPA received numerous individual comments from various RFS stakeholders, most of

which are available in the public docket for this action;

however, some of the comments from petitioning small

refineries provided unique, refinery-specific information

50a

submitted under claims of confidentiality that are,

therefore, being addressed in appendices that will be

provided only to the individual commenters. EPA has

carefully considered all comments received and provides

responses to those comments in Appendix B and in

confidential, refinery-specific appendices to this action.

While this final action adjudicates 69 SRE petitions for

the 2016–2021 compliance years, many small refineries’

comments raised arguments and provided data

applicable to more than one of their pending SRE

petitions. EPA considered and responded to all

information relevant to the remanded 2018 SRE

petitions in the April 2022 SRE Denial. In this action,

EPA considers and responds to comments relating to 69

SRE petitions for the 2016– 2021 compliance years.

First, EPA received similar comments from most

small refineries and their trade associations challenging

the validity of the Proposed Denial’s approach to DEH.

Many submitted refinery-specific information about

their operations, finances, and the fuels markets in which

they participate to support their arguments that they

should receive SREs. Because the same arguments were

repeated by most, if not all, SRE petitioners, EPA

presents and responds to them as a group in Section

IV.D.3. These comments articulate the following general

themes:

(a) Small refineries face unique challenges that

prevent them from achieving RIN cost

passthrough and EPA must consider their

specific circumstances;

(b) EPA’s Point of Obligation denial is not relevant

to SRE policy because it did not address their

situations and does not apply to them;

51a

inapplicable;

(d) Revenue from RIN sales allows large retailers

to undercut small refineries;

(e) Large integrated refiners set prices in fuels

markets, undercutting small refineries on price

because of their market position and because

large integrated refiners have lower or no RIN

costs;

(f)

EPA is incorrect about there being parity

between the cost of obtaining a RIN through

blending and the cost of buying a RIN on the

market;

(g) Single-site refineries are disadvantaged

relative to large integrated refiners because

they only have access to a limited market; and

(h) Small refineries that produce primarily diesel

fuel are at a disadvantage because they cannot

blend as much renewable fuel into their product

as can refineries that produce gasoline.

After addressing the universal comments described

above, EPA presents and responds to unique comments

received from a range of RFS stakeholders—including

refineries and their trade organizations, biofuel

producers and their trade organizations, and a number of

local, state, and federal officials—in Appendix B and,

where applicable, in confidential, refinery-specific

appendices to this action. The comments addressed in

Appendix B focus on EPA’s notice-and-comment process

for proposing and finalizing the SRE Denial, EPA’s legal

authority to take this final action, and how the SRE

Denial may affect the RFS program as a whole. The

comments addressed in the refinery-specific appendices

52a

focus on information submitted by many refineries under

claims of confidentiality regarding their specific

operations and finances, and studies commissioned based

on such confidential information to evaluate the RFS

economic findings described in the Proposed Denial.

After careful consideration of all the comments

received as well as all other available information

regarding the RFS program, the operation of the RIN

market, and the validity of our DEH analysis, EPA is

here adopting and applying its proposed SRE statutory

interpretations and denying 69 pending SRE petitions.

I. Final Adjudication Summary and Process

This section summarizes EPA’s final action and the

public process the Agency has followed to reach its

decision. EPA has determined that any small refinery

seeking an exemption from its RFS obligations must:

(1) Demonstrate that any DEH it claims to experience is

caused by compliance with the RFS program; and

(2) Reconcile any such showing with RIN cost passthrough.5 EPA has also changed its criteria for assessing

a refinery’s eligibility to receive an exemption from its RFS

obligations; we now require a small refinery to have

received the original statutory exemption under CAA

section 211(o)(9)(A)(i) in order to be eligible to petition

for an extension of that exemption, though, consistent

with the Supreme Court’s holding in HollyFrontier,6 a

small refinery need not have received continuous

exemptions since the original statutory exemption.7

This approach is described in more detail in Section III. The

RIN cost passthrough phenomenon is explained in Section IV.D.2.

See HollyFrontier Cheyenne Refining, LLC, et al. v. Renewable

Fuels Ass’n, et al., 114 S.Ct. 2172, 2181 (2021) (HollyFrontier).

Refinery eligibility is explained in Section IV.A.

53a

On December 7, 2021, EPA issued the Proposed Denial.

On December 8, 2021, the D.C. Circuit remanded 36 2018

SRE petitions.8 On January 3, 2022, EPA provided notice

that it was considering deciding the 36 SRE petitions

under the Proposed Denial and requested comment on that

approach. On April 7, 2022, EPA denied the 36 2018 SRE

petitions consistent with the Proposed Denial. After

analyzing the petitions, applying the new approach to

DEH, and for the reasons described in this document,

EPA is denying 69 pending SRE petitions for the 2016–

2021 compliance years. EPA received numerous

comments on the process utilized in reaching this final

action, and we have responded to those comments in

Appendix B.

In addition to denying 69 pending SRE petitions on

DEH grounds, EPA is also finding that there are

alternative grounds to deny four pending SRE petitions

from two refineries, each for the 2019 and 2020

compliance years, because they did not receive the

original statutory blanket exemption under CAA section

211(o)(9)(A)(i).9 Additionally, EPA is finding that one of

the two refineries is ineligible to petition for an

exemption for the 2019 and 2020 compliance years

because it exceeded the crude oil throughput limit of

75,000 barrels per day in 2019, thereby making the

refinery ineligible for an exemption in those two years

See, e.g., Order, Doc. No. 1925942, Dec. 8, 2021, Sinclair Wyo.

Refining Co. v. EPA, No. 19-1196 (consol. with 19-1197) (D.C. Cir.).

While we determine in this action that these two refineries are

ineligible to petition for SREs, this determination is made in the

alternative, because EPA has denied these four petitions as part of

the 69 pending SRE petitions denied by this action on DEH grounds

for the reasons described herein. Therefore, even if the refineries

are later deemed eligible to petition for exemptions, their four SRE

petitions pending before EPA are denied for substantive reasons.

54a

pursuant to applicable EPA regulations.10 EPA received

comments from these refineries under claims of

confidentiality and has responded to those comments in

confidential, refinery-specific appendices. EPA has also

responded to generalized comments on eligibility to

petition for an SRE in Appendix B.

This final agency action therefore adjudicates 69

pending SRE petitions by: (1) Clearly articulating EPA’s

current interpretation of its statutory authority to grant

SREs; (2) Presenting our analysis of all available data on

RFS costs and market dynamics, including our response

to comments received on the Proposed Denial; and (3)

Denying 69 pending SRE petitions based on the current

statutory interpretation and analysis described herein in

a single action. EPA’s final action on the pending SRE

petitions is based on the legal and factual analysis

presented herein, after consulting with the Department

of Energy (DOE), and considering the 2011 DOE small

refinery study, “other economic factors,” and public

comments submitted in response to our request for

comment on the Proposed Denial.11

While this single final action adjudicates 69 SRE

petitions, we intend for this adjudication to be severable in

these articulated ways. First, we intend for the two

distinct statutory interpretations we adopt in this action

to be severable. If a reviewing court invalidates our

interpretation that DEH must be caused by compliance

with the RFS program, our interpretation on eligibility

to petition for and receive an exemption would still stand.

Second, it is our intent that the separate action we are

40 CFR 80.1401 and 80.1441(e)(2)(iii).

EPA has established a docket for this action under Docket ID

No. EPA-HQ-OAR-2021-0566. Supporting materials for this action and

comments received on the Proposed Denial can be found there.

55a

taking to provide an alternative compliance

demonstration be severable from the decision to deny the

SRE petitions. While the need for the alternative

compliance demonstration flows from this adjudication,

each action is separate and independent from the other.

This adjudication, consistent with the statute and

applicable case law, denies 69 SRE petitions. The

separate June 2022 Compliance Action providing

compliance flexibility determines how the identified 31

small refineries will demonstrate compliance with their

newly created 2016–2018 obligations. As these actions

utilize differing authorities and operate independently,

we intend for them to be severable.

This document provides a sequential explanation of

EPA’s current approach to SRE petition evaluation and

the data we analyzed to support this approach. It begins,

in Section II, by providing background on the RFS

program, compliance with the RFS program, and the

SRE provisions of that program. Section II also provides

a brief history of EPA’s approach to evaluating SRE

petitions and judicial review of EPA’s past SRE

decisions. Section III presents the statutory requirements for EPA’s evaluation of SRE petitions and EPA’s

new approach to SRE evaluation. Section IV provides

EPA’s analysis of the SRE eligibility and petition

requirements and statutory construction of the CAA’s

SRE provisions. It also presents a detailed explanation

of RFS market economics including the costs of RFS

compliance on obligated parties, and the implications of

In evaluating SRE petitions, CAA section 211(o)(9)(B)(ii)

requires the Administrator, in consultation with the Secretary of

Energy, to consider the findings of the DOE study performed under

CAA section 211(o)(9)(A)(ii)(I) and other economic factors. A

memorandum summarizing the consultation between EPA and DOE

can be found in the docket for this action.

56a

those costs on DEH. Section IV also includes a

description of how EPA satisfied the statutory

requirements for this action, then summarizes and

responds to the arguments advanced by the petitioning

small refineries, and others that commented on the

Proposed Denial, as to how and why RFS compliance

could cause DEH.13 Section V describes the separate,

concurrent actions EPA is taking to provide certain small

refineries with an alternative com-pliance demonstration

for their 2016–2018 RFS obligations and all small

refineries with an alternative RIN retirement schedule

for their 2020 RFS obligations. Lastly, Section VI

provides EPA’s conclusion to deny 69 SRE petitions

based on all the information presented herein and

information regarding judicial review of this final action.

II. Background

This section describes the RFS program in general,

including the SRE provisions of the program, as well as

how EPA has implemented the SRE provisions in the

past.

A. RFS Program

In 2005 and 2007, Congress amended the CAA to

establish the RFS program.14 Congress enacted this

program to “move the United States toward greater

energy independence and security” and to “increase the

A summary of the substantive comments EPA received that

were not submitted under claims of confidentiality, and EPA’s

responses to those comments, can be found in Appendix B. EPA has

responded to confidential information submitted by the petitioning

small refineries in their comments through confidential, refineryspecific appendices to this action.

See Energy Policy Act of 2005 (EPAct), Pub. L. No. 109-58, 119

Stat. 594; Energy Independence and Security Act of 2007 (EISA),

Pub. L. No. 110-140, 121 Stat. 1492

57a

production of clean renewable fuels,” among other

purposes.15 The statute specifies increasing annual

“applicable volumes” for four categories of renewable

fuel for the transportation sector: total renewable fuel,

advanced biofuel, cellulosic biofuel, and biomass-based

diesel (BBD).16 The specified applicable volumes for

renewable fuel, advanced biofuel, and cellulosic biofuel

are prescribed for each year through 2022, and for BBD

through 2012; EPA must determine the applicable volumes

for subsequent years.17

Congress directed EPA to establish a compliance

program and annual percentage standards to ensure that

the applicable volumes are used each year.18 To calculate

these percentage standards, EPA divides the applicable

volume for each type of renewable fuel established in the

CAA or determined by EPA19 by the Energy

Information Administration’s estimate of the national

volume of transportation fuel that will be introduced into

commerce in that year.20 For example, if EPA set the

percentage standard for total renewable fuel at 10%, an

obligated party that produced 1,000,000 gallons of gasoline

one year would need to ensure that 100,000 gallons of

renewable fuel was introduced into the market that year.

Congress authorized EPA to place the obligation to

satisfy the applicable percentage standards on “refineries,

blenders, and importers, as appropriate.”21 By regulation,

121 Stat. 1492.

CAA section 211(o)(2)(B)(i)(I)-(IV).

Id.

Id.; CAA section 211(o)(2)(A)(i), (iii), and (3)(B)(i).

CAA section 211(o)(2)(B), (7)(A), and (7)(D)-(F).

CAA section 211(o)(3)(A).

CAA section 211(o)(3)(B)(ii)(I).

58a

EPA determined that refineries and importers of

gasoline and diesel fuel must fulfill the requirements of

the RFS program.22 These “obligated parties” apply the

percentage standards to their own annual production (or

importation) of gasoline and diesel fuel to calculate their

individual renewable volume obligation (RVO or “RFS

obligation”) for each category of renewable fuel. Thus,

the RFS standards place the same obligation on all

producers and importers of gasoline and diesel fuel in

proportion to their production (or importation) volume.

B. Renewable Identification Numbers (RINs)

The CAA requires EPA to establish a credit trading

program allowing obligated parties that acquire excess

credits in one year to apply credits toward compliance in

a subsequent year or to sell the credits to another

obligated party for use in its own compliance.23 In

conjunction with EPA’s authority under CAA section

211(o)(2)(B) to put in place implementing regulations for

the RFS program, and in compliance with CAA section

211(o)(5), EPA designed a flexible and comprehensive

system of tradable credits (Renewable Identification

Numbers or RINs). Section 211(o)(5) required only that

EPA allow for the generation and trading of credits for

obligated parties that refine, blend, or import excess

renewable fuel. The RIN system fulfills that statutory

provision, and also creates a fungible system of credit

trading by not just obligated parties but also renewable

fuel producers and others, creating an open, liquid

40 CFR 80.1406. For simplicity this document focuses on

refiners; however, the same concepts of RIN costs, RIN cost

passthrough, and RIN discount for blended fuel also apply to

importers.

CAA section 211(o)(5)(A)-(C).

59a

market for RINs to allow obligated parties to comply

with their RFS obligations.

Under the RIN system, producers and importers of

renewable fuel generate RINs for each gallon of

renewable fuel they import or produce for use in the

United States.24 RINs are “assigned” to batches of

renewable fuel by the producers and importers of

renewable fuel.25 RINs may be “separated” from those

batches by a party that blends the renewable fuel into

gasoline or fossil-based diesel fuel to produce a transportation fuel, heating oil, or jet fuel.26 Once separated,

RINs may be kept for compliance or sold.27 Obligated

parties may use a RIN to demonstrate compliance for the

compliance year in which the RIN is generated, or for the

following compliance year (for up to 20% of an obligated

party’s obligations).28 An obligated party may not use a

RIN for any subsequent compliance years because the

RIN has expired, is now invalid, and therefore not useable

for compliance purposes.29 Obligated parties meet their

RFS obligations by accumulating RINs and “retiring”

them in an annual compliance demonstration.30 The

statute and RFS regulations also provide that, in lieu of

retiring the requisite number of RINs to show

compliance for a particular compliance year, an obligated

party may choose to carry forward a RIN deficit into the

40 CFR 80.1426(a).

40 CFR 80.1426(e).

40 CFR 80.1429(b).

40 CFR 80.1425–29.

40 CFR 80.1427(a)(6), 80.1428(c), and 80.1431(a).

40 CFR 80.1427(a).

60a

following compliance year under certain conditions.31 An

obligated party may carry forward a RIN deficit equal to

its full or partial RFS obligations in a given compliance

year, but must satisfy the deficit in full the subsequent

compliance year, along with the obligations for that

subsequent year in full (i.e., the obligated party cannot

carry forward the subsequent compliance year’s

obligations as a deficit).

The price of the RIN is expected to reflect the

marginal difference between the supply price for the

renewable fuel and the demand price for the renewable

fuel, which is the price the market is willing to pay for

the renewable fuel as a transportation fuel.32 In other

words, if it costs more to produce the renewable fuel than

consumers are willing to pay for it, the RIN price would

be expected to match that cost difference so that, in the

end, the fuel price for consumers is the same.33 The price

of the RIN, therefore, provides the “discount” on the

renewable fuel necessary for the market to consume the

renewable fuel. This dynamic functions to incentivize

blending and use of the renewable fuel up to the

mandated volume even if the market demand price for

the renewable fuel would not cover the cost of its

production. In this way, the RIN price facilitates greater

use of renewable fuel as the RFS program was designed

CAA section 211(o)(5)(D), 40 CFR 80.1427(b).

32 32

See “A Preliminary Assessment of RIN Market Dynamics,

RIN Prices, and Their Effect,” Dallas Burkholder, Office of

Transportation and Air Quality, US EPA, May 14, 2015, pg. 7

(hereinafter the “Burkholder memo”).

Throughout this document we use the term “consumer” to refer

to wholesale and retail consumers alike as RIN prices pass through

both levels of the market. Where we are specifically describing the

sale from terminals or refinery racks we refer to the purchaser of the

fuel at wholesale as the “wholesale purchaser.”

61a

to do. Throughout this document we refer to the cost

difference described here as the “RIN discount.”

The design of the RIN trading system enabled parties

that were already producing and blending renewable fuel

to continue to do so. They could then sell excess RINs to

obligated parties that lacked blending capability. This open

trading market for RINs provides three main benefits.

First, it allows all obligated parties, regardless of size or

situation, equal ability to comply with their RFS

obligations immediately without having to invest capital or

resources. They can contract with others already

providing the services and/or go into the open market to

acquire RINs. Second, this system averts the need for

each individual obligated party to purchase and blend

renewable fuel into its own gasoline and diesel fuel.34 Thus,

the program was designed to “preserve[] existing business

practices for the production, distribution, and use of both

[petroleum] and renewable fuel.”35 Third, it levels the

playing field for the cost of compliance, with all obligated

parties having access to the RINs needed for compliance

at the same cost, regardless of whether they acquire the

needed RINs by purchasing them on the open market or

by blending renewable fuel themselves. The RFS

program, through the RIN system, was designed to

avoid creating DEH based on whether compliance is

achieved through blending of renewable fuel or through

purchasing RINs.

Complying with such a requirement would have been difficult,

if not impractical for obligated parties, as different renewable fuels

are blended into gasoline and diesel fuel and pipeline operators

normally do not allow gasoline or diesel fuel containing renewable fuel

to be transported through their pipelines.

“RFS1 Summary and Analysis of Comments,” EPA-420-R-07006 at 1-6, April 2007.

62a

C. RFS Compliance and RIN Market Dynamics

Congress structured the RFS program to impose

proportional requirements on all obligated parties,

including small refineries. The RFS obligations are

established as a percentage of an obligated party’s

production (or importation) of gasoline and diesel fuel;36

therefore, by definition, the obligation is proportional to

the quantity of gasoline and diesel fuel that a party

produces (or imports) each year.37 Obligated parties must

acquire RINs to meet their RFS obligations,38 either

through their own blending of renewable fuel or through

the purchase of RINs from other parties that produce or

blend renewable fuel. Obligated parties must

demonstrate compliance annually by retiring RINs

requisite with their RFS obligations.

See supra, Sections II.A and B.

See CAA section 211(o)(3)(B); 40 CFR 80.1407.

For purposes of the RFS program, transportation fuel is

defined as “fuel for use in motor vehicles, motor vehicle engines,

nonroad vehicles, or nonroad engines (except fuel for use in oceangoing vessels).” 40 CFR 80.1401. The regulations at 40 CFR 80.1406

establish that “[a]n obligated party is any refiner that produces

gasoline or diesel fuel within the 48 contiguous states or Hawaii, or

any importer that imports gasoline or diesel fuel into the 48

contiguous states or Hawaii during a compliance period.” The

regulations at 40 CFR 80.1407 establish that, in practice, an RFS

obligation is imposed only on gasoline and ultra-low-sulfur diesel

(ULSD) used in motor vehicles, nonroad engines, locomotives, and

marine engines (historically called MVNRLM diesel fuel). Such

gasoline and diesel fuel only incur an obligation if used in the RFS

“covered location” as defined in 40 CFR 80.1401. Throughout this

document we refer to fuel that incurs an RFS obligation (i.e.,

gasoline and diesel fuel) as “obligated fuel” and fuel that does not

incur an RFS obligation (e.g., heating oil, jet fuel) as “non-obligated

fuel.”

63a

The cost of acquiring RINs is the same for all parties

regardless of whether the RINs needed to comply are

acquired by blending renewable fuel or by procuring

RINs from others.39 This occurs through the phenomena of

RIN discount and RIN cost passthrough, introduced in

the Executive Summary and explained in detail

throughout this document. Parties that blend more

renewable fuel than they need to satisfy their RFS

obligations may show an apparent revenue source from

the sale of those RINs. However, in the competitive fuels

market, parties that sell RINs acquired through

blending renewale fuels must discount the price of their

blended fuel by the value of the RINs associated with the

renewable fuel in the fuel blend.40 If parties that blend

renewable fuel into transportation fuel do not discount

the price of their blended fuel by the market price of the

RIN, then their blended fuel would be priced higher than

the same fuel where the producer has discounted the fuel

by the price of the RIN, and the non-discounted fuel

would never sell. Therefore, in order to price their

products competitively in the fuels market, parties that

blend renewable fuel into transportation fuel must reduce

the price of their blended fuel by the price of the RIN

(RIN discount). Thus, the revenue from the RIN sale is

used to offset the discounted sales price of the blended

fuel and is passed through to consumers through reduced

market prices for the blended fuels. Moreover, the RFS

program imposes the same cost on all parties that

produce (or import) gasoline or diesel fuel nationwide41

See infra, Section IV.D.2.

Burkholder Memo, pg. 24.

In this document, the term “nationwide” refers to the RFS

“covered location,” which the RFS regulations define as “the

contiguous 48 states of the United States, Hawaii, and any state or

64a

because the market price for all gasoline and diesel fuel

increases to reflect this RIN price (RIN cost

passthrough), much as it would increase in response to a

new tax. This relationship between RIN prices and the

market prices for blended fuels was first analyzed by

EPA in 2015.42

In this document we refer to an obligated party’s

ability to recover the cost of the RINs it acquires for

compliance as “RIN cost passthrough,” since obligated

parties are passing these costs through to wholesale

purchasers. We refer to the lower prices received for

blended fuel (i.e., gasoline and diesel fuel blended with

renewable fuel) enabled by the sale of RINs as “RIN

discount,” since the sale of the RIN allows blenders to

discount the price of the blended fuel. We find that all

types of obligated parties have the same cost to acquire

RINs, and that all types of obligated parties recover

these costs when they sell the gasoline and diesel fuel

they produce (or import) at the market price (RIN cost

passthrough). Further, we find that blenders use revenue

from RIN sales to discount the price of blended fuel (RIN

discount). We therefore conclude that compliance with

the RFS program cannot cause DEH for small

refineries.43

territory that has received an approval from the Administrator to

opt-in to the RFS program under §80.1443.” 40 CFR 80.1401.

Burkholder Memo, pg. 22.

The economic theory supporting EPA’s findings on RIN cost

passthrough and the RIN discount, the market data we have

evaluated in reaching these findings, and more detailed explanations

on how various parties in the fuels market are affected by the RFS

program are discussed in Section IV.D.2.

65a

D. History of SREs

A small refinery is defined by the CAA as “a refinery

for which the average aggregate daily crude oil

throughput for a calendar year . . . does not exceed 75,000

barrels.”44 Both the original RFS statutory provisions

enacted pursuant to the Energy Policy Act (EPAct) and

the current text of the statute as amended by the Energy

Independence and Security Act (EISA) provided all

small refineries an initial blanket exemption from their

obligations under the RFS program until calendar year

2011.45 Under EPA’s regulations, small refineries that

were producing either “gasoline” under RFS146 or

“transportation fuel” under RFS247 were required to

notify EPA that they qualified for the temporary

exemption by submitting verification letters stating their

average crude oil throughput rate during the applicable

qualification period.48 Further discussion of EPA’s past and

current interpretation of small refinery eligibility

criteria is provided in Section IV.A.

CAA section 211(o)(1)(K). Thus, a “small refinery” is

determined based on the annual volume of crude oil processed at the

refinery, not on the size of the company that owns the refinery.

Indeed, many “small refineries” are owned by large multi-national

companies.

CAA section 211(o)(9)(A)(i).

“Regulation of Fuels and Fuel Additives: Renewable Fuel

Standard Program,” 72 FR 23900 (May 1, 2007).

40 CFR 80.1441(a)(1).

72 FR 23900, 23924 (May 1, 2007); 40 CFR 80.1441(b). EPA’s

regulations allowed for small refineries that had submitted

verification letters to qualify for the original statutory exemption

under EPAct/RFS1 to also qualify under the SRE provisions in

EISA/RFS2. The small refineries were not required to re-certify

their throughput to maintain eligibility under the RFS2 program.

66a

The CAA includes two additional provisions regarding

extensions of the SRE for the period after the initial

blanket exemption expired:

1) Under the first statutory mechanism, applicable

to 2011 and 2012, if DOE determined, through a

study mandated under the CAA, that compliance

with the RFS requirements would impose DEH

on a small refinery, EPA was required to extend

the small refinery’s exemption by at least two

years.49 In 2009, DOE completed its study and

found that, in a liquid and competitive RIN

market, compliance with the RFS requirements

would not impose DEH on any small refinery.

Subsequently, some members of Congress

directed DOE to revisit the 2009 DOE Small

Refinery Study50 and in so doing to solicit input

from the small refineries themselves.51 In 2011,

DOE completed a second study that used the

small refinery input to develop a set of financial

and operational metrics intended to inform DOE

whether a small refinery was likely to experience

DEH.52 Contrary to the 2009 DOE Study, the 2011

DOE Study did not assume that RFS compliance

costs would be the same for all refineries in a

competitive market, and instead, assumed that

small refineries could face higher compliance costs

CAA section 211(o)(9)(A)(ii)(II).

“EPACT 2005 Section 1501 Small Refineries Exemption

Study,” Office of Policy and Internation Affairs, U.S. Department of

Energy, February 2009 (hereinafter the “2009 DOE Study”).

Senate Report 111-45, at 109 (2009).

“Small Refinery Exemption Study, An Investigation into

Disproportionate Economic Hardship,” Office of Policy and

International Affairs, U.S. Department of Energy, March 2011

(hereinafter the “2011 DOE Study”).

67a

by purchasing RINs when compared to large

integrated refiners that would acquire RINs

through blending. Furthermore, neither study

considered the possibility that refineries would

recover the cost of RINs through higher prices for

their products.53 DOE organized the metrics into

a two-part matrix with sections addressing

“disproportionate impacts” and “viability

impairment.”54 DOE also developed a scoring

protocol for the matrix that required the score in

both sections of the matrix to exceed an

established threshold for DOE to find that DEH

existed at a given small refinery. Using this

regime, the 2011 DOE Study found that DEH

existed at 14 small refineries, but again, assumed

that small refineries bore a higher cost of

compliance in the acquisition of RINs and that no

refineries recovered the RIN compliance costs in

the prices for their products. As required by the

statute, EPA granted those small refineries a twoyear extension of the original exemption (through

2012).

2) The second statutory mechanism provided that

small refineries “may at any time petition the

Administrator for an extension of the exemption

under [section 211(o)(9)(A)] for the reason of

[DEH].”55 The Supreme Court recently opined on

the meaning of “extension” in the context of CAA

section 211(o)(9)(B), overturning one holding in the

Tenth Circuit’s RFA opinion that required a small

refinery to have continuous exemptions to be

See infra, Section IV.D.

2011 DOE Study at 32–36.

CAA section 211(o)(9)(B)(i).

68a

eligible for further exemption extensions.56 When

evaluating SRE petitions, the Act directs the

Administrator, “in consultation with the

Secretary of Energy,” to “consider the findings of

the study under [CAA section 211(o)(9)(A)(ii)(I)]

and other economic factors.”57 After DOE conducted its 2011 DOE Study and EPA granted twoyear extensions to the 14 refineries the study

identified, additional refineries came forward to

EPA to seek exemptions for 2011 and 2012. EPA

shared these new petitions with DOE, which

applied the matrix scoring methodology

developed in the 2011 DOE Study and shared the

scoring results with EPA. EPA chose to satisfy

the statutory requirements for consultation and

consideration of the 2011 DOE Study by using

DOE’s scoring results in its evaluation of each

SRE petition. Consistent with the extensions of

exemptions it granted to the 14 small refineries

through the 2011 DOE Study, EPA then decided

to grant an extension of the exemption to an

additional ten small refineries for 2011, and to nine

for 2012. Since 2013, EPA has shared all incoming

SRE petitions and supplemental information with

DOE.58

See HollyFrontier, 114 S.Ct. at 2181. Consistent with that

decision, small refineries that received the initial blanket exemption

but have not received continuous exemption extensions remain

eligible to petition for future exemptions.

CAA section 211(o)(9)(B)(ii).

DOE continued to make findings to EPA based on its scoring

matrix, which does not assess the degree to which small refineries

recover their RFS compliance costs in higher prices for their refined

products (i.e., it does not consider RIN cost passthrough). See infra,

Section IV.C, for a description of EPA’s current consultation process.

69a

Since 2013, DOE and EPA have changed their

treatment of the scoring matrix several times as

informed by direction from members of Congress, court

decisions, and changing administration policies. For

DOE, the most significant change in approach did not

involve the matrix evaluation or the scoring methodology. Rather, in 2016 DOE modified the finding it provided

to EPA for a given score on the matrix (i.e., as described

below, DOE implemented new direction from

Congressional report language to recommend 50%

exemptions, as opposed to the exclusively 0% or 100%

recommendations in prior years). For EPA, the changes

involved the weight EPA afforded DOE’s findings

relative to the “other economic factors” EPA considered

when evaluating SRE petitions. However, in none of

these years did EPA require small refineries to

demonstrate that they faced RFS compliance costs that

were higher than for other obligated parties (i.e.,

disproportionate), nor did EPA require a demonstration

that the hardship was caused by compliance with the

RFS program, including an explanation for how

compliance costs harmed them in a market characterized

by RIN cost passthrough.

In some prior decisions, DOE and EPA concluded that

DEH existed only when a small refinery experienced

both disproportionate impacts and viability impairment,

as measured by the matrix. In response to concerns that

the two agencies’ threshold for establishing DEH was

too stringent, Consolidated Appropriations Act report

language directed DOE to recommend 50% relief when a

small refinery’s score on either section of the matrix

exceeded the applicable threshold.59 Subsequent Senate

Consolidated Appropriations Act, 2016, Pub. L. No. 114-113

(2015). The Explanatory Statement is available at 161 Cong. Rec.

H9693, H10105 (daily ed. Dec. 17, 2015): “If the Secretary finds that

70a

Report language directed EPA to follow DOE’s

recommendation, and to report to Congress if it did not.60

This direction was not included in the Explanatory

Statements for the 2022 fiscal year appropriations bill.61

The Congressional direction, along with changing

administration policies, prompted EPA to change its

approach to finding DEH at a small refinery. Whereas

EPA had previously exercised discretion in evaluating

“other economic factors” in its analysis of a small

refinery’s petition, EPA changed its approach to instead

rely on DOE’s findings and began granting a full

exemption whenever DOE findings indicated that the

small refinery could receive at least 50% relief, based on

its matrix score.62 Under this approach, EPA exempted

either of these two components exists, the Secretary is directed to

recommend to the EPA Administrator a 50 percent waiver of RFS

requirements for the petitioner.”

Senate Report 114-281, 71 (“When making decisions about

small refinery exemptions under the RFS program, the Agency is

directed to follow DOE’s recommendations which are to be based on

the original 2011 Small Refinery Exemption Study prepared for

Congress and the conference report to division D of the Consolidated

Appropriations Act of 2016. Should the Administrator disagree with a

waiver recommendation from the Secretary of Energy, either to

approve or deny, the Agency shall provide a report to the Committee

on Appropriations and to the Secretary of Energy that explains the

Agency position. Such report shall be provided 10 days prior to issuing

a decision on a waiver petition.”).

Consolidated Appropriations Act, 2022, Pub. L. No. 117-103

(2022). (“The Committees recognize that the Renewable Fuel

Standard (RFS) under Clean Air Act Section 211(o)(9) provides that

EPA may exempt small refineries from compliance with the RFS in

certain circumstances and that a small refinery “may at any time

petition the Administrator for an extension of the exemption . . . for

the reason of disproportionate economic hardship.”)

We note that under this approach, EPA granted full SREs to

some very profitable refineries. A substantial number of small

71a

small refineries from their RFS obligations solely based

on this DOE finding, which was derived from metrics

that assumed some refineries faced higher RFS

compliance costs and that did not account for RIN cost

passthrough. Thus, neither EPA nor DOE required any

demonstration that the DEH a small refinery claimed to

experience was due to the RFS program. Nor did EPA

reconcile this reasoning with EPA’s own finding that the

costs of RINs used for compliance with the RFS program

are the same for all obligated parties and passed through

by all obligated parties to consumers (RIN cost

passthrough).

EPA’s approach to evaluating SRE petitions has been

challenged several times by small refineries and other

parties in different U.S. Courts of Appeals, as well as in

the Supreme Court.63 The approach to evaluating DEH

we apply in this action is informed by the outcome of the

RFA litigation in the Tenth Circuit. Biofuels groups led by

the Renewable Fuels Association challenged EPA’s actions

in granting three individual SREs, and the affected small

refineries intervened on EPA’s behalf.64 The court

vacated and remanded EPA’s actions for three reasons.

First, under the Tenth Circuit’s reading of the CAA, a

refineries that showed no viability impairment on the matrix

received a 50% waiver finding from DOE, based only on the small

refinery’s disproportionate impacts score.

See e.g., Hermes Consol., LLC v. EPA, 787 F.3d 568 (D.C. Cir.

2015); Lion Oil Co. v. EPA, 792 F.3d 978 (8th Cir. 2015); Sinclair

Wyoming Refining Co. v. EPA, 887 F.3d 986 (10th Cir. 2017); ErgonWest Virginia, Inc. v. EPA, 896 F.3d 600 (4th Cir. 2019) (EWV-I);

Ergon-West Virginia, Inc. v. EPA, 980 F.3d 403 (4th Cir. 2020)

(EWV-II); Renewable Fuels Ass’n, et al. v. EPA, 948 F.3d 1206 (10th

Cir. 2020) (RFA); Renewable Fuels Ass’n., et al. v. EPA, No. 19-1220

(D.C. Cir.).

RFA at 1206.

72a

small refinery would be eligible for SRE relief only if it

has received extensions of the initial exemption in every

year since 2010.65 Second, the court found that EPA may

grant relief only when it finds that the small refinery

would suffer DEH caused by compliance with the RFS

program and not due, even in part, to other factors.66

Third, the court held that EPA had acted arbitrarily and

capriciously by failing to explain how granting the

exemptions was consistent with the Agency’s

longstanding findings on RIN cost passthrough.67

After the Tenth Circuit’s RFA opinion, the small

refinery intervenors petitioned the Supreme Court for a

writ of certiorari, appealing only the Tenth Circuit’s first

holding that, in order to be eligible for exemption, a small

refinery needed a continuous, uninterrupted exemption

history.68 The Supreme Court granted the petition for a

writ of certiorari and reviewed the Tenth Circuit’s

holding. EPA—which changed its prior litigation

position—and RFA filed briefs in opposition, arguing

that the Court should uphold the Tenth Circuit’s ruling.

On June 25, 2021, the Supreme Court held that the term

“extension” as used in CAA section 211(o)(9)(B) does not

include a continuity requirement and reversed the Tenth

Circuit opinion only on that issue.69 The Supreme Court

did not review the other two holdings in RFA as those

were not appealed by the small refineries, and on July 29,

2021, the Tenth Circuit issued its mandate in RFA. On

August 19, 2021, EPA filed a motion for clarification

regarding the legal effect of the court’s mandate. The

RFA at 1244–49.

Id. at 1253–54.

Id.

Pet. for Writ of Certiorari at (i), HollyFrontier.

HollyFrontier, 141 S.Ct. at 2183.

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Agency stated that, if the court concluded no further

clarification was needed, EPA would proceed with its

understanding that the alternative holdings of RFA

remain in effect and the SRE decisions at issue in RFA

are remanded to EPA without vacatur.70

On August 26, 2021, the court denied EPA’s motion.71

Accordingly, EPA considers the remaining holdings of

RFA to remain in effect, as explained to the court in its

motion.

After the Supreme Court issued its opinion in the

HollyFrontier case, EPA met with several of the

petitioning small refineries in individual meetings,72

received additional supplemental information from

petitioning small refineries,73 informed all petitioning

small refineries of the opportunity to submit additional

information to EPA for consideration,74 and conducted an

open meeting with the small refineries, inviting them to

participate and provide feedback.75 EPA then issued its

EPA’s Motion for Clarification of the Court’s July 29, 2021

Mandate at 2, RFA, 948 F.3d 1206 (10th Cir. August 19, 2021).

Order, id. (10th Cir. August 26, 2021).

See “Memorandum on EPA Meetings with Individual Small

Refinery Petitioners Between June 25, 2021, and December 7, 2021,”

available in the docket for this action.

These supplemental materials were submitted under claims of

confidentiality and are, therefore, not included in the public record.

Where the supplemental information was not confidential or such

that EPA could aggregate and summarize it, we have done so and

provided this information and our responses to it in Appendix B. We

have also responded to confidential information through

confidential, refinery-specific appendices to this action.

Email from Karen Nelson, EPA, sent bcc to all SRE petitioners

(August 17, 2021) (email on record with EPA).

Email from Byron Bunker, EPA, with meeting invite sent bcc

to all SRE petitioners (August 16, 2021) (email on record with EPA).

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Proposed Denial on December 7, 2021, which initiated a

public comment period allowing all interested parties to

inform this final analysis and decision.77 We especially

sought additional information that would support or

refute the proposed finding that small refineries do not

experience DEH caused by compliance with the RFS

program. We also requested information demonstrating

that the cost of compliance with the RFS program is the

same for all obligated parties and is passed on to

consumers.

On December 8, 2021, the U.S. Court of Appeals for

the D.C. Circuit granted EPA’s motion for voluntary

remand without vacatur of EPA’s final action granting or

denying 36 SRE petitions for the 2018 compliance year

and ordered EPA to issue new decisions by April 7, 2022.

EPA had requested remand without vacatur to

reconsider the final action in light of the intervening

judicial opinions and to provide a more robust explanation for any action taken on remand.78 After the court

granted EPA’s motion for remand, EPA notified the 2018

SRE petitioners of the remand via emails to each

individual petitioner, requesting comment on “whether

or not to include those 36 petitions under the Proposed

Denial of other pending SRE petitions or to adjudicate

the petitions separately,” and inviting comment on “any

aspect of this issue.”79 On April 7, 2022, EPA denied the

36 remanded SRE petitions for the 2018 compliance year.

“Proposed RFS Small Refinery Exemption Decision,” EPA420-D-21-001, December 2021 (hereinafter the “Proposed Denial”).

86 FR 70999 (December 7, 2021).

See, e.g., EPA’s Motion for Voluntary Remand Without Vacatur,

Sinclair Wyoming Refining Co. v. EPA, No. 19-1196 (D.C. Cir.

August 25, 2021), pg. 5.

“Memorandum: Scope of Action and Notification,” EPA-HQOAR-2021-0566-0027.

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EPA is now taking final action on 69 SRE petitions

consistent with the April 2022 SRE Denial and the

Proposed Denial.

III. EPA’s Approach to Determining DEH When

Evaluating SRE Petitions

This section describes EPA’s approach to evaluating

SRE petitions based on DEH, as explained in more detail

in the remainder of this document. Section 211(o)(9)(B)(i)

of the CAA authorizes the EPA Administrator to

temporarily exempt small refineries from their RFS

obligations for the reason of DEH. The statute directs

EPA, in consultation with DOE, to consider the DOE

Study and other economic factors in evaluating SRE

petitions. The statute does not define “disproportionate

economic hardship” and identifies no particular “economic

factors” to be considered, giving EPA “substantial

discretion” for purposes of implementing these

exemption provisions.80 EPA, however, must interpret

these provisions in a reasonable manner, consistent with

the purpose of the statutory provisions at issue.

In the past, EPA’s approach to interpreting these

statutory provisions and evaluating SRE petitions was

that a small refinery could receive an exemption from its

RFS obligations by demonstrating it was experiencing

DEH for any reason, including reasons unrelated to RFS

Hermes, 787 F.3d at 575 (“The statute gives no further

instruction and identifies no particular economic factors or metrics

to be considered. That sort of statutory silence about the particular

factors that an agency must consider conveys ‘nothing more than a

refusal to tie the agency’s hands’ (internal citation omitted). As long

as EPA consults with DOE and considers the 2011 Study and ‘other

economic factors,’ EPA retains substantial discretion to decide how

to evaluate hardship petitions.”).

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compliance. In this action, EPA is applying the

approach proposed on December 7, 2021, and adopted in

the April 2022 SRE Denial, requiring the small refinery

to demonstrate that compliance with the RFS program

is the cause of the DEH experienced by the small

refinery. EPA has previously performed analyses and

reviewed academic studies on the RIN market that

verify the passthrough of RFS compliance costs to

wholesale purchasers. However, our prior approach to

evaluating SRE petitions did not require a showing that

DEH was caused by RFS compliance because we

concluded that our consideration of “other economic

factors” extended beyond economic factors addressing

DEH caused by RFS compliance. The Tenth Circuit in

RFA determined that EPA’s prior approach was

contrary to the language of the CAA authorizing

exemptions only due to DEH caused by compliance with

the requirements of the RFS program.82 Under our

current approach, a small refinery must demonstrate a

direct causal relationship between its RFS compliance

costs and the DEH it alleges; assertions regarding other

real but unrelated financial difficulties a small refinery

may be experiencing will not satisfy this requirement.

Additionally, a small refinery must demonstrate how its

specific RFS compliance costs are disproportionate

compared to other refineries’ RFS compliance costs and

are of sufficient magnitude to warrant the exemption.

EPA has weighed several considerations in developing

this new approach and this interpretation is consistent

with the language of the Act, the purpose of the SRE

See supra, Section II.D.

RFA, 948 F.3d at 1253–54.

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provisions, and is the most reasonable approach for

implementing the RFS program.83

Our change in approach is primarily informed by the

RFA opinion, which laid out a rationale for the Tenth

Circuit’s conclusion that the statutory SRE provisions

require DEH to be caused by RFS compliance.84

Additionally, the court in RFA held that EPA had acted

arbitrarily and capriciously when the Agency ignored

the relevant evidence in granting three SREs without

addressing EPA’s long-standing position that RIN costs

are passed through by refineries and ultimately borne by

consumers. After review of the court’s decision, EPA agrees

that these holdings both reflect a better interpretation of

the Act and comport with EPA’s longstanding conclusions

regarding RIN cost passthrough.85

Our change in approach is also supported by DOE’s

definition of DEH in the 2011 DOE Study. Under the

CAA, DOE was directed to “conduct for the Administrator

a study to determine whether compliance with the

requirements of [the RFS] would impose a [DEH] on

small refineries.”86 In the 2011 DOE Study, DOE stated

that DEH “must encompass two broad components: a

high cost of compliance relative to the industry average, and

an effect sufficient to cause a significant impairment of

the refinery operations.”87 In other words, for a small

refinery to demonstrate DEH, it must have

disproportionate RFS compliance costs and actual

economic hardship due to those disproportionate RFS

See infra, Section IV.D.1.

RFA, 948 F.3d at 1253–54.

See infra, Section IV.D.2.

CAA section 211(o)(9)(A)(ii)(I).

2011 DOE Study at 3.

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compliance costs. The approach adopted in the April 2022

SRE Denial, and applied in this action, aligns with DOE’s

definition: EPA’s analysis shows that the costs of

compliance with the RFS program through blending or

buying RINs are the same; therefore, small refineries do

not have disproportionate RFS compliance costs.88

Additionally, the RIN cost passthrough analysis

demonstrates that there is no economic hardship caused by

RFS compliance costs; therefore, no small refinery

experiences DEH as a result of compliance with the RFS

program.89 EPA now has data to demonstrate that the

assumption DOE relied on in the 2011 DOE Study that

RINs generated through blending renewable fuels

would be free to those generating them—whereas RINs

purchased through the market would represent a

disproportionately high costs of compliance on obligated

parties that complied that way—is false.90

EPA also considered “other economic factors” in

evaluating whether a small refinery’s RFS compliance

costs cause DEH. While the CAA does not require EPA

to consider any particular number or types of economic

factors, it does require that DEH be caused by

compliance with the RFS program. Thus, it is clear that

the “other economic factors” EPA may consider when

evaluating SRE petitions must still be related to

determining whether the small refinery’s compliance

with its RFS obligations is what caused its alleged DEH.

EPA may not consider economic factors in its evaluation

of SRE petitions that may show a small refinery is

struggling financially when those struggles are

unrelated to its RFS compliance. By performing the

See infra, Section IV.D.2.

Id.

See infra Section IV.D.2.

79a

analyses described in Section IV.D.2, and in the

responses to comments in Appendix B and in the

confidential, refinery-specific appendices, EPA has

evaluated and considered many “other economic

factors,” including, but not limited to, the dynamics and

characteristics of the fuels and RIN markets, publicly

available price data, confidential financial and other

refinery-specific data submitted by the petitioning small

refineries, and all the data other commenters submitted

on the Proposed Denial. Fundamentally, EPA has

reviewed all the information the small refineries and

other interested parties submitted to ensure the Agency

has considered all the appropriate “other economic

factors” provided in determining that small refineries do

not experience DEH caused by RFS compliance.

Using this new approach, we evaluated the information and data available to us, including data we

received responding to our request for comment, to

assess whether any of the petitioning small refineries

demonstrated DEH. The data confirm that the marketbased design of the RFS program with the RIN system

for compliance has equalized the cost of compliance

among all market participants, making it highly unlikely

any one refinery would face a disproportionate cost of

compliance. We have evaluated an extensive amount of

data and available literature, including academic and

commissioned studies submitted by commenters, and our

analysis shows that the cost of RINs is the same whether

refineries acquire the RINs by blending renewable fuel

or by buying RINs on the open market.91 The data and

available literature also informed our finding that RFS

compliance costs are passed through in the price of

refined products. Therefore, considering all of this

See infra, Section IV.D.2.

80a

information and analysis as more fully explained in later

sections of this document, we find that no small refinery

experiences DEH due to its compliance with the RFS

program.

As described in the April 2022 SRE Denial, when an

agency changes its position, it must “provide a reasoned

explanation for its action” and “display awareness that it

is changing position.”92 In doing so, EPA does not need

to show “that the reasons for the new policy are better

than the reasons for the old one; it suffices that the new

policy is permissible under the statute, that there are

good reasons for it, and that the agency believes it to be

better, which the conscious change of course adequately

indicates.”93 The approach explained in this final action is

reasonable as it is supported by the language and

construction of the CAA and data analyses performed by

EPA and independent parties.94 For the reasons

described herein, EPA believes that this approach is the

best interpretation of—and the most reasonable way to

implement—the statutory SRE provisions. Therefore,

we apply it here.

IV. EPA Evaluation

This section explains in detail EPA’s evaluation of the

69 SRE petitions on which it is taking final action,

including its evaluation of eligibility for the exemption, of

DEH, and of other economic factors.

FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009).

Id. (emphasis in the original).

See infra, Section IV.D.

81a

A. Eligibility to Petition for Extension of a

Small Refinery Exemption

EPA is denying 69 pending SRE petitions for failing to

demonstrate DEH. In addition, we determine that two of

the refineries receiving denials were additionally ineligible

to petition for SREs for the 2019 and 2020 compliance

years, each for failing to meet one or more requirements

for eligibility. One refinery is ineligible because its

throughput exceeded 75,000 barrels per day (bpd) in a

petitioning year—making it ineligible to petition for an

SRE in the petitioning year and the subsequent year—

and also because it did not receive the initial RFS blanket

exemption under CAA section 211(o)(9)(A).95 The second

refinery is ineligible because it did not receive the initial

blanket exemption.

In making this finding, we are adopting the interpretation proposed in the Proposed Denial and applied in

the April 2022 SRE Denial interpreting the RFS statute

to mean that only small refineries that received the initial

blanket exemption are eligible to petition for an

extension of that initial exemption, consistent with a

prior EPA interpretation.96 Note that this does not mean

that any refinery that met the definition of “small

refinery” at the start of the RFS program is qualified to

seek exemption for later years; the small refinery must

have actually received the blanket exemption for the

This initial exemption is sometimes called the “blanket

exemption” since it could be obtained by all eligible small refineries

producing transportation fuel for the years 2006–2010.

At the same time, we are maintaining our approach to sizebased eligibility—only small refineries with an average aggregate

daily crude oil throughput that does not exceed 75,000 bpd for the

calendar year they petition and the prior year are eligible to petition

for an SRE. See CAA section 211(o)(1)(K), 40 CFR 80.1401, 40 CFR

80.1441(e)(2)(iii).

82a

years before 2011 pursuant to the RFS statute and

implementing regulations. This means that the small

refinery must have been producing transportation fuel,

such that it was an obligated party under the RFS

program to qualify for the blanket exemption from the

RFS requirements (i.e., a refinery processing fewer than

75,000 bpd of crude oil into products only other than

transportation fuel could not have received an exemption

from an RFS obligation it did not have). This is why,

under the RFS program, a refinery that met the

definition of a “small refinery” was additionally required

to submit a verification letter to EPA confirming its

status as a small refinery before receiving the blanket

exemption.

1. Definition of Small Refinery

As part of EPAct, Congress defined a small refinery as

“a refinery for which the average aggregate daily crude

oil throughput for a calendar year (as determined by

dividing the aggregate throughput for the calendar year

by the number of days in the calendar year) does not

exceed 75,000 barrels.”97 This definition was maintained

in EISA.98 These definitions informed EPA’s

implementing regulations in 2007 and 2010, which

similarly defined a small refinery as processing less than

75,000 bpd in 2004 and 2006, respectively, for purposes of

determining eligibility for the initial blanket statutory

exemption from 2006–2010.99 In 2014, EPA promulgated

regulations related to eligibility and requirements for

CAA section 211(o)(1)(K); EPAct of 2005, Pub. L. No. 109-58,

119 Stat. 594 (2005).

EISA of 2007, Pub. L. No. 110-140, 121 Stat. 1492 (2007).

40 CFR 80.1101(g), 72 FR 23900 (May 1, 2007); 40 CFR 80.1401,

80.1441(a)(1), 75 FR 14670 (March 26, 2010).

83a

SRE petition extensions. In these regulations, EPA

modified the eligibility requirements such that small

refineries qualified to seek exemption extensions based on

their crude oil throughput for the petition year and the

prior year.101 This requirement is still in effect and means

that, to qualify as a small refinery eligible to seek an

extension of its exemption, a refinery must have

processed no more than 75,000 bpd of crude oil in both

the year for which the refinery requests an exemption

and the prior year.102

100

2. Requirement to Have Received Initial

Blanket Statutory Exemption

In 2016, EPA took an action finding a refinery ineligible

to petition for an exemption extension because the refinery

did not exist in 2006 and, thus, could not have received

the initial blanket exemption.103 In that adjudication,

EPA relied on the RFS regulations that state “a refiner

may petition the Administrator for an extension of its

small refinery exemption....” (emphasis added).104

Additionally, EPA reasoned that “newer small refineries

100

79 FR 42128 (July 18, 2014).

101

40 CFR 80.1441(e)(2)(iii) (“In order to qualify for an extension

of its small refinery exemption, a refinery must meet the definition

of ‘small refinery’ in §80.1401 for the most recent full calendar year

prior to seeking an extension and must be projected to meet the

definition of ‘small refinery’ in §80.1401 for the year or years for

which an exemption is sought. Failure to meet the definition of small

refinery for any calendar year for which an exemption was granted

would invalidate the exemption for that calendar year.” (emphasis

added)). See also 79 FR 42128 (July 18, 2014).

102

40 CFR 80.1401. We are not modifying this regulation in this

action.

103

See Pet. for Review, Dakota Prairie Refining, LLC v. EPA,

No. 16-2692, at 8 of 17 (8th Cir. June 13, 2016).

104

40 CFR 80.1441(e)(2).

84a

have the ability to consider whether they believe the

establishment of the RFS program and its requirements

will cause economic hardship before beginning

operations.”105 Beginning in 2017, EPA shifted to a

different approach to small refinery eligibility and

granted exemptions for refineries that had not received

the initial blanket exemption. With the April 2022 SRE

Denial, consistent with the Supreme Court’s holding in

HollyFrontier, we adopted and applied the requirement

that, to be eligible to petition for an SRE, a refinery must

have actually been an obligated party under the RFS

program prior to 2011 and received the initial blanket

exemption, though a small refinery need not have had a

continuous exemption since the original statutory

exemption. In this action, we are again applying this

interpretation.

3. Changed Approach to Eligibility

In the April 2022 SRE Denial, EPA explained that it

had changed its approach to SRE eligibility to require

that a petitioning small refinery must have received the

initial statutory exemption prior to 2011 in order to

qualify for an extension of the initial exemption under

CAA section 211(o)(9)(B) because we believe this policy

aligns with the text of the CAA, which describes a small

refinery’s ability to “at any time petition the

Administrator for an extension of the exemption in

subparagraph (A) for the reason of [DEH].”106

Furthermore, we believe this interpretation best

supports the policy interests of implementing the RFS

program in promoting greater use of renewable fuels.

This is particularly true since exemptions provide a

significant windfall profit to exempted small refineries,

105

106

Pet. for Review, Dakota Prairie¸ at 8–9 of 17.

CAA section 211(o)(9)(B)(i) (emphasis added).

85a

as the small refineries passthrough their RIN costs and

then, when exempted, sell any RINs they had acquired

or generated. Such a result would be particularly unfair

if granted to new participants in the RFS program that

were not producing transportation fuel during the

statutory blanket exemption period of 2006–2010

because these new participants would have had the

opportunity to prepare and plan for compliance with the

RFS program prior to starting operations or otherwise

being subject to an RFS obligation, unlike the refineries

that received the initial blanket exemption.107

Additionally, refineries that exceeded the 75,000 bpd

throughput threshold in 2006 were not the intended

recipients of the initial exemption for small refineries,

and new entrants to the transportation fuels industry

after this blanket exemption ended have knowledge of

the requirements of the RFS program, and make an

informed decision whether to enter the transportation

fuels business. Thus, we are acting consistently with

congressional intent by continuing to exclude these

parties from receiving an SRE.

While the Supreme Court has held that a small

refinery need not have had a continuous exemption since

receiving the initial blanket exemption, the Court’s

decision suggests that an exemption must have existed

at some point for it to be extended.108 The Court agreed

107

108

See infra, Section IV.D.2.

See HollyFrontier, 141 S. Ct. at 2177 (“It is entirely natural—

and consistent with ordinary usage—to seek an “extension” of time even

after some lapse.”); id. at 2181 (“And fairly read, the key phrase at

issue before us—‘A small refinery may at any time petition the

Administrator for an extension of the exemption under

subparagraph (A) for the reason of disproportionate economic

hardship’—simply does not contain the continuity requirement the

court of appeals supposed.”); id. at 2184 (Barrett, J. dissenting)

(“Yet, HollyFrontier insists, the term “extension” is not always used

86a

with the Tenth Circuit that, as used in CAA section

211(o)(9), the word “extension” has a temporal meaning

(i.e., an extension of time), and not the alternative

meaning of “extension” to grant or offer.109 The Court,

however, clarified that an extension may still be given

after a lapse.110 In order for something to lapse, it must

have existed to begin with. The Court applied several

analogies to illustrate this, including that of a student

requesting an extension of a deadline to submit a paper

after the deadline has already passed.111 Applying that

analogy to a small refinery that did not receive the

original exemption, but requests an extension of that

exemption, would be like a student that was never in the

class asking the professor for an extension of a deadline

for a paper that was never assigned to that student to

begin with (i.e., there is no due date for the professor to

extend just as there is no exemption period for EPA to

extend). Thus, the language of the statute indicates that,

without having received “the exemption under

that way. Instead, it might sometimes refer to a “non-continuous

extension”—in other words, an extension of something that used to

exist but no longer does. . . . [T]he Court concludes that HollyFrontier’s reading must be right—which means that EPA can

provide an “extension” of an exemption that is no longer in effect.”);

id. at 2177–78 (the Court’s extension analogies assume something

existed initially to be extended, i.e. “a term paper after the deadline

has passed, the tenant who does the same after overstaying his

lease, or parties who negotiate an ‘extension’ of a contract after its

expiration.”).

109

See supra, Section II.D.

110

HollyFrontier, 141 S.Ct. at 2177 (“Ultimately, however, we

agree with the renewable fuel producers and the court of appeals

that subparagraph (B)(i) uses “extension” in its temporal sense—

referring to the lengthening of a period of time.”). The

HollyFrontier decision is further discussed in Section II.D.

111

Id. at 2177–78.

87a

subparagraph (A),” there is nothing for a small refinery

to petition EPA to extend temporally.112 Thus, if a small

refinery did not receive the original statutory blanket

exemption, it is ineligible to have EPA extend the

duration of that exemption.113

4. Alternative Eligibility Determinations for

Two Refineries

In this final action, EPA is denying four SRE petitions

for the 2019 and 2020 compliance years from two

refineries, not just because they have failed to

demonstrate DEH, but also on alternative grounds: EPA

here determines that both refineries are ineligible to

petition for SREs. These two refineries submitted

refinery-specific comments under claims of confidentiality

specifically addressing their eligibility to submit SRE

petitions. EPA addresses general eligibility comments in

Appendix B and addresses refinery-specific eligibility

comments in confidential, refinery-specific appendices to

this action.

For the first refinery, EPA determines that it is

ineligible to petition for an SRE under the approach

described in Section IV.A.3. The refinery did not receive

the initial blanket exemption because it did not qualify as

a “small refinery” in 2004 or 2006, since its average

aggregate daily crude oil throughput exceeded 75,000

112

Id. at 2181–82 (“Indeed, the dissent finds it ‘odd’ that our

reading would permit hardship relief only to small refineries in

existence in 2008 and not to new ones, post, at 2189-2190 ... Nor is

there anything odd about the fact that Congress chose only to

protect existing small refineries rather than new entrants. Often

Congress chooses to protect existing market participants from shifts

in the law while applying new restrictions fully to future entrants.”)

113

We note that this issue was not before the courts in RFA or in

HollyFrontier because the three small refineries at issue in those

cases had all received the initial blanket exemption.

88a

bpd during those qualification years.114 The refinery,

therefore, did not submit the verification letter required

by regulation to receive the initial blanket exemption,

and, because it did not receive that exemption, it is

ineligible to petition for an SRE. EPA additionally

determines that this refinery is ineligible for to petition

for an SRE for the 2019 and 2020 compliance years

because it exceeded the 75,000 bpd throughput limit in

2019, thereby making the refinery ineligible to petition

for an SRE in both 2019 and 2020.115 This eligibility

determination is alternative and added to our denial of

its 2019 and 2020 SRE petitions because the refinery did

not demonstrate that it experienced DEH caused by

RFS compliance as described generally for all small

refineries in Section IV.D.2, based on our review of the

petitions, supplemental information, and comments

submitted by the refinery. As such, even if this refinery

was eligible to petition for an SRE for the 2019 and 2020

compliance years—which EPA determines it was not—

the petitions are denied on DEH grounds.

For the second refinery, EPA determines that it is also

ineligible to petition for an SRE under the approach

described in Section IV.A.3. The refinery did not receive the

initial blanket exemption because it was not an RFS

obligated party at the time the initial blanket exemption

was available prior to 2011. Even though this refinery

met the statutory definition of a “small refinery,” it did

not receive the blanket exemption because it did not

produce transportation fuel from 2006–2010; therefore, it

had no RFS obligation, and thus, there was nothing to

exempt. Therefore, the refinery did not submit the

114

40 CFR 80.1141(a)(1), 72 FR 23900 (May 1, 2007); 40 CFR

80.1441(b), 75 FR 14670 (March 26, 2010).

115

40 CFR 80.1441(e)(2)(iii).

89a

verification letter required by the RFS regulations to

receive the initial blanket exemption, and because it did not

receive that exemption, it is ineligible to petition for an

SRE. This eligibility determination is alternative and

added to our denial of its 2019 and 2020 SRE petitions

because the refinery also did not demonstrate that it

experienced DEH caused by RFS compliance described

generally for all small refineries in Section IV.D.2 for

these compliance years, based on our review of the

petitions, supplemental information, and comments

submitted by the refinery. As such, even if this refinery

was eligible to petition for an SRE for the 2019 and 2020

compliance years—which EPA determines it was not—

the petitions are denied on DEH grounds.

B. Compliance with SRE Petition Requirements

When submitting an SRE petition to EPA, the small

refinery bears the burden of demonstrating that compliance with the requirements of the RFS program

causes DEH for that small refinery. The RFS regulations

require that an SRE petition specify the factors that

demonstrate DEH, provide a detailed discussion

regarding the hardship the refinery would face in

complying with the RFS requirements, and identify the

date by which the small refinery anticipates that

compliance with the RFS requirements can reasonably

be achieved.116 Since the Tenth Circuit issued its opinion

in RFA, many small refineries have contacted EPA to

supplement their original SRE petitions and to provide

additional information about their financial situations. In

addition, EPA received extensive input in response to its

request for comment on the Proposed Denial. EPA

greatly appreciates this information. EPA has completed

a thorough evaluation of the data and information

116

40 CFR 80.1441(e)(2).

90a

provided in the SRE petitions, supplemental

submissions, and comments to determine if any of the

petitioners have demonstrated that the cost of

compliance with the RFS is the cause of their alleged

DEH and that such costs are not passed through by that

small refinery to the wholesale purchasers under the

RIN cost passthrough principle.117

C. DOE Consultation and EPA Consideration of

the DOE Study

CAA section 211(o)(9)(A)(ii) required that EPA grant

exemptions for “not less than 2 additional years” (i.e.,

2010 and 2011) upon DOE’s determination that a small

refinery “would be subject to a disproportionate

economic hardship.”118 Section 211(o)(9)(B), in contrast,

provides how EPA will evaluate petitions, “in consultation with the Secretary of Energy,” but does not dictate

any particular action that EPA must take following that

consultation, nor does it not provide any further

direction on the form EPA’s consultation with DOE must

take. In fact, “Congress placed no limits on how DOE

should provide its consultation to EPA under [the

RFS].”119 This absence of direction provides “substantial

discretion” to the agencies to determine how DOE will

provide consultation for the pending SRE petitions.120

Both agencies previously relied on DOE’s findings

through its application of the DOE scoring matrix to

effectuate DOE’s consultation on each SRE petition.121

For this action, EPA shared all SRE petition and

117

See infra, Appendix B, for a summary of the comments and

EPA’s responses.

118

119

120

121

See supra, Section II.D.

Hermes, 787 F.3d at 577.

Id. at 575.

See supra, Section II.D.

91a

comment information with DOE. However, DOE did not

apply the scoring matrix because it was not designed to

account for RIN cost passthrough. Rather, EPA

consulted with DOE through discussions in meetings and

phone conversations regarding the pending SRE

petitions, the supplemental supporting information the

small refineries provided, other comments submitted in

response to the Proposed Denial, and the analysis and

determinations that supply the basis for this final

action.122

In evaluating petitions for SREs under CAA section

211(o)(9)(B), EPA is directed to “consider the findings of

the [DOE] study.” DOE, in fact, conducted two studies,

one in 2009 and an update to the study in 2011.123 The

original 2009 DOE Study concluded that small refineries

would not face DEH from compliance with the RFS

program given the proportional obligations of the

program as a function of their gasoline and diesel fuel

production and the opportunity for refineries to comply by

blending or by purchasing RINs, provided that the RIN

market proved to be liquid and com-petitive. The RIN

market has developed to be open, competitive, liquid, and

functioning as intended;124 hence, the 2009 DOE Study

accurately forecasted what was likely to occur given the

highly competitive fuels market with which DOE was

familiar.

122

While not legally required, EPA has added a memorandum to

the docket for this action describing the EPA-DOE consultation

process. See “Memorandum on DOE Consultation from Byron

Bunker,” available in the docket for this action (hereinafter the

“DOE Consultation Memo”).

123

124

See supra, Section II.D.

See infra, Section IV.D.2.

92a

When DOE expanded its study in 2011, it posited that

small refineries could face DEH “if blending renewable

fuel into their transportation fuel or purchasing RINs

increase[d] their cost of products relative to

competitors.”125 DOE expressed a similar possibility

another way noting, “If certain small refineries must

purchase RINs that are far more expensive than those

that may be generated through blending, this will lead to

disproportionate economic hardship for those affected

entities.”126 Looking to a potential future where RIN

prices rose significantly (as they have since done), DOE

projected, “there are numerous circumstances when

RIN prices could rise, increasing the cost of compliance

and perhaps increasing the cost of compliance more for

refineries that rely on [purchasing] RINs for compliance

compared to those that do not.”127 To make clearer the

circumstances it was envisioning where such

disproportionate costs could arise, DOE provided a

detailed appendix (Appendix B) that laid out scenarios

for three refiners in different circumstances relative to

the RFS program.128 The first case was a refiner that

blends all its production with ethanol and does not have

to purchase ethanol RINs. The second case was for a

refiner that does not do any blending and must purchase

all its RINs to meet its RVOs. Finally, the third case was

for a refiner with excess RINs to sell into the market.

DOE assumed in Appendix B that the refiner that got its

RINs through blending ethanol would get the RINs at

nearly no cost, while the refiners that had to buy RINs

would be forced to pay the higher market cost for

125

126

127

128

2011 DOE Study at vii (emphasis added).

Id. at 2 (emphasis added).

Id. at 3 (emphasis added).

Id. at B-4.

93a

compliance. Based on this assumption, DOE projected

that some refineries could face a disproportionate cost of

compliance. Through the matrices in its report, DOE

evaluated whether those disproportionate costs rose to a

level such that a refinery faced DEH due to those higher

costs. DOE articulated bringing those two elements

together when it stated: “[d]isproportionate economic

hardship must encompass two broad components: a high

cost of compliance relative to the industry average, and an

effect sufficient to cause a significant impairment of the

refinery operations.”129 However, DOE did not assess in

its 2011 study whether its assumptions that refiners bear

different costs for blending or purchasing RINs and that

they may not be able to pass these costs on to wholesale

purchasers in the marketplace would actually occur.130

A number of small refineries have stated to EPA that

DOE’s projection in the 2011 DOE Study is exactly what

has come to pass, reiterating these assertions in their

comments on the Proposed Denial. Ethanol (D6) RIN

prices have risen significantly, and small refineries argue

that they bear these higher RIN costs while integrated

refiners (refiners that blend renewable fuels) and nonobligated blenders receive RINs at almost no cost.

Further, they argue that these disproportionate costs

are significant enough that they constitute DEH for the

refineries just as DOE articulated. EPA has carefully

reviewed data, contracts, and other information from

small refineries to evaluate if, as DOE posited in 2011,

refineries that acquire RINs through blending get them

at a lower cost than do refineries that purchase RINs on

the open market.131 What we have found is that the RIN

129

130

131

Id. at 3.

See DOE Consultation Memo.

See infra, Section IV.D.2.

94a

discount phenomenon applies—blenders, in fact,

discount their sales price for E10 by the market price of

the RIN (i.e., the sales price of E10 reflects the cost to

buy ethanol minus the market price for selling the RIN).

Hence, while the blender gets the RIN for “free” when it

purchases a gallon of ethanol, it has to discount the price

of that ethanol when sold as E10 by the full current

market price of the RIN. This means the blending

refinery pays the full market cost of the RIN through the

discount it gives in the price of the E10 it sells. The 2011

DOE Study did not consider that blending refineries

would have to discount blended fuel by the price of the

RIN; therefore, the projections envisioned by the 2011

DOE study have not occurred in practice. Rather, as the

2009 DOE Study anticipated, the competitive market

forces have resulted in the same cost of compliance

whether that cost comes through the purchasing of RINs

on the open market or through the discounting of the

price for blended fuel sold by blenders. Moreover, neither

the 2009 DOE Study nor the 2011 DOE Study

anticipated the even more significant finding that,

without regard to how refineries experience their RFS

compliance costs, the RIN cost passthrough phenomenon

applies—refineries pass those higher costs through to

their customers in higher prices for the refined products

they sell.

For the reasons described above and after considering the

“other economic factors” described in Section IV.D.2, we

find small refineries do not face disproportionate costs to

compl

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