EPA Proposes to Deny All
Pending RFS Small Refinery
Exemption Petitions
Ch
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Renewable Fuels Association, et a I. i>. EPA, 948 F.3d 1206 (10th Cir. 2020) (RFA) and
HollyFrontier Cheyenne Refining, LLC, et al. Renewable Fuels Ass'n, et al., 114 S.Ct.
2172 (2021) (HollyFrontier) opinions.
The Proposed Decision
EPA is departing from past practice regarding SRE decisions by inviting comment on
the proposed decision and the analysis provided in the proposal. This public notice-
and-comment process is intended to achieve the broadest possible dissemination
of EPA's preliminary analysis, to solicit information or data to bolster or refute the
analysis of RIN market dynamics and economic principles, and to receive public
input on the proposed decision to deny all pending SRE petitions based on that
analysis. The proposed decision and EPA's accompanying change in its interpretation
of the relevant CAA provision are compelled by the Tenth Circuit's 2020 ruling in
RFA, the Supreme Court's subsequent decision in HollyFrontier, EPA's experience
implementing the RFS program for more than a decade, and EPA's exhaustive
analysis of how the RIN market functions.
EPA is proposing to determine that the petitioning small refineries have failed
to demonstrate the DEH necessary for an exemption, and therefore all pending
SRE petitions should be denied. The conclusions EPA relies on in the proposal
are: (1) Regardless of the mechanism by which small refineries and other obligated
parties comply with their RFS obligations, the 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) Obligated parties, including small
refineries, recover 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 disproportionate economic hardship pursuant to the statute.
EPA has reviewed the available literature on the economics of the RIN market,
publicly available price data from various fuels markets and the RIN market, and
confidential data small refineries submitted regarding their local markets and RIN
purchases. The data EPA reviewed, including those submitted by the small refineries,
support the proposed conclusions. In short, EPA's analysis shows that all refineries
face the same costs to acquire RINs regardless of whether the RINs are obtained
through the act of blending renewable fuel or are purchased on the open market.
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This happens because the market price for these fuels increases to reflect the cost of
the RIN, much as it would increase in response to a new tax. In other words, this
increased price for gasoline and diesel fuel allows obligated parties to recover their RIN
costs through the market price of the fuel they produce. Because the market behaves
this way for all parties subject to the RFS program, there is no disproportionate cost to
any party, including small refineries. As a result, EPA concludes that small refineries
do not face DEH and proposes to deny all pending SRE petitions. As stated above,
EPA is requesting comment on the proposed decision and further requests any
available data that supports or refutes the conclusions described in the proposal.
For More Information
You can access the proposed adjudication and related documents on EPA's website at:
https://www.epa.gov/ renewable-fuel-standard-program/ proposal-deny-petitions-
small-refinery-exemptions
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