July 2023 Denial of Petitions for RFS Small Refinery Exemptions


July 2023 Denial of Petitions
for RFS Small Refinery Exemptions

£%	United States

Environmental Protect
Agency

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July 2023 Denial of Petitions
for RFS Small Refinery Exemptions

United States Environmental Protection Agency

United States
Environmental Protection
^1	Agency

EPA-420-R-23-007
July 2023

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Table of Contents

I.	Executive Summary	1

II.	Background	1

III.	EPA Evaluation	2

A.	Two Refineries Ineligible to Petition for Exemptions	2

B.	SRE Petition Requirements	3

C.	DOE Consultation	4

D.	DEH Must Be Caused by RFS Compliance	6

IV.	EPA's Response to the Final GAO Report	7

V.	Denial of Petitions and Judicial Review	9

Appendix A - Updated Market Analysis	12

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I. Executive Summary

In this action, the Environmental Protection Agency ("EPA" or "the Agency") is acting
on 26 individual small refinery exemption ("SRE") petitions from 15 small refinery petitioners
seeking exemption from their Renewable Fuel Standard ("RFS") obligations for compliance
years 2016-2018 and 2021-2023.1 In consultation with the Department of Energy ("DOE"),
EPA reviewed all the information submitted by each individual small refinery in support of its
petition or petitions. After careful consideration of all the information submitted by the small
refineries, EPA is denying all of the petitions because the individual small refineries have failed
to demonstrate that compliance with their RFS obligations would cause disproportionate
economic hardship ("DEH"). This final action denies 26 SRE petitions (hereinafter the "July
2023 SRE Denial Action").

The decision to deny these 26 petitions is based on the following reasons, including the
analysis found in prior EPA actions denying SRE petitions in April 20222 and June 20223
(collectively the "2022 SRE Denial Actions") and any new information submitted by the small
refineries for the specific petitions addressed in this action.

II. Background

In the 2022 SRE Denial Actions, EPA denied 105 petitions from 39 small refineries
seeking exemptions from their RFS obligations for the 2016-2021 compliance years. These
decisions have been challenged in different courts and those challenges are currently pending.4
In the 2022 SRE Denial Actions, we described the RFS program and explained relevant
background information, including the Renewable Identification Number ("RIN") compliance
program and the market dynamics of the RIN system as well as the SRE provisions.5 We
explained EPA's revised interpretation of the SRE statutory provisions, including DEH, in light
of the U.S. Court of Appeals for the Tenth Circuit's decision in Renewable Fuels Association et
al. v. EPA, 948 F.3d 1206 (10th Cir. 2020) ("RFA").6 This July 2023 SRE Denial Action relies
on the same approach and the same analyses described in the 2022 SRE Denial Actions in
denying 26 additional SRE petitions from 15 small refineries for compliance years 2016-2018
and 2021-2023. This action therefore incorporates by reference the explanation and analyses in
the 2022 SRE Denial Actions, including both the non-confidential and confidential refinery -

1 EPA is acting on a 2023 SRE petition prior to the conclusion of the 2023 compliance year because that small
refinery has indicated its intent to initiate litigation against the Agency if EPA does not act on this petition.

2 "April 2022 Denial of Petitions for RFS Small Refinery Exemptions," EPA-420-R-22-006, April 2022 ("April
2022 SRE Denial Action"), https://www.epa.gov/renewable-fiiei-standard-program/april-2022-den.ial-petitions-rfs-
s mat 1-refi ne ry -exe mpti ons.

3 "June 2022 Denial of Petitions for RFS Small Refinery Exemptions," EPA-HQ-OAR-2021-0556, June 2022
("June 2022 SRE Denial Action"), https://www.epa.gov/renewable-fiiei-standard-program/iniie-2022-denial-
petitions-rfs-sni alt-refinery-exemptions.

4 Sinclair Wyoming Refining Co. LLC, et al. v. EPA, No. 22-1073 (and consolidated cases) (D.C. Cir.); Calumet
Shreveport Refining, LLC et al. v. EPA, No. 22-60266 (and consolidated cases) (5th Cir.); and Hunt Refining Co. v.
EPA, No. 22-11617 (and consolidated case) (11th Cir.). Decisions in these cases will likely be dispositive to most
issues that would be raised in any challenges to this final action.

5 2022 SRE Denial Actions, Section II.

6 2022 SRE Denial Actions, Section III.

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specific appendices to those actions. EPA also carefully evaluated any relevant new information,
including those submitted by small refineries, but concluded that the new information does not
warrant a different conclusion.

III. EPA Evaluation

This section describes EPA's evaluation of the 26 SRE petitions for compliance years
2016-2018 and 2021-2023 that EPA is addressing in this action. EPA first evaluated the
petitions to determine whether each refinery is eligible to petition as a small refinery under the
statutory SRE provisions and determined that two refineries are not eligible. EPA then evaluated
all petitions using the same approach applied in the 2022 SRE Denial Actions regarding the
required demonstration of DEH.7 In general, the small refineries provided little new information
and instead repeated the information included in the prior petitions that EPA denied with the
2022 SRE Denial Actions.8 To the extent any small refinery did submit new information, EPA
has addressed that information in the 2023 Consultation Memo (discussed in Section III.C of this
action) and in the confidential refinery-specific appendices to this action. In particular, a number
of small refineries cited as support a November 2022 report from the Government Accountability
Office ("GAO").9 EPA provided its response to a draft version of that report in October 202210
and issued its final analysis of the price of RINs paid by small refineries in December 2022.11 On
May 2, 2023, EPA issued its final response to the Final GAO Report.12 Section IV of this action
addresses the Final GAO Report in detail in response to those small refineries that raised it in
their petitions.

A. Two Refineries Ineligible to Petition for Exemptions

EPA received two SRE petitions for each of the 2018, 2019 and 2020 compliance years
from two refineries; EPA determined those two refineries to be ineligible to petition for an
exemption under Clean Air Act (CAA) section 21 l(o)(9) in the 2022 SRE Denial Actions.13 In
this final action, EPA is denying three 2021 and 2022 SRE petitions from these same two
refineries, not only because they have failed to demonstrate DEH, but also on alternative and
independent grounds: EPA here determines that both refineries remain ineligible to petition for
SREs. These two refineries submitted refinery-specific comments under claims of confidentiality

7	2022 SRE Denial Actions, Section IV.

8	In instances where a small refinery resubmitted comments it had previously submitted in response to EPA's
"Proposed RFS Small Refinery Exemption Decision," EPA-420-D-21-001, December 2021 ("Proposed Denial"),
EPA relied on its previous evaluation of and responses to those comments as presented in the 2022 SRE Denial
Actions.

9	"Renewable Fuel Standard: Actions Needed to Improve Decision-Making in the Small Refinery Exemption
Program," GAO-23-104273 and GAO 23-105801, November 2022 ("Final Report" or "Final GAO Report").

10	Letter from Joseph Goffman, EPA, to Frank Rusco, GAO, October 13, 2022 ("EPA Comment Letter"). The EPA
Comment Letter is included as Appendix IV in the Final GAO Report.

11	"An Analysis of the Price of Renewable Identification Numbers (RINs) and Small Refineries," EPA-420-R-22-
038, December 2022 ("EPA RIN Price Analysis").

12	EPA Response to Final GAO SRE Report, May 2, 2023 ("EPA Final GAO Response"), available at

https://www.epa.gov/renewable-fiiel-standard-program/epa-analvsis-price-rins-and-smaH-refineries: See, e.g.,
https://www.epa.gov/svstem/files/documents/2023-05/EPA-Response-to-Final-GAQ-SRE-Report-Letter-to-Honse-

13	2022 SRE Denial Actions, Section IV. A.

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specifically addressing their eligibility to submit SRE petitions; EPA addresses these refinery-
specific eligibility comments in confidential, refinery-specific appendices to this action.

We have again determined that these two refineries are ineligible to petition for 2021 and
2022 SREs because they did not receive the initial blanket exemption from the RFS program
under CAA section 21 l(o)(9)(A). In making this determination, we are applying the same
interpretation taken in the 2022 SRE Denial Actions: that the SRE statutory provisions dictate
that only small refineries that actually received the initial blanket exemption are eligible to
petition for an extension of that initial exemption.14 This ineligibility determination provides an
alternative and independent basis to support EPA's conclusion that these small refineries should
not be granted an exemption from their 2021 and 2022 RFS obligations, in addition to EPA's
conclusion that their petitions do not demonstrate that they experience DEH caused by RFS
compliance.

B. SRE Petition Requirements

The applicable SRE petition requirements are contained in EPA's regulations at 40 CFR
80.1441(e)(2). As explained in the 2022 SRE Denial Actions, the petitioning small refinery has
the obligation to demonstrate in its petition that its DEH is caused by compliance with its RFS
obligations.15 In this action, EPA considered 26 SRE petitions for compliance years 2016-2018
and 2021-2023; small refineries claim that each petition contains the small refinery's
demonstration of DEH caused by RFS compliance. EPA evaluated the information submitted in
each petition—in consultation with DOE as discussed in more detail below—to determine if the
petition satisfied the regulatory criteria and met the statutory requirement to demonstrate DEH
based on EPA's interpretation of the SRE provisions of the CAA as described in the 2022 SRE
Denial Actions.

In comments on EPA's Proposed Denial, small refineries claimed that EPA's action
would be improper because it would "retroactively" apply the Agency's interpretation of the
SRE statutory provisions and the RFA decision to petitions that had already been submitted, and
further that they lacked sufficient notice of that interpretation. As explained in the 2022 SRE
Denial Actions, and for all the reasons articulated in EPA's recently filed response briefs in the
challenges to the 2022 SRE Denial Actions, incorporated herein, EPA disagrees.16 The action is
not retroactive because EPA applied its revised approach to then-pending petitions, which did
not take away or impair "vested rights acquired under existing laws" or create a "new
obligation.. .in respect to transactions.. .already past," but merely confirmed the status quo that
petitioning small refineries comply with preexisting RFS obligations; therefore, no rights had
vested in any of the small refineries' uncompleted transactions (e.g., their pending petitions).17
These RFS obligations were previously imposed by Congress and implemented through EPA

14 2022 SRE Denial Actions, Section IV. A.

15 2022 SRE Denial Actions, Section IV.D.

16 2022 SRE Denial Actions, Appendix B, Section 1.3; EPA's Second Corrected Response Brief, pp. 29-39, Doc.
No. 336-2 (Restricted), June 22, 2023, Calumet ShreveportRefining, LLC et at. v. EPA, No. 22-60266 (and
consolidated cases) (5th Cir.) (waiting for court to docket redacted version of brief filed June 22, 2023); and EPA's
Response Brief, pp. 22-33, Doc. No. 77, April 20, 2023, Hunt Refining Co. v. EPA, No. 22-11617 (and consolidated
case) (11th Cir.) (collectively, "EPA's Response Briefs").

17 Landgrafv. USLFilm Prods., 511 U.S. 244, 269 (1994); 42 U.S.C. § 7545(o)(3)(B)(ii)(I); 40 CFR 80.1406.

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regulations wholly separate from the SRE petition process. Moreover, Congress delegated
resolution of SRE petitions to EPA "at any time,"18 thereby expressly authorizing any purported
retroactive effect, and EPA reasonably adjudicated the SRE petitions by applying the proper
statutory interpretation to the facts at hand, making any purported retroactive effect
permissible.19 And it is clear that the petitioning small refineries can have no reasonable reliance
interest with respect to EPA's prior approach. The small refineries were well aware of EPA's
proposed revised approach as was evident in their numerous supplements to their petitions and
comments submitted on the Proposed Denial, as well as their active participation in meetings and
related litigation.20 Additionally, EPA has repeatedly stated that small refineries should expect to
comply with their RFS obligations unless and until an exemption is received.21 As such, this
action does not disrupt any reasonable expectations the small refineries could have had regarding
the prior approach. Particularly in light of the 2022 SRE Denial Actions, the only reasonable
expectation was that compliance with the RFS program would continue to be required.

Moreover, here, the small refineries submitted the 2021-2023 SRE petitions at issue after
EPA issued the 2022 SRE Denial Actions.22 All of these small refineries had petitions for other
compliance years that were denied in the 2022 SRE Denial Actions, meaning they are clearly
aware of the revised approach EPA is now taking when evaluating SRE petitions, EPA's
supporting analyses, and the fact that EPA intends to continue to apply its revised approach in
future analysis of SRE petitions.23 The small refineries are also aware of the types of information
they would need to submit in their petitions to demonstrate their DEH is caused by their RFS
compliance.24 Nonetheless, as noted above, the SRE petitions addressed in this action contain
little new information, but instead simply repeat the small refineries' past arguments and rely on
the same information EPA previously evaluated.

C. DOE Consultation

As more fully described in the 2023 Consultation Memo,25 EPA consulted with DOE to
evaluate each of the 26 SRE petitions, consistent with the revised approach to DEH that EPA
implemented with the 2022 SRE Denial Actions.26 Technical, legal, and policy staff for EPA and
DOE met on at least 14 separate occasions to discuss various aspects of DEH and the SRE
petitions.

18 CAA section 21 l(o)(9)(B)(i), (ii).

19 Nat 'I Petrochemical & Refiners Ass 'n v. EPA, 630 F.3d 145, 159 (D.C. Cir. 2010).

20 2022 SRE Denial Actions, Section II.D.; EPA's Response Briefs, Section II. Factual and Procedural Background.

21 See, e.g., "Financial and Other Information to Be Submitted with 2016 RFS Small Refinery Hardship Exemption
Requests," December 6, 2016, p.3 ("[petitioning small refineries should always presume that they are subject to the
requirements of the RFS program and include RFS compliance in their overall planning.") (emphasis added),
available at https://www.epa.gov/sites/default/files/2016-12/documents/rfs-smail-refinerv-2016-12-06.pdf.

22 The 2016-2018 SRE petitions at issue were submitted prior to the 2022 SRE Denial Actions and are addressed in
the confidential refinery-specific appendices.

23 2022 SRE Denial Actions, Section IV.D.l.a.

24 2022 SRE Denial Actions, Appendix B, Section 1.8.

25 "Consultation with the Department of Energy under Clean Air Act Section 211 (o)(9)(B)(ii) Regarding the
Petitions Addressed in the July 2023 SRE Denial Action" (the "2023 Consultation Memo").

26 2022 SRE Denial Actions, Section IV. C.

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For this action, EPA shared the 26 SRE petitions and all supporting information with
DOE. The agencies reviewed the petitions and all the supporting information, using a
consultation approach consistent with that adopted in the 2022 SRE Denial Actions, to determine
if any of the information indicated that the petitioning small refinery faces a higher cost of RFS
compliance relative to the industry average (disproportionate cost of compliance). If the
information demonstrated a small refinery experiences a disproportionate cost of compliance, the
agencies then considered whether that disproportionate cost of compliance constitutes DEH.
Where petitioning small refineries again submitted information they had previously provided to
support their prior-year petitions, the agencies did not re-evaluate that information since they had
previously reviewed and considered that information when acting on prior petitions in the 2022
SRE Denial Actions and had determined that the information does not demonstrate a
disproportionate cost of compliance for those small refineries. The agencies did, however,
carefully evaluate all the new information the petitioning small refineries provided to support the
petitions addressed in this action to determine if any individual petitioning small refinery may
face a disproportionate cost of compliance when compared to the industry average. In particular,
the agencies looked for:

1.	Evidence that a petitioning small refinery paid above-market prices for RINs or
discounted its blended fuel price by more than the proportional market price of a RIN.

2.	Evidence that a petitioning small refinery was unable to pass its RIN costs on to the
market because it received a price for its gasoline or diesel below that for a full
passthrough of its RIN costs for reasons due to the RFS. A petitioning small refinery
cannot simply assert—without supporting information—that it received lower prices than
those in other markets since the difference may be due to other non-RFS factors such as
transportation costs.

The agencies' review did not identify any information in any of the 26 SRE petitions that
indicated that any petitioning small refinery faces a disproportionate cost of RFS compliance
when compared to the industry average.

We note that while many of the petitioning small refineries submitted information
containing "self-scored" metrics using the matrix from the DOE 2011 Study,27 during the
agencies' review of all the information submitted (e.g., the PI-588 survey form, small refinery
financial statements, and the RFS cost compliance spreadsheets), EPA did not request that DOE
use the information to prepare a matrix from the DOE 2011 Study. The DOE 2011 Study
contemplated a scenario where refineries that blend renewable fuels and separate RINs would
have a lower cost of compliance. The "disproportionate structural impact" portion of the matrix
was designed, in part, to identify which refineries were less likely to be able to blend renewable
fuels due to a lack of resources or support for renewable fuel blending in the markets where they
competed.28 It was those refineries that the DOE 2011 Study presumed would have to buy RINs
and would therefore potentially face a higher cost of RFS compliance. None of the petitioning
small refineries provided information demonstrating such a difference in their RFS compliance

27	Small Refinery Exemption Study, An Investigation into Disproportionate Economic Hardship, Office of Policy
and International Affairs, U.S. Department of Energy, March 2011 ("DOE 2011 Study"), available at
https://www.epa.gov/sites/defauit/files/2016-12/documents/small-refinerv-exempt-study.pdf.

28	DOE 2011 Study, pp. 33-35.

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costs. Accordingly, EPA determined there was no purpose to DOE scoring a matrix designed to
address a scenario that has not materialized.

DOE also confirms that its DOE 2011 Study did not evaluate the degree to which
refineries would pass through the cost of compliance in the products they sold, and hence, did
not evaluate empirical data or any other information pertaining to RIN cost passthrough by
refineries.

EPA and DOE additionally considered the submissions made by small refineries
regarding the Final GAO Report to determine if any small refinery demonstrated that, in
acquiring separated RINs, it faced a disproportionate cost of compliance. EPA and DOE found
that no small refinery offered evidence of such disproportionate costs in their petition.

D. DEH Must Be Caused by RFS Compliance

In the 2022 SRE Denial Actions, EPA explained its interpretation of the statutory
provisions at CAA section 21 l(o)(9) governing EPA's authority to grant SREs. Specifically,
EPA explained that its authority to grant an SRE "for the reason of [DEH]" requires that the
hardship is caused by RFS compliance. As explained in those actions, this interpretation aligns
with the statutory text as well as with the structure and purpose of the SRE provisions and the
RFS program.29

EPA bases this action on the same analyses described in the 2022 SRE Denial Actions.30
EPA explained in the 2022 SRE Denial Actions that "in this final action and going forward, we
will require that petitioning small refineries demonstrate that DEH is caused by RFS
compliance" and provided abundant explanation and examples to enable small refineries to
understand what would be needed to make such a demonstration for future petitions.31 However,
the 26 SRE petitions addressed in this action generally were not supported by new information or
arguments. Instead, small refineries merely restated their disagreement with EPA's analyses
presented in the 2022 SRE Denial Actions and claimed that EPA had failed to consider the small
refineries' specific evidence of their own DEH. The remainder of this section summarizes EPA's
approach to evaluating DEH as applied in the 2022 SRE Denial Actions and further explains
how that approach is being applied here to deny the 26 SRE petitions covered by this action.

In the 2022 SRE Denial Actions, EPA explained that under its interpretation of the
statute, EPA only has the authority to grant SREs when a small refinery's DEH is caused by RFS
compliance, consistent with the Tenth Circuit's holding in RFA.32 EPA also explained the RIN
discount and RIN cost passthrough principles and their implications for EPA's authority to grant
SREs based on the requisite finding of DEH, consistent with a separate holding in RFA.33 EPA's
interpretation of the statute and its assessment of RIN market dynamics, the economic principles
of RIN discount and RIN cost passthrough, and the impacts on different market participants as

29 2022 SRE Denial Actions, Section IV.D.l.

30 2022 SRE Denial Actions, Section IV.D.

31 2022 SRE Denial Actions, Section IV.D.l.a.

32 2022 SRE Denial Actions, Section IV.D.l.

33 2022 SRE Denial Actions, Section IV.D.2.

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described in the 2022 SRE Denial Actions apply to each of the individual SRE petitions
evaluated in this action. No small refinery provided any information to show that either the RIN
cost passthrough or RIN discount principles do not apply for the SRE petitions addressed in this
action. EPA is therefore denying these petitions for all the same reasons explained in the 2022
SRE Denial Actions since no small refinery has demonstrated that it suffers DEH caused by its
RFS compliance.

Additionally, EPA has updated part of its analysis regarding RIN cost passthrough to
include data from compliance years 2021 and 2022. The results of this updated analysis—which
compared historical prices for obligated and non-obligated fuels—are shown in Appendix A, and
again illustrates that RIN costs are being passed through in the prices of the obligated fuel.

IV. EPA's Response to the Final GAO Report

In November 2022, GAO published its Final Report, which reviewed EPA's
implementation of the SRE program. The Final GAO Report did not directly assess whether
small refineries experience DEH.34 In spite of that fact, many small refineries attached the Final
GAO Report to their SRE petitions, claiming it provides evidence that they face higher costs of
RFS compliance due to a purported difference in the price they must pay to acquire RINs, and
that they therefore will face DEH. EPA disagrees. EPA and DOE provided comments on a
September 2022 draft version ("Draft Report") of the Final GAO Report, and these comments
are available in the Final GAO Report, Appendices IV (EPA Comment Letter) and V. As
explained below, the Final GAO Report fails to address EPA's comments on and concerns with
the Draft Report raised in the EPA Comment Letter. Following issuance of the Final GAO
Report, in December 2022, EPA completed the EPA RIN Price Analysis—an additional
evaluation of the price of RINs paid by small refineries—and provided GAO with a copy of this
analysis. On May 2, 2023, EPA issued its Final GAO Response to GAO and Congress.

Small refineries that submitted the Final GAO Report as evidence of their DEH did not
provide any accompanying explanation or supporting information demonstrating that they in fact
pay a cost above the posted market prices when they buy RINs. Instead, these small refineries
simply attached the Final GAO Report to their petitions without additional explanation or
supporting information. For example, the petitioning small refineries did not include any
explanation regarding how the Final GAO Report supports their assertion that they face a higher
cost to acquire RINs when compared to larger refineries. Nor did these small refineries attempt
to explain why paying a slightly higher price for RINs (if true) would so significantly impact
their operations as to constitute DEH. It is the obligation of petitioning small refineries to
develop their arguments and show how the information they are presenting supports their
petition. The petitioning small refineries have failed to present those arguments here and
therefore have failed to explain how the Final GAO Report demonstrates they experience DEH
caused by their RFS compliance.

34 "EPA expressed concerns that our analysis did not directly assess whether small refineries experience
disproportionate economic hardship. Given the information available to us at the time, this is not what we analyzed."
Final GAO Report, p. 29.

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EPA has reviewed the Final GAO Report and strongly disagrees with its primary
analysis, conclusions, and recommendations with respect to the SRE program. The Final GAO
Report analysis retains several of the fundamental flaws EPA previously addressed in the EPA
Comment Letter on the Draft Report. For example, GAO did not actually analyze "small
refineries" as defined by the CAA in its analysis. And GAO again reached the same flawed
conclusions when the results of its RIN price analysis changed from small refineries allegedly
paying 39% more to only allegedly paying 2.4% more for RINs. EPA's own analysis corrected
these errors and suggests the resulting price differential could simply be only 0.5% (0.60), and
that difference "could simply reflect noise in the data rather than an actual characteristic of the
RIN market."35 Further, GAO misunderstands and does not address the fact that historically
small refineries have not claimed they paid more than the market price for RINs, and in the
limited instances when individual small refineries made those claims, EPA fully evaluated and
responded to them. Lastly, GAO does not properly account for the process that EPA undertakes
to evaluate SRE petitions, which often includes the very market data GAO suggests is missing.

In its Final Report, GAO asserts that EPA does not have "quality information" to
evaluate SRE petitions.36 The Final GAO Report also asserts that EPA's conclusion regarding
RIN cost passthrough relied on "two assumptions that the agency has not fully assessed" when
making SRE decisions: (1) "EPA assumed that all parties pay and receive one price for RINs"
and (2) "EPA assumed that the studies it reviewed regarding RIN pass-through could be relied
on to draw conclusions about additional markets that were not examined in those studies" (e.g.,
EPA must "fully examin[e] and document[],. .RIN [cost] pass-through in all relevant fuel
markets").37 GAO concludes that "EPA will continue to make decisions on small refinery
exemptions without quality information" and "risks inappropriately denying valid exemption
petitions" if it does not reassess these assumptions.38

EPA rejects these and other statements in the Final GAO Report, as EPA considered
extensive data and other information and explained the basis for the 2022 SRE Denial Actions.
Moreover, EPA attempted several times to explain the discrepancies between EPA's and GAO's
respective analyses during the Agency's engagement with GAO on this audit, but those
explanations were not taken into account in the Final GAO Report. When GAO provided the
Draft Report to EPA, containing many of the same erroneous conclusions as are now found in
the Final GAO Report, EPA expressed its disagreement and began its own analysis to remedy the
flaws with the Draft Report. EPA further explained its reasons for its disagreement in the EPA
Comment Letter, which included preliminary results of EPA's own RIN price analysis. Since
publication of the Final GAO Report, EPA concluded and published its final analysis in the EPA
RIN Price Analysis.

EPA's criticisms and concerns regarding several fundamental flaws in the Final GAO
Report are thoroughly explained in the EPA Final GAO Response. In particular, EPA's response
to Recommendation 1 describes EPA's suggested changes in the EPA Comment Letter to GAO's
analysis in the Draft Report, and how GAO failed to act on or incorporate those comments into

35 Final GAO Response, pg. 4.

36 Final GAO Report, pg. 9.

37 Id. at 10, 13.

3SId. at 13.

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its Final Report.39 As thoroughly explained in the EPA Final GAO Response, GAO's analysis in
its Final Report ultimately does not support GAO's conclusion that small refineries pay more for
RINs than large refineries. Consistent with the EPA Final GAO Response, EPA continues to
disagree with the Final GAO Report, and we do not believe the Final GAO Report provides
persuasive evidence of DEH in support of any of the SRE petitions before us. In reaching this
conclusion, EPA relies upon the voluminous analysis we have conducted on this issue and our
longstanding experience administering the SRE program pursuant to Congress's delegation of
authority to EPA in CAA section 21 l(o)(9). GAO lacks any similar delegation of authority and
has no expertise in or experience from implementing and administering the SRE program.

V. Denial of Petitions and Judicial Review

Section 21 l(o)(9)(B) of the CAA gives EPA the authority to grant an SRE petition only
when a small refinery demonstrates DEH caused by its compliance with the RFS program. Based
on our detailed evaluation, careful consideration of all the available information, consultation
with DOE, and consideration of the DOE Study and other economic factors, EPA finds that none
of the 26 pending SRE petitions for the 2016-2018 and 2021-2023 compliance years have
demonstrated DEH caused by their RFS obligations.

As explained in the 2022 SRE Denial Actions, the market-based design of the RFS
program and the RIN-based compliance system have equalized the cost of compliance among all
market participants, such that no refinery would face DEH from its RFS obligations. After
evaluating an extensive amount of data and available information, we continue to conclude that
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. Hence, small refineries do not face a
disproportionate cost of compliance when compared to other refineries, or to each other. Our
analysis further shows that the costs of RFS compliance (i.e., RINs) are passed through in the
prices of refined products. Hence, in recovering their RIN costs, refineries do not face economic
hardship due to compliance with the RFS program. Finding no disproportionate cost of
compliance and no economic hardship due to the RFS program, we conclude that small refineries
do not face DEH. As such, EPA finds that compliance with the RFS program does not impose
DEH on the petitioning small refineries and, accordingly, is denying 26 pending SRE petitions in
this final action.

Section 307(b)(1) of the CAA governs judicial review of final actions by the EPA. This
section provides, in part, that petitions for review must be filed only in the United States Court of
Appeals for the District of Columbia Circuit: (i) when the agency action consists of "any other
nationally applicable.. .final action taken by the Administrator," or (ii) when a final action is
locally or regionally applicable but "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

39 EPA Final GAO Response, pp. 2-8.

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based on such a determination." The CAA reserves to EPA the complete discretion to decide
whether to invoke the exception in (ii) described in the preceding sentence.40

This final action is "nationally applicable" within the meaning of CAA section 307(b)(1).
Whether an action is "nationally applicable" is a narrow inquiry based only on the "face" of the
action.41 The question is whether the action itself is nationally applicable, not whether the nature
and scope of the arguments raised or relief sought by a petitioner challenging the action are
nationally applicable.42 On its face, this final action is nationally applicable because it denies 26
SRE petitions for 15 small refineries across the country located within 14 states in 7 of the 10
EPA regions and in 8 different Federal judicial circuits. This final action is based on EPA's
consistent nationwide application of its revised interpretation of the relevant CAA provisions and
using its "common, nationwide analytical method" of RIN discount and RIN cost passthrough
principles for evaluating all SRE petitions, no matter the location or market in which the small
refineries operate.43

To the extent a court finds this final action to be locally or regionally applicable, the
Administrator is exercising the complete discretion afforded to him under the CAA to make and
publish a finding that this action is based on a determination of "nationwide scope or effect"
within the meaning of CAA section 307(b)(1).44 In deciding whether to invoke the exception by
making and publishing a finding that this final action is based on a determination of nationwide
scope or effect, the Administrator has also taken into account a number of policy considerations,
including his judgment balancing the benefit of obtaining the D.C. Circuit's authoritative
centralized review versus allowing development of the issue in other contexts and the best use of
Agency resources. The substance of the Administrator's determination is entitled to deference.45
In addition to applying a common analytical method, this action decides SRE petitions for 26
small refineries across the country located within 14 states in 7 of the 10 EPA regions and in 8
different Federal judicial circuits. Where, as here, the Administrator "unambiguously
determine[s] that [a] final action . . . has nationwide scope and effect" and publishes that finding,
"all petitions for review of th[e] action belong in [the D.C.] Circuit" under CAA section

40 Sierra Club v. EPA, 47 F.4th 738, 745 (D.C. Cir. 2022) ("EPA's decision whether to make and publish a finding
of nationwide scope or effect is committed to the agency's discretion and thus is unreviewable"); Texas v. EPA, 983
F.3d 826, 834-35 (5th Cir. 2020).

41 Dalton Trucking, Inc. v. EPA, 808 F.3d 875, 881 (D.C. Cir. 2015).

42 S. III. Power Coop. v. EPA, 863 F.3d 666, 670-71 (7th Cir. 2017); ATKLaunch Sys., Inc. v. EPA, 651 F.3d 1194,
1198-1199 (10th Cir. 2011); RMS of Ga., LLC v. EPA, 64 F.4th 1368, 1372-1373 (11th Cir. 2023).

43 S. Ill Power, 863 F.3d at 671; ATK Launch Sys.,651 F.3d at 1197.

44 In the report on the 1977 Amendments that revised section 307(b)(1) of the CAA, Congress noted that the
Administrator's determination that the "nationwide scope or effect" exception applies would be appropriate for any
action that has a scope or effect beyond a single judicial circuit. See H.R. Rep. No. 95-294 at 323, 324, reprinted in
1977 U.S.C.C.A.N. 1402-03.

45 The Administrator's determination is akin to other determinations that Congress leaves to an agency's broad
discretion, such as the denial of a rulemaking petition, and merits considerable deference. Cf, e.g., WildEarth
Guardians v. EPA, 751 F.3d 649, 651 (D.C. Cir. 2014) (discussingMassachusetts v. EPA, 549 U.S. 497 (2007)); see
also Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 543 (1978) (absent constitutional or statutory
limitations or otherwise "extremely compelling circumstances," agencies "should be free to fashion their own rules
of procedure and to pursue methods of inquiry capable of permitting them to discharge their multitudinous duties");
NAACP v. FPC, 425 U.S. 662, 668 (1976) (reiterating the "general proposition" that agencies have discretion to
determine how to shape their regulatory and adjudicatory actions).

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307(b)(1).46 This outcome promotes the principles underlying CAA section 307(b)(1) and
ensures that petitions for review are consolidated in the D.C. Circuit where Congress designated
them to be heard, avoiding piecemeal litigation, furthering judicial economy, and eliminating the
risk of inconsistent judgments.47

For these reasons, this final action is nationally applicable or, alternatively, 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.

Under CAA section 307(b)(1), petitions for judicial review of this action must be filed in
the United States Court of Appeals for the District of Columbia Circuit within 60 days from the
date notice of this final action is published in the Federal Register.

This action is not a rulemaking and is not subject to the various statutory and other
provisions applicable to a rulemaking. This action is immediately effective upon issuance.

Alcoa, Inc. v. EPA, No. 04-1189, 2004 WL 2713116, at *1 (D.C. Cir. Nov. 24, 2004); see also ATKLaunch Sys.,
Inc., 651 F.3d at 1199 n.4 (acknowledging. llcoa).

47 Texasv. EPA, No. 10-60961, 2011 WL 710598, at *4 (5thCir. Feb. 24, 2011).

11

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Appendix A - Updated Market Analysis

In the 2022 SRE Denial Actions, EPA analyzed the available market data to verify the
economic principles at work and to verify that the RIN cost and RIN discount are being reflected
in the retail price of blended fuel. 48 These analyses confirm that both the cost of the RINs—
which is reflected in the price for fuel and blendstocks—and the discount of the RINs are passed
through to wholesale purchasers in the marketplace in the price they pay for blended fuel. For
this action, EPA updated its analysis from the 2022 SRE Denial Actions regarding RIN cost
passthrough49 to include the available market data for 2021 and 2022 and again found that the
RIN cost per gallon is passed through in the prices of petroleum transportation fuels. EPA used
the same analytical approach described in the 2022 SRE Denial Actions.50 Including the 2021-
2022 market data in its analysis, EPA again found a strong correlation between the RIN cost per
gallon of petroleum transportation fuel and the price difference in New York Harbor between
ultra-low sulfur diesel (ULSD) (which is subject to an RFS obligation) and heating oil (which is
essentially identical to ULSD but is not subject to an RFS obligation), as shown in Figures A-l
and 2. EPA found a similar correlation between the RIN cost per gallon of petroleum
transportation fuel and the price difference in the U.S. Gulf Coast between ULSD and jet fuel (a
non-obligated fuel similar to ULSD, but less so than heating oil), as shown in Figures A-3 and 4.
As explained in the 2022 SRE Denial Actions, there is more noise in the data for ULSD vs. jet
fuel, but a general relationship between the price difference of these fuels and the RIN cost can
be seen. EPA concludes that the 2021-2022 market data continue to reflect the economic
principle of RIN cost passthrough.

48 2022 SRE Denial Actions, Section IV.D.2.d.

49 2022 SRE Denial Actions, Section IV.D.2.d.i.

50 2022 SRE Denial Actions, Section IV.D.2.d.i.

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Figure A-l: Price Difference Between ULSD and Heating Oil in New York Harbor and
RIN Cost (2017-2022)51

$0.60

(Ja en 	

JU. JU

$0.40
$0.30

T. ^ ,





n



j



r

f

5- —1		— "" 1 II

$(0 1&)3^2017 1/3/2018 _ 1/3/2019 1/3/2020 1/3/2021 1/3/2022





$(0.30)





$(0.50)

ULSD-Heating Oil RIN Cost

Figure A-2: Correlation Between Price Difference of ULSD and Heating Oil and RIN Cost
(2017-2022)

$0,60

$0.50

$0.40

=E $0.30
z

= $0.20
O

w> $0.10

TO	<-













RIN Cost

51 Prices for ULSD and heating oil are reported by EIA and are available at

https://www.eia.gov/dnav/pet/pet pri spt si d.htm.

13

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Figure A-3: Price Difference Between ULSD and Jet Fuel in the Gulf Coast and RIN Cost
(2017-2022)52

¦ ULSD-Jet Fuel

•RIN Cost

Figure A-4: Correlation Between Price Difference of ULSD and Jet Fuel and RIN Cost
(2017-2022)53

52	Prices for ULSD and jet fuel are reported by EIA and are available at

https://www.eia.gov/dnav/pet/pet pri spt si d.htm. Also apparent in Figure A-3 is the impact of the C0V1D-19
pandemic. In late March 2020, air travel and demand for jet fuel decreased dramatically, resulting in an oversupply
of jet fuel and a spike in the price premium for ULSD over jet fuel. Over time, as demand for jet fuel gradually
increased and refiners adjusted their production to better match fuel demand, the price difference between jet fuel
and ULSD returned to match the RIN cost.

53	Circled data is for March through May 2020, and reflects the tempo ran sharp decrease in jet fuel prices due to the
COVID-19 pandemic.

14

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