The Environmental Protection Agency (EPA) plays a central role in balancing clean air protections with the economic pressure that comes with changing market structures. It also must use its research and expertise to shape that balance in light of the modern climate crisis. In Sinclair Wyoming Refinery Co. v. EPA (Sinclair), the Court of Appeals for the District of Columbia Circuit assessed this balance under the Clean Air Act (CAA) and its Renewable Fuel Standard program (RFS), which requires the EPA to balance its interest in reducing fossil fuels with its interest in preventing disproportionate economic hardship on regulated entities.
The RFS program requires refiners (and importers) to meet annual renewable fuel requirements set by the EPA. Each year, regulated entities must obtain and retire enough credits that represent renewable fuels, called “Renewable Identification Numbers” (RINs), to satisfy the EPA’s mandatory renewable fuel volume targets for each category. When enacting the RFS program, Congress created a blanket exemption for small refineries, and those exemptions can be extended upon a showing that compliance creates a disproportionate economic hardship on a particular refinery.
The D.C. Circuit opinion emphasized the court’s reluctance to deviate from traditional metrics for assessing disproportionate economic hardship. However, traditional metrics fail to encompass changing circumstances. As new market information emerges regarding how refineries manage RFS compliance, EPA decision making should reflect updated market research. EPA decision making that reflects new research on RIN market dynamics and RFS compliance will allow the agency to better enforce the congressionally intended balance between increasing the national renewable fuel supply and preserving the important economic value of small refineries.
First, this In Brief summarizes the CAA’s RFS program and small refinery exemptions, market research on RIN compliance, relevant case law, and the standard of review under the Administrative Procedure Act (APA). Second, it summarizes the D.C. Circuit’s decision in Sinclair. Finally, it critiques the existing metric for assessing disproportionate economic hardship and suggests areas to integrate theories on RIN market dynamics into decision making on small refinery exemption applications. Ultimately, the EPA should have the power to utilize current market trends, specifically RIN cost passthrough theory, in its decision to grant or deny RFS exemptions.
