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IX

. Statutory and Executive Order Reviews

C. Regulatory Flexibility Act (RFA)

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden, or othe rwise has a positive economic effect on the small entities subject to the rule.

The small entities directly regulated by the RFS program are small refiners, which are defined at 13 CFR 121.201 as refiners with 1,500 e mployees or less company

- wide. The imp acts of the RFS program as a whole on small entities were addressed in the March 26, 2010

, RFS2 rulemaking (75 FR 14670), which was a rule that implemented the entire program required by the Energy Independence and Sec urity Act of 2007 (EISA 2007). As such , the Small Business Regulatory Enforcement Fairness Act (SBREFA) panel process that took place prior to the 2010 rule was also for the entire RFS program and looked at impacts o n small refiners through 2022.

For the SBREFA process for the March 26, 2010

, RFS2 rulemaking, EPA conducted outreach, fact

- finding, and analysis of the potential impacts of the program on small refiners which are all described in the Final Regulatory Flexibility Analysis, located in the rulemaking docket (EPA

– HQ

– OAR

– 2005

– 0161). Th is analysis looked at impacts to all refiners, including small refiners, through the year 2022 and found that the program would not have a significant economic impact on a substantial number of small entities, and that this impact was expected to decrease over time, e ven as the standards increased. The analysis included a cost

- to

- sales ratio test, a ratio of the estimated annualized compliance costs to the value of sales per company, for gasoline and/or diesel small refi ners subject to the standards. From t his test, it was estimated that all directly regulated small entities would have compliance costs that are less than one percent of their sales over the life of the program (75 FR 14862).

W e have determined that t his final rule will not impose any additional requirements on small entities beyond those already analyzed, since the impacts of this final rule are not greater or fundamentally different than those already considered in the analysis for the March 26, 2010

, rule assuming full impl ementation of the RFS program. As shown above in Tables I

- 1 and I.A

- 1 (and discussed further in Sections II and IV), this rule finalize s the 2014, 2015, and 2016 volume requirements for cellulosic biofuel, advanced biofuel, and total renewable fuel at levels significantly below the statutory volume targets. This exercise of EPA’s waiver authorities reduces burdens on small entities, as compared to the burdens that would be imposed under the volumes specified in the Clean Air Act in the absence of waive rs

– which are the volumes that we assessed in the screening analysis that we prepared for implementation of the full program

. Regarding the biomass

- based diesel standard, we are finalizing an increase in the volume requirements for 2014

- 2016 over the stat utory minimum value of 1 billion gallo ns. However, this is a nested standard within the advanced biofuel category, for which we are finalizing significant reductions fro m the statutory volume targets. As discussed in Section III, we are setting the biomass

- based diesel volume requirement at a level below what is anticipated will be producedPage 2 of 3

and used to satisfy the reduced advanced biofuel requirement. The net result of the standards being final ized in this action i s a reduction in burden as compared to implementation of the statutory volume targets, as was assumed in the March 26, 2010

, analysis.

For this final rule, EPA has conducted a screening analysis to assess whether it should make a finding that this action would no t have a significant economic impact on a substan tial number of small entities. C urrently

- available information shows that the impact on small entities from implementation of this rule will not be significant. EPA has reviewed and assessed the available informatio n , which suggests that obligated parties, including small entities, are generally able to recover the purchase cost of the RINs necessary for compliance through higher sales prices of the petroleum products they sell than would be expected in the absence of the RFS
program. 1

, 2 Even if we were to assume that the cost of RINs were not recovered by obligated parties, and we used the maximum values of the illustrative costs discussed in S ection II. I
, the gasoline and diesel fuel volume projections from the October 2015 version of EIA's Short

- Term Energy Outlook , and current wholesale fuel prices, a cost

- to

- sales ratio test shows that the costs to small entities of the RFS standards are les s than 1% of the value of their sales.

While the rule will not have a significant economic impact on a substantial number of small entities

, there are compliance flexibilities in the program that can help to red uce impacts on small entities. These flexibilities include being able to comply through RIN trading rather than renewable fuel blending , 20% RIN rollover allowance (up to 20% of an obligated party’s RVO can be met using previous

- year RINs), and deficit carry forward (the ability to carr y over a deficit from a given year into the following year, providing that the deficit is satisfied toget her with the next year’s RVO). In the March 26, 2010

, final rule, we discussed other potential small entity flexibilities that had been suggested by th e SBREFA panel or through comments, but we did not adopt them , in part because we had serious concerns regarding our authority to do so

. Additionally, as we realize that there may be cases in which a small entity experiences hardship beyond the level of assistance afforded by the program flexibilities, the program provides hardship relief provisions for small entities (small refiners), as well as for small refineries

. 3 As required by the statute, the RFS regulations include a hardship relief provision (at 40 CFR 80.1441(e)(2)) which allow s for a small refinery 4 to petition for an extension of its small refinery exemption at any time based on a showing that compliance with the requirements of the RFS program would result in the refinery experiencing a “ disp roportionate economic hardship

. ” EPA regulations provide similar relief to small refiners that are not eligible for small refinery relief. A small refiner may petition for a small refiner exemption based on a similar showing that compliance with the requir ements of the RFS program would result in the refiner experiencing a

1 For a further discussion of the ability of obligated parties to recover the cost of RINs see "A Preliminary Assessment of RIN Market Dynamics, RIN Prices, and Their Effect s ," Dallas Burkholder, Office of Transportation and Air Quality, US EPA. May 14, 2015

, EPA Air Docket EPA

- HQ

- OAR

- 2015

- 0111

2 Knittel, Christopher R., Ben S. Meiselman, and James H. Stock. “ The Passthrough of RIN Prices to Wholesale and Retail Fuels Under the Renewable Fuel Standard. ” Working Paper 21343. NBER Working Paper Series. Available online http://www.nber.org/papers/w21343.pdf

. 3 Se e CAA section 211(o)(9)(B)

. 4 A small refinery, as defined by the statute, is a refinery with an average daily crude throug hput of 75,000 barrels or less. As this is a facility

- based definition, not company

- based as SBA’s small refiner definition is, it fo llows that not all small refiners’ facilities meet the definition of a small refinery.Page 3 of 3

“ disproportionate economic hardship ” (see 40 CFR 80.1442(h))

. EPA evaluates these petitions

on a case

- by

- case basis and may approve such petitions if it finds that a dis proportionate economic hardship exists

. In evaluating such petitions, EPA consults with the U.S. Department of Energy, and takes the findings of DOE’s 2011 Small Refinery Study and other economic factors into consideration. For the 2013 RFS standards, the EPA successful ly implemented these provisions by evaluating 16 petitions for exemptions from small refineries (one was later withdrawn).

Given that this final rule would not impose additional requirements on small entities, would decrease burden via a reduction in requ ired volumes as compared to statutory volume targets, would not change the compliance flexibilities currently offered to small entities under the RFS program ( including the small refinery hardship provisions we continue to successfully implement )

, and avai lable information shows that the impact on small entities from implementation of this rule will not be significant

, we have therefore concluded that this action would not have a significant impact on a substantial number of small entities

.