The Honorable Stephen L. Johnson 

Administrator 

U.S. Environmental Protection Agency 

Ariel Rios Building 

1200 Pennsylvania Avenue, N.W. 

Washington, D.C. 20460 

Dear Mr. Johnson: 

Enclosed for your consideration is the Report of the Small Business Advocacy Review 

Panel (SBAR Panel or the Panel) convened for the proposed rulemaking “Renewable Fuel 

Standards 2” (RFS2) that the U.S. Environmental Protection Agency (EPA or the Agency) is 

currently developing. 

On July 9, 2008, EPA's Small Business Advocacy Chairperson (SBAC) convened this 

Panel under Section 609(b) of the Regulatory Flexibility Act (RFA) as amended by the Small 

Business Regulatory Enforcement Fairness Act (SBREFA) of 1996. In addition to the Chair, the 

Panel consisted of the Director of EPA's Assessment and Standards Division within the Office of 

Transportation and Air Quality, the Chief Counsel for Advocacy of the Small Business 

Administration, and the Administrator of the Office of Information and Regulatory Affairs 

within the Office of Management and Budget. 

The Panel's findings and discussion are based on the information available during the 

term of the Panel. EPA is continuing to conduct analyses relevant to the proposed rule, and 

additional information may be developed or obtained during the remainder of the rule 

development process and from public comment on the proposed rule. Any options the Panel 

identifies for reducing the rule's regulatory impact on small entities may require further analysis 

and/or data collection to ensure that the options are practicable, enforceable, environmentally 

sound, and consistent with the Clean Air Act, primarily sections 202(1) and 183(e). 

Small Entities That May Be Subject to the Proposed Regulation

Gasoline and Diesel Fuel Refiners

EPA's current assessment is that 21 gasoline and diesel fuel refiners meet SBA's criterion 

of having 1,500 employees or less. It should be noted that because of the dynamics in the 

refining industry (i.e., mergers and acquisitions) and decisions by some refiners to enter or leave 

the gasoline market, the actual number of refiners that ultimately qualify for small refiner status 

under the RFS2 program could be much different than these initial estimates. 

Summary of Small Entity Outreach

Before beginning the formal SBREFA process, EPA actively engaged in talking to 

entities that would potentially be affected by the upcoming rulemaking. EPA began well in 
ES-2

advance of the SBREFA process conducting phone conferences and face-to-face meetings with 

various parties throughout the fuel industry, including small refiners, to discuss the changes 

made by the Energy Independence and Securities Act and how these changes would affect the 

RFS program. This helped lead to the selection of a set of potential SERs that represent a crosssection of small refiners. 

EPA provided each business with EPA/SBAC fact sheets on the SBREFA process and 

background information on and the rulemaking process and the upcoming RFS2 proposed rule 

itself. Once potential SERs were identified, EPA began having more discussions to better 

understand the needs of the small entities in more detail. 

On June 3, 2008 EPA held a two-hour outreach meeting with potential SERs. All eight 

of the potential SERs participated in the meeting (in person and by phone). These outreach 

meetings were held to provide the potential SERs with information on the SBREFA process and 

the role of a SER, and to solicit feedback from the potential SERs on the upcoming rulemaking. 

After the Panel convened on July 9, 2008, a second outreach meeting was held on July 30, 2008 

with the SERs (the potential SERs became SERs once the Panel convened). Seven SERs 

participated in the meeting by phone. Following each of the outreach meetings, comments were 

received from the SERs; a summary and full text of these comments can be found in the Panel 

report. 

Regulatory Approaches

As required by section 211(o) of the Clean Air Act, as amended by the Energy 

Independence and Security Act of 2007 (EISA), 36 billion gallons of renewable fuels are 

required to be blended into gasoline and diesel fuel by the year 2022. To meet this requirement, 

obligated parties must comply with four “nested” standards (total renewable fuel, advanced 

biofuel, cellulosic biofuel, and biomass-based diesel). Of the 36 billion gallons of total 

renewable fuels mandated by EISA for 2022, 21 billion gallons of that must be advanced biofuel; 

of the 21 billion gallons of advanced biofuel required, 16 billion gallons must be cellulosic 

biofuel and 1 billion gallon must be biomass-based diesel. For the RFS2 proposed rule, EPA 

intends to propose amending the RFS1 program regulations to implement the new EISA 

requirements. EPA anticipates that the RFS2 program will continue to use many aspects of the 

RFS1 program (such as the Renewable Identification Number system), but amendments to the 

regulations will be needed to account for additional changes made by EISA, including additional 

definitions (for the new renewable fuel categories), lifecycle GHG reduction thresholds, etc. 

EPA is considering an implementation date of January 1, 2010. 

Panel Findings and Discussion

The Panel assessed each of the issues raised in the outreach meetings and in written 

comments by the SERs. The Panel also discussed regulatory approaches and agreed to request 

comment in the proposed rulemaking on such issues. 

Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Proposed Rule
ES-3

Registration, recordkeeping and reporting are necessary to track compliance with the 

RFS2 requirements and transactions involving RINs. These compliance requirements under the 

RFS2 program will likely be similar to those required under the RFS1 program. Program 

registration for the RFS1 program uses the same basic forms that EPA uses under the 

reformulated gasoline (RFG) and anti-dumping program, as these forms are well known in the 

regulated community and are simple to fill out. Reporting under the RFS1 program currently 

uses a simplified method of reporting via EPA’s Central Data Exchange (CDX), and records 

related to RIN transactions may be kept in any format and the period of record retention by 

reporting parties is five years, similar to other EPA fuel programs. 

Other Relevant Federal Rules Which May Duplicate, Overlap, or Conflict With the Proposed 

Rule

The primary federal rules that the Panel notes are related to the proposed RFS2 rule under 

consideration are the Mobile Source Air Toxics rule (Federal Register Vol. 72, p. 8428, 

February 26, 2007) and the first Renewable Fuel Standard (RFS1) rule (Federal Register Vol. 

72, p. 23900, May 1, 2007). The Panel is also aware of a Technical Amendment Direct Final 

Rulemaking for RFS1, which EPA expects to be published by early Fall 2008. 

Regulatory Alternatives

The Panel considered a wide range of options and regulatory alternatives for providing 

small businesses with flexibility in complying with the RFS2 standards. As part of this process, 

the Panel requested and received comment on many ideas that were suggested by both the Panel 

members and the SERs. Taking into consideration the comments received on these ideas, as well 

as additional business and technical information gathered from and about potentially affected 

small entities, the Panel summarizes the major options below. The complete set of 

recommendations can be found in section 9 of the full Panel Report. 

Major Panel Recommendations

Regulatory Flexibility Options

Delay in Standards

 The RFS1 program regulations provide small refiners who operate small refineries as 

well as small refiners who do not operate small refineries with a temporary exemption 

from the standard through December 31, 2010. Small refiner SERs suggested that an 

additional temporary exemption for the RFS2 program would be beneficial to them in 

meeting the standards. EPA evaluated a temporary exemption for at least some of the 

four required RFS2 standards for small refiners. The Panel recommends that EPA 

propose a delay in the effective date of the standards until 2014 for small entities, to the 

maximum extent allowed by the statute. However, the Panel recognizes that EPA has 

serious concerns about its authority to provide an extension of the temporary exemption 

for small refineries that is different from that provided in CAA section 211(o)(9), since 

Congress specifically addressed an extension for small refineries in that provision. 
ES-4

Phase-in

Small refiner SERs’ suggested that a phase-in of the obligations applicable to small 

refiners would be beneficial for compliance, such that small refiners would comply by 

gradually meeting the standards on an incremental basis over a period of time, after 

which point they would comply fully with the RFS2 standards, EPA has serious concerns 

about its authority to allow for such a phase-in of the standards. CAA section 

211(o)(3)(B) states that the renewable fuel obligation shall “consist of a single applicable 

percentage that applies to all categories of persons specified” as obligated parties. This 

kind of phase-in approach would result in different applicable percentages being applied 

to different obligated parties. Further, as discussed above, such a phase-in approach 

would provide more relief to small refineries operated by small refiners than that 

provided under the small refinery provision.1

 Thus the Panel recommends that EPA 

should invite comment on a phase-in, but not propose such a provision. 

RIN-related Flexibilities

The small refiner SERs requested that the proposed rule contain provisions for small 

refiners related to the RIN system, such as flexibilities in the RIN rollover cap percentage 

and allowing all small refiners to use RINs interchangeably. Currently in the RFS 

program, EPA allows for 20 percent of a previous year’s RINs to be “rolled over” and 

used for compliance in the following year. A provision to allow for flexibilities in the 

rollover cap could include a higher RIN rollover cap for small refiners for some period of 

time or for at least some of the four standards. Since the concept of a rollover cap was 

not mandated by section 211(o), EPA believes that there is an opportunity to provide 

appropriate flexibility in this area to small refiners under the RFS2 proposed program but 

only if it is determined that there is a disproportionate effect warranting relief. The Panel 

recommends that EPA request comment on increasing the RIN rollover cap percentage 

for small refiners, and further that EPA should request comment on an appropriate level 

of that percentage. The Panel recommends that EPA should invite comment on allowing 

RINs to be used interchangeably for small refiners, but should not propose this concept 

because under this approach small refiners would arguably be subject to a different 

applicable percentage than other obligated parties. 

Program Review

With regard to the suggested program review, EPA raised the concern that this could lead 

to some redundancy since EPA is required to publish a notice of the applicable RFS 

standards in the Federal Register annually, and that this annual process will inevitably 

include an evaluation of the projected availability of renewable fuels. Nevertheless, the 

SBA and OMB Panel members believe that a program review could be helpful to small 

entities in providing them some insight to the RFS program’s progress and alleviate some 

uncertainty regarding the RIN system. As EPA will be publishing a Federal Register 

notice annually, the Panel recommends that EPA include an update of RIN system 

progress (e.g., RIN trading, RIN availability, etc.) in this notice and that the results of this 

evaluation be considered in any request for case-by-case hardship relief. The Panel also 

recommends that EPA work with DOE in the development of DOE’s small refinery 

 

1 Additional extensions under section 211(o)(9) are discussed below. To the extent a phase-in may be an 

appropriate form for an extension under that provision, the Panel recommends that it be considered in that context. 
ES-5

study, specifically to communicate the comments that SERs raised during the Panel 

process. 

Extension of Existing RFS1 Temporary Exemption

The Panel recommends that EPA propose in the RFS2 program the provision at 40 CFR 

80.1141(e) extending the RFS1 temporary exemption for at least two years for any small 

refinery that DOE determines would be subject to disproportionate economic hardship if 

required to comply with the RFS2 requirements. 

Petitions for an Extension Based on Disproportionate Economic Hardship

While SERs did not specifically comment on the concept of hardship provisions for the 

upcoming proposal, the Panel notes that under CAA section 211(o)(9)(B) small refineries 

may apply to EPA for case-by-case extensions of the small refinery temporary exemption 

on the basis of disproportionate economic hardship. The Panel recommends that EPA 

propose in the RFS2 program a case-by-case hardship provision for small refineries 

similar to that provided at 40 CFR 80.1141(e)(1). The Panel also recommends that EPA 

propose a case-by-case hardship provision for small refiners that do not operate small 

refineries that is comparable to that provided for small refineries under section 

211(o)(9)(B), using its discretion under CAA section 211(o)(3)(B). This would apply if 

EPA does not adopt an automatic extension for small refiners, and would allow those 

small refiners that do not operate small refineries to apply for the same kind of extension 

as a small refinery. The Panel recommends that EPA take into consideration the results 

of the annual update of RIN system progress. 

The purpose of the Panel process is to solicit information as well as suggested flexibility 

options from the SERs, and the Panel recommends that EPA continue to do so during the 

development of the RFS2 rule. Recognizing the concerns about EPA’s authority to provide 

extensions to small refineries different from that provided in section 211(o)(9), the Panel 

recommends that EPA continue to evaluate this issue, and that EPA request comment on its 

authority and the appropriateness of providing extensions beyond those authorized by section 

211(o)(9) for small refineries operated by a small refiner. The Panel also recommends that EPA 

propose to provide the same extension provision to small refiners who do not operate small 

refineries as is provided for small refineries. 

Final Report 

of the 

Small Business Advocacy Review Panel 

on EPA=s Planned Proposed Rule 

Regulation of Fuels and Fuel Additives: 

Renewable Fuel Standard Program 

September 5, 2008

Table of Contents 

1. Introduction 

2. Background 

2.1 Regulatory History 

2.2 Description of Rule and its Scope 

2.3 Related Federal Rules 

3. Overview of Proposal Under Consideration 

3.1 Potential Requirements and Guidelines of the Proposal 

3.2 Options Likely to be Proposed 

3.3 Broader Rule Issues 

4. Applicable Small Entity Definitions 

5. Small Entities That May Be Subject to the Proposed Regulation 

6. Summary of Small Entity Outreach 

7. List of Small Entity Representatives 

8. Summary of Comments from Small Entity Representatives 

8.1 Number and Types of Entities Affected 

8.2 Potential Reporting, Recordkeeping, and Compliance 

8.3 Related Federal Rules 

8.4 Regulatory Flexibility Alternatives 

 8.5 Discussion and Summary of Comments During June 3, 2008 EPA Outreach 

 Meeting 

 8.6 Discussion and Summary of Comments During July 30, 2008 Outreach Meeting 

9. Panel Findings and Discussions 

 9.1 Number and Types of Entities Affected 

 9.2 Potential Reporting, Record Keeping, and Compliance 

 9.3 Related Federal Rules 

 9.4 Regulatory Flexibility Alternatives 

Appendix A: List of Materials Shared With SERs 

Appendix B: Written Comments Received from SERs 
1. INTRODUCTION 

This report is presented by the Small Business Advocacy Review Panel (SBAR Panel or 

Panel) convened for the planned proposed rulemaking on the Renewable Fuel Standard Program 

(RFS2), currently being developed by the U.S. Environmental Protection Agency (EPA). Under 

section 609(b) of the Regulatory Flexibility Act (RFA) as amended by the Small Business 

Regulatory Enforcement Fairness Act of 1996 (SBREFA), a Panel is required to be convened 

prior to publication of the initial regulatory flexibility analysis (IRFA) that an agency may be 

required to prepare under the RFA. In addition to EPA’s Small Business Advocacy Chairperson, 

the Panel consisted of the Director of the Assessment and Standards Division within EPA’s 

Office of Air and Radiation- Office of Transportation and Air Quality, the Administrator of the 

Office of Information and Regulatory Affairs within the Office of Management and Budget, and 

the Chief Counsel for Advocacy of the Small Business Administration. 

This report includes the following: 

• background information on the planned proposed rule under development; 

• information on the types of small entities that would be subject to the planned proposed 

 rule ; 

• a summary of the Panel’s outreach activities; and 

• the comments and recommendations of the Small Entity Representatives (SERs). 

Section 609(b) of the RFA directs the Panel to report on the comments of small entity 

representatives and make findings on issues related to identified elements of IRFA under section 

603 of the RFA. Those elements of an IRFA are: 

• a description of and, where feasible, an estimate of the number of small entities to which 

the proposed rule will apply; 

• projected reporting, record keeping, and other compliance requirements of the proposed 

rule, including an estimate of the classes of small entities which will be subject to the 

requirements and the type of professional skills necessary for preparation of the report or 

record; 

• an identification, to the extent practicable, of all other relevant Federal rules which may 

duplicate, overlap, or conflict with the proposed rule; 

• any significant alternatives to the proposed rule which accomplish the stated objectives of 

applicable statutes and which minimize any significant economic impact of the proposed 

rule on small entities; and 

• any impacts on small entities, such as a business or community, of the proposed rule or 

1
significant alternatives to the proposed rule. 

Once completed, the Panel report is provided to the agency issuing the proposed rule and 

included in the rulemaking record. In light of the Panel report, and where appropriate, the 

agency is to make changes to the draft planned proposed rule, the IRFA for the planned proposed 

rule, or the decision on whether an IRFA is required. 

It is important to note that the Panel’s findings and discussion will be based on the 

information available at the time the final Panel report is drafted. EPA will continue to conduct 

analyses relevant to the proposed rule, and additional information may be developed or obtained 

during the remainder of the rule development process. The Panel makes its report at a 

preliminary stage of rule development and its report should be considered in that light. At the 

same time, the report provides the Panel and the Agency with an opportunity to identify and 

explore potential ways of shaping the proposed rule to minimize the burden of the rule on small 

entities while achieving the rule’s purposes. 

Any options identified by the Panel for reducing the rule’s regulatory impact on small 

entities may require further analysis and/or data collection to ensure that the options are 

practicable, enforceable, environmentally sound, and consistent with the Clean Air Act. 

2. BACKGROUND

2.1 Background and Regulatory History

 Section 1501 of the Energy Policy Act of 2005 (EPAct) amended section 211 of the 

Clean Air Act (CAA) by adding section 211(o) which required the Environmental Protection 

Agency (EPA) to promulgate regulations implementing a renewable fuel program. EPAct 

specified that the regulations must ensure a specific volume of renewable fuel to be used in 

gasoline sold in the U.S. each year, with the total volume increasing over time. The goal of the 

program was to reduce dependence on foreign sources of petroleum, increase domestic sources 

of energy, and help transition to alternatives to petroleum in the transportation sector. 

The final Renewable Fuels Standard (RFS1) program rule was published on May 1, 2007, 

and the program began on September 1, 2007. Per EPAct, the RFS1 program created a specific 

annual level for minimum renewable fuel use that increases over time—resulting in a 

requirement that 7.5 billion gallons of renewable fuel be blended into gasoline (for highway use 

only) by 2012. Under the RFS program, compliance is based on meeting the required annual 

renewable fuel volume percent standard (published annually in the Federal Register by EPA) 

through the use of Renewable Identification Numbers, or RINs, 38-digit serial numbers assigned 

to each batch of renewable fuel produced. For obligated parties (those who must meet the annual 

volume percent standard), RINs must be acquired to show compliance. 

2.2 Description of the Rule and its Scope

The Energy Independence and Security Act of 2007 (EISA) amended section 211(o), and 

2
the RFS program, by requiring higher volumes of renewable fuels, to result in 36 billion gallons 

of renewable fuel by 2022. EISA also expanded the purview of the RFS program by requiring 

that these renewable fuels be blended into gasoline and diesel fuel (both highway and nonroad). 

This expanded the pool of regulated entities, so the obligated parties under the RFS2 program 

will now include certain refiners, importers, and blenders of these fuels that were not previously 

covered by the RFS1 program. In addition to the total renewable fuel standard required by 

EPAct, EISA added standards for three additional types of renewable fuels to the program 

(advanced biofuel, cellulosic biofuel, and biomass-based diesel) and requires compliance with all 

four standards. 

2.3 Related Federal Rules

The primary federal rules that are related to the proposed RFS2 rule under consideration 

are the Mobile Source Air Toxics rule and the first Renewable Fuel Standard (RFS1) rule 

(Federal Register Vol. 72, p. 23900, May 1, 2007). In addition, the RFS1 Technical Amendment 

Direct Final Rulemaking is expected to be published by early Fall 2008.1

 

3. OVERVIEW OF PROPOSAL UNDER CONSIDERATION 

3.1 Potential Requirements and Guidelines of the Proposal

As stated above, EISA requires 36 billion gallons of renewable fuel by the year 2022 and 

requires that renewable fuels must be blended into both gasoline and diesel. Unlike the RFS1 

program (which only required compliance with one total renewable fuel standard until 2012, and 

thereafter also required compliance with a cellulosic biomass standard), obligated parties must 

comply with the four “nested” standards described above in section 2.2 (total renewable fuel, 

advanced biofuel, cellulosic biofuel, and biomass-based diesel) to reach the 36 billion gallon 

requirement. Of the 36 billion gallons of total renewable fuels mandated by EISA for 2022, 21 

billion gallons of that must be advanced biofuel; of the 21 billion gallons of advanced biofuel 

required, 16 billion gallons must be cellulosic biofuel and 1 billion gallon must be biomass-based 

diesel. 

 While EPA intends to propose to largely use the framework and regulations currently in 

place for the RFS1 program, EPA will need to make some changes to the regulations to account 

for the new requirements mandated by EISA, as discussed more below. 

3.2 Options Likely to be Proposed

 The details of the proposed RFS2 program are still under development. However, as 

EISA amended the mandates in section 211(o), EPA will propose amending the RFS1 program 

regulations to implement the new EISA requirements. EPA anticipates that the RFS2 program 

will continue to use the RIN system developed for RFS1, though some modifications will be 

 

1

This Direct Final Rule will simply correct minor typographical errors and provide clarification on existing 

provisions in the RFS1 regulations.

3
necessary to account for the four nested standards required by EISA. Further, EPA anticipates 

amending the regulations to account for additional changes made by EISA, including additional 

definitions (for the new renewable fuel categories), lifecycle GHG reduction thresholds, etc. 

For recently finalized or promulgated fuel programs (e.g., the Mobile Source Air Toxics 

rule (MSAT2), and the Renewable Fuels Standard rule (RFS1)), EPA included regulatory 

flexibility provisions for small refiners. The RFS1 rule included an exemption from the 

renewable fuel standard requirements for small refineries (defined by EPAct as refineries with a 

crude throughput of no more than 75,000 barrels of crude per day) through December 31, 2010, 

as mandated by EPAct’s amendments to the CAA. This small refinery exemption applied to 

most, but not all, of the small refiners. Using EPA’s discretion under CAA section 

211(o)(3)(B)(ii)(I)2

, EPA provided the same temporary exemption to the remaining small 

refiners that met the Small Business Administration’s definition of a small refiner (1,500 

employees or less, company-wide) but did not operate a small refinery (as defined in section 

211(o)(9). Congress did not amend or change the relief provided to small refineries through 

EISA’s amendments to CAA section 211(o). 

As EPA develops the proposed RFS2 program, EPA is considering appropriate options 

that would, consistent with the Clean Air Act, ease the compliance burden for small businesses 

that may be affected by the rule while maintaining the overall goals of the program. EPA will 

continue to seek input from small entities throughout the regulatory development process. While 

not an exhaustive list, the following potential regulatory flexibility provisions to assist small 

refiners in compliance with the RFS2 program requirements have been identified and are being 

evaluated. 

RIN-related Flexibilities

EPA intends to seek comment in the proposed rule on provisions for small refiners 

related to the RIN system. Such provisions could include flexibilities in the RIN rollover 

cap percentage. Currently in the RFS program, EPA allows for 20 percent of a previous 

year’s RINs to be “rolled over” and used for compliance in the following year. A 

provision to allow for flexibilities in the rollover cap could include a higher RIN rollover 

cap for small refiners for some period of time. 

Extension of Existing RFS1 Temporary Exemption

CAA section 211(o)(9)(A)(ii) requires the Department of Energy (DOE) to conduct a 

study to determine if compliance with the RFS2 requirements imposes disproportionate 

economic hardship on small refineries. If DOE determines that a small refinery would be 

subject to disproportionate hardship then EPA is required to grant an extension of at least 

2 years. EPA intends to propose the same extension from the RFS1 program (at 40 CFR 

80.1141(e)) in the RFS2 program for any small refinery DOE determines meets such 

criteria. 

Petitions for Disproportionate Hardship Relief

EPA intends to propose the same case-by-case hardship provision from the RFS1 

 

2 “[...The renewable fuel obligation determined for a calendar year under clause (i) shall] be applicable to 

refineries, blenders, and importers, as appropriate.” 

4
program (at 40 CFR 80.1141(e)(1)) in the RFS2 program for small refineries to apply for 

hardship relief at any time on the basis of disproportionate economic hardship per CAA 

section 211(o)(9(B). The results of the DOE study, and a consideration of EPA’s ongoing 

review of the functioning of the RIN market, could factor into the basis for approval of 

such a hardship. 

EPA is also considering proposing a case-by-case hardship provision, using its discretion 

under CAA section 211(o)(3)(B)(ii)(I) (that the standards shall be applicable to obligated 

parties “as appropriate”), to allow those small refiners that are not small refineries to 

apply for the same relief available to small refineries based on a showing of 

disproportionate economic hardship. 

Please see section 9.4 of this Report for flexibilities the Panel recommends that EPA 

propose, as well as more discussion on EPA’s discretion in providing regulatory flexibility for 

small refiners in the RFS2 program. 

3.3 Broader Rule Issues 

In developing the proposed RFS2 rule, EPA is also evaluating the RFS1 program and will 

use this opportunity to address concerns that have arisen during implementation of the RFS1 

program. During the SBREFA Panel process, some SERs raised concerns over the burden 

placed on them to implement the RIN system—these concerns are largely the same as those 

raised by other regulated entities. EPA is currently processing the multitude of reports that have 

been received for the first RFS1 reporting period. Many reporting errors have been discovered, 

and those who have participated in RIN trading so far have made suggestions to EPA for 

improvements in the RIN program. EPA’s proposed rule will include proposed options to 

improve the RIN system, and will request comment on these options. However, EPA does 

suggest that SERs also provide comments during the rulemaking’s public comment period. 

These concerns are broader rulemaking issues, and are better suited for discussion in the 

rulemaking process, rather than in the SBREFA process. 

4. APPLICABLE SMALL ENTITY DEFINITIONS 

For purposes of assessing the impacts of the proposed rule on small entities, small entity 

is defined as: (1) a small business as defined by the Small Business Administration's (SBA) 

regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a 

city, county, town, school district or special district with a population of less than 50,000; and (3) 

a small organization that is any not-for-profit enterprise which is independently owned and 

operated and is not dominant in its field. 

Small businesses (as well as large businesses) would be regulated by this rulemaking, but 

not small governmental jurisdictions or small organizations as described above. As set by SBA, 

the categories of small entities that will potentially be affected by this rulemaking are defined in 

the following table: 

5
Industry Defined as small entity 

by SBA if less than or 

equal to: 

NAICS Codes 

Gasoline fuel refiners 1500 employees* 324110 

* EPA has included in past fuels rulemakings a provision that, in order to qualify for the small refiner flexibilities, a 

refiner must also produce no greater than 155,000 bpcd crude capacity.

EPA used a variety of sources to identify which entities are appropriately considered 

Asmall.@ EPA used the criteria for small entities developed by the Small Business Administration 

under the North American Industry Classification System (NAICS) as a guide. Information 

about the characteristics of refiners comes from sources including the Energy Information 

Administration (EIA) within the U.S. Department of Energy, oil industry literature, and previous 

rulemakings that have affected the refining industry. EPA then found employment information 

for these companies using the business information database Hoover’s Online (a subsidiary of 

Dun and Bradstreet). These refiners fall under the Petroleum Refineries category, 324110, as 

defined by NAICS. 

5. SMALL ENTITIES THAT MAY BE SUBJECT TO THE PROPOSED 

REGULATION

Small entities that will be subject to the renewable fuel standard include: domestic 

refiners that produce gasoline and/or diesel and importers of gasoline and/or diesel into the U.S. 

Based on 2007 data, EPA believes that there are about 95 refiners of gasoline and diesel fuel. Of 

these, EPA believes that there are currently 21 refiners producing gasoline and/or diesel fuel that 

meet the SBA small entity definition of having 1,500 employees or less. Further, we believe that 

three of these refiners own refineries that do not meet the Congressional definition of a “small 

refinery”. It should be noted that because of the dynamics in the refining industry (i.e., mergers 

and acquisitions), the actual number of refiners that ultimately qualify for small refiner status 

under the RFS2 program could be different than this initial estimate. 

6. SUMMARY OF SMALL ENTITY OUTREACH 

6.1 Small Entity Outreach

 Before beginning the formal SBREFA process, EPA actively engaged in outreach with 

entities that would potentially be affected by the upcoming rulemaking. EPA held phone 

conferences with many of these companies, and also had conference calls with an ad-hoc 

coalition of small refiners to discuss the proposed rulemaking and to provide these contacts with 

an early opportunity to ask questions and discuss their concerns with the upcoming rulemaking. 

EPA provided each business with general information on the SBREFA process and 

background information on EISA and the RFS2 rulemaking process. Once the SBREFA process 

began and potential SERs were identified, EPA held an outreach meeting with the potential 

6
SERs on June 3, 2008. After the Panel convened on July 9, 2008, the Panel then held an 

outreach meeting with the SERs on July 30, 2008. 

6.2 Summary of EPA=s Outreach Meeting with Potential Small Entity 

Representatives

On June 3, 2008 EPA held a two-hour meeting with potential SERs for this SBREFA 

Panel and invited representatives from the Office of Advocacy of the Small Business 

Administration (SBA-Advocacy) and the Office of Information and Regulatory Affairs within 

the Office of Management and Budget (OMB) to the meeting. To help them prepare for the 

meeting/teleconference, on May 20, 2008, EPA sent materials to each of the potential SERs via 

email. A list of the materials shared with the potential SERs during the pre-panel outreach 

meeting is contained in Appendix A. The Outreach Meeting was held to solicit feedback from 

the potential SERs on the upcoming rulemaking. Representatives from all eight companies and 

organizations that we selected as potential SERs for this SBREFA process participated in the 

meeting (in person and by phone). 

The meeting was opened by Alex Cristofaro, EPA’s Small Business Advocacy Chair, 

with a short introduction to the Regulatory Flexibility Act (RFA) and SBREFA; this also 

included an explanation of the SBREFA process, the purpose of the Outreach Meeting, and the 

importance of the SERs’ comments. Following this was a presentation by EPA staff on the 

RFS1 rule, requirements of EISA, and our current thinking on the scope of the proposed 

requirements for the RFS2 rule. EPA then began a discussion on how the RFS program is 

working so far (as the majority of the small refiners have not participated in the RFS program as 

of yet), small business flexibility alternatives used in past rulemakings, and potential small 

business flexibilities for the RFS2 rule. EPA asked that the potential SERs provide feedback on 

the outreach packet as well as the outreach meeting itself, and potential SERs were asked to 

provide these comments by June 17, 2008. 

A discussion of issues related to the RFS program (both the RFS1 and RFS2 rules) 

followed EPA’s presentation. The RFS1 program was discussed for those SERs who were not as 

familiar with the program since they currently have a temporary exemption from the standards. 

Further, there were discussions regarding the changes mandated by EISA that will be proposed 

in the RFS2 rule that are of importance to the small refiners. These changes include: compliance 

with four standards instead of one (thus requiring four different types of RINs), new obligated 

parties (refiners of diesel and/or nonroad fuels only were not obligated parties under the RFS1 

rule), and higher required volumes of renewable fuels. In general, potential SERs noted that they 

wanted to ensure that the RFS2 RIN program was fair and equitable to all. Some small refiners 

also raised the concern that, while the RFS2 program doesn’t require capital changes like other 

EPA fuels programs, they would still need to make capital improvements in order to blend 

renewable fuels into their gasoline and diesel fuel. 

 With regard to regulatory flexibility, ideas that were discussed during the meeting 

included: a delay in at least some of the RFS standards, concept of RINs of one type being used 

for compliance with a different standard (e.g., use of two biomass-based diesel RINs to equal one 

advanced biofuel RIN), a phase-in of the standards for small refiners, and treatment of diesel7
only refiners. 

6.3 SBAR Panel’s Outreach to Small Entity Representatives 

On July 30, 2008 the SBAR Panel held an outreach meeting/teleconference with the 

SERs. In addition to the materials that the SERs received for the pre-Panel outreach, the SERs 

were provided with background information (SERs were sent an outreach packet on July 16, 

2008, which can be found in Appendix A) to help them prepare for the teleconference and 

prepare their comments on the planned proposed rulemaking. 

During the July 30, 2008 teleconference representatives from seven of the eight SERs 

that were selected for this SBREFA process participated in the conference call. Alex Cristofaro, 

EPA’s Small Business Advocacy Chair, opened the meeting by giving SERs a short introduction 

on the purpose of the SBREFA Panel process and the Panel Outreach Meeting, and a brief 

description of the Panel process. Tom Sullivan, SBA-Advocacy Chief Counsel, also provided 

opening remarks thanking the SERs for their participation in this SBREFA. The remainder of 

the Outreach Meeting itself focused on Section B of the July 16 Outreach Packet that was sent to 

SERs. This discussion focused on four specific areas of the SERs comments from the Pre-Panel 

Outreach Meeting; the SERs’ comments on each area were summarized, EPA explained 

preliminary views regarding the feasibility of some options, and discussion was then had 

regarding these explanations. The four areas of focus were: 1) participation in the RFS1 

program, 2) challenges of meeting the four required RFS2 standards, 3) regulatory flexibility 

options suggested by SERs, and 4) the credit trading/RIN program. In general, the SERs voiced 

concerns with respect to the RIN program, uncertainty about RFS2 (volumes, RIN availability, 

and cost), and the desire for a RIN system review. 

Lastly, EPA asked that the SERs provide feedback on the Outreach Packet materials as 

well as the outreach meeting itself, and SERs were asked to send any written comments by 

August 13, 2008. 

The outreach meetings with SERs were held to solicit feedback on the information 

provided their suggestions for the upcoming rulemaking. At the meetings, the SERs were asked 

to also provide written feedback on ideas under consideration for the proposed rulemaking and 

responses to questions regarding their experience with the existing RFS1 rule. Comments made 

during the June 3, 2008 and July 30, 2008 outreach meetings and written comments submitted by 

the SERS are summarized in section 8 of this document. Written comments received are 

included in Appendix B. 

7. LIST OF SMALL ENTITY REPRESENTATIVES 

The following is a list of the SERs that were included in the Panel process: 

AGE Refining, Inc. 

Cindy Fuqua 

San Antonio, TX 

8
American Farm Bureau Federation 

Anne Steckel 

Washington, D.C. 

American Refining Group 

John Robinson, Steve Sherk 

Bradford, PA 

Countrymark Cooperative 

John Stern 

Indianapolis, IN 

Gary-Williams Energy Corporation 

Sally Allen 

Denver, CO 

Kern Oil & Refining Co. 

Jerry Frost 

Bakersfield, CA 

Placid Refining 

Pam Posster 

Port Allen, LA 

Wyoming Refining 

Bob Neufeld 

Denver, CO 

8. SUMMARY OF COMMENTS FROM SMALL ENTITY REPRESENTATIVES 

 As described in Section 6 above, EPA and the SBAR Panel conducted outreach to the 

potential SERs and SERs by sending outreach packages to them and conducting outreach 

meetings/ teleconferences on June 3, 2008 and July 30, 2008. In addition to the comments that 

the SERs made during the June 3 outreach meeting, EPA received five sets of comments from 

five individual potential SERs, one set of comments from the small refiner potential SERs, and 

the small refiner potential SERs also resubmitted their comments from the RFS1 public comment 

period for consideration in this SBREFA Panel process.3

Following the July 30 meeting, the small refiner SERs submitted one set of comments 

jointly on August 12, 2008. The comments received from the SERs were distributed to all Panel 

members and are included in Appendix B. A summary of the comments is provided below. 

 

3 SERs for the RFS2 SBREFA Panel process are considered “potential SERs” prior to the Panel Convening on July 

9, 2008. 

9
8.1 Number and Types of Entities Affected

 In their November 2006 comments (submitted during the comment period for the RFS1 

rule), the Ad-Hoc Coalition of Small Refiners commented that there were approximately 20 U.S. 

small refiners with 1,500 or less total employees (SBA’s definition of a small refiner). The 

commenters also commented that small refining companies are located across the country from 

Pennsylvania to the West Coast; vary greatly in operational configuration, product slate, 

marketing area, capacity; and some are only diesel refiners. Kern Oil, a small refiner located in 

California, noted that the number of small refiners in California has decreased from 26 to seven 

from 1981 to 2003. AGE Refining commented that it is the only diesel-only refiner with no 

plans to produce gasoline in the future. 

In their August 12 comments, the small refiner SERs did not comment specifically on the 

number and/or types of entities affected, but they did mention that they believe that small 

refiners currently produce less than six percent of all U.S. gasoline and diesel fuel. 

8.2 Potential Reporting, Recordkeeping, and Compliance

All of the small refiner potential SERs for this SBREFA process submitted joint 

comments as the “Ad Hoc RFS2 Small Refiner SBREFA Coalition” (Coalition) and thus, they 

all concur with comments submitted by the Coalition. The Coalition refiners commented that 

they believe it will be much more difficult—if not impossible—for small refiners to meet all four 

standards rather that complying with just the total renewable fuel standard of RFS1. The 

commenters fear the cellulosic ethanol fuels will be limited in supply (if available at all), more 

expensive, and perhaps more difficult to handle. They also commented that they fear the biofuel 

demand and infrastructure will not be sufficient to realistically move the fuel into the 

marketplace, so that RINs for these three fuel categories will be limited in number and volatile in 

price. The commenters also noted that small refiners do not typically own or operate upstream 

oil and gas production or downstream marketing, transportation, or retail (as do many of the 

larger integrated oil companies); and therefore, it is much more difficult for small refiners to 

implement and to recover from new regulations and programs. The commenters stated that, due 

to their limited resources and capital, small refiners are more affected by market, pricing, and 

supply fluctuations. 

 The Ad Hoc RFS2 Small Refiner SBREFA Coalition noted that they believe mandated 

biomass-based diesel blending would be a significant problem, as two small refiners (American 

Refining Group, AGE Refining) with two very different seasonal temperatures have not been 

able to meet the biomass-based diesel blending pour point for blended biodiesel. The 

commenters also stated that they cannot really comment on potential operational costs or 

operational changes that meeting the new standards would impose, but they did note that extra 

tankage and perhaps blending facilities could be needed (thus necessitating additional time to 

secure pre-construction and operating permits from various regulatory oversight agencies). They 

further noted that the Magellan pipeline/terminal system, used by some small refiners, estimates 

that each ethanol injection facility being built at its terminals will cost approximately $3.3 

million, and the pipeline projects will not be able to complete construction of the additional 

tankage and injection systems for ethanol until the end of 2010. 

10
The Ad Hoc RFS2 Small Refiner SBREFA Coalition commented that they are very 

concerned about the cost and availability of RINs, and noted that there could be additional costs 

for them for automated measuring systems, RIN reporting software, and more 

accounting/operational staff needed. 

While it does not currently need to acquire or sell RINs for compliance, Placid Refining’s 

experience with the RIN program has been that RIN transfer rarely occurs with actual product 

transfer and obtaining RINs after the fact is an on-going task, many times at no fault of the 

ethanol suppliers as they have yet to receive RINs from the prior ethanol/RIN owner in the chain 

(and ethanol vendors do not necessarily sell current RINs). Also, Placid currently has one 

marketing person dedicated to ethanol buying/selling, RIN tracking, EPA report coordination, 

and RIN trading; Placid anticipates needing to add one accounting person to manage the RIN 

portion of the RFS program as ethanol blending locations increase and the blending volumes 

expand. 

 In their comments originally submitted during the comment period for the RFS1 rule, the 

Ad-Hoc Coalition of Small Refiners commented on seasonality issues and varying state 

standards and noted that these could cause problems with compliance. 

 Gary-Williams Energy Corporation commented that they had not yet participated in the 

RIN program, but noted that they do not currently have the internal accounting capability to 

handle complex reporting of RINs. They also commented that there are no ethanol blending 

facilities at many of the terminals on the pipeline system that they use to ship product, nor are 

there blending facilities at their Wynnewood refinery (or sufficient tankage for storing ethanol). 

 American Refining Group (ARG) commented that they fear that there will be compliance 

issues for small refiners if there is volatility in the RIN market, as this could drive up costs for 

small refiners (and place a large burden on them). ARG also commented that they believe that 

regional refiners and small refiners will have problems accessing RINs for certain renewable 

categories—thus driving up the cost of RINs and sourcing/transporting renewables—and the 

commenter is especially concerned about compliance with the advanced biofuel and cellulosic 

biofuel standards. ARG is also concerned that they will need to install additional tankage to 

comply with the RFS program, and the company is concerned that biodiesel compliance will be 

problematic due to ASTM pour-point specs and issues with diesel in colder climates. 

 ARG commented that similar-sized operations/companies have had significant difficulty 

under RFS1 with tracking, recording, and reporting RINs. The commenter noted that many of 

these companies have had to hire additional staffing to comply and still there remains much 

confusion with the RIN System. 

 AGE Refining commented that they had previously made an unsuccessful attempt to 

enter the biodiesel market. The commenter also noted that to enter the biodiesel market again, it 

would require added tankage, piping, a blending unit, and extra staff to handle the RIN system. 

Further, a new process unit would be required to produce and sell biomass or cellulose-based 

diesel. AGE Refining also commented that the biggest challenge facing small refiners is the 

11
availability and cost of purchasing renewable fuel components. 

 Countrymark Cooperative (Countrymark) commented that it has been blending some 

renewable fuel and has purchased fuel with attached RINs, and noted that it has experienced 

some problems with the RIN system; namely mistakes in the RIN digits and issues with the RIN 

date (invoice date versus product delivery date). While Countrymark does not need to 

participate in the RIN program for compliance currently, it recommended that EPA make the 

RIN date the date of product delivery for ease in tracking the product and associating it with the 

RIN. Countrymark also noted that because of the difficulties experienced with the RIN system, 

it has added one employee, obtained a new software system, and would likely hire another new 

employee after RFS2 begins. 

 In their August 12 comments, the small refiner SERs commented that they are very 

concerned about the economic and financial impact on their businesses of trying to meet the four 

standards at any time, and especially before the RFS2 program has been operational for a 

sufficient time period to smooth out potentially severe expected market volatility. The 

commenters stressed that volatility is their main concern with the RFS2 program (with regard to 

both the available renewable fuels volumes as well as the anticipated “blend wall”). The 

commenters also stated that EPA’s denial of Texas’ waiver offers them little comfort that EPA’s 

waiver authority will actually be used when needed. The commenters questioned how market 

maturity will be ascertained in accepting and consuming the more advanced fuels. The 

commenters raised the concern that it is too risky for their businesses to “simply hope that the 

program operates as designed”—the commenters further questioned if decisions to waive the 

RFS2 requirements would actually come in time to allow small refiners to avoid capital 

investments for infrastructure. 

 The small refiner SERs commented that they are severely disadvantaged by the 

economies of scale that exist for larger companies. The commenters noted that in many cases 

they do not have upstream oil and gas production, or downstream marketing, transportation, or 

retail outlets like many larger integrated oil companies. The commenters stated that it is thus 

more difficult for their businesses to implement and recover from new regulations and programs, 

and further they are more affected by market pricing and supply fluctuations. The small refiner 

SERs also noted that they may also face additional transportation costs, especially for those 

small refiners that are far from the sources of most renewable fuels. 

8.3 Related Federal Rules

 Kern Oil commented that small refiners in California “are still recovering” from recently 

having to meet new California Air Resources Board Reformulated Fuel Standards, (Federal) 

Ultra-Low Sulfur Diesel standards, new Low Carbon Fuel Standards, and Renewable Fuel 

Standards. The commenter noted that small refiners are facing significant uncertainty as to how 

state and federal fuel standards will either compete or overlay each other and what impact the 

costs of these new programs and standard will ultimately be. The commenter also noted that it is 

more difficult for small refiners to implement and recover from new regulations and programs 

considering the fact that they do not typically have limited resources and capital compared to 

larger integrated oil companies. (This was also noted in the Ad Hoc RFS2 Small Refiner 

12
SBREFA Coalition’s comments.) 

 AGE Refining commented that the company is still working to complete its processing 

unit to comply with the Nonroad Diesel rules. 

8.4 Regulatory Flexibility Alternatives

The Ad Hoc RFS2 Small Refiner SBREFA Coalition requested the following flexibilities 

for small refiners: 

1) Small refiners be completely exempt from complying with RFS2 until January 1, 

2016 or five years after the RFS2 effective date, at which time small refiners 

should only be required to comply with the total renewable fuel standard on a 

phased-in basis; 

2) Small refiner renewable fuel compliance volumes should be increased by no more 

than 20% per year until the full required volume is attained; 

3) There should be no specific requirements for advanced biofuel, biomass-based 

diesel and cellulosic biofuels at any time (though RINs for these fuels would 

always be valid to demonstrate small refiner compliance with the total renewable 

fuel standard); 

4) The advanced biofuel standard, if small refiners are subject to it, should be phased 

in at a requirement of 20% or less of additional volume over a five year period; 

5) EPA should review the RFS2 program with small refiners in 2015 to evaluate 

whether or not changes are appropriate. 

The commenters further commented that they estimate that small refiners now produce less than 

6% of U.S. gasoline and diesel fuel, and may well be an even more insignificant part of the U.S. 

refining industry by 2020. The commenters stated that they believe their exemption from 

immediate full compliance will have no material impact on the country’s renewable fuels 

consumption but will provide much needed relief for small refiners. 

 The Ad Hoc RFS2 Small Refiner SBREFA Coalition requested that RINs for all four fuel 

categories be interchangeable for small refiners. The commenters requested a permanent ability 

for small refiners to enjoy interchangeability on a one-to-one or other basis between the four 

categories such that RINs generated in one category can be used for small refiner compliance in 

any other category. The commenters also believe that all RINs should have equivalent value on 

a one-to-one basis (independent from the lifecycle analysis), as they believe that tracking 

different vintage RINs for each of the four “nested” fuels will be much more complex and errorprone than even the cumbersome RIN reporting system of RFS1. The commenters requested 

that small refiner-generated or purchased RINs should be valid for compliance in the calendar 

year generated and for an unlimited time thereafter with no credit rollover cap. However, they 

requested that if elimination of a credit rollover cap is not possible, small refiners should be 

granted the flexibility to meet their current year renewable volume obligation (RVO) with up to 

50% of prior year RINs. 

 The Ad Hoc RFS2 Small Refiner SBREFA Coalition also requested that EPA plan a 

comprehensive review of the RIN program—in cooperation with small refiners—at least one 

year before the small refiner RFS2 compliance deadline, similar to the program review in the 

13
MSAT2 rulemaking. 

Kern Oil commented that it strongly believes that additional lead time beyond the RFS1 

temporary exemption is essential given the costs, reporting complexities, the anticipated 2013 

blend wall, and potential RIN market volatility. 

 AGE Refining stressed that a delay to 2016 and additional flexibilities for small refiners 

would provide the company with the time and flexibility to make adjustments and make the 

financial commitments necessary to remain in the fuel market. 

 Countrymark also commented that it is concerned that it has been receiving “stale-dated” 

RINs. The commenter thus suggested that small refiners be allowed to carry-over RINs for an 

indefinite period to eliminate the 20% carry-over penalty. Further, Countrymark recommended 

that small refiners be given a complete exemption from RFS2 due to market uncertainties and 

financial impacts—the commenter believes that a complete exemption would have little or no 

impact on the program since small refiners make up a small percentage of the total gasoline and 

diesel market. 

 In their August 12 comments, the small refiner SERs repeated their request for a delay in 

the small refiner compliance deadline and flexibility in the requirements for some or all of the 

four RFS2 standards. The SERs commented that they believe such relief would have no material 

impact on the country’s renewable fuels consumption and an insignificant impact on the RIN 

system. The commenters also requested a phase-in of the standards upon the small refiner 

compliance date, and as much flexibility in compliance with the various nested RFS2 

requirements as legally possible. 

 The small refiner SERs commented that they believe EPA has more authority under 

EISA and that the Act can be interpreted to provide additional small refiner flexibility. The 

commenters thus requested that RINs be totally fungible for small refiners. Additionally, the 

small refiner SERs requested an extension of credit life and an expansion in the 20 percent RIN 

rollover cap for RINs generated or purchased by small refiners—the commenters requested that 

these RINs have an unlimited credit life with no rollover cap. 

 The small refiner SERs requested that EPA perform a comprehensive review of the RIN 

system in cooperation with small refiners at least one year prior to the small refiner compliance 

deadline. The commenters stated that they could support the concept of tying the small refiner 

compliance date to an EPA review if (in addition to the EPA annual review of available 

renewable fuel volumes) there is a RIN technical compliance review to estimate trading versus 

blending activity and the extent to which RINS are being generated and are available. The 

commenters noted that if most companies are blending to comply, that will impact small refiner 

compliance choices. 

8.5 Discussion and Summary of Comments During June 3, 2008 Outreach 

 Meeting 

Background Presentation (EPA-OTAQ)/Discussion (all) 

14
 EPA-OTAQ presented a briefing titled “The Renewable Fuels Standard” 

o Presentation discussion included background on RFS1, as many small refiners 

have not yet participated in the program 

o The presentation then discussed the changes that would need to be made to the 

RFS program to implement changes mandated by the Energy Independence and 

Security Act 

o The presentation concluded with rule-related and SBREFA-related questions that 

EPA would like the potential SERs to try and respond to in their comments 

 Discussion began with a question to the potential SERs on whether or not any of them 

have participated in the RFS program/traded RINs yet 

o One potential SER indicated that his refinery has, another mentioned they blended 

fuels without RINs attached 

 EPA mentioned that even if you are a gasoline-only or diesel-only refiner, you will be 

required to comply with all four of the RFS standards 

o One potential SER commented that it is important that if small refiners are buying 

RINs, the program should be fair and equitable, they should not have to shoulder 

more burden with regard to RINs 

o A potential SER questioned why EPA would require parties to meet all four 

standards, and mentioned that it would be helpful if there were a way to tailor the 

program to allow diesel-only refiners to not have to comply with all of the 

standards—EPA indicated it is open to discussing and pursuing other options but 

EISA mandates that all the standards be a percentage of the obligated volume, 

which includes both gasoline and diesel; additionally, EPA indicated that such a 

program would become extremely complex 

 One potential SER commented that the price of RINs could easily be driven up under the 

RFS2 program, and asked if waivers were possible 

o EPA noted that EISA provides for potential waivers (slides 17 and 18 of the 

presentation): general waivers and biomass-based diesel waivers (anyone subject 

to the requirements can apply for a waiver); and cellulosic “waivers” (EISA gave 

general guidelines on how EPA is to implement this waiver authority, but these 

decisions will largely be outside the scope of this rulemaking) 

 A potential SER asked about delays, and whether or not small refiners should focus on a 

delay as possible regulatory flexibility 

o EPA noted that the total renewable standard isn’t new (it already exists under 

RFS1), but that a delay could more likely be applied to one or more of the 3 new 

standards 

 A potential SER questioned what would happen if there was a glut of ethanol and the 

vehicle fleet was not able to absorb all of this ethanol 

o EPA mentioned the concept of the “blend wall” (a point where the market is not 

able to blend sufficient ethanol to meet the standard), and noted the various ideas 

that have been discussed with industry to date- including the need for more E85 

vehicles and stations, the notion of mid-level ethanol blends, etc. 

 A potential SER suggested the possibility of allowing 2 of one type of RIN to count as 1 

of another 

o EPA explained that EISA doesn’t really allow EPA the flexibility to do something 

like this 

15
o Also, this could result in one or more of the standards not being met 

 A potential SER commented that a delay and/or phase-in of the standards would be most 

helpful to small refiners (i.e., meet total renewable standard initially, then a phase-in of 

the other three standards); another potential SER mentioned that he thought a four year 

delay would be necessary for small refiners 

 One potential SER stated that cap-and-trade programs are bad for small businesses 

initially because they aren’t as well equipped to absorb ‘hiccups’ as well, and market 

volatility can also be worse for them 

 A few potential SERs noted that they would need to put in additional tankage at their 

facilities to meet the standards 

 One potential SER commented that the earliest his company could comply would likely 

be 2015 

o The potential SER noted that this could be a bad year to enter the program, as that 

would likely be when things were most volatile in the market 

o Another potential SER commented that this might be the time when E85 

legislation might have been put in place to address blend wall issues 

 A few potential SERs asked for clarification on the lifecycle GHG threshold (slide 15) 

and biomass-based diesel (slide 16) 

o EPA explained EISA’s mandate that renewable fuels must meet these thresholds 

and discussed how EPA’s goal is to create a truly market-based system 

o EPA explained the definitions of ”FAME” (fatty acid methyl esters) and 

“renewable diesel” (can not be co-processed with petroleum) 

8.6 Discussion and Summary of Comments During July 30, 2008 Outreach 

Meeting 

 EPA-OTAQ explained that the focus of the Outreach Meeting would be on Section B of 

the outreach document, which summarized the small refiner SERs’ comments from the 

June 3, 2008 Outreach Meeting and provided some explanation and discussion regarding 

those comments 

 The comments from the June 3 Outreach Meeting were summarized into four main areas 

of focus: 1) participation in the RFS1 program, 2) challenges in meeting the four required 

RFS2 standards, 3) regulatory flexibility options suggested by SERs, and 4) the credit 

trading/RIN program 

 Participation in the RFS1 program 

o A SER that has been participating in the RIN system commented that they are 

having issues with RINs, and that the system needs to be modernized and 

updated; the SER further commented that it believes problems with the RIN 

system could be exacerbated with the introduction of more boutique fuels 

o Another SER commented that it is having problems with RINs because your 

ability to get RINs relies on the person who sold you the fuel 

 EPA questioned why refiners couldn’t just specify in their contracts that 

RINs must be transferred with the fuel; SERs replied that contracts do 

specify this, but parties are still not transferring RINs with the fuel 

o EPA also asked if any small refiners were using some of the industry RIN trading 

systems or if all RIN trading and other RIN compliance was being done in-house 

16
 SERs mentioned that they were doing everything in-house 

o EPA noted that the upcoming NPRM will include proposed provisions for 

improving the RIN system; and also offered to send the RFS program Compliance 

Help weblink to SERs to assist them in compliance 

 Challenge in meeting the four required RFS2 standards/regulatory flexibility options 

suggested by SERs 

o A SER questioned why EPA did not believe that it would be feasible to allow 

small refiners to use RINs fungibly to meet the standards 

 EPA explained that EISA specifies that all four standards must be met by 

all obligated parties, and such a provision for small refiners would be akin 

to different standards for small refiners—which EPA believes is not 

consistent with the Act 

 EPA also explained that the standards are nested and that some standards 

can actually be used to meet other standards (thus providing SERs some 

ability to use RINs for one standard to meet another standard) 

 A SER commented that it did not agree with EPA’s reading of EISA and 

that it believes that EPA has more discretion to allow this 

o EPA asked for the SERs to try and explain, with more specificity, exactly what 

relief they need, and why they believe this relief is needed 

 One SER commented that its main concern is renewable fuel volume 

uncertainty, and also the fact that its refinery is in a non-agricultural area 

 Another SER commented that the market may hit a blend wall in 2013, 

and thus the suggestion of a delay until 2015 was because this could likely 

be when the volatility is lower following the blend wall 

 A SER commented that small refiners would prefer a delay until 2015 or 

2016 (five years after the general compliance date) and a phase-in after 

that point 

 The SBA-Advocacy Panel member suggest that EPA may want to explore 

projecting when the market would potentially be less volatile, and 

proposing that small refiners would comply at some point after that 

 SERs also mentioned potential technical problems, demand issues (if they 

make the decision to comply by blending, but customers do not want the 

fuel), and state-mandated blending; SERs also asked about EPA’s waiver 

authority 

 EPA discussed its waiver authority under EISA (CAA section 211(o)(7)) 

 Credit trading/RIN program 

o The SBA-Advocacy and OMB Panel members also expressed that they believe a 

review of the credit trading/RIN system would be helpful to small refiners 

 They commented that this review could help to show if the credit trading 

system is working, availability of RINs and other renewable fuels for 

small refiner planning, (if possible) permitting and refinery plans, and RIN 

pricing 

 A SER questioned whether or not such a review could include information 

on the availability of specific types of fuels in certain areas of the country 

o EPA voiced its concern with a review since there will already be similar work 

being done as part of EPA’s requirement to publish the RFS2 standard annually in 

17
the Federal Register, and EPA noted that some of this information will be 

required in reports that obligated parties will be sending to EPA (which will be 

discussed in the NPRM) 

o EPA also noted that it cannot provide information on pricing (EPA does not have 

such information) but that this information is often provided by other industry 

sources (e.g., the Oil Price Information Service (OPIS)) for free; and that specific 

geographic information on renewable fuels production could only be provided on 

a PADD level if it were to be provided 

9. PANEL FINDINGS AND DISCUSSION

9.1 Number and Types of Entities Affected

 As discussed above in section 5, the Panel believes that small entities that will be subject 

to the upcoming RFS2 rulemaking include domestic refiners that produce gasoline and/or diesel 

and importers of gasoline and/or diesel into the United States. The current estimate of small 

refiners that would be subject to the upcoming rule, based on 2007 data, is 21 gasoline and/or 

diesel refiners. These refiners meet the SBA small-entity definition of having 1,500 employees 

or less. The Panel also notes that because of the dynamics in the refining industry (i.e., mergers 

and acquisitions), the actual number of refiners that ultimately qualify for small refiner status 

under the RFS2 program could be different than this estimate. 

9.2 Potential Reporting, Record Keeping, and Compliance 

 Registration, recordkeeping and reporting are necessary to track compliance with the 

RFS2 requirements and transactions involving RINs. These compliance requirements under the 

RFS2 program will likely be similar to those required under the RFS1 program. Program 

registration for the RFS1 program uses the same basic forms that EPA uses under the 

reformulated gasoline (RFG) and anti-dumping program, as these forms are well known in the 

regulated community and are simple to fill out. Reporting under the RFS1 program currently 

uses a simplified method of reporting via EPA’s Central Data Exchange (CDX), and records 

related to RIN transactions may be kept in any format and the period of record retention by 

reporting parties is five years, similar to other EPA fuel programs. 

9.3 Related Federal Rules 

The primary federal rules that the Panel notes are related to the proposed RFS2 rule under 

consideration are the Mobile Source Air Toxics rule (Federal Register Vol. 72, p. 8428, 

February 26, 2007) and the first Renewable Fuel Standard (RFS1) rule (Federal Register Vol. 

72, p. 23900, May 1, 2007). The Panel is also aware of a Technical Amendment Direct Final 

Rulemaking for RFS1, which EPA expects to be published by early Fall 2008. 

9.4 Regulatory Flexibility Alternatives 

As described above in section 3.2, RFA, as amended by SBREFA, requires that EPA 

18
consider providing regulatory relief as appropriate, in accordance with the Agency’s authority 

under the Clean Air Act. EPA evaluated potential regulatory alternatives with this in mind. 

In section 211(o)(9), Congress specifically addressed the issue of an extension of time for 

small refineries, temporarily exempting them from the renewable fuel obligations through 

December 31, 2010. This temporary exemption may be extended under two separate provisions. 

One involves a study by the Department of Energy (DOE) concerning whether compliance with 

the renewable fuel requirements would impose disproportionate economic hardship on small 

refineries, with an extension of not less than two years for a small refinery that DOE determines 

would be subject to such disproportionate hardship. Another provision authorizes EPA to grant 

an extension for a small refinery based upon disproportionate economic hardship, on a case-bycase basis. EISA did not amend the small refinery provisions. 

Nearly half of the small refineries that meet the “small refinery” definition are owned and 

operated by small refiners; there are only a few small refiners with refineries that do not meet the 

small refinery definition. Thus almost all of the small refiners are covered by the small refinery 

provisions in section 211(o)(9). As noted above, in RFS1 EPA whether it should provide relief 

to the limited number of small refiners who were not covered by the small refinery provision, by 

providing them a temporary exemption consistent with that provided by Congress for small 

refineries. EPA exercised its discretion under section 211(o)(3), as described above, and 

provided such relief. It’s important to note that this did not modify the small refinery provision 

or provide any further relief than Congress provided for small refineries. 

The RFS2 rulemaking now presents a very different issue – whether EPA has the 

authority to provide small refineries that are operated by a small refiner with an extension of time 

that would be different from and more than the temporary exemption specified by Congress in 

section 211(o)(9) to small refineries. For those small refiners who are covered by the small 

refinery provisions, Congress has specifically adopted a relief provision aimed at their refineries. 

This provides a temporary extension through December 31, 2010 and allows for further 

extensions if certain criteria are met. EPA believes that providing small refineries with an 

additional exemption different from that provided by section 211(o)(9) raises serious concerns 

about inconsistency with the intent of Congress. Congress spoke directly to the relief that EPA 

may provide for small refineries, including those small refineries operated by small refiners, and 

limited it to a blanket exemption through December 31, 2010, with additional extensions if the 

criteria specified by Congress were met. An additional or different extension, relying on a more 

general provision in section 211(o)(3), raises serious questions about consistency with the clear 

intent of Congress. 

For the small refiners who do not operate small refineries, there would not be the same 

issue of consistency with section 211(o)(9), as Congress did not specifically address the issue of 

an extension for this group of small refiners. However EPA noted that it has concerns, as it did 

in RFS1, that in general small refiners should be treated similarly, whether they are covered by 

the small refinery provisions or not. 

It is important to recognize that the small refinery provision does allow for extensions 

beyond December 31, 2010, with two separate provisions addressing extensions beyond 2010. 

19
EPA believes that these avenues of relief can and should be fully explored by small refiners who 

are covered by the small refinery provision. In addition, EPA believes that it is appropriate to 

consider allowing petitions to EPA for an extension of the temporary exemption based on 

disproportionate economic hardship for those small refiners who are not covered by the small 

refinery provision. As in RFS1, this would ensure that all small refiners have available to them 

the same relief available to small refineries. 

The purpose of the Panel process is to solicit information as well as suggested flexibility 

options from the SERs, and the Panel recommends that EPA continue to do so during the 

development of the RFS2 rule. Recognizing the concerns about EPA’s authority to provide 

extensions to small refineries different from that provided in section 211(o)(9), the Panel 

recommends that EPA continue to evaluate this issue, and that EPA request comment on its 

authority and the appropriateness of providing extensions beyond those authorized by section 

211(o)(9) for small refineries operated by a small refiner. The Panel also recommends that EPA 

propose to provide the same extension provision to small refiners who do not operate small 

refineries as is provided for small refineries. 

Delay in Standards

 The RFS1 program regulations provide small refiners who operate small refineries as 

well as small refiners who do not operate small refineries with a temporary exemption 

from the standard through December 31, 2010. Small refiner SERs suggested that an 

additional temporary exemption for the RFS2 program would be beneficial to them in 

meeting the standards. EPA evaluated a temporary exemption for at least some of the 

four required RFS2 standards for small refiners. The Panel recommends that EPA 

propose a delay in the effective date of the standards until 2014 for small entities, to the 

maximum extent allowed by the statute. However, the Panel recognizes that EPA has 

serious concerns about its authority to provide an extension of the temporary exemption 

for small refineries that is different from that provided in CAA section 211(o)(9), since 

Congress specifically addressed an extension for small refineries in that provision. 

Phase-in

Small refiner SERs’ suggested that a phase-in of the obligations applicable to small 

refiners would be beneficial for compliance, such that small refiners would comply by 

gradually meeting the standards on an incremental basis over a period of time, after 

which point they would comply fully with the RFS2 standards, EPA has serious concerns 

about its authority to allow for such a phase-in of the standards. CAA section 

211(o)(3)(B) states that the renewable fuel obligation shall “consist of a single applicable 

percentage that applies to all categories of persons specified” as obligated parties. This 

kind of phase-in approach would result in different applicable percentages being applied 

to different obligated parties. Further, as discussed above, such a phase-in approach 

would provide more relief to small refineries operated by small refiners than that 

provided under the small refinery provision.4

 Thus the Panel recommends that EPA 

should invite comment on a phase-in, but not propose such a provision. 

 

4 Additional extensions under section 211(o)(9) are discussed below. To the extent a phase-in may be an 

appropriate form for an extension under that provision, the Panel recommends that it be considered in that context. 

20
RIN-related Flexibilities

The small refiner SERs requested that the proposed rule contain provisions for small 

refiners related to the RIN system, such as flexibilities in the RIN rollover cap percentage 

and allowing all small refiners to use RINs interchangeably. Currently in the RFS 

program, EPA allows for 20 percent of a previous year’s RINs to be “rolled over” and 

used for compliance in the following year. A provision to allow for flexibilities in the 

rollover cap could include a higher RIN rollover cap for small refiners for some period of 

time or for at least some of the four standards. Since the concept of a rollover cap was 

not mandated by section 211(o), EPA believes that there is an opportunity to provide 

appropriate flexibility in this area to small refiners under the RFS2 proposed program but 

only if it is determined that there is a disproportionate effect warranting relief. The Panel 

recommends that EPA request comment on increasing the RIN rollover cap percentage 

for small refiners, and further that EPA should request comment on an appropriate level 

of that percentage. The Panel recommends that EPA should invite comment on allowing 

RINs to be used interchangeably for small refiners, but should not propose this concept 

because under this approach small refiners would arguably be subject to a different 

applicable percentage than other obligated parties. 

Program Review

With regard to the suggested program review, EPA raised the concern that this could lead 

to some redundancy since EPA is required to publish a notice of the applicable RFS 

standards in the Federal Register annually, and that this annual process will inevitably 

include an evaluation of the projected availability of renewable fuels. Nevertheless, the 

SBA and OMB Panel members believe that a program review could be helpful to small 

entities in providing them some insight to the RFS program’s progress and alleviate some 

uncertainty regarding the RIN system. As EPA will be publishing a Federal Register 

notice annually, the Panel recommends that EPA include an update of RIN system 

progress (e.g., RIN trading, RIN availability, etc.) in this notice and that the results of this 

evaluation be considered in any request for case-by-case hardship relief. The Panel also 

recommends that EPA work with DOE in the development of DOE’s small refinery 

study, specifically to communicate the comments that SERs raised during the Panel 

process. 

Extension of Existing RFS1 Temporary Exemption

The Panel recommends that EPA propose in the RFS2 program the provision at 40 CFR 

80.1141(e) extending the RFS1 temporary exemption for at least two years for any small 

refinery that DOE determines would be subject to disproportionate economic hardship if 

required to comply with the RFS2 requirements. 

Petitions for an Extension Based on Disproportionate Economic Hardship

While SERs did not specifically comment on the concept of hardship provisions for the 

upcoming proposal, the Panel notes that under CAA section 211(o)(9)(B) small refineries 

may apply to EPA for case-by-case extensions of the small refinery temporary exemption 

on the basis of disproportionate economic hardship. The Panel recommends that EPA 

propose in the RFS2 program a case-by-case hardship provision for small refineries 

similar to that provided at 40 CFR 80.1141(e)(1). The Panel also recommends that EPA 

21
22

propose a case-by-case hardship provision for small refiners that do not operate small 

refineries that is comparable to that provided for small refineries under section 

211(o)(9)(B), using its discretion under CAA section 211(o)(3)(B). This would apply if 

EPA does not adopt an automatic extension for small refiners, and would allow those 

small refiners that do not operate small refineries to apply for the same kind of extension 

as a small refinery. The Panel recommends that EPA take into consideration the results 

of the annual update of RIN system progress. 
Appendix A: 

List of Materials Shared With SERs 
List of Materials EPA shared with Potential Small Entity 

Representatives 

(May 2008) 

– EPA Outreach Document for June 3, 2008 Outreach Meeting/Teleconference 

– The RFS2 Briefing Presentation Prepared for the June 3, 2008 Outreach 

Meeting/Teleconference 

– Flexibility Concepts from Current and Previous EPA Rulemakings

– List of Potential Small Entity Representatives

Additional Materials the SBAR Panel shared with Small Entity 

Representatives 

(July 2008) 

– RFS2 Panel Outreach Document for July 30, 2008 Panel Outreach Meeting 

– List of Small Entity Representatives 

A-1
Appendix B: 

Written Comments the SBAR Panel 

Received from SERs
AD HOC COALITION 

OF 

SMALL BUSINESS REFINERS 

June 16, 2008 

Ms. Tia Sutton 

Environmental Protection Agency 

2000 Traverwood Drive 

Ann Arbor, MI 48105 

Sutton.Tia@epa.gov

Dear Tia: 

Age Refining Company, American Refining Company, Countrymark Cooperative, GaryWilliams Energy Corporation, Kern Oil & Refining Company, Placid Refining Company and 

Wyoming Refining Company greatly appreciate the opportunity to participate in the 

SBREFA process on Renewable Fuel Standards 2. 

In our meeting on June 3, you asked us to comment on a series of questions by June 17. 

We have discussed the issues raised at the meeting and have strong consensus about our 

recommendations. Therefore we are submitting these comments as an “Ad Hoc RFS 2 

Small Refiner SBREFA Coalition”. Several companies expect to submit individual 

comments also. We have not yet conferred with other small refiners who did not participate 

in the June 3 meeting. 

Background: June 3, 2008 Meeting Highlights 

Our understanding of RFS 2 highlights, as discussed on June 3, includes the following: 

1. EPA is continuing to develop the RFS 2 regs as specified in the 2007 Energy Independence 

and Security Act (EISA) though the schedule has slipped a bit. 

• EISA calls for a Final Rule 12.19.08 with a 1.1.09 effective date; 

• EPA expects a proposal this fall with a final rule by 1.1.09 and 1.1.10 effective date; 

• Current RFS 1 regs will be in effect until 1.1.10 with new ethanol volumes as mandated; 

• Small refiners are exempt from RFS 1 until 1.1.11; 

• The SBREFA panel will formally convene on July 9 and then has 60 days to complete its 

work; another meeting with SERs is tentatively scheduled for July 30. 
2. EISA mandated some key changes (in addition to new definitions of GHG lifecycles, etc.). 

• Standards are extended to include diesel and non-road gasoline, in addition to highway 

gasoline; 

• New renewable fuel categories include 4 “nested” standards; 

• By 2022 total renewable fuels volumes must be 36 billion gallons including 21 billion 

gallons of total advanced biofuel which in turn includes both biomass-based diesel (16 

billion gals) and cellulosic biofuels (1.0 billion gals). 

3. A period of great volatility is anticipated when a “blend wall” hits (when the national average 

concentration of ethanol is greater than 10% (E-10) but there are not yet enough E-85 vehicles 

to consume it). 

• At that time, the only way for obligated parties to comply will be to produce fuel they 

can’t sell or buy RINs; 

• EPA estimates the US will hit the E-10 blend wall in 2013; 

• NPRA and API, however, predict the blend wall will occur in 2010; 

• EPA noted that if small refiners produce RINs before they are required to and have no 

use for them, they may be able to sell profitably to larger companies with an earlier 

compliance deadline. 

4. EPA expects significant market volatility up until 2015 (and perhaps beyond) while the market 

sorts itself out. 

Responses to EPA Questions 

General Program Details 

Participation in the RFS Program. 

Of the seven small refiner SERs, only Countrymark and Placid have participated in the RFS 

RIN program to date. Countrymark blends biodiesel from soy beans and gasoline with corn 

ethanol. Placid is blending ethanol at select conventional gasoline terminal racks in the 

Southeast U.S. Countrymark and Placid report that tracking RINs has been cumbersome, 

complex and time consuming. It is almost impossible to avoid errors because the 38 digit 

numbers are subject to human error at each stage of the process. In addition, EPA 

requires, for example, that RINs transfer on the date of product transfer, which differs from 

company records which are based on date of purchase (or delivery). Placid’s experience 

has been that RIN transfer rarely occurs with product transfer and obtaining RINs after the 

fact is an on-going task, many times at no fault of the ethanol suppliers as they have yet to 

receive RINs from the prior ethanol/RIN owner in the chain. Moreover, ethanol vendors do 

not necessarily sell current RINs. Countrymark has received ethanol in 2008 with 2007 

RINs. Vendors may detach RINs but hold product in inventory for some time or sell different 

ethanol batches to which they attach old RINs. Thus often the RINs traded to Countrymark 

are “stale”. 

Countrymark has had to add at least one accounting staff person just for RFS recordkeeping. As the program continues, they expect to add at least one marketing staff person 

to handle the purchase and sale of RINs. Placid currently has one marketing person 

dedicated to ethanol buying/selling, RIN tracking, EPA report coordination and RIN trading. 

As ethanol blending locations increase and the blending volumes expand, Placid anticipates 
that they may have to add one accounting person to manage just the RIN portion of the 

program. 

Relative Challenge of Meeting the Four Standards. 

We believe that it will be much more difficult – if not impossible -- for small refiners to meet 

total advanced biofuel, biomass-based diesel and cellulosic biofuels standards than to 

comply with a general total renewable fuel standard. We fear the non-corn-based ethanol 

fuels will be limited in supply (if available at all), more expensive, and perhaps more difficult 

to handle. In addition, we fear the biofuel demand and infrastructure will not be sufficient to

realistically move the fuel into the marketplace. RIN credits for these three fuel categories 

will be limited in number and volatile in price. It is important to consider that small refiners 

do not typically own or operate upstream oil and gas production or downstream marketing, 

transportation or retail as do many of the larger integrated oil companies. Therefore, it is 

much more difficult for small refiners to implement and to recover from new regulations and 

programs. Due to their limited resources and capital, small refiners are more affected by 

market, pricing and supply fluctuations. 

In California, in particular, small refiners are still recovering from recently having to meet 

new Air Resources Board Reformulated Fuel Standards and Ultra-Low Sulfur Diesel 

standards. Small refiners in California are now facing new Low Carbon Fuel Standards and 

Renewable Fuel Standards. Small refiners are facing significant uncertainty as to how state 

and federal fuel standards will either compete or overlay each other and what impact the 

costs of these new programs and standard will ultimately be. 

Overall Response to Options 

Additional Lead Time/How Long. 

We strongly believe that additional lead time (beyond the RFS1 delay until January 1, 2011) 

is essential. In addition to the costs and reporting complexities of the rule and based on the 

anticipated 2013 blend wall, we expect significant RINs market volatility until 2015 – 

assuming the RFS 2 program goes into effect on January 1, 2010 -- and probably beyond. 

Small refiners request the following consideration: 

1. Small refiners should be fully exempt from complying with the RFS 2 rule until 

January 1, 2016 – or at least five years after the RFS 2 effective date. At that time, 

small refiners should be required to comply only with the overall renewable fuel 

standard on a phased-in basis. 

2. Small refiner renewable fuel compliance volumes should be increased by not more 

than 20%/year until the full required volume is attained. 

3. There should be no specific requirements for advanced biofuel, biomass-based 

diesel and cellulosic biofuels at any time although RINs for these fuels would always 
be valid to demonstrate small refiner compliance with the overall renewable fuel 

standard.1

4. If EPA decides that at some future time small refiners must be subject to the 

advanced biofuels standard, it too should be phased in by requiring not more than 

20% of additional volume over a five-year period. 

5. In 2015, EPA should review the RFS -2 program with small refiners to evaluate if 

changes are appropriate.

 It should be pointed out that mandated biomass-based diesel blending would be a significant 

problem. At least two small refiners, American Refining Group and Age Refining with two very 

different seasonal temperatures, have not been able meet biomass-based diesel blending pour 

point for blended biodiesel. In Michigan and Wisconsin, American Refining reports, home 

heating systems became plugged and inoperable and fuel systems in trucks have formed 

restrictions and experienced plugging of fuel lines and system components. Pour point 

depressants have not been shown to be effective with biodiesel at any level. 

We estimate that small refiners now produce less than 6% of U.S. gasoline and diesel fuel. 

By 2020, we may well be an even more insignificant part of the U.S. refining industry. Our 

exemption from immediate full compliance will have no material impact on the country’s 

renewable fuels consumption. However it will provide much needed relief for small refiners. 

Costs of Compliance and Lead Time

Operational Costs and Changes. 

We do not have enough information at this time to comment on potential operational costs 

or operational changes that meeting the new standards would impose. We do not know, for 

example, whether each of the four fuels have to be segregated for RIN tracking and 

verification and therefore do not know whether we will need significant extra tankage and 

perhaps blending facilities. If that is the case, additional time will be required to secure the 

pre-construction and operating permits from the local air pollution control districts and other 

regulatory over-site agencies. 

We understand that the Magellan pipeline/terminal system, used by Gary-Williams Energy 

Corporation and Placid Refining, estimates that each ethanol injection facility being built at 

its terminals will cost approximately $3.3 million in today’s dollars. The pipeline projects that 

it will not be able to complete construction of the additional tankage and injection systems 

for ethanol until the end of 2010. 

In any case, we do know that there will be additional costs for tankage, automated 

measurement system and RINs reporting software, and staff both at the accounting and 

 

1

 This concept is compatible with EISA which requires only that the “renewable fuels obligation” apply to 

“transportation fuels” generally rather than to each category on a specific and separate basis. An EPA 

determination that RIN fungibility for small refiners does not endanger meeting the volume mandates for 

any renewable fuel category will satisfy the requirements of the statute in this regard. 
operations levels. We anticipate that pipeline tariffs and terminal storage/handling charges 

will have to increase as a result. 

Credit Trading Program 

We are very concerned about the cost and availability of credits (RINs). Whatever final RFS 

volumes are established for small refiners, RIN credits for all four fuel categories must be 

interchangeable for small refiners. There should be a permanent ability for small refiners to 

enjoy interchangeability on a one-to-one or other basis between the “renewable fuel”, “advanced 

biofuel”, “cellulosic biofuel” and “biomass-based diesel” categories such that credits or RINs 

generated in one category can be used for small refiner compliance in any other category. (See 

footnote 1 above.) 

If small refiner RINs are not fungible, as suggested above, we anticipate that our credit 

purchasing costs could be extremely damaging. 

We also believe that all RINs should have equivalent value on a one-to-one basis, independent 

from the life cycle analysis. This will significantly facilitate and enhance RIN trading and 

reporting. Tracking different vintage RINS for each of the four “nested” fuels will be much more 

complex and error-prone than even the cumbersome RIN reporting system of RFS 1. 

Small refiner-generated or purchased RINs should be valid for compliance in the calendar year 

generated and for an unlimited time thereafter with no credit rollover cap. Our small businesses 

will be particularly vulnerable to credit market fluctuations. We might, for example, buy RINs 

when they are relatively highly priced and be forced to sell them when their value is much less. 

The combination of RIN interchangeablity and no rollover cap will give small refiners the ability 

to fully utilize renewable fuels opportunities in the limited and sometimes niche markets where 

we operate. If elimination of a credit rollover cap is not possible, small refiners at the very least 

should be granted the flexibility to meet their current year RVO with up to 50% of prior year 

RINs. 

We also request that EPA plan a comprehensive review of the credit trading program and 

RINs system – in cooperation with small refiners – at least one year before the small refiner 

RFS 2 compliance deadline. By that time, there should be sufficient RINs market trading 

data to assess the availability and relative costs of the nested fuels and their credits. Such 

a review was proposed in the preamble to the MSAT 2 rule published in the Federal 

Register on February 26. 2007 (page 8492). 

Thank you for your consideration of these comments. We refer you also to the comments 

on RFS 1 which we submitted in November 2006 and which are attached. 

We look forward to the opportunity to discuss these concepts with you in greater detail as 

the SBREFA process continues. 

Sincerely yours, 

(Signed by:) 
Age Refining Cindy Fuqua, Environmental Consultant 

Phil Goodman, Director of Operations 

Gary-Williams Energy 

Corporation/Wynnewood 

Refining Company 

Sally V. Allen, VP Administration and Governmental Affairs 

American Refining Group John Robinson, VP Business Development 

Steve Sherk, VP Compliance 

Countrymark Cooperative John Stern, Consultant 

Kern Oil & Refining Company Jerry Frost, Senior Environmental Regulatory Advisor 

Placid Refining Company Pam Posster, Marketing Manager 

Wyoming Refining Company Bob Neufeld, VP Environment and Governmental Relations 
AD HOC COALITION 

OF 

SMALL BUSINESS REFINERS 

Comments 

On 

EPA’s Proposed Rule on Regulation of Fuels and Fuel Additives: 

Renewable Fuel Standard Program 

November 10, 2006 

Docket ID No. EPA-OAR-2005-0161 

Submission deadline: November 12, 2006 

There are approximately 20 U.S. small refiners falling within the EPA definition of small 

business refiner (with a capacity of not more than 155,000 BPD and fewer than 1,500 

total employees). We have worked together for many years in an ad hoc coalition which 

has enabled us to share views, exchange relevant information and work cooperatively 

on issues of importance, even survival. We appreciate the opportunity to comment on 

the proposed Renewable Fuel Standard Program 

Small refining companies are located across the country from Pennsylvania to the West 

Coast. They vary greatly in operational configuration, product slate, marketing area and 

capacity. Some do not now make gasoline but are considering entrance into the 

gasoline market. Some are subject to California regulations. There is generally no single 

regulatory approach which assists all small refiners equally. Therefore small refiner 

flexibilities included in EPA rulemakings are particularly important to the continuing 

viability of the small refiner segment of the industry. 

As part of its ongoing effort to confer with stakeholders during the development of clean 

fuels rules, EPA’s Office of Transportation and Air Quality met with ten to twelve small 

refiners in two extended conference calls to discuss the rulemaking as it developed and 

to seek small refiner input. 

Waiving the SBREFA Requirement

A key initial question involved the exemption granted in the Energy Policy Act to smaller 

refineries (75,000 bpd or less) until 2011. EPA proposed that the exemption be 

extended to small refiners with fewer than 1,500 employees and a capacity of 155,000 

bpd or less (as noted above, the EPA small refiner definition) and asked whether that 

would obviate the need for an investigation of the economic impact of the rule on small 
business refiners under the Small Business Regulatory Enforcement Fairness Act 

(SBREFA). EPA’s objective was to expedite compilation and finalization of the rule. 

The small refiners agreed that such an expedited approach would be acceptable if (1) 

small business refiners receive such an exemption, (2) they could generate RFS credits 

if they elected to blend renewables before 2011; and (3) those small refiners electing to 

blend and earn credits are relieved of program compliance requirements. 

Strong Endorsement of Expanded Small Refiner Definition

EPA specifically requested comment on the proposal to extend the small refinery 

exemption until 2011 which is incorporated in the act to small refiners as defined above. 

We strongly support that expanded definition. In fact, as noted, our initial agreement 

not to insist on a SBREFA panel was predicated on the understanding that the 

expanded definition would be incorporated in the final rule. 

Need for Change in and Continued Monitoring of Credit System

Small refiners generally endorse the Renewable Identification Numbers (RINs) 

approach to the establishment and operation of a credit trading program – with a key 

exception: we oppose it’s companywide (versus individual facility) compliance basis, as 

noted below 

EPA apparently anticipates that there will be a surplus of available credits and that 

therefore their cost will not be prohibitive. The cost and availability of credits are 

important issues to small refiners. The Energy Policy Act provides that the Secretary of 

Energy must determine whether the renewable fuels requirements impose 

disproportionate economic hardship on small refineries. We request that the rule include 

a specific provision, similar to that proposed in MSAT 2, to review the credit program 

and its impact on small refiners on a periodic basis. 

Plant-by-Plant vs Company-wide Compliance 

We strongly believe, for the reasons provided below, that compliance with the 

renewable fuels standard should be based on individual refinery plants rather 

than tallied on a company-wide basis. 

EPA points out in the preamble to the proposed rule that 42 small refineries are 

expected to qualify under the Energy Policy Act definition of small refinery 

(capacity not exceeding 75,000 bpd regardless of the size of the refining 

company that owns the refinery). We estimate that more than half of those are 

owned by large integrated oil and gas companies. Small refiners are concerned 

about the disproportionate advantage which will be enjoyed by large companies 

which can spread RINS among several refining facilities for two important 

reasons. 

On the one hand, large refiners with several facilities will be able to comply but 

still benefit from exemption for their small refineries. There may economies of 

scale, longer term contracts, and various other competitive benefits which larger 
companies will enjoy. Larger companies may build or acquire their own ethanol 

production facilities. Small refiners with only one plant operating in the same 

market area will be disadvantaged. Small refiners believe that compliance should 

be based on an individual refinery basis. Otherwise, the “solution” appears to lie 

only in the credit program and the hope that the volume of available credits will 

result in reasonable credit costs. 

On the other hand, in markets where production of corn-based ethanol is 

expected to be significant, large refining companies may decide to meet most or 

all of their RFS blending obligation at plants situated close to ethanol production 

sources. By doing so, they will save the transportation costs incurred when 

ethanol is shipped to other markets. The result will be an imbalance in the 

distribution of ethanol, with a concentration in the corn-belt area and lower 

volumes on the coasts. The related increase in gasoline volume in those corngrowing/ethanol producing regions will lead to lower gasoline prices which will 

disadvantage, in fact may be disastrous to, a small refiner or small refinery 

dependent upon its gasoline sales. 

In the Midwest, for example, corn is grown and ethanol is produced in most of the 

states served by the Magellan pipeline. Corn and ethanol production in the area 

is expected to increase significantly over the next decade. That volume will very 

soon grow by at least 10% if regional refineries elect to blend as much ethanol as 

possible (currently most cars can operate with a maximum 10% ethanol blended 

fuel) and thereby satisfy their company-wide ethanol blending requirement. As 

more flex vehicles come into use and retail distribution systems are put in place, 

gasoline volumes will increase further. Demand is not expected to keep pace. 

Prices will drop below national averages. There will be at least two 

consequences. Small refiners marketing in those states, without the ability to 

offset loss of revenue at other facilities, will be severely disadvantaged. And the 

“corn belt” already benefiting significantly from federal tax advantages and 

blending requirements, will enjoy lower gasoline prices than the rest of the 

country: a double whammy with potential consumer outrage in other parts of the 

country. 

Opportunity to Accumulate RINs before 2011

The proposed rule is not clear, in our opinion, about whether a small refiner blending 

ethanol at a terminal or any location without formally opting into the program before 

2011 can separate RINs and sell them or transfer them to customers (or use them if a 

later opt-in decision is made). The preamble to the rule, referring to small refineries and 

small refiners, says “If a refiner does not waive the exemption, the refiner could still 

separate and transfer RINS, but only for the renewable fuel that the refiner itself 

blends into gasoline (i.e. the refiner operates as an oxygenate blender.” The meaning of 

the word “itself” should be interpreted broadly. Most companies will purchase ethanol 

and blend at locations other than their own physical plant. 
As noted above, we proposed to EPA during our early discussions that small refiners 

should generate RFS credits if they elected to blend renewables before 2011 without 

formally opting into the program but they should not be held to specific RFS volumes 

under program compliance requirements. We formally recommend this provision again 

now. Such an approach would provide an incentive to small refiners to blend ethanol. 

Need to Address Hardships Resulting from Varying State RVP Standards

The proposed rulemaking does not address seasonality issues: the hardships faced by 

small refiners who market gasoline in non-attainment areas and/or must meet varying 

state RVP standards. We note the “ethanol penalty” resulting from both the California 

permeation emissions program and the fact that some areas in which small refiners 

market do not allow a 1 lb summer RVP waiver. It is our understanding that the Energy 

Information Administration (EIA) intends to study seasonal use. We request that the 

study be accelerated and that the RFS regulations allow subsequent revisions to the 

small refiner provisions to recognize the hardship which seasonality imposes on small 

business refiners if demonstrated by the EIA study 

Need for a General Hardship Provision 

EPA has not proposed a temporary exemption based on unforeseen circumstances. 

Other recent EPA clean fuels regs include hardship provisions allowing for temporary 

waivers based on unforeseen circumstances and/or extreme hardship circumstances. It 

may turn out , as EPA suggests in the Preamble to the rule, that there will be a 

sufficient volume of RINs available to offset reduced gasoline production. In addition 

lower gasoline volumes would result in a reduction of the renewable fuels requirement. 

But it is impossible at this early regulatory stage to predict with any certainty just how 

this program will in fact impact small refiners. We strongly request the inclusion of such 

provisions in this rule, particularly because of the competitive disadvantages that may 

result for small refiners if the small refinery exemption is not expanded to small refiners 

and if the company-wide (versus individual plant) compliance structure of the RINS 

program is not changed. 

We appreciate this opportunity to submit comments on this important rulemaking. If you 

have questions or need additional information at this time, please do not hesitate to 

contact any of the companies listed below or Sally V. Allen, Vice President of 

Administration and Governmental Affairs, Gary-Williams Energy Corporation, at 

303.628.3800 X460 (sallen@gwec.com ). 

The following companies endorse this statement: 

Age Refining Company, San Antonio, TX 

American Refining Group, Bradford, PA 

Countrymark Cooperative, Mt Vernon, IN 

Frontier Refining Company 

• C heyenne, WY 

• El Dorado, KS 
Gary-Williams Energy Corporation, Denver, CO 

• Wynnewood Refining Company, OK 

Holly Corporation, Dallas, TX 

• Navajo Refining, NM 

• Woods Cross Refining, UT 

Montana Refining Company, Inc., Great Falls, MT 

Petro Star Inc., Anchorage, Alaska 

• North Pole, AK 

• Val dez, AK 

Placid Refining Company, Dallas, TX 

• Port Allen, LA 

Silver Eagle Refining Company, Woods Cross, UT and Eagle Springs, NV 

The Somerset Refinery, Inc., Somerset, KY 

Western Refining Company, El Paso, TX 

Wyoming Refining Company, Denver, CO 

• N ewcastle, WY 

Ms. Tia Sutton June 17, 2008 

Environmental Protection Agency 

2000 Traverwood Dr. 

Ann Arbor, MI 48105 

 

Tia, 

 

ARG would like to comment on RFS#2 as below and we also endorse the comments made 

jointly under the Ad HOC Coalition of Small Business Refiners as submitted recently by Sally 

Allen. 

 

American Refining Group operates a small 10,000 bpd refinery in North Western Pennsylvania. 

We are unique in that 50% of our output is commodity fuels while the remaining portion is 

specialty lubricants, waxes, base oils, resins and extracts. We serve local markets and sell our 

entire fuels output local to Bradford, PA. We are a significant source for Locomotive Diesel 

Fuel, Off Road Diesel and Home Heating Fuel. We are currently supplying <500ppm Sulfur 

Diesel under the small refiners exemption. Our Gasoline sulfur levels are well below the 

mandated 30ppm. We operate on 100% Penn Grade Crude Oil that is indigenous to the 

geographic area. This crude is highly paraffinic and naturally low in sulfur. 

 

Our thoughts and concerns regarding RFS#2 are as follows: 

 

° We fear great volatility in the RIN market potentially driving up costs for small refiners. 

This will be true as we approach the “blend wall” for ethanol in gasoline estimated for 

2013. We expect market volatility to remain for several years as flex fuel vehicles and 

other alternatives work their way through the market. We foresee market volatility 

through 2015; this instability would place a large burden on small refiners. 

° Access to RIN’s. We believe under RFS#2 the blend categories may make it difficult for 

regional refiners to source certain categories of renewable fuels. This will put us at a 

disadvantage purchasing RIN’s and or drive up the cost of sourcing renewables with 

heavy freight charges. This holds especially true for Advanced Bio-mass material and 

cellulosic material. The volume purchasing power of large refiners and nation wide 

locations will put us at a price disadvantage. 

 

 

° We have seen that similar sized operations like ours have had significant difficulty under 

RFS#1 tracking, recording and reporting RIN’s. Many have had to higher additional 

staffing to comply and still there remains much confusion with the RIN System. We see 

staffing, RIN Trading and purchasing staff, accounting and others needed to comply with 

the burden of this legislation. This cost will be difficult to recover on the small volume of 

fuels we produce as compared to large refiners. 

 

° We have budgeted $1.5MM for a blending system in 2009 to comply under RFS#1. 

Further to comply with RFS#2 we are estimating several more tanks and blending would 

be required; estimates are as high as $6MM to comply. This is a significant outlay of 
desperately needed capitol for a small company that only produces aprox 5,000 bpd of 

commodity fuels at full production. This cost is a burden based on the relatively small 

amount of fuel we provide compared to our larger competitors. 

 

 ° We fully expect mandatory bio-diesel blending will be problematic for the northern tier 

states due to ASTM pour point specs. We have found no PPD (pour point depressants) to 

work with diesel fuel and bio-diesel blends. An insufficient amount of ULSK exists to 

blend with and at the blend % of bio-diesel expected would not be effective. We cite 

recent problems in Wisconsin and Michigan as evidence that serious potential problems 

with gelled fuels will exists. Forcing small refiners to buy RIN’s for half of their winter 

diesel blending requirements is not a good solution due to availability issues, market 

fluctuations and additional cost considerations. 

We appreciate this opportunity to voice our concerns to EPA, we hope that EPA will consider 

and implement the recommendations on delayed implementation and phase, RIN issues etc in as 

proposed by the Ad HOC Coalition of Small Business Refiners cited in Sally Allen’s letter of 

June 16th, 2008. We also ask that you consider many of the points raised above when 

implementing your program going forward. 

 

Should you have any questions or if you would like to discuss any point further please feel free 

to contact me. 

 

Sincerely, 

 

John W. Robinson 

V.P. of Business Development 
June 17, 2008 

Ms. Tia Sutton 

Environmental Protection Agency 

2000 Traverwood Drive 

Ann Arbor, MI 48105 

Sutton.Tia@epa.gov

SUBJECT: SBREFA RFS2 Comments 

Dear Tia: 

Kern Oil & Refining Co. (Kern) appreciates the opportunity to participate in the SBREFA 

process on Renewable Fuel Standards 2. For the record, Kern supports the comments 

previously submitted on June 16, 2008 by the Ad Hoc Coalition of Small Business Refiners 

(Attached) 

Small Refiner Overview

Kern is a small independent refiner who has been operating in the Southern San Joaquin 

Valley for over 70-years. Kern is the only small independent refinery in California 

continuously producing and supplying both California Air Resources Board (CARB) 

Reformulated Phase 3 Gasoline and new CARB Ultra-Low Sulfur Diesel. Kern is 

recognized by CARB and the CEC as a “Small Refinery”. 

Kern has no upstream oil and gas production nor do we have any marketing or retail 

facilities. Therefore, the economies of scale for Kern are much poorer than they are for the 

larger refiners.

The California Air Resources Board (CARB), and others, have long recognized Small 

Refiners as vital in providing supply and competition to California’s petroleum industry. 

Kern Oil & Refining Co. 

7724 East Panama Lane 

Bakersfield, CA 93307 

Phone (661) 845-0761 

Fax (661) 845-0330 

KERN
 C- 16

SBREFA RFS2 Comments 

June 17, 2008 

Page 2 of 4 

Recognizing the importance of Small Refiners yet understanding the higher compliance 

costs, CARB has adopted Small Refiner specific regulations, which provides certain 

flexibility for compliance while preserving the intent. The USEPA has adopted similar 

regulations applicable to Small Refiners under the same premise (Ref. 40 CFR 80.550). 

Based on the “Oil & Gas Journal”, there were 26 small refiners in California in 1981, and 

by 2003 there were only 7 small refiners. 

EPA recognizes the uniqueness of Small Refineries and in EPA's FR notice dated 1-18-01, 

pages 5073-5075, EPA makes the following references to small refiners: 

• “ ...disproportionately challenged...” 

• “...poorer economies of scale...” 

• “...re lative difficulty...warrants flexibility...” 

• “...are disadvantaged by the economies of scale that exist for larger refining 

companies...” 

• “...capital costs and per-barrel fixed operating costs are generally higher...” 

• “...we agree that small refiners would likely experience a significant and 

disproportionate financial hardship...” 

• “...generally lack the resources available to large companies...” 

• “...more difficultly in securing loans, competing for engineering resources 

and completing construction...” 

• “...have limited additional sources of income beyond refinery earnings...” 

• “...do not have the financial backing that larger more integrated companies 

have...” 

 

As mentioned previously, Small Refiners experience poorer economies of scale than the 

large refineries and refineries owned by major integrated oil companies. Small refiners 

have no upstream oil and gas production nor do they have marketing and retail 

distribution. 

In California, in particular, small refiners are still recovering from recently having to meet 

new Air Resources Board Reformulated Fuel Standards and Ultra-Low Sulfur Diesel 

standards. Small refiners in California are now facing new Low Carbon Fuel Standards 

and Renewable Fuel Standards. Small refiners are facing significant uncertainty as to how 

state and federal fuel standards will either compete or overlay each other and what impact 

the costs of these new programs and standard will ultimately be. 
 C- 17

SBREFA RFS2 Comments 

June 17, 2008 

Page 3 of 4 

It is important to consider that small refiners do not typically own or operate upstream oil 

and gas production or downstream marketing, transportation or retail as do many of the 

larger integrated oil companies. Therefore, it is much more difficult for small refiners to 

implement and to recover from new regulations and programs. Due to their limited 

resources and capital, small refiners are more affected by market, pricing and supply 

fluctuations 

Overall Response to RFS2 Options 

Additional Lead Time/How Long

 

Kern strongly believes that additional lead time (beyond the RFS1 delay until January 1, 

2011) is essential. In addition to the costs and reporting complexities of the rule and based 

on the anticipated 2013 blend wall, we expect significant RINs market volatility until 2015 – 

assuming the RFS 2 program goes into effect on January 1, 2010 -- and probably beyond. 

Kern and the other small refiners request the following consideration: 

1. Small refiners should be fully exempt from complying with the RFS 2 rule until 

January 1, 2016 – or at least five years after the RFS 2 effective date. At that time, 

small refiners should be required to comply only with the overall renewable fuel 

standard on a phased-in basis. 

2. Small refiner renewable fuel compliance volumes should be increased by not more 

than 20%/year until the full required volume is attained. 

3. There should be no specific requirements for advanced biofuel, biomass-based 

diesel and cellulosic biofuels at any time although RINs for these fuels would always 

be valid to demonstrate small refiner compliance with the overall renewable fuel 

standard.1

 

4. If EPA decides that at some future time small refiners must be subject to the 

advanced biofuels standard, it too should be phased in by requiring not more than 

20% of additional volume over a five-year period. 

5. In 2015, EPA should review the RFS -2 program with small refiners to evaluate if 

changes are appropriate. 

 

1

 This concept is compatible with EISA which requires only that the “renewable fuels obligation” apply to 

“transportation fuels” generally rather than to each category on a specific and separate basis. An EPA 

determination that RIN fungibility for small refiners does not endanger meeting the volume mandates for any 

renewable fuel category will satisfy the requirements of the statute in this regard. 
SBREFA RFS2 Comments 

June 17, 2008 

Page 4 of 4 

It is estimated that small refiners now produce less than 6% of U.S. gasoline and diesel 

fuel. By 2020, we may well be an even more insignificant part of the U.S. refining industry. 

Our exemption from immediate full compliance will have no material impact on the 

country’s renewable fuels consumption. However, it will provide much needed relief for 

small refiners. 

Thank you for your consideration of these comments and we look forward to the 

opportunity to discuss these concepts with you in greater detail as the SBREFA process 

continues. 

Sincerely, 

COPY 

Jerry L. Frost, REA, REM 

Senior Environmental Regulatory Advisor 

Attachment