PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT 

_______________________

No. 21-3218

_______________________

UNITED REFINING COMPANY,

 Petitioner

v.

UNITED STATES ENVIRONMENTAL PROTECTION 

AGENCY

_______________________

On Petition for Review of a Decision of the 

Environmental Protection Agency

__________________________

Argued December 14, 2022

Before: RESTREPO, McKEE, and SMITH, 

Circuit Judges

(Filed April 5, 2023)
2

Mark W. DeLaquil [Argued]

Baker & Hostetler

1050 Connecticut Avenue, N.W.

Suite 1100

Washington, DC 20036

Counsel for Petitioner

Patrick R. Jacobi [Argued]

United States Department of Justice

Environmental Defense Section

999 18th Street

South Terrace, Suite 370

Denver, CO 80202

Counsel for Respondent

__________________________

OPINION OF THE COURT

__________________________

SMITH, Circuit Judge.

Petitioner United Refining Co. (“United”) challenges 

the Environmental Protection Agency’s (“EPA”) denial of 

United’s request for a hardship exemption from EPA’s

Renewable Fuel Standard program. United chiefly argues that 

EPA arbitrarily relied on what United characterizes as an 

“accounting trick” that artificially inflated United’s running 

average net refining margin and thus led EPA to deny United’s 
3

exemption request. We are not persuaded that this 

discretionary agency decision—or any other aspect of EPA’s 

decision-making process that United now challenges on 

review—provides a basis for setting aside EPA’s denial of 

United’s exemption request. We will, therefore, deny United’s 

petition for review.

I. Background

A. Statutory and Regulatory Framework

The Renewable Fuel Standard (“RFS”) program 

requires gasoline and diesel fuel refiners, blenders, and 

importers (“obligated parties”) to ensure that a certain portion 

of their annual transportation fuel production consists of 

renewable fuels. Congress authorized the creation of the RFS 

program in 2005 with the long term goal of shifting the United 

States toward greater reliance on sustainable domesticallyproduced energy. See Energy Policy Act of 2005, Pub. L. No.

109–58, § 1501, 119 Stat 594, 1067–76 (2005) (codified at 42 

U.S.C. § 7545(o)). The statute set out annual target volumes of 

renewable fuel production for each year through 2022. 42 

U.S.C. § 7545(o)(2)(B)(i). For the purpose of the statute, the 

category of renewable fuels includes biodiesel, biogas, ethanol, 

and certain other fuels produced from biomass. Id. § 

7545(o)(1)(B)–(F). Congress tasked EPA with enacting 

regulations to bring about a gradual increase in the volume of 

renewable transportation fuel sold in the continental United 

States. Id. § 7545(o)(2)(A)(i).
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1. How the RFS program works

Under the RFS program, EPA annually sets standards 

dictating, in percentage terms, what component of each 

obligated party’s transportation fuel production must consist of 

renewable fuels. Id. § 7545(o)(3). For example, EPA’s 2019 

standards required renewable fuels to comprise 10.97 percent

of each obligated party’s transportation fuel output. See 

Renewable Fuel Standard Program: Standards for 2019 and 

Biomass-Based Diesel Volume for 2020, 83 Fed. Reg. 63,740–

41 (Dec. 11, 2018). All obligated parties must meet the same 

percentage threshold.

EPA has created a credit-trading system to track 

compliance with the RFS program using Renewable 

Identification Numbers (“RINs”). See 40 C.F.R. § 80.1401; 42 

U.S.C. § 7545(o)(5)(A) (authorizing creation of credit trading 

program). A RIN is a unique serial number assigned to each 

gallon of renewable fuel that is produced in or imported to the 

United States. 40 C.F.R. § 80.1426. Each RIN remains 

associated with a discrete gallon of renewable fuel until the 

fuel’s owner “separates” the RIN from the fuel. Id. § 80.1429.

Once a RIN is separated from the fuel, it becomes a fungible 

credit that an obligated party may redeem with EPA (or, in the 

agency’s parlance, “retire”) or transfer to another private party. 

Id. §§ 80.1427, 80.1429(c)–(e); 42 U.S.C. § 7545(o)(5)(A). 

An obligated party demonstrates compliance with the 

RFS program by annually redeeming a quantity of RINs equal 

to its renewable fuel obligations under the RFS program. 40 

C.F.R. § 80.1427, 80.1451. An obligated party may generate 

enough RINs to satisfy its RFS obligations simply by 
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producing renewable fuels or by purchasing and blending 

renewable fuels into conventional transportation fuel. An 

obligated party also may purchase additional RINs on the 

market. If an obligated party produces or purchases more RINs 

than it needs, it may sell the excess RINs to other private 

parties. But RINs are time-limited, and “may only be used to 

demonstrate [RFS] compliance . . . for the calendar year in 

which they were generated or the following calendar year.” Id.

§ 80.1427(a)(6)(i).

2. Exemptions for small refineries

Recognizing that refineries with limited production 

capacity lack economies of scale and so would face additional 

hurdles in complying with the RFS program, Congress 

authorized EPA to waive the requirements of the RFS program 

for small refineries. 42 U.S.C. § 7545(o)(9). The statute defines 

“small refinery” to mean any refinery with a maximum 

production capacity of 75,000 or fewer barrels per day. Id. § 

7545(o)(1)(K). Congress initially exempted all small refineries 

from their RFS compliance obligations until 2011. Id. 

§ 7545(o)(9)(A)(i). Congress tasked the Department of Energy 

(“DOE”) with studying “whether compliance with [the RFS 

program] would impose a disproportionate economic hardship 

on small refineries.” Id. § 7545(o)(9)(A)(ii)(I). Congress

instructed EPA to consider the results of DOE’s study and, if 

the agency identified potential disproportionate hardships on 

small refineries, to extend the small refinery exemption beyond 

2011. Id. § 7545(o)(9)(A)(ii)(II). In the alternative, Congress 

authorized EPA to grant temporary discretionary exemptions 

to any small refineries for whom compliance with the RFS 
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program would present a “disproportionate economic 

hardship.” Id. § 7545(o)(9)(B)(i). During the period at issue 

here, EPA had allowed the blanket exemption for all small 

refineries to lapse and considered each individual refinery’s

hardship exemption petition on a case-by-case basis.

The practical effect of a hardship exemption is that the 

exempt refinery need not comply with EPA’s renewable fuel 

standards for the year of exemption and so need not redeem 

any RINs for that year. If a refinery has produced or purchased 

RINs while its exemption petition is pending before the 

agency, the exemption enables it to sell those unneeded RINs 

to other parties. On the flip side, if a refinery has not produced 

or purchased any RINs or has produced or purchased too few 

RINs to meet its compliance obligations, the exemption spares 

it the expense of purchasing RINs. In either event, a hardship 

exemption represents a significant benefit to the refinery.

3. How EPA evaluates small refinery exemption 

petitions

To receive a hardship exemption, a small refinery must 

submit to EPA a petition demonstrating “disproportionate 

economic hardship.” 40 C.F.R. § 80.1441(e)(2). The petition 

“must specify the factors that demonstrate a disproportionate 

economic hardship and must provide a detailed discussion 

regarding the hardship the refinery would face” if it were 

forced to comply with the RFS program. Id. § 80.1441(e)(2)(i). 

EPA regulations thus require the refinery to provide all 

relevant data to the agency. But the regulations do not require 

the refinery to support its petition with legal arguments, nor do 
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they prescribe any additional actions that the refinery may take 

after submitting the exemption petition.

EPA evaluates hardship petitions “in consultation with 

the Secretary of Energy” and considers DOE’s research on the 

economic hardships faced by small refineries as well as “other 

economic factors.” 42 U.S.C. § 7545(o)(9)(B). EPA refers each 

exemption petition to DOE, which in turn scores the petition 

on a matrix (the “DOE Matrix”). The DOE Matrix aims to

capture DOE’s aforementioned findings on the RFS program’s 

economic effects on small refineries. The DOE Matrix scores 

a refinery along several different metrics, such as the refinery’s 

production capacity, its financial condition, its access to capital 

and other lines of business, the effect of state regulations on its 

operations, and the effect of the RFS program on the refinery’s 

operations and competitiveness. DOE scores each metric 

between 0 and 10 and then aggregates the scores to yield two 

overarching indices: one index designed to capture the 

disproportionate structural impact of regulation on the refinery 

and one index designed to capture the refinery’s business 

viability. DOE recommends that EPA grant a full exemption to 

refineries earning a score greater than 1 on both indices, a 50

percent exemption to refineries earning a score greater than 1 

on one index, or no exemption to refineries that earn a score 

less than 1 on both indices. After reviewing DOE’s 

recommendation, EPA decides whether to grant the exemption 

petition and then notifies the refinery of its decision. Unlike 

DOE, EPA has construed § 7545 to authorize only a full 

exemption or no exemption and thus does not grant 50 percent

exemptions even when DOE recommends that it do so. For 

example, in the 2018 compliance year, EPA granted full 
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exemptions to all refineries for which DOE recommended a 50 

percent exemption.

Of particular relevance to this case, one metric that DOE 

considers when evaluating hardship petitions is the refinery’s 

“relative refining margin.” This metric compares the refinery’s 

average net profit per barrel for the previous three compliance 

years against the industry average net profit per barrel over the 

same period. A refinery whose net profit per barrel was above 

the industry average receives a score of 0; a refinery whose net 

profit per barrel was positive but below the industry average 

receives a score of 5; and a refinery whose net profit per barrel 

was negative receives a score of 10.

B. United’s Petition

United operates a small refinery in Pennsylvania and 

produces fuel that it sells in Pennsylvania, New York, and 

Ohio. United has periodically sought and received hardship 

exemptions since the creation of the RFS program, most 

recently in the 2017 and 2018 compliance years. United 

acquired 2017 and 2018 RINs before EPA granted its 

exemption petitions for those years. EPA delayed granting the 

2017 and 2018 exemption petitions, and United retained its 

RINs while its petitions were under review. EPA eventually 

granted United’s 2017 and 2018 exemption petitions in early 

2019. United then sold its 2017 and 2018 RINs.

In 2019, as in previous years, United sought an 

exemption from the requirements of the RFS program. But

rather than accepting the data in United’s petition at face 

value—as it apparently had done in previous years—EPA 
9

responded by asking United to “let [EPA] know how United 

[had] accounted for the financial benefit of its 2018 RFS 

exemption.” J.A. 249. Specifically, EPA asked United to 

explain whether it sold “any 2017 or 2018 RINs that were 

[subject to] the [2018] exemption, and if so, where in the 

margin spreadsheet were the sale proceeds included.” J.A. 249.

In response, United submitted an amended financial 

statement which explained that revenue from RINs generated 

in a particular year was included in net revenues for that year, 

even if the RINs in fact were sold in a later calendar year. The 

revised financial statement listed United’s proceeds from the 

sale of 2017 and 2018 RINs as separate line items in the 

financial statements for 2017 and 2018, respectively. United’s 

updated accounting resulted in higher net refining margins for 

2017 and 2018 as compared to United’s originally submitted 

financial statement, but a lower net refining margin for 2019.

Notably, the DOE Matrix considers a refinery’s average 

refining margin for the three years before the year of the 

petition, which in this case meant looking to United’s (high) 

margins from 2016 through 2018 and disregarding its (low) 

2019 margin. As a result, United’s amended figures showed a 

three-year refining margin that was higher than the margin in 

United’s original submission and, crucially, higher than the 

industry average for that period.

EPA referred United’s amended submission to DOE, 

which evaluated United’s submission under the DOE Matrix. 

Three of DOE’s scoring determinations are relevant to this 

appeal. First, DOE found that United’s amended financial 

statements placed its three-year refining margin above the 
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industry average and therefore warranted a score of 0 for that 

metric. Second, DOE assigned United scores of 0 for the access 

to capital and other lines of business metrics because United is 

a direct subsidiary of Red Apple Group, a large private 

corporation with diversified business activities. Finally, DOE 

assigned United a score of 0 for the state regulations metric 

because United is located in Pennsylvania, a state that does not 

impose exceptionally restrictive regulations on refineries. 

Based on these scores and United’s scores on the rest of the 

DOE Matrix, DOE at first recommended that United not 

receive a hardship exemption.

DOE subsequently changed its recommendation to 

account for the effects of COVID-19. Recognizing that the 

pandemic caused widespread disruption to global energy 

markets, DOE updated its recommendation and suggested that 

United receive a 50 percent exemption for the 2019 compliance

year.

EPA was less forgiving—it denied United any 

exemption. Though EPA noted that DOE’s updated 

recommendation accounted for the effects of COVID-19, EPA 

declined to consider events “that did not emerge until 2020, the 

year after the petition in question.” J.A. 11 n.3 (emphasis in 

original). EPA accepted the rest of DOE’s recommendation 

and determined that United was not entitled to a hardship 

exemption for the 2019 compliance year.

II. Jurisdiction

United timely filed its petition for review. We have 

jurisdiction to review EPA’s order pursuant to 42 U.S.C. § 
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7607(b)(1). Venue is proper because EPA’s order pertained to 

United’s refinery in Pennsylvania. See 42 U.S.C. § 7607(b)(1).

III. Discussion

We review EPA’s action applying the Administrative 

Procedure Act (“APA”), under which we will set aside EPA’s 

order if it was “arbitrary, capricious, an abuse of discretion, or 

otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).

Under this standard, we ask whether the agency has “failed to 

consider an important aspect of the problem,” whether the 

agency’s decision is “unreasoned,” or whether the agency has 

“relied on factors which Congress has not intended it to 

consider.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State 

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). We also ask 

whether the agency’s decision is supported by sufficient 

“relevant evidence as a reasonable mind might accept as 

adequate to support a conclusion.” Biestek v. Berryhill, 139 S. 

Ct. 1148, 1154 (2019) (cleaned up). But we may not “substitute 

[our] judgment for that of the agency,” and will uphold the 

agency’s decision so long as it was reasonable. Citizens to 

Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971).

Here, none of United’s challenges to the denial of its 2019 

exemption petition is persuasive under the APA’s narrow 

standard of review.

A. EPA reasonably attributed RIN sale revenue to 

the year of generation rather than the year of 

sale.

The gravamen of United’s petition for review is that 

EPA acted arbitrarily and capriciously by attributing United’s 
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proceeds from selling 2017 and 2018 RINs to the years in 

which the RINs were generated even though United sold the 

RINs in 2019. On review before this Court, EPA argues that 

United forfeited this challenge by failing to object to EPA’s 

accounting methodology during the proceeding before the 

agency. We reject EPA’s forfeiture argument and so consider 

United’s objection on the merits. But on the merits, United’s 

challenge fails.

1. United did not forfeit its objection to EPA’s

accounting method.

To start, United did not forfeit its objection to EPA’s 

decision to attribute RIN sale revenue to the year of generation 

because RFS exemption petitions do not require issue 

exhaustion. As a general matter, “federal appellate courts do 

not consider issues that have not been passed on by the 

agency,” as it would be unfair to force the agency to litigate 

issues that it did not have the opportunity to address in the first 

instance. Sw. Pa. Growth All. v. Browner, 121 F.3d 106, 112 

(3d Cir. 1997) (cleaned up). But this is only a “general rule.” 

United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 

(1952). Most “requirements of administrative issue exhaustion 

are . . . creatures of statute” or agency regulations. Sims v. 

Apfel, 530 U.S. 103, 107 (2000). And where, as here, there is 

no statutory or regulatory requirement that a litigant raise an 

issue in front of the agency before seeking judicial review of 

that issue, the decision of whether to impose an issue 

exhaustion requirement “is a matter of sound judicial 

discretion.” Cerro Metal Prods. v. Marshall, 620 F.2d 964, 970 

(3d Cir. 1980).
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When deciding whether to impose an issue exhaustion 

requirement in the absence of a statutory directive, we look to 

“the nature of the claim presented,” the “characteristics of the 

particular administrative procedure” at issue, and the 

competing individual and governmental interests at play. Cirko 

ex rel. Cirko v. Comm’r of Soc. Sec., 948 F.3d 148, 153 (3d 

Cir. 2020) (cleaned up). But we do not weigh these factors 

equally, and Supreme Court precedent teaches that the 

characteristics of the proceeding—that is, whether the 

proceeding is more like a common law adversarial proceeding 

or a civil law inquisitorial proceeding—predominate. See Carr 

v. Saul, 141 S. Ct. 1352, 1360 (2021) (treating the 

characteristics of the proceeding as dispositive). This stands to 

reason, as “[t]he basis for a judicially imposed issueexhaustion requirement is an analogy to the rule that appellate 

courts will not consider arguments not raised before trial 

courts.” Sims, 530 U.S. at 109. And “[t]he critical feature that 

distinguishes adversarial proceedings from inquisitorial ones is 

whether claimants bear the responsibility to develop issues for 

adjudicators’ consideration.” Carr, 141 S. Ct. at 1358.

Here, the character of the hardship exemption

proceeding tilts decidedly against imposing an issue 

exhaustion requirement, as a refinery petitioning for RFS 

exemption bears no responsibility—indeed, has no 

opportunity—to develop legal issues in front of the agency. A 

refinery bears the initial burden of submitting a petition that 

“specif[ies] the factors that demonstrate a disproportionate 

economic hardship” under the DOE Matrix and discusses “the 

hardship the refinery would face in” complying with the RFS 

program. See 40 C.F.R. § 80.1441(e)(2)(i). But this 
14

information is purely factual, and a refinery need not submit 

any legal arguments in support of its petition. After the refinery 

has submitted the petition, the ball is in EPA’s court: EPA 

develops the administrative record, coordinates with DOE to 

assess the submission under the DOE Matrix, reviews DOE’s 

recommendation, and decides whether to grant or deny the 

requested exemption. At no point in the proceeding does EPA 

ask for oral or written arguments on whether the refinery ought 

to be exempt from the RFS program. Indeed, United avers that 

it was unaware of EPA’s choice of accounting methodology 

until EPA issued a final decision denying United’s exemption 

petition.

In this respect, RFS exemption petitions are similar to 

the Social Security ALJ proceedings that the Supreme Court, 

like this Court, determined to be non-adversarial. Like a small 

refinery seeking exemption from the RFS program, a Social 

Security claimant bears the initial burden of submitting a form 

that articulates the basis for relief. Carr, 141 S. Ct. at 1359. 

And as with an RFS exemption petition, the rest of a Social 

Security appeal is “driven by the agency rather than the 

claimant” insofar as the agency adjudicator bears the burden of 

developing issues. Cirko, 948 F.3d at 156. To be sure, an RFS 

exemption request is longer and more factually complex than 

the “roughly three lines” available for a Social Security 

claimant to state his case. Carr, 141 S. Ct. at 1359. But length 

alone does not alter the fundamental balance between a 

petitioner who is responsible for providing initial data and an 

agency that is, thereafter, responsible for everything else. Thus,

RFS exemption petitions, no less than Social Security appeals, 
15

are inquisitorial in character and do not give rise to an issue 

exhaustion requirement.

To be sure, certain other factors counsel for requiring 

issue exhaustion in the RFS exemption petition context. Most 

notably, the nature of United’s claim—an APA challenge to 

the reasonableness of the agency’s action—is of the sort that 

EPA ought to pass on in the first instance. While “agency 

adjudications are generally ill suited to address structural 

constitutional challenges,” Carr, 141 S. Ct. at 1360, they are 

generally well suited to address challenges to agency actions 

that “involve[] exercise of the agency’s discretionary power or 

. . . allow the agency to apply its special expertise,” McCarthy 

v. Madigan, 503 U.S. 140, 145 (1992). Nor would it have been 

futile for United to challenge EPA’s accounting methodology 

in the context of the agency proceeding, as it is well within 

EPA’s authority to reconsider its approach to adjudicating RFS 

exemption petitions. See Carr, 141 S. Ct. at 1361 (noting that 

“futility exception to exhaustion requirements” applies when 

adjudicator is “powerless to grant the relief requested”). In a 

different context, these factors might “tip the scales” in favor 

of imposing an exhaustion requirement. Id. at 1360. But they 

do not overcome the basic unfairness of preventing a regulated 

party from litigating an issue that it had neither the obligation 

nor the opportunity to raise during the agency proceeding.

We therefore hold that United has not forfeited its 

ability to challenge EPA’s method of accounting for RIN sale 

proceeds.
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2. Attributing RIN sales to the year of generation 

was reasonable.

As a threshold matter, we are not convinced that EPA 

ever decided to attribute United’s RIN sale revenue to the year 

of generation rather than the year of sale. EPA merely asked 

United to explain “how United [had] accounted for the 

financial benefit of its 2018 RFS exemption,” including 

whether United sold “any 2017 or 2018 RINs” and “where in 

the margin spreadsheet” it had accounted for proceeds from 

those sales. J.A. 249. Rather than provide narrow clarifying 

answers to the questions posed, United chose to respond to this 

request for explanation by submitting an updated financial 

statement. And it was this amended financial statement that, 

for the first time, “assume[d] that RINS associated with” a 

given calendar year “were sold and included in net revenue in” 

that year. J.A. 415. Thus it was United, not EPA, that decided 

to attribute RIN sale proceeds to the year of generation. In this 

respect, EPA’s reliance on United’s recalculated financial 

statement seems less a choice of accounting methodology than 

a decision to take the refinery’s most up-to-date submission at 

face value.

In any event, it was reasonable to determine that 

attributing RIN sale revenue to the year of generation would 

provide the best picture of a refinery’s economic situation. As 

our sister circuits have recognized, “EPA retains substantial 

discretion to decide how to evaluate hardship petitions.” 

Hermes Consol., LLC v. E.P.A., 787 F.3d 568, 575 (D.C. 

Cir. 2015); see also Lion Oil Co. v. E.P.A., 792 F.3d 978, 983

(8th Cir. 2015). EPA faced a choice between attributing RIN 
17

sale proceeds to the year in which the RINs were sold or the 

year in which the RINs were generated. The former accounting 

method provides a more accurate depiction of a refinery’s 

actual annual cash flows. But the latter accounting method, 

which generally attributes the income from RIN sales to the 

same year in which the refinery incurred costs to generate those 

RINs, provides a more accurate depiction of the refinery’s 

financial health if it were excluded from the RFS program in 

the first instance. Either insight strikes us as a defensible way 

to determine whether compliance with the RFS program 

“would impose a disproportionate economic hardship” on the 

refinery, 42 U.S.C. § 7545(o)(9)(A)(ii)(I), as the statute 

instructs EPA to do, id. § 7545(o)(9)(B)(ii). And “it is the 

agency’s prerogative to choose between two competing, 

justifiable . . . considerations.” Stardyne, Inc. v. N.L.R.B., 41 

F.3d 141, 148 n.6 (3d Cir. 1994).

At bottom, United’s argument hinges on an assumption 

that the original financial statement that it submitted to EPA—

which attributed RIN sale revenues to the year of sale rather 

than the year of generation—represented the refinery’s 

authentic financial situation without agency meddling. But one 

could equally argue that the opposite is true. United’s original 

financial statement reflected the fact that United used some of 

its 2017 and 2018 income to purchase RINs—themselves a 

creature of EPA regulations—and that United then realized 

income from selling those RINs in 2019. In this respect, even 

United’s original financial statement reflected the effect of 

EPA regulations on the firm’s financial situation. By contrast, 

United’s updated financial statement reallocated certain line 

items to approximate the refinery’s balance sheet in the 
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absence of the RFS program and thereby provided an insight 

into the refinery’s financial situation in a pre-regulation state 

of nature. At the very least, United’s updated financial 

statement was no less authentic a depiction of the refinery’s 

financial health than was its original financial statement.

EPA’s approach also enabled “apples-to-apples” 

comparisons among small refineries. Broadly speaking, a small 

refinery must choose between two strategies for RFS 

compliance. On the one hand, the refinery can produce or 

purchase RINs throughout the year with the plan of selling 

those RINs if and when EPA grants its exemption petition. On 

the other hand, the refinery can hold off on producing or 

purchasing RINs and hope to purchase any necessary RINs if 

and when EPA denies its exemption petition. A refinery 

adopting this latter strategy would have comparatively higher 

margins in earlier years due to its lack of RFS compliance costs 

and lower margins in subsequent years due to its lack of 

income from RIN sales. A fair and consistent outcome requires 

EPA to adopt some sort of methodology to standardize profits 

between otherwise similarly situated small refineries that 

happen to have adopted divergent compliance strategies. In 

allocating United’s RIN sale proceeds to the year of 

generation, EPA has done just that.

Nor did attributing RIN sales to the year of generation 

prevent a fair comparison between United’s margins and the 

overall industry average. To be sure, most refineries are not 

exempt from the RFS program and so must bear the full cost 

of RFS compliance each year. Like those non-exempt

refineries, United incurred RFS compliance costs during 2017 
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and 2018. But unlike those refineries, United was able to offset 

its compliance costs by selling 2017 and 2018 RINs after 

receiving RFS exemptions for those years. EPA reasonably 

viewed this benefit as a relevant consideration when assessing 

how United’s refining margin—a heuristic for the refinery’s 

overall financial stability—stacked up against the competition.

To the extent that EPA’s request for United to account

for its proceeds from RIN sales represented a change in agency 

practice, any such change was permissible. EPA has never 

promulgated a rule on how to account for RIN sales in 

calculating refining margins. Nor was EPA obligated to issue 

such a rule or guidance in advance, as agencies retain “the 

informed discretion” to implement policy via discrete 

adjudications rather than broad-based rulemaking. Sec. & 

Exch. Comm’n v. Chenery Corp., 332 U.S. 194, 203 (1947).

EPA faced a decision between two possible methods of 

carrying out its statutory directive to safeguard small refineries 

from any “disproportionate economic hardship” imposed by

the RFS program. 42 U.S.C. § 7545(o)(9)(A)(ii)(I). The 

agency’s choice—to attribute United’s RIN sale proceeds to 

the year in which the RINs were generated—was a reasonable 

means of accomplishing that task. We ask no more of an 

agency charged with administering a broad and complex 

statutory program, and will not disturb EPA’s decision.
20

B. EPA’s denial of United’s exemption petition was 

not otherwise arbitrary or capricious.

1. EPA need not have considered the effect of the 

COVID-19 pandemic.

As the D.C. Circuit has explained, “EPA retains broad 

discretion to choose which economic factors it will (and will 

not) consider” in evaluating an RFS exemption petition. 

Hermes, 787 F.3d at 577 (cleaned up). And here, EPA 

reasonably exercised that discretion by declining to consider 

an economic factor that postdated the compliance year in 

question.

Nor did EPA act arbitrarily in declining to follow 

DOE’s recommendation to consider the effect of the COVID19 pandemic. To be sure, Congress instructed EPA to 

“consult[]” with DOE when evaluating RFS exemption 

petitions. 42 U.S.C. § 7545(o)(9)(B)(ii). But as our sister 

circuits have recognized, EPA need not “blindly adopt” DOE’s 

recommendations. Ergon-W. Va., Inc. v. E.P.A., 896 F.3d 600, 

610 (4th Cir. 2018) (quoting City of Tacoma v. FERC, 460 F.3d 

53, 76 (D.C. Cir. 2006)).

2. EPA reasonably relied on DOE’s evaluation of 

United’s hardship petition.

United argues that EPA mistakenly relied on DOE’s 

analysis of United’s business viability. Because this action 

proceeds against EPA and not against DOE, our review is 

limited to whether EPA’s reliance on DOE’s evaluation was 

arbitrary or capricious, not whether DOE’s evaluation of 
21

United’s hardship petition was itself arbitrary or capricious. 

See Ergon-W. Va., 896 F.3d at 610. In any event, “the two 

inquiries overlap” given that the reasonableness of DOE’s 

recommendation necessarily informs our analysis of whether 

EPA reasonably relied on that recommendation. City of 

Tacoma, 460 F.3d at 75. 

United specifically challenges EPA’s reliance on three 

of DOE’s determinations. First, United argues that, because it 

sells fuel in New York and Ohio and not just in Pennsylvania, 

the agencies should have considered how consumer 

preferences and fuel regulations in New York and Ohio impact 

United’s business. Second, United argues that the agencies 

should have given more weight to certain expenses that United 

incurred from ongoing maintenance projects and an 

unanticipated shutdown of operations. Third, United objects to

the agencies’ decision to attribute to United the capital 

characteristics and business diversification of United’s parent 

corporation.

These arguments are unpersuasive. United does not 

argue that EPA or DOE “entirely failed to consider” the effect

of neighboring state regulations or unexpected business events 

on a refinery’s profits, nor that the capital characteristics of a 

refinery’s parent corporation are a “factor[] which Congress 

has not intended [EPA] to consider.” State Farm, 463 U.S. at

43. Rather, United objects to the manner in which the agencies

chose to evaluate those factors when considering United’s 

exemption petition. But we may not “substitute [our] judgment 

for that of the agency” and instead may ask only whether the 

agency’s decision was reasonable. Citizens to Pres. Overton 
22

Park, 401 U.S. at 416. And all of the agency decisions that 

United challenges satisfy that deferential standard. 

First, EPA reasonably ignored the effect of New York 

and Ohio market preferences and regulations on United’s 

business. DOE has chosen to limit its consideration of state 

regulations and market preferences to those of the state in 

which the refinery is located. This decision hardly strikes us as

contestable given the administrative complexity that inevitably 

would ensue if DOE and EPA were to consider the regulations 

and market preferences of every state in which a refinery’s 

products are sold.

Nor was it unreasonable for DOE and EPA to disregard 

United’s 2019 expenses associated with a capital project and 

an unplanned shutdown. DOE reasonably determined that 

United’s ongoing upgrades and maintenance were not the sort 

of short-term crisis that ought to bear on whether a refinery 

receives an RFS exemption. And DOE justifiably declined to 

consider the losses from United’s brief unplanned shutdown 

in 2019 after determining that those losses were immaterial. 

EPA’s reliance on these assessments likewise was reasonable.

Lastly, EPA reasonably considered the capital 

characteristics and business diversification of United’s parent 

corporation when evaluating United’s access to capital and 

lines of business. United is a direct subsidiary of a large private 

refining company that owns several gas stations, produces 

other types of fuel along with transportation fuel, and ranks 

among the largest privately held corporations in the country. 

Because United “does not have a public debt rating” of its own, 

DOE sensibly looked to the parent company’s credit rating and 
23

access to capital. J.A. 421. And because United’s parent 

company has several diversified lines of business, DOE treated 

United as having access to upstream and downstream lines of 

business and further determined that United was not “solely 

dependent on transportation fuel margins.” J.A. 422. In short, 

it was reasonable for DOE and EPA to treat a wholly owned

subsidiary as having the capital characteristics and diversified 

business of its parent company.

IV. Conclusion

For the foregoing reasons, we will deny United’s 

petition for review.