Sidley Secures Precedential D.C. Circuit Decision Vacating EPA Denial of Small-Refinery Exemption

Sidley secured a significant victory for Alon Refining Krotz Springs, Inc. (Krotz Springs), a Delek US Holdings, Inc. oil refinery, in the U.S. Court of Appeals for the D.C. Circuit. Krotz Springs had challenged the Environmental Protection Agency (EPA)’s denial of small-refinery exemptions under the Clean Air Act’s Renewable Fuel Standard (RFS) program that is worth tens of millions of dollars for Krotz Springs.

In a precedential opinion issued on April 7, 2026, Chief Judge Srinisivan and Circuit Judges Rao and Pan unanimously vacated EPA’s denial of Krotz Springs’ petition for a 2024 small-refinery exemption and remanded the matter to the agency.

The case turned on EPA’s interpretation of its 2014 eligibility regulation, which governs when a refinery is eligible for a small refinery exemption. Under the regulation, to be eligible, a refinery must qualify as a “small refinery” in both “the most recent full calendar year prior to seek an [exemption]” and “the year or years for which an exemption is sought.” In 2025, Krotz Springs applied for an exemption from its 2024 compliance obligations. EPA denied Krotz Springs’ application for a small-refinery exemption on the ground that it failed to meet the statutory throughput threshold to qualify as a “small refinery” — average throughput of less than 75,000 barrels per day — in the year for which an exemption was sought and the prior year, i.e., in 2023 and 2024.

The D.C. Circuit ruled that EPA unlawfully violated the plain text of its own regulation. The Court held that, properly read, the regulation required Krotz Springs to qualify as a “small refinery” only in 2024 because 2024 was both “the most recent full calendar year prior to” when Krotz Springs sought the exemption and “the year … for which an exemption [was] sought.” Because the regulation was unambiguous, the Court gave EPA’s contrary interpretation no deference. In a concurring opinion, Judge Rao opined that EPA’s requirement that refineries show two years of qualifying throughput also violates the Clean Air Act itself, which defines small refinery status based on just one year’s throughput.

The D.C. Circuit’s decision will have significant implications for the administration of the multi-billion dollar RFS program and offers important guidance on how the timing of exemption petitions informs eligibility, particularly for retroactive applications, which the statute permits “at any time.” By vacating the denial, the Court also opened a pathway for Krotz Springs’ to obtain the sought-after exemption from compliance obligations totaling tens of millions of dollars. Even more significantly, this ruling will enable refineries that exceed the small-refinery throughput threshold in one year to obtain small refinery exemptions the following year by appropriately timing when they apply for such exemptions — overturning an EPA policy that made refineries ineligible for small refinery exemptions for two years if they happened to exceed the throughput threshold in just one year.

The Sidley team included Dan Feith (Regulatory Litigation), who argued the appeal in the D.C. Circuit, Peter Whitfield (Environmental, Health, and Safety), Peter Bruland (Supreme Court, Appellate, and Litigation Strategies), and Cody Akins (Supreme Court, Appellate, and Litigation Strategies).