[00:00:00] Speaker 00:
Case number 25, number 1187, et al.

[00:00:04] Speaker 00:
Elong refining cross-brains anti-petitioner versus environmental protection agency.

[00:00:10] Speaker 00:
Mr. Fythe for the petitioners, Mr. Gates for the respondents.

[00:00:14] Speaker 03:
Good morning, Council.

[00:00:15] Speaker 03:
Mr. Fythe, please proceed when you're ready.

[00:00:17] Speaker 04:
Thank you, Your Honor.

[00:00:19] Speaker 04:
Daniel Fythe for petitioners.

[00:00:21] Speaker 04:
I'd like to reserve three minutes for rebuttal.

[00:00:24] Speaker 04:
May it please the court?

[00:00:26] Speaker 04:
This court can resolve this case easily and narrowly by holding that the phrase full calendar year prior to seeking an extension in EPA's regulation means full calendar year prior to submitting a petition for hardship relief.

[00:00:43] Speaker 04:
All agree the court has jurisdiction to decide that question.

[00:00:46] Speaker 04:
That interpretation of EPA's regulation is consistent with its plain text, context, and structure.

[00:00:54] Speaker 04:
And indeed, that interpretation is how EPA has consistently explained the regulation's meaning right up until the August 2025 denial decisions challenged here.

[00:01:06] Speaker 04:
Under the clear text of EPA's regulation, petitioners were eligible for 2024 exemptions when they applied for them in 2025, and EPA violated its own regulation in denying their petitions.

[00:01:20] Speaker 03:
So you just talked both about the statute and the clear text of the regulations.

[00:01:23] Speaker 03:
I just want to confirm something, which I think is true from your papers, which is, from your perspective, it doesn't matter whether we view the case under the text of the regulation or under the text of the statute, the one-year, two-year text that you started with, right?

[00:01:40] Speaker 03:
Because either way, if we were to agree with you on either of those arguments, you would be in the same place.

[00:01:46] Speaker 03:
That's correct, Your Honor.

[00:01:47] Speaker 03:
We went either way.

[00:01:48] Speaker 04:
As to the statutory challenge, we think the court can and should resolve the case on that basis as well.

[00:01:56] Speaker 04:
EPA barely tries to defend the merits of its statutory- How would we do both if we can do one?

[00:02:01] Speaker 04:
Well, to be clear, we would be happy with winning the case on either grounds.

[00:02:06] Speaker 04:
The court could decide them on alternative bases.

[00:02:10] Speaker 04:
But as I said, I think that either ground would be sufficient.

[00:02:14] Speaker 01:
The question I had is, if we assumed that the denials here were inconsistent with the Clean Air Act, would we have to say anything about the regulation?

[00:02:27] Speaker 01:
I mean, there might be consequences for how EPA would need to interpret its regulation in the future, but would we need to reach any question about the regulation's interpretation?

[00:02:38] Speaker 04:
I don't think you would, Your Honor.

[00:02:41] Speaker 04:
I think that the way that EPA has applied that regulation here, it requires that a refinery be small for two years.

[00:02:53] Speaker 01:
The statute clearly... And that seems to be a bit idiocy.

[00:02:56] Speaker 01:
I mean, there are only a few examples of that occurring.

[00:03:00] Speaker 01:
Your honor, I think these two petitions, and it sounds like the parties identified one other instance where denial was based on this interpretation.

[00:03:10] Speaker 04:
Well, Your Honor, so I know that EPA tries to argue that in 2022, it denied a petition based on this interpretation.

[00:03:19] Speaker 04:
I don't actually think that's clear from the 2022 denial decision.

[00:03:23] Speaker 01:
OK, maybe there are only two such denials.

[00:03:26] Speaker 01:
It's a very small number compared to the hundreds of exemptions that are sought, it seems.

[00:03:31] Speaker 04:
That's correct.

[00:03:32] Speaker 04:
Your honor, this is the first case where EPA has come out and clearly said that in its view, the 2014 regulation requires that a refinery be small in the year for which it's seeking an exemption and in the prior year.

[00:03:47] Speaker 01:
So then I guess I have a related question.

[00:03:50] Speaker 01:
Again, assuming we thought the denial was inconsistent with the Clean Air Act, would that determination

[00:03:58] Speaker 01:
necessarily require us to, would that determination in some way run into the time bar on challenging the regulation?

[00:04:08] Speaker 01:
Just like a pure statutory conclusion that the denials are inconsistent with the Clean Air Act, does that have any necessary link to the time bar?

[00:04:18] Speaker 04:
No, Your Honor.

[00:04:21] Speaker 04:
The time bar applies where a party is seeking relief that runs directly as to the underlying rule.

[00:04:27] Speaker 04:
So the time bar would apply if we were seeking relief running directly as to the 2014 regulation.

[00:04:33] Speaker 04:
We don't seek any relief as to the 2014 regulation.

[00:04:36] Speaker 04:
We simply seek vacancy of the 2025 denial decisions.

[00:04:40] Speaker 04:
And the Supreme Court recognized this key distinction just last term in McLaughlin Chiropractic.

[00:04:46] Speaker 04:
where the court distinguished between a declaration that a rule is invalid, which it identified as relief that runs directly as to the rule.

[00:04:54] Speaker 04:
And for considering the validity of the rule in the context of determining how a statute applies to a regulated party in an as applied setting.

[00:05:04] Speaker 04:
And our challenge falls into the latter category that under this court's precedence, like NRDC VEPA,

[00:05:11] Speaker 04:
where we are both seeking relief, not as to the underlying regulation.

[00:05:17] Speaker 04:
And the substance of our challenge runs only as to the denials.

[00:05:22] Speaker 01:
So yeah, I take those points.

[00:05:24] Speaker 01:
But I think EPA is arguing that by having a statutory determination like this, we would somehow be circumventing the Clean Air Act's very stringent time bar.

[00:05:37] Speaker 01:
And so what would be your response to that?

[00:05:39] Speaker 04:
So, Your Honor, a couple of points on that.

[00:05:42] Speaker 04:
I think that, again, so the principle that McLaughlin laid down and that this Court has recognized as well is that as applied review of the validity of a regulation is available unless a statute clearly says otherwise.

[00:05:57] Speaker 04:
And Section 7607B1 of the Clean Air Act does not clearly say otherwise.

[00:06:03] Speaker 04:
And we know that both from this court's decision in ARCA 1, where the court said that provisions like 7607B1 imply no limitation on the well-recognized principle that parties against whom a regulation is enforced can challenge the validity of that regulation in an enforcement context.

[00:06:22] Speaker 01:
This is not an enforcement context.

[00:06:24] Speaker 04:
Yes, Your Honor, but this Court has taken that very principle that it was applying in ART but one and recognize that it applies in non-enforcement contexts as well.

[00:06:33] Speaker 04:
So, you know, cases like CRU, VFEC, or say the total communications all apply that principle outside the enforcement context as well.

[00:06:41] Speaker 04:
We also know that section 7601B1 doesn't bear the meaning that EPA says it does from McLaughlin itself.

[00:06:50] Speaker 04:
In McLaughlin, where the court is discussing the Clean Air Act,

[00:06:54] Speaker 04:
The court recognizes that the Clean Air Act does preclude as applied review in enforcement proceedings.

[00:07:01] Speaker 04:
And it does that in 7607B2.

[00:07:06] Speaker 04:
That provision would be entirely superfluous if 7607B1 meant what the government says it does.

[00:07:13] Speaker 04:
Because in the EPA's view, 7607B1 precludes all as applied review.

[00:07:18] Speaker 04:
And so there would be no purpose to Congress precluding it

[00:07:22] Speaker 04:
as to enforcement proceedings specifically in the next provision.

[00:07:26] Speaker 04:
And so that provision is very powerful evidence that the government's view of 7607B1 is incorrect, and that 7607B1, as this court recognized in ARC1, doesn't limit our ability to bring an as-applied challenge to the 2025 denial decisions.

[00:07:47] Speaker 02:
Which is why this court... Is it important to your analysis that in this case, you are not saying that the denial of your applications complied with the regulation?

[00:08:00] Speaker 02:
Because it seems to me that that is a factual distinction that sets us apart from something like Sinclair IV and other things, because you're just saying the statute says a calendar year.

[00:08:13] Speaker 02:
this decision that was rendered in my case required me to meet the standard for two calendar years, that violates the statute.

[00:08:22] Speaker 02:
And this is not a backdoor way to challenge the regulation because this didn't comply with the regulation either.

[00:08:29] Speaker 02:
And I think that's important because in a case where the agency relies on a regulation and you challenge the regulation,

[00:08:41] Speaker 02:
and also challenge the statute, the statutory challenge is necessarily also a challenge to the regulation.

[00:08:48] Speaker 02:
But where factually you're saying it didn't comply with the regulation, you're not challenging the regulation when you say that this decision doesn't match the statute.

[00:08:59] Speaker 02:
Like to me, I feel like that factual distinction seems important because in a case where you say you apply this regulation,

[00:09:08] Speaker 02:
correctly, but the regulation is wrong, when you go to your statutory claim, then you are, by definition, also challenging the regulation.

[00:09:18] Speaker 02:
But in this case, since you're not relying on the regulation at all, you're doing a different kind of claim than, for example, Sinclair IV.

[00:09:27] Speaker 04:
Is that right?

[00:09:29] Speaker 04:
Well, Your Honor, I do think that that is a distinction, a distinction with Sinclair IV.

[00:09:34] Speaker 04:
I think that's absolutely a basis for differentiating this case.

[00:09:39] Speaker 04:
I guess I would, nevertheless, push back gently on the idea that even if this, so let me make one point first.

[00:09:47] Speaker 04:
The fact that this is not consistent with the regulation as well gives us an additional jurisdictional hook as to the underlying regulation because EPA's about face on what the regulation means and on what the regulations requirements are in the 2025 denial decisions is a separate legal after a rising ground for challenging the regulation itself.

[00:10:12] Speaker 04:
But in terms of our primary jurisdictional argument, I think that there's still a distinction between seeking relief directly as to the 2014 regulation and

[00:10:30] Speaker 04:
a statutory claim that may implicate whether or not the 2014 regulation is correct, but doesn't actually necessarily require the court to discuss the 2014 regulation.

[00:10:41] Speaker 02:
The court, I think, as you're pointing out, can resolve— But in some cases, that would be a backdoor way to challenge the regulation after your time has expired.

[00:10:48] Speaker 02:
In some cases, it's not.

[00:10:49] Speaker 02:
And I'm trying to figure out when it is and when it isn't.

[00:10:51] Speaker 04:
I think the important point is, are you seeking relief as to the underlying regulation or are you simply seeking relief as to the action that's before the court?

[00:11:00] Speaker 04:
That's the fundamental principle that McLaughlin recognized.

[00:11:04] Speaker 04:
In McLaughlin, the Hobbs Act gave courts of appeals exclusive jurisdiction to determine the validity of rules.

[00:11:12] Speaker 04:
And the reason that the court explained that the district court in the case that became McLaughlin was able to itself decide whether or not an FCC interpretation was correct as applied to the parties there.

[00:11:30] Speaker 04:
was that the parties weren't seeking any relief as to the FCC's rule.

[00:11:35] Speaker 04:
The parties were simply arguing that the statute required one thing.

[00:11:43] Speaker 04:
The FCC interpretation that I believe it was the defendant in that case was relying on was incorrect.

[00:11:50] Speaker 04:
And so the court could just resolve that in that narrow as applied setting,

[00:11:55] Speaker 04:
And we're basically seeking the same thing.

[00:11:58] Speaker 04:
We think the court can resolve our statutory challenge simply by comparing the asserted basis for the decisions in the 2025 denial document against what the Clean Air Act's text requires.

[00:12:10] Speaker 04:
It doesn't even need to mention the 2014 regulation.

[00:12:12] Speaker 02:
But the implication would be that the 2014 regulation violates the statute.

[00:12:17] Speaker 02:
It would just be an implication.

[00:12:19] Speaker 04:
That would be an implication.

[00:12:20] Speaker 04:
And certainly in this circuit, the court's decision, if it's presidential, would have a presidential effect.

[00:12:26] Speaker 04:
But the important distinction between seeking relief as to the underlying rule and seeking relief simply as to the

[00:12:33] Speaker 04:
the application of that rule, is that when you seek relief as to the underlying rule, for example, when you seek to set aside that rule that wipes the rule from the books, the agency can't enforce that rule against any party in any context, arguably anywhere.

[00:12:47] Speaker 04:
Here, the RFS, these small refinery exemptions are actually a good illustration of how much narrower the relief we're seeking is, because- So if we ruled the way that you propose,

[00:13:02] Speaker 02:
there would be this ruling about this action violated the statute, regardless of the regulation.

[00:13:07] Speaker 02:
There'd be the implication that the regulation violates the statute.

[00:13:11] Speaker 02:
And where would that leave, I guess, parties, et cetera?

[00:13:16] Speaker 02:
Would they need to move to amend the regulation in light of this opinion?

[00:13:21] Speaker 02:
Or how would, I guess, people deal with the fact that there's, by implication, a ruling that says that that regulation violates the statute?

[00:13:32] Speaker 04:
Look, I think it's, Your Honor, I'm in my rebuttal time, but if I can answer.

[00:13:37] Speaker 04:
So I think that parties would have a number of options.

[00:13:41] Speaker 04:
I think primarily, though, this would be up to EPA.

[00:13:44] Speaker 04:
The only reason that we are in the DC Circuit for this case is because EPA has taken the position that all of these challenges belong in the DC Circuit, and we haven't challenged that here.

[00:13:54] Speaker 04:
But as the Supreme Court recognized in Callum at Shreveport,

[00:13:58] Speaker 04:
Small refinery exemption decisions are by default belong in local or regional circuits.

[00:14:03] Speaker 04:
So in principle, if EPA wished to continue trying to apply this blatantly unlawful regulation, it could do so and try its luck in other circuits

[00:14:14] Speaker 04:
And this court's decision would be persuasive authority.

[00:14:19] Speaker 04:
But the point is that this illustrates why our challenge is not in fact a back door challenge to the 2014 regulation.

[00:14:28] Speaker 04:
If it were, EPA wouldn't have the ability to continue doing that.

[00:14:32] Speaker 04:
So we think that our hope would be that EPA would take the guidance from this court and change the regulation itself, or would at least stop applying the regulation in an unlawful way.

[00:14:49] Speaker 04:
But if EPA didn't do that, certainly parties could seek to petition for amendment of the reconsideration.

[00:14:58] Speaker 04:
That's not a substitute for judicial review of the sort that we're seeking, given the fact that EPA has a tremendous amount of discretion over whether to grant such petitions.

[00:15:10] Speaker 04:
And under the ARCA line of cases, trying to seek review of those petitions is extremely difficult.

[00:15:18] Speaker 04:
I think that for purposes of this case, I think the questions your honor is driving at really underscore that our challenge is strictly as to the 2025 denial actions.

[00:15:32] Speaker 04:
And that's why this court has jurisdiction to consider it.

[00:15:34] Speaker 02:
Can I ask you a timing question?

[00:15:36] Speaker 02:
Please.

[00:15:36] Speaker 02:
Because I guess there is some

[00:15:39] Speaker 02:
Indication that time is of the essence and so my understanding is the earliest the 2025.

[00:15:48] Speaker 02:
RFS obligations could be set by final rule at this point.

[00:15:55] Speaker 02:
would put us at June 1st as the quarterly report deadline right now.

[00:16:00] Speaker 02:
That's correct.

[00:16:01] Speaker 02:
But we don't know exactly when this will be.

[00:16:03] Speaker 02:
I guess my question is, how many days before whatever the deadline is, do you need a ruling in order for the RINs to not expire before you can do something with them?

[00:16:15] Speaker 04:
So we have asked for this court to direct EPA to adjudicate our petitions by 21 days before the compliance deadline.

[00:16:25] Speaker 04:
So 21 days before June 1st would be the earliest.

[00:16:29] Speaker 04:
It's the latest we would want EPA to adjudicate our petitions, which would mean that this court, we would respectfully ask this court to rule far enough in advance of that date.

[00:16:39] Speaker 04:
So three weeks before June 1st is May 11th, we would respectfully ask the court

[00:16:43] Speaker 01:
Well, the statute gives them 90 days, and we're already 90 days.

[00:16:48] Speaker 01:
We're within 90 days already of June 1.

[00:16:50] Speaker 04:
So your honor, a couple of points on that.

[00:16:55] Speaker 04:
EPA took more than 90 days to adjudicate our petitions in the first instance.

[00:16:59] Speaker 04:
And we cite in our brief a case in Ray Peoples Mujahideen organization, I believe, where even though the statute gave the government six months, this court ordered relief within four months.

[00:17:13] Speaker 04:
So we think that it's within the court's authority to order faster relief.

[00:17:17] Speaker 04:
EPA hasn't disputed that.

[00:17:18] Speaker 01:
Where does that authority come from?

[00:17:19] Speaker 01:
So you have one case, but that is a matter of first principles.

[00:17:22] Speaker 01:
Where does it have authority to shorten a deadline that Congress has set?

[00:17:26] Speaker 04:
Well, I think it's arguably equitable authority to ensure that we obtain meaningful relief in this case.

[00:17:35] Speaker 04:
I think, again, EPA has already taken the 90 days that it was given.

[00:17:38] Speaker 04:
And so it's not clear as a statutory matter that they get an additional 90 days anyway.

[00:17:45] Speaker 01:
But I think that, you know, EPA's EPA's best argument is that they don't get

[00:17:49] Speaker 01:
a second set of 90 days.

[00:17:52] Speaker 04:
And I would point out, EPA has never argued that the court lacks the authority to direct it to issue relief faster.

[00:17:58] Speaker 04:
And so we would ask that the court issue an opinion with sufficient time for EPA to adjudicate our petitions by May 11th.

[00:18:05] Speaker 04:
And Judge Penn, I would just add,

[00:18:08] Speaker 04:
Our understanding is that the 2026 rule is currently before OMB and is due to be issued this month, in which case it would actually be June 1st.

[00:18:19] Speaker 04:
My colleague on the other side may have more insight into the timing, but that's our best understanding of when the compliance deadline is likely to be.

[00:18:29] Speaker 02:
This may be a question for your friend on the other side, but it seems that there's been reference to the possibility of EPA generating, I guess, replacement RINs or something in order to, like if we were to miss this deadline, that there would be a way to make sure that there is some relief for your clients by issuing replacement RINs for the ones that

[00:18:53] Speaker 02:
Let me tell you what I'm looking at.

[00:18:56] Speaker 02:
In the denial order, EPA said, EPA acknowledges that it has in exceptional circumstances permitted individual small refineries to generate new current year vintage rins as a method of implementing exemptions when decisions denying those exemptions were vacated by a court.

[00:19:13] Speaker 02:
And then there is apparently a 10th Circuit case that talked about replacement rins.

[00:19:19] Speaker 04:
Your honor, there have been a couple instances where that has happened.

[00:19:22] Speaker 04:
EPA has never said that it would do that here.

[00:19:25] Speaker 04:
And in fact, there's a whole set of consolidated cases in this court challenging almost all of the other partial denials in the August 2025 decision, where the fact that EPA went on in its decision

[00:19:44] Speaker 04:
to say that it's not going to issue replacement rins and it was only going to return expired rins to parties and that that was its policy.

[00:19:51] Speaker 04:
Wait, so it said that in the other litigation?

[00:19:54] Speaker 04:
So in the same decision that you were just reading from, EPA went on to say

[00:19:59] Speaker 04:
we're not doing that here.

[00:20:00] Speaker 04:
We're going to be returning whatever vintage rins the refineries expired to them, which means that in the vast number of cases, EPA returned to the party's worthless rins.

[00:20:13] Speaker 04:
That's the situation that we're trying to avoid here.

[00:20:16] Speaker 02:
And so if we can order them to change their deadline, can we order them to order replacement rins?

[00:20:25] Speaker 02:
I don't know.

[00:20:25] Speaker 02:
It just seems that

[00:20:27] Speaker 02:
It's a very tight timeline for this court to rule.

[00:20:30] Speaker 02:
And I'm trying to understand how real is this deadline.

[00:20:34] Speaker 04:
Your Honor, I guess I would say that given all of EPA's positions to date, we think it's a real deadline.

[00:20:43] Speaker 04:
EPA has never offered us that alternative.

[00:20:46] Speaker 04:
I suppose if the court were to order it, that could be a way of resolving the harm to us.

[00:20:56] Speaker 04:
But that really hasn't been raised by EPA as a possibility to date.

[00:21:03] Speaker 03:
Make sure my colleagues don't have additional questions at this point.

[00:21:05] Speaker 03:
OK.

[00:21:05] Speaker 03:
Thanks very much.

[00:21:09] Speaker ?:
Sure.

[00:21:09] Speaker 06:
Mr. Cates.

[00:21:18] Speaker 06:
Good morning.

[00:21:19] Speaker 06:
May it please the court.

[00:21:20] Speaker 06:
My name is Redding Cates for the United States EPA.

[00:21:24] Speaker 06:
Petitioners brought their principal challenge in this case over a decade too late.

[00:21:28] Speaker 06:
Long before EPA's August 2025 decisions, petitioners had standing and a right claim to assert that the 2014 eligibility regulation violated the Clean Air Act.

[00:21:39] Speaker 06:
But they chose not to.

[00:21:41] Speaker 06:
This court's precedent, as expressed often but only most recently in Sinclair IV, is clear in this situation.

[00:21:48] Speaker 06:
Petitioners cannot challenge the 2014 regulation that violates the Clean Air Act under the guise of challenging August 2025 adjudications.

[00:21:57] Speaker 06:
They bring one timely, though narrow challenge, whether EPA correctly interpreted its 2014 eligibility regulation when finding them ineligible for an exemption in the year 2024.

[00:22:07] Speaker 01:
Mr. Cates.

[00:22:11] Speaker 01:
Why shouldn't we look at this action?

[00:22:13] Speaker 01:
You know, the 2025 denials are discrete final agency action, a kind of, I don't know, sort of an adjudication of whether they're entitled to an exemption.

[00:22:24] Speaker 01:
So that clearly can be challenged.

[00:22:27] Speaker 01:
They brought that challenge within 60 days.

[00:22:29] Speaker 01:
And they raise an argument that the denial, this discrete action, is inconsistent with the Clean Air Act.

[00:22:36] Speaker 01:
If we were to conclude that it were inconsistent with the Clean Air Act,

[00:22:40] Speaker 01:
Why would that

[00:22:46] Speaker 01:
an indirect attack on the regulation.

[00:22:49] Speaker 01:
And that's obviously EPA's entire framing here.

[00:22:52] Speaker 01:
But to be honest, I guess I'm a little baffled by it, because it sort of assumes that by denying, by saying these denials are invalid on statutory grounds, that determination would have some kind of universal effect on the 2014 regulation.

[00:23:10] Speaker 01:
But that's not how we think about discrete cases.

[00:23:12] Speaker 01:
I mean, courts decide cases all the time where we decide a particular issue.

[00:23:16] Speaker 01:
Maybe there are some collateral consequences for other decisions the agency will make, but it doesn't mean that the discreet challenge to a final agency action would be time barred.

[00:23:27] Speaker 01:
So I want to understand why you think a statutory ruling would be a time barred attack on the reg where we say nothing about the reg.

[00:23:36] Speaker 06:
Well, the key distinction here is that, and petitioners admit several times in their briefing, that the only basis for their denial was the 2014 regulation.

[00:23:46] Speaker 06:
There's nothing else the court could point to.

[00:23:49] Speaker 01:
Well, but that's not really, I mean, yes, EPA cites the reg in making the denial, but there's also a discrete agency action, which they have said is inconsistent with the Clean Air Act.

[00:24:03] Speaker 06:
Correct, but the only basis for the denial was that they could not show two consecutive years of data, which is what the regulation requires.

[00:24:11] Speaker 01:
Okay, but still, if that's inconsistent with the statute, why does it matter what the reg says?

[00:24:19] Speaker 01:
In a sense, if the statute would not permit that sort of interpretation, then the denial is contrary to law.

[00:24:28] Speaker 06:
if the statute would not, let me make sure I have your question correct.

[00:24:33] Speaker 01:
You're saying that- So say I read the Clean Air Act to require, if you're seeking a 2024 exemption, you have to show that you're below the 75,000 whatever barrels per day throughput for 2024.

[00:24:45] Speaker 01:
If you assume I read the Clean Air Act that way, then denial is inconsistent with the statute.

[00:24:53] Speaker 01:
And then whatever that means for what EPA thinks about its 2014 reg would be something EPA would have to figure out.

[00:25:01] Speaker 06:
Then I think that would run contrary to Sinclair 4 and most of this court's precedent, because that would be a backdoor attack on the regulation itself, when in this case- The same thing about the reg.

[00:25:11] Speaker 06:
Well, when in this case, the reg is the only basis for the denial.

[00:25:15] Speaker 06:
Now, the question about whether the reg itself was properly interpreted is a timely challenge, and we acknowledge that.

[00:25:23] Speaker 06:
But the court couldn't simply say this is contrary to the Clean Air Act.

[00:25:27] Speaker 06:
Why?

[00:25:28] Speaker 06:
Because it required two years.

[00:25:29] Speaker 06:
We say that's what the regulation requires.

[00:25:31] Speaker 01:
But you can't just rely on a regular if your if your decision is contrary to statute is contrary to statute, irrespective of how the agency interprets the regulation.

[00:25:41] Speaker 06:
Not in the context where an agency has written regulation and it's over a decade old.

[00:25:47] Speaker 06:
And that regulation requires this result.

[00:25:50] Speaker 06:
And we believe that it does.

[00:25:51] Speaker 01:
Maybe EPA's argument would have some force if, say, for instance, the Clean Air Act doesn't define small refinery.

[00:25:59] Speaker 01:
There's no definition of small refinery.

[00:26:00] Speaker 01:
And then EPA 2014 has a regulation that defines small refinery and then implements it the way it's done here.

[00:26:09] Speaker 01:
In that instance, I think your argument that the denial is based solely on the reg, solely on the way the reg defines small refinery,

[00:26:17] Speaker 01:
Maybe in that instance, it would be a backdoor.

[00:26:20] Speaker 01:
But here the statute defines small refinery very specifically with a number of barrels per calendar year, and that's in the statute.

[00:26:31] Speaker 01:
So is it the case that where you have a specific statutory definition, but the agency enacts a reg, a party that receives an adjudication of sorts can never raise a statutory challenge because the reg has sort of superseded the statute?

[00:26:48] Speaker 01:
I mean, that would be a very peculiar outcome in a sense.

[00:26:52] Speaker 01:
It would make the time bar drive the contrary to law assessment, arguably.

[00:26:59] Speaker 06:
Your Honor, I disagree, and I would point you to Sinclair 4, because while it's true that the statute defines what a small refinery is, the statute does not define who is entitled to a small refinery exemption.

[00:27:10] Speaker 06:
So in Sinclair 4, EPA had passed a regulation that required a verification letter, and the party in that case said, we were small.

[00:27:19] Speaker 06:
We don't need to submit the verification letter.

[00:27:21] Speaker 06:
And this court held that, well, there's a regulation that says you do, and it's old.

[00:27:27] Speaker 06:
And you are time barred from challenging that regulation now.

[00:27:31] Speaker 06:
The party in that case brought both challenges.

[00:27:33] Speaker 06:
They challenged whether EPA correctly applied the regulation requiring the verification letter.

[00:27:39] Speaker 06:
This court said that EPA correctly applied this regulation.

[00:27:42] Speaker 06:
And then it said, but you're challenging the regulation itself, which goes beyond the text of the Clean Air Act.

[00:27:48] Speaker 02:
But this is where the distinction I was asking your friend on the other side about kicks in.

[00:27:54] Speaker 02:
If a party challenges a reg and the statute, and it turns out that the action the party is challenging is consistent with the reg, and then the party then tries to challenge the same action under the statute, it is by definition challenging the reg.

[00:28:13] Speaker 02:
That's Sinclair IV.

[00:28:15] Speaker 02:
In this case,

[00:28:17] Speaker 02:
They say that you didn't follow the reg either.

[00:28:19] Speaker 02:
And so I feel like that is an important distinction because what they're saying is put this reg aside.

[00:28:27] Speaker 02:
We're just saying we were a small refinery for a calendar year.

[00:28:32] Speaker 02:
Statute says it's only required to be a calendar year.

[00:28:35] Speaker 02:
The agency actually violates the statute by implication.

[00:28:41] Speaker 02:
this reg probably violates the statute too, but they're not challenging the reg.

[00:28:46] Speaker 02:
They don't think the reg is appropriate, but in their statutory challenge, they're just saying it's a calendar year, statute says a calendar year, EPA required two calendar years.

[00:29:01] Speaker 02:
It's a statutory violation and it's not a back door to get at the regulation because we don't think the regulation was properly applied either.

[00:29:13] Speaker 02:
So I feel like that's an important distinction because they can challenge the action without necessarily challenging the reg under these facts, which are different from Sinclair IV.

[00:29:24] Speaker 06:
I don't see how the facts are different from Sinclair Four, Your Honor.

[00:29:27] Speaker 06:
In Sinclair Four, the party said exactly the same thing.

[00:29:30] Speaker 06:
It said that the reg was being misapplied by EPA and that the reg itself violated the statute.

[00:29:35] Speaker 06:
They're making the same two points here.

[00:29:36] Speaker 02:
But the answer was that the reg was not misapplied by EPA.

[00:29:38] Speaker 06:
Right.

[00:29:38] Speaker 06:
And we agree that that should be the result here.

[00:29:40] Speaker 02:
But here, in this case, if we think the reg was misapplied by EPA, it's different.

[00:29:45] Speaker 06:
No.

[00:29:45] Speaker 06:
I think if you hold in this case that the reg was misapplied by EPA, then you would be ruling on the one challenge that we say is timely.

[00:29:51] Speaker 06:
They win anyway.

[00:29:52] Speaker 06:
I mean, you lose anyway.

[00:29:53] Speaker 06:
But we lose for a very different reason.

[00:29:55] Speaker 03:
Right.

[00:29:55] Speaker 03:
No, I get it.

[00:29:55] Speaker 03:
But it's just that we wouldn't even need to get to anything else if we'd already concluded that the reg, that your interpretation of the reg was wrong.

[00:30:01] Speaker 03:
Correct.

[00:30:02] Speaker 01:
That's right, Your Honor, because- That would be a worse outcome though for EPA, arguably, because it would upend this regulation that has been in place for a long time, which includes a whole range of various factors.

[00:30:18] Speaker 06:
But it would not open a huge loophole to the backdoor challenge, which I believe this court would be doing if it ruled, as petitioners say, allowing them to challenge whether the 2014 regulation, whether they say so or not, violates the Clean Air Act.

[00:30:31] Speaker 06:
Half of their brief is talked about how everyone, when the 2014 regulation was passed, knew that it required two years of data.

[00:30:38] Speaker 06:
And if I could just like to read

[00:30:40] Speaker 06:
something for you.

[00:30:42] Speaker 06:
It said EPA decided in 2014 to measure refinery output based on the year for which the exemption is sought and the immediately preceding year.

[00:30:51] Speaker 06:
The output of a small refinery seeking an exemption for the year 2020, for example, must be a small refinery in both 2020 and 2019.

[00:30:58] Speaker 06:
Now, that's not me recapitulating what the 2014 regulation says.

[00:31:03] Speaker 06:
That's this court in Sinclair IV.

[00:31:06] Speaker 03:
Can I ask you this?

[00:31:07] Speaker 03:
So you're going to resist the

[00:31:09] Speaker 03:
the assumption that I want you to accept, but just assume that you were faced with a choice.

[00:31:18] Speaker 03:
Either you lose under the statute because A year doesn't map onto the two-year framework that EPA has applied under its interpretation of the reg, or you lose because your interpretation of the reg is consistent with the reg itself.

[00:31:32] Speaker 03:
There's these two arguments.

[00:31:34] Speaker 03:
Which is less damaging to you?

[00:31:38] Speaker 03:
The latter.

[00:31:39] Speaker 03:
You would rather have the latter.

[00:31:40] Speaker 03:
Correct, because I think that that is proper under this court's precedent.

[00:31:43] Speaker 03:
I think that- No, but OK, so I understand what you're saying about timeliness.

[00:31:47] Speaker 03:
So I get that you think that the challenge to your understanding of the regulation is time.

[00:31:53] Speaker 03:
There's no timeliness bar to that, whereas you think there's a timeliness bar in the other one.

[00:31:58] Speaker 03:
But I don't understand why the-

[00:32:00] Speaker 03:
Is really what you care the most about as EPA is vindication of re-understanding the timeliness rule or do you really, it would seem to me the choice would be between would you rather have your interpretation of the regulation be deemed invalid or would you rather have

[00:32:20] Speaker 03:
your application of the statute to require two years be deemed invalid.

[00:32:25] Speaker 03:
That seems to me to be the choice that would be on the table for you.

[00:32:28] Speaker 03:
Yes, there's timeliness implications.

[00:32:30] Speaker 03:
And if you tell us what we really care about more than either of those substantive outcomes in terms of the regulation versus the statute is timeliness, then I'll hear you out and accept it.

[00:32:38] Speaker 03:
But I guess I'm a little surprised that you would be focused purely on the timeliness question as opposed to which substantive

[00:32:46] Speaker 03:
result is the one that you would think would be less damaging.

[00:32:52] Speaker 03:
Well, perhaps I could answer that.

[00:32:53] Speaker 06:
You're right, Your Honor.

[00:32:54] Speaker 06:
I think that the timeliness issue is more important, and I'll tell you why.

[00:32:58] Speaker 06:
I'll tell you why, if I could.

[00:33:01] Speaker 06:
So let's say this court issues a ruling that says EPA's 2025 decision is invalid because they required these refineries to show two years of data, and that violates the statute.

[00:33:12] Speaker 06:
EPA at this point cannot continue to use the 2014 regulation at all.

[00:33:17] Speaker 06:
It's as if the court has invalidated it because that was the sole basis for the denial here.

[00:33:22] Speaker 06:
The 2014 regulation as written requires two years of data almost all the time.

[00:33:26] Speaker 06:
Right, but that's... It also requires a lot of other things though.

[00:33:32] Speaker 01:
No, I just mean it's like a big regulatory scheme.

[00:33:36] Speaker 01:
It's not just the two years of data.

[00:33:38] Speaker 06:
That's true, but I guess what I'm trying to say is that in this instance, if the court said that what the 2014 regulation requires violates statute, then that part of the regulation is no longer valid.

[00:33:54] Speaker 03:
The concern for you is not the timeliness, it's just the timeliness is a gateway to a conclusion about the regulations, validity, vis-a-vis the statute that you find problematic.

[00:34:04] Speaker 03:
That's your concern.

[00:34:06] Speaker 03:
And you just think that if in order to find the challenge to be timely,

[00:34:11] Speaker 03:
it would strongly imply that the regulation is inconsistent with the statute, then what you care about is the fact that the regulation would likely be deemed inconsistent with the statute, and that's a big problem for EPA, as opposed to saying that EPA's construction of its own regulation is a problem because that doesn't have the same sweeping effect.

[00:34:30] Speaker 03:
I think that's part of the concern.

[00:34:32] Speaker 06:
And maybe you captured this as well.

[00:34:34] Speaker 06:
I'm not sure.

[00:34:35] Speaker 06:
But the other big concern is that EPA administers this program every year.

[00:34:41] Speaker 06:
Every year it has to adjudicate so many of these applications.

[00:34:46] Speaker 03:
And it's always doing it with two years of data.

[00:34:49] Speaker 03:
At least that's the heartland.

[00:34:51] Speaker 03:
Correct.

[00:34:53] Speaker 06:
But beyond the two-year requirement that was established in 2014, EPA has a process, which the Clean Air Act requires, where it promulgates rules about how this annual process is supposed to work.

[00:35:05] Speaker 06:
And if this court allows this backdoor challenge to one of those rules a decade later, it could be applied to any of them.

[00:35:13] Speaker 06:
The Clean Air Act is structured to provide that kind of finality.

[00:35:16] Speaker 06:
It says, when EPA does these rules, like the one in Sinclair IV, the ones in ARTBA,

[00:35:22] Speaker 06:
and no one challenges after 60 days, that's the rule.

[00:35:25] Speaker 03:
That's a timeliness concern, okay?

[00:35:26] Speaker 03:
That one has to do just with the timeliness, which is that you're just worried that if this challenge is deemed, this statutory challenge is deemed timely, then it opens the floodgates to other kinds of challenges that would be along the same lines.

[00:35:37] Speaker 06:
I would say that EPA is worried about that as an understatement.

[00:35:40] Speaker 06:
Yes, Your Honor.

[00:35:42] Speaker 06:
because of the difficulty in managing this program.

[00:35:45] Speaker 06:
That's not the way the Clean Air Act is supposed to work.

[00:35:47] Speaker 06:
And whether petitioners say they're challenging the 2014 regulation, and even if this court in its decision says we're not challenging the 2014 regulation, but that decision says you can't require two years of data, the regulation is worthless.

[00:36:00] Speaker 01:
Mr. Cates, that seems like just such a universalistic understanding of what a

[00:36:07] Speaker 01:
contrary to law decision about these denials would mean, because even in some of the briefing, you suggest that the regulation is somewhat ambiguous, or if there's ambiguity, it could be interpreted in different ways.

[00:36:18] Speaker 01:
So if we make a ruling about what the statute means, EPA can then interpret its regulations consistent with that understanding.

[00:36:27] Speaker 01:
It's not as though the whole regulation disappears.

[00:36:29] Speaker 01:
It just means you can't base a denial on two calendar years of

[00:36:36] Speaker 01:
fruit, but which apparently has only happened a couple of times.

[00:36:38] Speaker 01:
I mean, there are thousands of these exemptions adjudicated.

[00:36:41] Speaker 01:
And if this is like two or possibly three times over a decade, why isn't the more sort of appropriate judicial thing to just take these denials

[00:36:53] Speaker 01:
if we believe that they're contrary to the Clean Air Act and set them aside.

[00:36:57] Speaker 01:
And it's sort of like EPA is assuming that that has this kind of, you know, apocalyptic thing on the whole, you know, scheme.

[00:37:05] Speaker 01:
But why would that be the case where there have been two or three denials on this interpretation?

[00:37:13] Speaker 01:
And why would EPA rather have this court fully reinterpret the way EPA should read the statute if we wanted to give relief to these petitioners, or we thought these petitioners weren't entitled to relief?

[00:37:29] Speaker 06:
There was a lot there, and I'll try to get it all.

[00:37:32] Speaker 06:
The first thing is that it is the case that it has been rare to deny on this basis.

[00:37:38] Speaker 06:
But that does not mean that there have not been massive effects on the regulated community.

[00:37:44] Speaker 06:
Since 2014, almost every small refinery has ensured that it is under the threshold for two years.

[00:37:51] Speaker 06:
In fact, most of them are under it every year.

[00:37:53] Speaker 06:
So it's not simply the case that throwing out this two-year requirement wouldn't really matter very much.

[00:38:00] Speaker 06:
EPA is not being apocalyptic for rhetorical purposes.

[00:38:06] Speaker 06:
It's being apocalyptic because it has to manage this program.

[00:38:09] Speaker 06:
and it would have to take this court's order saying, this regulation is fine, but you can't follow it anymore because one year means two years, would have broad reaching effects on the kinds of petitions that parties could file.

[00:38:23] Speaker 06:
Many parties have not filed because they were above one year because they knew EPA's interpretation and decided not to seek them.

[00:38:31] Speaker 06:
Should they get to go back and see them now?

[00:38:32] Speaker 01:
So you just want people to not be able to challenge their denials as contrary to statute where the statute says a calendar year.

[00:38:40] Speaker 01:
What EPA wants is for this... So you just want to just make sure that those challenges just cannot be brought, that people can't challenge based on statutory grounds.

[00:38:49] Speaker 01:
So I closed the courthouse doors for that.

[00:38:52] Speaker 06:
I don't want to close the courthouse doors for that.

[00:38:54] Speaker 06:
I want the court to abide by the Clean Air Act and what the Clean Air Act says is... Why does the Clean Air Act allow two years?

[00:39:01] Speaker 01:
If you were seeking exemption in 2024, on what statutory basis can EPA require that you meet the standards for another year in addition to the year you're seeking the exemption?

[00:39:11] Speaker 01:
What's the statutory basis for that?

[00:39:13] Speaker 06:
Your honor, if I could, could I respond to the question you asked just before that first?

[00:39:16] Speaker 06:
OK, so we're not trying to close the courthouse door to legitimate claims.

[00:39:21] Speaker 06:
What we're trying to do is follow this court's precedent in the Clean Air Act, which says a party cannot challenge an old regulation after 60 days unless there's an after arising event, which they don't have.

[00:39:34] Speaker 06:
And so we're not closing the courthouse doors in a way that Congress didn't intend.

[00:39:39] Speaker 06:
Congress intended this in the way it structured the Clean Air Act.

[00:39:43] Speaker 06:
It said the EPA could promulgate these regulations.

[00:39:47] Speaker 06:
And if no one challenges after 60 days, that becomes the regulation.

[00:39:50] Speaker 06:
It cannot be called into question later.

[00:39:52] Speaker 06:
The court could say, well, you're misinterpreting the regulation and the simplification, which is the timely claim they bring here.

[00:39:58] Speaker 06:
But it can't go back and start messing with the regulation.

[00:40:01] Speaker 06:
And my broader point, and I understand you're saying we wouldn't have to reference the regulation in our decision, but it would have that effect to say that EPA can't require two years, which everyone acknowledges.

[00:40:14] Speaker 01:
Maybe that runs into the time bar.

[00:40:16] Speaker 01:
I mean, assuming it does run short.

[00:40:19] Speaker ?:
OK.

[00:40:20] Speaker 01:
What I don't hear EPA making an argument about is why in a small refinery would have to be below the statutory throughput for two years, the exemption year plus whichever other year, however you read the regulation, two years.

[00:40:38] Speaker 06:
Well, we make this argument in our brief, but we don't think we should have to because it's time barred.

[00:40:42] Speaker 06:
But I'm happy to talk about why EPA decided in 2014 to make this regulation the way that it did.

[00:40:48] Speaker 06:
And that was because, at the time, almost all refineries were applying during the year they were seeking the exemption, which makes sense.

[00:40:56] Speaker 06:
They wanted to know before the year was up, and they had to comply whether they were going to be exempted or not.

[00:41:01] Speaker 06:
And EPA looked at the statute and said, well, they have to be under the threshold for a full calendar year.

[00:41:07] Speaker 06:
But also, they have to be a small refinery in the year that they're seeking.

[00:41:13] Speaker 06:
And so EPA said, well, the other problem is that the Clean Air Act allows them to apply for an exemption at any time.

[00:41:21] Speaker 06:
So EPA said, well, which year is it?

[00:41:24] Speaker 06:
Is it the full calendar year before they've applied?

[00:41:27] Speaker 06:
Or is it the year during they're applying, the one they're actually seeking the exemption for?

[00:41:31] Speaker 06:
And EP said, well, I think we have to require both.

[00:41:35] Speaker 06:
Because in one instance, a refinery could be not small the year before.

[00:41:40] Speaker 06:
And so it would not have a full year of data, excuse me, and therefore comply with the Clean Air Act.

[00:41:47] Speaker 06:
But if we just look at the year before, then that party can, in the year it's seeking an exemption, blow right through the threshold.

[00:41:54] Speaker 06:
And so EPA said, well, we need to ensure that they're projected to stay under the threshold for that year as well, which is why the 2014 regulation required, and I'll quote from Sinclair IV, decided in 2014 to measure refinery output based on the year for which the exemption is sought and the immediately preceding year.

[00:42:13] Speaker 06:
So that's why it complies with the Clean Air Act.

[00:42:18] Speaker 02:
But that rationale doesn't seem to,

[00:42:23] Speaker 02:
be necessary in this instance where the applicant is applying the year after the year that they're seeking the exemption.

[00:42:32] Speaker 02:
And now we know which calendar year we need to look at and it meets the requirement.

[00:42:40] Speaker 02:
It is a small refinery for the year that it's seeking the exemption.

[00:42:45] Speaker 02:
It seems that your phrasing in your regulation could be fine as applied to certain people where you're not sure and they're applying early.

[00:42:54] Speaker 02:
But in the case before us,

[00:42:56] Speaker 02:
your regulation by its very text would allow these plaintiffs or these petitioners to benefit from the exemption.

[00:43:06] Speaker 02:
What's the problem with that?

[00:43:08] Speaker 02:
If we rule in favor of the petitioners, this is apparently a very unusual situation.

[00:43:14] Speaker 02:
It doesn't happen that often.

[00:43:16] Speaker 02:
Or maybe you're saying that people don't apply because they think they won't win.

[00:43:21] Speaker 02:
But it just seems to me that the concerns that you expressed that justified the way this is structured don't apply to this case.

[00:43:30] Speaker 02:
And this case falls within the actual words that you put in the regulation that entitles them to benefit from the exemption under just a pure regulatory interpretation.

[00:43:42] Speaker 06:
Adopting petitioners interpretation of what the regulation says would make almost every other EPA adjudication completely arbitrary because it would treat two refineries that are the same size and refine in a calendar year exactly the same amount of fuel differently

[00:44:03] Speaker 06:
based not on those criteria at all, but based on the date when they apply.

[00:44:07] Speaker 01:
So Mr. Cates, I'm sympathetic to that argument, that their interpretation of the reg in all the other circumstances might lead to some very peculiar results, which is why it seems preferable not to take that interpretation of the reg, but to decide on the Clean Air Act.

[00:44:26] Speaker 01:
And then EPA can't base a denial

[00:44:31] Speaker 01:
going forward on 2 years requiring 2 years, but you know, it can continue to administer the program, you know, in whatever way it thinks is sensible.

[00:44:43] Speaker 01:
I just don't think that I mean, for instance, EPA could require.

[00:44:47] Speaker 01:
more information, but only based the denial on one year, if we were to rule that way under the Clean Act.

[00:44:53] Speaker 01:
If there's some administrability reason for requiring additional information, EPA could ask parties maybe to provide that information for some administrative purposes, but the exemption denial would have to still be based on one year of data.

[00:45:12] Speaker 06:
The 2014 regulation is on the books, and in effect, an EPA has to follow it.

[00:45:17] Speaker 06:
How could it follow it if this court issued that order?

[00:45:21] Speaker 06:
It is required to point to data for the year the party is seeking the exemption and the year prior.

[00:45:28] Speaker 06:
That's how EPA has always interpreted the regulation and always applied it to every single applicant for the last 12 years.

[00:45:35] Speaker 03:
Right.

[00:45:36] Speaker 03:
I think you would need a new regulation that doesn't require two years of data, right?

[00:45:39] Speaker 03:
I mean, that's what ultimately would happen because if that's the statutory interpretation that a year means a year and you can't look at two years, then this regulation can't be applied, period.

[00:45:48] Speaker 03:
Your Honor, I think you have it right there.

[00:45:51] Speaker 06:
That is the reason why, although I understand the court's interest in not adopting their interpretation because it would lead to insane results,

[00:45:59] Speaker 06:
But I think the court only has two options.

[00:46:02] Speaker 06:
It either invalidates the regulation in effect or actually says it in the opinion, which we believe is time barred.

[00:46:10] Speaker 06:
Or the court has to adopt their interpretation or give EPA some other interpretation.

[00:46:15] Speaker 03:
Well, and their interpretation of the regulation.

[00:46:17] Speaker 03:
So I understand your point about what you think are similarly situated entities being treated differently.

[00:46:27] Speaker 03:
Why is that the case?

[00:46:28] Speaker 03:
Because if everybody has a choice, let's say we conclude that their interpretation of the regulation is correct and just accept that.

[00:46:37] Speaker 03:
I know you don't want to accept it, but just accept that for the purposes of this question.

[00:46:41] Speaker 03:
Then everybody would have a common understanding about the way the regulation is correctly applied.

[00:46:47] Speaker 03:
Obviously EPA could change the regulation, but for now the regulation would be fixed.

[00:46:51] Speaker 03:
Then there wouldn't be the problem because everybody would have the choice about what year to apply in.

[00:46:56] Speaker 03:
So you wouldn't necessarily have the dilemma that you outline about similarly situated refineries being treated differently because everybody could decide to apply after the fact.

[00:47:06] Speaker 06:
No, your honor, because time only moves in one direction.

[00:47:09] Speaker 03:
So for example- Well, I get it.

[00:47:12] Speaker 03:
People have had interpretations in the past.

[00:47:15] Speaker 03:
So sure, those decisions are made, but- No, no, no, no, no.

[00:47:17] Speaker 03:
You got a different point.

[00:47:18] Speaker 06:
Yes, your honor.

[00:47:19] Speaker 06:
So for example, in the 2025 decisions, EPA resolved petitions for calendar year 2021, 2022, 2023.

[00:47:28] Speaker 06:
Those decisions are being challenged in the main case that this one's been severed from.

[00:47:31] Speaker 06:
If the court were to rewrite the regulation, or I guess more charitably adopt their interpretation.

[00:47:39] Speaker 06:
But you'd be construing it along the lines that they would like.

[00:47:42] Speaker 06:
Currently pending challenge adjudications right now.

[00:47:45] Speaker 06:
So let's take the year 2021.

[00:47:47] Speaker 06:
Let's say a party in 2021 is under the threshold in 2021 and 2020.

[00:47:54] Speaker 06:
That's what they've understood EPA's regulation.

[00:47:56] Speaker 06:
That's what this court understood EPA's regulation to mean in St.

[00:47:58] Speaker 06:
Clair Four.

[00:47:59] Speaker 06:
That's what EPA said in the preamble.

[00:48:02] Speaker 06:
And that's what the entire industry has thought until now, until this very narrow circumstance when a party applies, not just afterwards, but the immediately following year of the year it's seeking the exemption.

[00:48:17] Speaker 06:
That's the only time this works when two years under the regulation becomes a one year.

[00:48:22] Speaker 06:
But for a party,

[00:48:23] Speaker 06:
that's applied for 2021, if the court were to adopt Petitioner's Interpretation, they would have to show data, not from 2020 and 2021, like they've always showed.

[00:48:33] Speaker 06:
They'd have to go back and say, oh my God, what did we do in 2024?

[00:48:36] Speaker 06:
We might lose our exemption now.

[00:48:38] Speaker 02:
You mean the year that they applied?

[00:48:39] Speaker 02:
Correct.

[00:48:40] Speaker 03:
When are they applying?

[00:48:41] Speaker 03:
I'm not understanding in your hypo.

[00:48:42] Speaker 03:
When are they applying?

[00:48:43] Speaker 06:
Well, this is not hypothetical.

[00:48:44] Speaker 06:
This is what has actually happened.

[00:48:46] Speaker 03:
OK.

[00:48:46] Speaker 06:
What scenario are you talking about?

[00:48:47] Speaker 06:
The one that has occurred, the EP adjudicated the 2025 decisions.

[00:48:51] Speaker 06:
So that was 170 some odd decisions.

[00:48:55] Speaker 06:
Those decisions were not just for 2024.

[00:48:57] Speaker 06:
They were for exemptions for 2021, 2022, 2023, 2024.

[00:49:01] Speaker 02:
But why wouldn't this be prospective if we rolled this way so it wouldn't affect all the pending months?

[00:49:07] Speaker 06:
Those petitioners I just described that applied for those for many years all at once are in the same position as these petitioners.

[00:49:15] Speaker 06:
It's the same adjudication.

[00:49:16] Speaker 06:
It's the same final order.

[00:49:17] Speaker 02:
And the adjudication has completed.

[00:49:18] Speaker 06:
Correct.

[00:49:19] Speaker 06:
It was one adjudication.

[00:49:20] Speaker 06:
It's not retroactive.

[00:49:21] Speaker 06:
It's prospective.

[00:49:21] Speaker 06:
Exactly.

[00:49:22] Speaker 01:
It seems that the petitioner's reading of the regulation only avoids those absurd results if you read the whole RFS program as requiring prospective seeking of exemptions.

[00:49:35] Speaker 01:
and no retroactive seeking of exemptions, which would be an even greater upheaval to the RFS program, as at least I understand it.

[00:49:43] Speaker 06:
That's right, Your Honor.

[00:49:45] Speaker 01:
I think the issue is that the 2014 regulation was written in a... I assume actually something petitioners wouldn't want is a prospectively, because a lot of these things are applied.

[00:49:56] Speaker 01:
retroactively.

[00:49:57] Speaker 06:
Correct.

[00:49:58] Speaker 06:
And given the remedy issues that are involved in the main case, even though the fact that these petitions for 2020 are old, they still think they can get some relief now.

[00:50:08] Speaker 06:
So it's still a live issue.

[00:50:09] Speaker 06:
It's not as if, well, all of this is in the past.

[00:50:15] Speaker 06:
The court's opinion adopting their interpretation would have immediate and radical ramifications for the way the EPA adjudicates these smaller finery petitions.

[00:50:27] Speaker 02:
But equally radical, regardless of which path we take.

[00:50:31] Speaker 06:
That's not true at all.

[00:50:32] Speaker 06:
Because if the court agrees with EPA's interpretation, the one that it expressed in Sinclair IV and the one that the EPA has been using since 2014, it would have no upheaval at all.

[00:50:43] Speaker 02:
Say we don't.

[00:50:44] Speaker 02:
Sure.

[00:50:45] Speaker 02:
OK, say we don't.

[00:50:46] Speaker 02:
Which is less upheaval for you, the regulatory approach or the statutory approach?

[00:50:50] Speaker 06:
I think as I answered earlier, I think

[00:50:52] Speaker 06:
this court adhering to the idea that the regulation itself cannot be challenged.

[00:50:58] Speaker 06:
It's untimely.

[00:50:58] Speaker 02:
So the regulatory approach is better, because even though there'll be upheaval in this program, it won't open the door for all the other programs to be challenged as violating the statute.

[00:51:07] Speaker 06:
Yes, Your Honor, as this court is well familiar, the Cleaner Act has a lot of provisions like this.

[00:51:12] Speaker 06:
And I think that would be apocalyptic from EPA's perspective.

[00:51:17] Speaker 03:
Suppose, take timeliness out of the field of vision.

[00:51:20] Speaker 03:
That's hard.

[00:51:21] Speaker 03:
But yes, your honor.

[00:51:21] Speaker 03:
Yeah, just do it.

[00:51:22] Speaker 03:
So pretend there's not a time in this issue of case.

[00:51:25] Speaker 03:
Then as between losing on your interpretation of the regulation, losing on their interpretation of the statute, which is preferable.

[00:51:36] Speaker 06:
Losing on our interpretation of the regulation.

[00:51:38] Speaker 06:
And the regulation stays unchallenged.

[00:51:41] Speaker 06:
And EPA has to

[00:51:43] Speaker 01:
And then you would do the weird things where someone applies in 2024 and they have to show compliance in 2024 for a 21 exemption.

[00:51:49] Speaker 01:
You would rather have that world?

[00:51:52] Speaker 06:
I would rather have that world than a world where parties can challenge decade-old regulations by simply... No, I took timeliness out of the way.

[00:52:00] Speaker 03:
I'm saying I don't want you to think about the implications for timeliness.

[00:52:05] Speaker 03:
I think we understand the point on that.

[00:52:08] Speaker 03:
But suppose there were no implications for timeliness, then I'm just asking, would you rather be faced with a situation in which EPA's asserted interpretation of the regulation itself were deemed invalid or a situation in which their statutory challenge succeeded so that a year means a year and you can't look at two years of GATA?

[00:52:31] Speaker 06:
I think I understand now how I misapprehended what you are asking.

[00:52:35] Speaker 06:
So what you're saying is there's statutory challenge, which I understand as a challenge to the regulation.

[00:52:40] Speaker 06:
But you're saying it's not.

[00:52:41] Speaker 03:
Yeah, I'm saying assume that the questions that have been asked, there's a difference between challenging the statute, a challenge under the statute, and a challenge under the regulation.

[00:52:51] Speaker 03:
Then you've got two alternatives.

[00:52:53] Speaker 03:
One is a challenge under the statute because the statute refers to a single year.

[00:52:57] Speaker 03:
That's ostensibly the interpretation of the statute.

[00:52:59] Speaker 03:
And this result can't be squared with that because this result loop requires looking at two years.

[00:53:05] Speaker 03:
That sends a strong implication about the validity of the regulation, which presupposes two years of data.

[00:53:10] Speaker 03:
That's one resolution.

[00:53:11] Speaker 03:
And the other is your interpretation of the regulation is wrong because it speaks in terms of the year prior to seeking an extension.

[00:53:19] Speaker 03:
That has to do with the year in which the extension is sought, not the year for which an extension is sought.

[00:53:24] Speaker 03:
between those two ways of having the determination set aside, which one would work better?

[00:53:35] Speaker 06:
One of those scenarios a little bit further so that I make sure I can answer this properly.

[00:53:40] Speaker 06:
OK.

[00:53:40] Speaker 06:
So in the instance where the court says in its decision nothing about the 2014 regulation at all and just says, this adjudication violated the Cleaner Act because it required one year instead of two.

[00:53:53] Speaker 06:
You were saying in that scenario, EPA is now in a position where it has to continue to comply with the 2014 regulation, but it can't do that.

[00:54:06] Speaker 03:
That may be the result for EPA.

[00:54:08] Speaker 03:
I mean, I think by hypothesis, the opinion wouldn't necessarily say that, but I think I'd take the point.

[00:54:15] Speaker 03:
I think we accept the point that under that scenario, EPA would face a serious question about the regulation because the regulation by its terms looks at more than one year.

[00:54:27] Speaker 02:
Wouldn't you have to amend the regulation and that would all be prospective and you wouldn't have the problem with the 2021 and 2024 problems?

[00:54:35] Speaker 06:
Well, I'm ending the regulation would not be immediate.

[00:54:38] Speaker 02:
And again, some period, but ultimately you'd have to amend the regulation.

[00:54:43] Speaker 02:
And I guess how bad how bad is the dislocation for that period before you amend versus having to to deal with all the past problems?

[00:54:55] Speaker 06:
I mean, they're both pretty bad, so it's hard for me to pick.

[00:55:00] Speaker 01:
I mean, the ruling, the way the chief judge described, though, would leave it with the agency, which is where this complicated scheme belongs, to decide how to interpret the 2014 regulation consistent with our opinion.

[00:55:17] Speaker 01:
and then also determine, based on its own decision-making, whether and how to amend the regulation in the future.

[00:55:28] Speaker 01:
So those complex decisions would stay with the agency.

[00:55:32] Speaker 01:
And our decision would be about these denials, which are a little quirky.

[00:55:38] Speaker 01:
As we say, there are two or three out of hundreds, thousands of these determinations.

[00:55:44] Speaker 01:
So why wouldn't

[00:55:46] Speaker 01:
I mean, I guess you could view it as kind of apocalyptic, or you could just sort of interpret the reg consistent with the decision and then later amend if necessary.

[00:55:58] Speaker 06:
OK.

[00:56:00] Speaker 06:
Your Honor, I think what's difficult for me to divorce here is that if this court adopted that approach, what it would mean is that every party that

[00:56:13] Speaker 06:
as of now thought it couldn't challenge a regulation because it didn't at the time, would now say all we have to do when we file our petition.

[00:56:21] Speaker 01:
I'd say very clearly that this denial was inconsistent with the Clean Air Act.

[00:56:25] Speaker 06:
I understand.

[00:56:26] Speaker 06:
And so what the party would understand is all we have to do is file a petition during the adjudication.

[00:56:32] Speaker 06:
We're not going to talk about how terrible the regulation is.

[00:56:34] Speaker 06:
We're just going to say the fact that they use that regulation to deny us violates the act.

[00:56:39] Speaker 06:
And we don't care.

[00:56:41] Speaker 06:
Let them keep the 2014 regulation on the books because it's never going to be applied to us again.

[00:56:46] Speaker 01:
I don't think they're going to be as, I mean, because there's so many parts of, they're not that many things in the statute that are as clear as like the definition of a small refinery, right?

[00:56:58] Speaker 01:
I don't know that there would be like a whole range of statutory challenges.

[00:57:03] Speaker 02:
Along those lines, how many of these refineries are there that are kind of straddling the line of 75,000 refineries?

[00:57:11] Speaker 02:
Is it barrels or whatever per day?

[00:57:13] Speaker 02:
It seems to me like there's probably a bunch that really are small, they're always below, and there's a bunch that are really huge and they're never below.

[00:57:21] Speaker 02:
What you're having apocalyptic worries about are the ones that go up and down, around 75,000.

[00:57:27] Speaker 02:
How many of those are there?

[00:57:30] Speaker 06:
I don't know offhand.

[00:57:31] Speaker 06:
What I do know is that it is in their interest to come as close to the threshold as possible, if they're able to, without going over it.

[00:57:39] Speaker 06:
Because then they get to make the money from refining fuel up to the line.

[00:57:43] Speaker 06:
Every single dollar close to the line.

[00:57:46] Speaker 06:
But if you go over it, you lose it.

[00:57:48] Speaker 06:
So there is some pressure on refineries to stay close to the line.

[00:57:55] Speaker 01:
That's a line that Congress drew.

[00:57:56] Speaker 01:
I mean, this is just like a rent seeking program that Congress created.

[00:58:00] Speaker 01:
So there's nothing permissible about that.

[00:58:03] Speaker 02:
I'm not saying that you would only go over if you're usually below the line and trying to take advantage of this.

[00:58:07] Speaker 02:
You only go over in a year where, wow, there's a huge amount of demand.

[00:58:12] Speaker 02:
I can make a lot of money this year, and my calculus is this year, I'm going to make more money if I go above.

[00:58:18] Speaker 02:
You're going to go as far above as you can.

[00:58:20] Speaker 02:
Once you're above, you want to make as much as you can.

[00:58:23] Speaker 02:
But how often does that happen?

[00:58:24] Speaker 02:
It just seems to me this is probably a small

[00:58:26] Speaker 02:
portion of cases, even though you're assuming it might be huge and apocalyptic.

[00:58:30] Speaker 02:
It's not clear to me that it should be.

[00:58:32] Speaker 06:
Well, I guess I should try, if I can, to tease out the various apocalypses.

[00:58:38] Speaker 06:
Sorry.

[00:58:38] Speaker 06:
So one is that this decision blows a hole in the backdoor challenge prohibition, which allows a party to, by the way- No, no.

[00:58:47] Speaker 02:
Let's assume we're just talking about your regulation.

[00:58:49] Speaker 02:
We decide on the regulatory basis.

[00:58:51] Speaker 06:
You just decide on the regulatory basis?

[00:58:53] Speaker 06:
OK.

[00:58:53] Speaker 06:
So you say that regulation cannot be challenged.

[00:58:56] Speaker 06:
It isn't being challenged.

[00:58:57] Speaker 06:
The regulation is fine.

[00:58:58] Speaker 02:
You've interpreted it wrong.

[00:58:59] Speaker 06:
We've interpreted it wrong.

[00:59:00] Speaker 06:
In that issue, in that instance, it's true that

[00:59:06] Speaker 06:
Their situation is small because very few refineries have been denied on this basis so far.

[00:59:12] Speaker 06:
I don't know that that means that they wouldn't have behaved differently if they had had this new interpretation of the 2014 regulation all along.

[00:59:20] Speaker 06:
If they had known over the last decade that they could go up in a year and then go down the next year and not lose both years.

[00:59:28] Speaker 06:
But that was the understanding they had.

[00:59:29] Speaker 06:
That was the understanding this court repeated in Sinclair IV.

[00:59:32] Speaker 06:
And that's what EPA has always done.

[00:59:35] Speaker 06:
Right?

[00:59:35] Speaker 06:
And so setting that aside, yes, I've lost it.

[00:59:49] Speaker 02:
Sorry.

[00:59:50] Speaker 02:
You had said that their situation, this is a very narrow thing.

[00:59:53] Speaker 02:
You have to fight a year after.

[00:59:55] Speaker 06:
Yes.

[00:59:58] Speaker 06:
OK.

[00:59:58] Speaker 06:
Sorry.

[00:59:59] Speaker 06:
But the court adopts their interpretation.

[01:00:01] Speaker 06:
Yes.

[01:00:03] Speaker 06:
OK.

[01:00:03] Speaker 06:
Then we have the chaos I talked about earlier, which is refineries who were complying with the regulation all along in the way that everyone knew it was going to be applied are now in jeopardy.

[01:00:13] Speaker 06:
because they have to look back and think we were just looking for 2021.

[01:00:17] Speaker 06:
We knew that that meant we had to be under for 2021 and 2020.

[01:00:20] Speaker 06:
But now, because we applied this year, we have to look at 2024.

[01:00:24] Speaker 06:
Do we even qualify?

[01:00:25] Speaker 06:
They'll be right back in here challenging that because they're saying we followed the regulation.

[01:00:30] Speaker 01:
But you said you prefer that legal ruling to a ruling about the Clean Air Act and these specific denials.

[01:00:36] Speaker 01:
You've suggested that you prefer us to reinterpret the reg and say EPA's interpretation is wrong, which I actually do agree would probably lead to massive upheaval and lots of backdoor challenges, as opposed to a narrower opinion about the statute, which seems like it may only apply in a couple of different cases.

[01:01:00] Speaker 01:
I just- What's apocalyptic about ruling out that these denials are inconsistent with the Clean Air Act?

[01:01:07] Speaker 06:
Because it would invalidate the 2014 regulation and EP would still have to- You would be putting EP in a possible position.

[01:01:13] Speaker 06:
They would have a regulation.

[01:01:14] Speaker 06:
They still have to follow.

[01:01:15] Speaker 06:
It's still in the books, but how are they supposed to?

[01:01:16] Speaker 03:
No, but they couldn't follow it.

[01:01:17] Speaker 03:
I mean, I think the bottom line is- They couldn't follow one part of it.

[01:01:21] Speaker 03:
I'm sorry?

[01:01:21] Speaker 01:
They couldn't follow one part of it.

[01:01:24] Speaker 06:
Fair enough, Your Honor, that it does say other things, but it's a big part of it.

[01:01:27] Speaker 03:
This part, this specific part of it, I take it that the concern is, I just want to make sure I'm understanding it correctly.

[01:01:32] Speaker 03:
And I understand the concern about time limits.

[01:01:34] Speaker 03:
I just put those to the side for one second.

[01:01:37] Speaker 03:
Just on what the repercussions would be for purposes of this particular provision in the regulations.

[01:01:43] Speaker 03:
I take it your point is that if we accept that the challenge is not untimely,

[01:01:52] Speaker 03:
And the reason we accept that the challenge is not untimely is that it's only a challenge to the statute.

[01:01:59] Speaker 03:
The statute requires, by hypothesis, only looking at a single year.

[01:02:05] Speaker 03:
Your point is, well, then that effectively invalidates this regulation because this regulation in every operation, basically every operation, calls for looking at two years.

[01:02:18] Speaker 03:
That's correct.

[01:02:19] Speaker 06:
But it would also have another effect.

[01:02:21] Speaker 06:
For example, it would undermine the court's decision in Sinclair IV.

[01:02:25] Speaker 06:
Because in Sinclair IV, the court said, well, yeah, you only have to be under the threshold for a year, but you got to do this letter.

[01:02:32] Speaker 06:
And they didn't like the letter.

[01:02:34] Speaker 06:
They didn't challenge the regulation requiring the letter at the time.

[01:02:37] Speaker 06:
But they said, look, we shouldn't have to provide the letter.

[01:02:41] Speaker 01:
The letter has nothing.

[01:02:42] Speaker 01:
There's no statute.

[01:02:43] Speaker 01:
There's nothing in the Clean Air Act about letters.

[01:02:46] Speaker 06:
there's nothing in the Clean Air Act about it, how could EPA require it?

[01:02:49] Speaker 06:
The point is, is that EPA is allowed to go beyond the mere definition of small refinery to effectuate Congress's intent that only small refineries can get it.

[01:03:02] Speaker 06:
And so that is what the verification letter requirement regulation is trying to do.

[01:03:06] Speaker 06:
And that's what the 2014 regulation is trying to do.

[01:03:08] Speaker 06:
It's trying to ensure that small refineries alone is a good benefit.

[01:03:11] Speaker 03:
Right.

[01:03:11] Speaker 03:
Which is to say you think that the 2014 regulation in its heartland applications is consistent with the statute.

[01:03:16] Speaker 03:
And of course you do.

[01:03:18] Speaker 03:
And what you're worried about is that if there's a ruling under the statute that says the statute talks about one year and so the result in this case, put aside the regulation by hypothesis, put aside the regulation, the result in this case can't be scored with the statute because the result in this case looked at two years.

[01:03:34] Speaker 03:
What you're worried about is, well, the upshot of that is

[01:03:36] Speaker 03:
then the 2014 regulation is effectively just irrelevant because it almost always requires looking at two years.

[01:03:45] Speaker 03:
Right.

[01:03:45] Speaker 06:
And I think I would also add that because the 2014 regulation, in this case, so you're telling EPA, go redo the adjudication.

[01:03:53] Speaker 06:
And EPA said, well, the only basis was the regulation.

[01:03:57] Speaker 06:
How can we redo it?

[01:03:58] Speaker 03:
That would be a repercussion for EPA to figure out how to handle it.

[01:04:01] Speaker 03:
Okay.

[01:04:02] Speaker 03:
And I don't know how it would do it.

[01:04:03] Speaker 02:
I feel like this is very logistical.

[01:04:04] Speaker 02:
Like we've talked about EPA could amend this regulation.

[01:04:07] Speaker 02:
You said there'll be some time.

[01:04:09] Speaker 02:
And can EPA grandfather people who relied on the prior?

[01:04:12] Speaker 02:
I mean, I feel like

[01:04:14] Speaker 02:
Agencies have a lot of discretion.

[01:04:16] Speaker 02:
Do you have tools to address this type of location by saying we're going to grandfather the people who relied on our prior application while we amend the regulation?

[01:04:27] Speaker 06:
Are things like that available to the agency?

[01:04:33] Speaker 06:
I don't know.

[01:04:35] Speaker 06:
I think that the agency certainly has some flexibility as to how it manages the program, but it is still required to go through a rulemaking process to take comments and make sure that the whole regulated community is able to weigh in on

[01:04:49] Speaker 06:
the changes it wants to make.

[01:04:50] Speaker 06:
And so doing these kind of ad hoc carve-outs have all kinds of unintended consequences.

[01:04:56] Speaker 02:
I was wondering if you have the equivalent of an administrative stay while you're doing that.

[01:05:01] Speaker 06:
Oh, well, I mean, a stay would be a very little benefit because, again, as we noted, the deadline for the courts of rule is predicated on the next volume rule coming out.

[01:05:14] Speaker 06:
And so every year,

[01:05:16] Speaker 02:
I'm just trying to address the people who are still waiting for their adjudications from 2021 and 2022, 2023, which I'm actually quite surprised to hear that those haven't been adjudicated yet.

[01:05:28] Speaker 06:
So maybe I misspoke, but they have been adjudicated.

[01:05:31] Speaker 06:
So they are part of the 2025 decisions that you would be invalidating, at least part of here.

[01:05:36] Speaker 02:
So they're just on appeal.

[01:05:37] Speaker 06:
They're being challenged.

[01:05:38] Speaker 06:
They're actually part of, they were part of this case.

[01:05:41] Speaker 03:
Can you, would you, unless there's further questions on it, would you just speak at least briefly to the time in this question that came up?

[01:05:49] Speaker 03:
Not time in us, on the timing of our decision, the issue about the timing of our decision that came up at the end of the argument on the other side and whether the June or March dates, how all of that could play out and what flexibility the agency has.

[01:06:06] Speaker 03:
So the March date is not happening.

[01:06:08] Speaker 06:
The earliest it could be would be June, and it could very well be September or even later.

[01:06:13] Speaker 06:
And as to the question of how much time EPA would need, it would need 90 days, because this is an important distinction.

[01:06:20] Speaker 06:
This case is not where their application was adjudicated and EPA found they shouldn't get an exemption because of certain economic factors.

[01:06:30] Speaker 06:
EPA here determined that they were not eligible.

[01:06:33] Speaker 06:
So if this court were to say, no, no, no, they are eligible,

[01:06:36] Speaker 06:
EPA's work would really just begin.

[01:06:39] Speaker 01:
You have to do the hardship determination.

[01:06:41] Speaker 01:
Exactly.

[01:06:41] Speaker 06:
And that is the bulk of the work.

[01:06:43] Speaker 06:
Exactly.

[01:06:44] Speaker 06:
So it would not be as simple like, oh, just give it to them.

[01:06:47] Speaker 06:
Now, EPA would have to say, we didn't think these people were eligible.

[01:06:50] Speaker 06:
They violated regulation that's a decade old.

[01:06:52] Speaker 06:
Everyone's been complying with this.

[01:06:54] Speaker 06:
So now EPA would have to actually look and say, okay, well, do they get a full exemption, a half exemption?

[01:06:59] Speaker 06:
They have to go to DOE.

[01:07:01] Speaker 06:
It would be a lot of work.

[01:07:02] Speaker 06:
So EPA needs 90 days that Congress gave it at least if it were ordered to find these petitioners eligible.

[01:07:12] Speaker 01:
Well, you're supposed to do it within 90 days, which apparently is a deadline that EPA just regularly blows through.

[01:07:17] Speaker 01:
So

[01:07:18] Speaker 03:
I have it on good authority that tries very hard, but yes.

[01:07:22] Speaker 03:
And then where does that leave things now?

[01:07:24] Speaker 03:
Because if we accept that proposition, then for the RINS, if they were ultimately earned to be worthwhile, where would the petitioners be?

[01:07:36] Speaker 06:
Well, as we say in the brief, Your Honor, petitioners can apply at any time.

[01:07:40] Speaker 06:
So part of this is of their own making.

[01:07:42] Speaker 06:
But I would also say that, as just Pan pointed out, EPA does have some flexibility if the court rules that they not only were eligible, but EPA should take the time to see if they actually get an exemption.

[01:07:56] Speaker 06:
I think EPA does have some flexibility if the deadline's expired to give them some relief.

[01:08:01] Speaker 06:
But again.

[01:08:02] Speaker 06:
You mean replacement rents?

[01:08:04] Speaker 06:
I think that is possible.

[01:08:06] Speaker 06:
I'm not saying the EPA would do that, but I'm saying that the court... But if the EPA had declined to do that, they would have no relief, even if we were in their favor?

[01:08:15] Speaker 06:
That's correct, Your Honor, I guess.

[01:08:17] Speaker 01:
And EPA pretty rarely issues replacement rents, isn't that correct?

[01:08:21] Speaker 06:
That's true.

[01:08:21] Speaker 06:
Although, as you said, this case is rare.

[01:08:28] Speaker 03:
All right.

[01:08:29] Speaker 03:
Make sure my colleagues don't have additional questions for you at this point.

[01:08:30] Speaker 03:
Okay.

[01:08:31] Speaker 03:
Thank you, counsel.

[01:08:31] Speaker 03:
Thank you.

[01:08:43] Speaker 03:
If I could give you three minutes for about.

[01:08:45] Speaker 04:
Thank you, your honor.

[01:08:47] Speaker 04:
Let me start by addressing some of the so supposedly apocalyptic consequences that Mr. Kate's describes.

[01:08:57] Speaker 04:
I think as Judge Rao pointed out, there have been at most three instances of EPA applying the regulation this way in the 10 plus years that the regulation has been on the books.

[01:09:08] Speaker 04:
And so the idea that this is going to have some floodgates effect is, I think, fanciful.

[01:09:14] Speaker 04:
I think the idea that it would have implications.

[01:09:17] Speaker 02:
But the argument is that the reason there's been so few is because everybody understood the interpretation that EPA was applying, so they didn't even try.

[01:09:26] Speaker 02:
an opinion comes out saying that interpretation is wrong.

[01:09:29] Speaker 02:
They'll be clued in that they can do this.

[01:09:32] Speaker 02:
And they can apply at any time.

[01:09:34] Speaker 04:
So to the extent that, so I guess a couple of points on that, Your Honor.

[01:09:38] Speaker 04:
First, with respect to the impact on the pending litigation, EPA only deemed two refineries ineligible under this regulation for the pending litigation.

[01:09:47] Speaker 04:
And both refineries are before you today.

[01:09:51] Speaker 04:
So it has zero impact for the pending cases.

[01:09:53] Speaker 02:
But do the refineries have to ask

[01:09:54] Speaker 02:
But for this, I guess... No, Your Honor.

[01:09:58] Speaker 02:
Does EPA automatically apply this, whether you... Yes.

[01:10:01] Speaker 04:
And that's reflected in the record here.

[01:10:03] Speaker 04:
The petitioners here applied.

[01:10:05] Speaker 04:
EPA then took the position and said, it appears in our view that based on our now reading of the 2014 regulation, you're ineligible.

[01:10:14] Speaker 04:
The petitioners all objected to that, said that's not a correct reading.

[01:10:18] Speaker 04:
So it's EPA on its own.

[01:10:19] Speaker 04:
So this will have no impact on the pending cases.

[01:10:24] Speaker 02:
And I think this concern that- So is it correct that of the 175 ones that are pending right now, only two of them fell within this category?

[01:10:31] Speaker 04:
That's correct.

[01:10:32] Speaker 04:
And they are the two refineries that are before you today.

[01:10:35] Speaker 04:
As far as the concern about refineries waiting years to apply, I think that concern is completely unrealistic, given the stakes of these exemptions.

[01:10:44] Speaker 04:
These exemptions are worth tens of millions of dollars a year.

[01:10:48] Speaker 04:
And so the idea- They're gone in two years, right?

[01:10:49] Speaker 04:
I'm sorry?

[01:10:52] Speaker 04:
The value.

[01:10:53] Speaker 04:
That's correct.

[01:10:54] Speaker 04:
Under EPA's policy of returning expired rins, refineries are on the clock.

[01:11:00] Speaker 04:
And so there is no circumstance where a refinery that a refinery is going to wait years to apply where these circumstances that EPA is describing would really come up.

[01:11:14] Speaker 04:
I would also add that

[01:11:17] Speaker 04:
To the extent that one can hypothesize, however unrealistic, strange scenarios, it is entirely a function of EPA's decision to depart from the statute by looking to two years rather than one.

[01:11:31] Speaker 04:
And so what EPA is trying to do here is to bootstrap a bad reading of the statute to justify a bad reading of the regulation.

[01:11:38] Speaker 04:
And as you pointed out, there are two paths here for us to prevail.

[01:11:45] Speaker 04:
We're happy to prevail under either one, whether it's the regulation or the statute.

[01:11:52] Speaker 01:
Which interpretation would be more or less disruptive to the industry?

[01:11:56] Speaker 01:
We spent a lot of time asking Mr. Cates which interpretation might be more disruptive to EPA in administering the program.

[01:12:04] Speaker 01:
Do you have a sense of that?

[01:12:07] Speaker 01:
I understand you're speaking for the entire small refining industry.

[01:12:12] Speaker 04:
Yeah, I was going to add that caveat.

[01:12:16] Speaker 04:
I think, again, we're really happy to prevail on either.

[01:12:21] Speaker 04:
I think that a ruling under the statute would probably provide greater clarity going forward.

[01:12:28] Speaker 04:
It would avoid any need for refineries

[01:12:33] Speaker 04:
time their petitions by looking at fundamentally what the statute directs the EPA to look at, which is one year's throughput.

[01:12:41] Speaker 04:
But again, we're fundamentally agnostic.

[01:12:46] Speaker 04:
We are happy to prevail on any grounds.

[01:12:50] Speaker 04:
If I could just

[01:12:50] Speaker 04:
with the court's indulgence, make one point about, or one or two points about Sinclair IV and then a brief point about the remedy.

[01:12:57] Speaker 04:
So on Sinclair IV, which is the case that my friend on the other side has pointed to as sort of the jurisdictional, the best case for the government on the jurisdictional question as to our statutory challenge.

[01:13:10] Speaker 04:
There, the briefing and the court's opinion both made clear that the petitioner was bringing a direct challenge to the verification letter regulation.

[01:13:21] Speaker 04:
The briefing and the court's opinion described the petitioner in that case as seeking to set aside that requirement.

[01:13:28] Speaker 04:
And in fact, at page 20 of EPA's brief, they also characterized Sinclair IV as being about a challenge to the 2007 regulation itself.

[01:13:39] Speaker 04:
That differentiates Sinclair 4 from our case because we seek no relief as to the 2014 regulation.

[01:13:46] Speaker 04:
And it's precisely for that reason that if it is so important for EPA to continue trying to enforce this unlawful regulation, it remains able to do so in other circuits without the presidential effect.

[01:14:01] Speaker 04:
I think we would hope that EPA would take the hint from it.

[01:14:06] Speaker 04:
Why did you just call it unlawful regulation?

[01:14:09] Speaker 04:
Well, we think that the regulation is, we think that the interpretation that EPA says that is trying to apply through the regulation is inconsistent with the Clean Air Act.

[01:14:18] Speaker 03:
But again, we're not seeking relief as to- Right, but you're calling it unlawful regulation.

[01:14:21] Speaker 03:
I know that your whole point was you're not challenging the regulation.

[01:14:24] Speaker 04:
That's how you get around- Sorry, I may have been speaking a little bit imprecisely.

[01:14:31] Speaker 04:
The court can resolve the statutory question without reference to the regulation.

[01:14:36] Speaker 04:
We seek no relief as to the regulation.

[01:14:38] Speaker 04:
But I took the court's questions today as

[01:14:45] Speaker 04:
acknowledging that there may be implications for the lawfulness of the regulations.

[01:14:48] Speaker 03:
Seems like there would be some pretty strong implications.

[01:14:50] Speaker 04:
Yes.

[01:14:51] Speaker 04:
And so to that extent, it would be perfectly appropriate for EPA to take the guidance from the court and reconsider whether this is an appropriate regulation.

[01:15:00] Speaker 04:
But the point is, it wouldn't have to.

[01:15:02] Speaker 04:
The regulation would remain on the books.

[01:15:04] Speaker 04:
EPA would be able to enforce it against other parties.

[01:15:08] Speaker 04:
It may face challenges in those cases.

[01:15:10] Speaker 04:
But the key point is,

[01:15:14] Speaker 04:
that this court judges whether a petition is a backdoor challenge by the substance of the claim and the relief a party seeks.

[01:15:21] Speaker 04:
And we don't seek relief as to the 2014 regulation.

[01:15:24] Speaker 04:
So this court has jurisdiction over our statutory challenge.

[01:15:27] Speaker 05:
Last point about the remedy.

[01:15:28] Speaker 04:
Yes.

[01:15:28] Speaker 04:
On the remedy, I think it's important.

[01:15:32] Speaker 04:
My friend on the other side kind of conspicuously did not commit

[01:15:36] Speaker 04:
to giving replacement RINs.

[01:15:39] Speaker 04:
This very question was before EPA in the 2025 denial decisions, where EPA had adjudicated petitions late, far, far outside the 90 days, even farther outside the 90 days than it was with us.

[01:15:51] Speaker 04:
And there, EPA made the choice not to exercise its authority to give replacement RINs and to instead return worthless RINs that deprive.

[01:16:00] Speaker 02:
Isn't this just a question of further litigation?

[01:16:02] Speaker 02:
We should just decide this case as we will.

[01:16:05] Speaker 02:
And on the timing stuff, EPA sometimes gives replacement rents, sometimes they don't.

[01:16:10] Speaker 02:
And if they don't, more litigation, arbitration, etc.

[01:16:16] Speaker 04:
So I think, Your Honor, in this circumstance where we're still in a position where the petitioners can get meaningful relief and EPA's policy is what it is.

[01:16:26] Speaker 04:
We would ask the court, consistent with its decision to expedite the briefing and consideration of this case, to decide the case with sufficient time so that we can have a meaningful remedy here and now.

[01:16:39] Speaker 04:
EPA's position, and I think Mr. Cates essentially said this, is that it is content to give us a meaningless remedy.

[01:16:48] Speaker 04:
And we don't think that's consistent with what the Clean Air Act is trying to achieve through the small refinery exemption scheme.

[01:16:55] Speaker 01:
Sir, are there any cases in which a small refinery has been denied replacement rins and then successfully challenged that in court?

[01:17:03] Speaker 01:
Because I assume that's a discretionary decision on EPA's part.

[01:17:08] Speaker 01:
Has there been any judicial ruling saying EPA acted too late and now must give replacement rins?

[01:17:15] Speaker 01:
I'm just curious if there's such cases.

[01:17:17] Speaker 04:
I believe there is a non-precedential decision in the Ninth Circuit involving a refinery called Kern.

[01:17:24] Speaker 04:
where there was an issue, it wasn't exactly the issue you have here, but there was an issue where I think EPA again, I believe decided that petition far outside the 90 days.

[01:17:37] Speaker 04:
And if I'm recalling that case correctly,

[01:17:39] Speaker 04:
the Ninth Circuit directed EPA to issue RINs that reflected the loss and replacement RINs that I think accounted for the loss in value due to exceeding the 90 days.

[01:17:50] Speaker 04:
This case is obviously somewhat different and I think the broader set of RFS cases that are kind of coming behind us are somewhat different.

[01:18:00] Speaker 04:
But that's the closest case that I'm aware of, Your Honor.

[01:18:03] Speaker 01:
Thank you.

[01:18:04] Speaker 04:
If the court has no further questions, we would ask that you vacate the denials.

[01:18:07] Speaker 03:
Thank you, counsel.

[01:18:08] Speaker 03:
Thank you to both counsel.

[01:18:09] Speaker 03:
We'll take this case under submission.