Hermes Consolidated, LLC, Doing Business As Wyoming Refining Company v. Environmental Protection Agency

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 12, 2014 Decided June 2, 2015
No. 14-1016
HERMES C ONSOLIDATED, LLC, DOING BUSINESS AS W YOMING
R EFINING C OMPANY,
P ETITIONER
v.
ENVIRONMENTAL P ROTECTION AGENCY ,
R ESPONDENT
On Petition for Review of Final Agency Action
of the United States Environmental Protection Agency
Eric D. Miller argued the cause for petitioner. With him
on the briefs were LeAnn Johnson Koch and William
Pedersen.
Justin D. Heminger, Attorney, U.S. Department of
Justice, argued the cause for respondent. With him on the
brief was Sam Hirsch, Acting Assistant Attorney General.
Before: GARLAND , Chief Judge, and TATEL and
S RINIVASAN , Circuit Judges.
Opinion for the Court filed by Circuit Judge S RINIVASAN.

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S RINIVASAN , Circuit Judge: The Environmental
Protection Agency administers a renewable fuels program
under which oil refineries must satisfy annual obligations
concerning production of renewable fuels. Petitioner
Wyoming Refining Company operates an oil refinery located
in Newcastle, Wyoming. WRC is subject to EPA’s renewable
fuels program, but obtained an exemption through 2012.
WRC unsuccessfully petitioned EPA for an extension of its
exemption through 2014. The company now seeks review of
EPA’s denial.
We reject WRC’s various challenges other than those
identifying two mathematical errors in EPA’s independent
analysis of WRC’s financial data. EPA concedes those errors,
and we are unable to conclude that EPA would have reached
the same decision absent its mistakes. We therefore vacate
EPA’s decision and remand to allow the agency to reevaluate
WRC’s petition using the correct figures.
I.
A.
In 2005, Congress amended the Clean Air Act to
encourage increased use of renewable fuels in the United
States. As part of that statutory scheme, Congress prescribed
target volumes of renewable fuels for use in each year through
2022. In 2015, for example, the statute calls for consumption
of 20.5 billion gallons of renewable fuels. 42 U.S.C.
§ 7545(o)(2)(B)(i)(I). The statute vests EPA with authority to
develop a renewable fuels program to secure satisfaction of
the annual benchmarks. Id. § 7545(o)(2)(A)(i).
The statute calls for the Energy Information
Administration (a component of the Department of Energy)

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annually to estimate the total amount of transportation fuel
expected to be sold in the United States in the upcoming year.
Id. § 7545(o)(3)(A). EPA then divides the renewable-fuels
benchmark set out in the statute by the overall fuel estimate
provided by DOE, yielding a “volume percentage”
requirement for the year. For example, if DOE projects the
use of 100 billion gallons of fuel in a year for which the
statute requires the use of 20 billion gallons of renewable
fuels, the “volume percentage” for that year would be 20%.
Obligated parties under the regulations—namely, refineries
and importers of fuel—must demonstrate that they meet a
pro-rata share of the overarching renewable fuels volume
obligations based on that “volume percentage.” See 40 C.F.R.
§ 80.1406(a). Under a volume percentage of 20%, for
example, an obligated party producing 100,000 gallons of fuel
in a year would have a renewable fuels volume obligation of
20,000 gallons.
Obligated parties, however, are not necessarily required
to produce and blend renewable fuels themselves. Instead,
they demonstrate compliance through a system of Renewable
Identification Numbers (RINs). Each gallon of renewable
fuel produced for use in the United States generates its own
RIN. Id. § 80.1426(a). RINs attach to the physical volume of
the renewable fuel, but become “separated” from renewable
fuel batches upon blending of the renewable fuel into
conventional fuel. Id. §§ 80.1426(e), 80.1429(b). After
blending, RINs may either be retained by the blending party
or sold to other obligated parties. Id. §§ 80.1427(a)(6),
80.1451. As a result, parties who purchase an adequate
number of RINs can comply with their renewable fuels
obligations without producing or blending renewable fuels
themselves. Each year, obligated parties must to submit to
EPA a list of RINs in fulfillment of their renewable fuels

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obligations. A RIN is retired upon submission to EPA. See
id. § 80.1427(a)(1).
The mechanics of the RIN system mean that obligated
parties incapable of blending must rely disproportionately on
the RIN market. Because small refineries generally have
more limited blending capacity than larger refineries, they
often need to acquire a large number of RINs from the market
in order to meet their annual obligations. Congress, aware
that small refineries would face greater difficulty complying
with the renewable fuels requirements, created a three-tiered
system of exemptions to afford small refineries a bridge to
compliance.
First, the statute granted all small refineries (defined as
refineries with crude oil throughput averaging 75,000 barrels
or less per day) an exemption from the renewable fuels
program through 2011. 42 U.S.C § 7545(o)(9)(A)(i),
(o)(1)(K). That blanket exemption gave small refineries time
to develop compliance strategies and increase blending
capacity. Second, the statute directed DOE to conduct a study
“to determine whether compliance . . . would impose a
disproportionate economic hardship on small refineries.” Id.
§ 7545(o)(9)(A)(ii)(I). If DOE determined that any small
refinery “would be subject to a disproportionate economic
hardship if required to comply with” the renewable fuels
program, EPA was required to extend the exemption for that
refinery “for a period of not less than 2 additional years.” Id.
§ 7545(o)(9)(A)(ii)(II). Third, the statute enables a small
refinery to initiate an inquiry into disproportionate economic
hardship at any time by “petition[ing] the [EPA]
Administrator for an extension of the exemption . . . for the
reason of disproportionate economic hardship.” Id.
§ 7545(o)(9)(B)(i). When evaluating a petition for an
extension, EPA must consult with DOE and consider the DOE

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study required by § 7545(o)(9)(A)(ii)(I), as well as “other
economic factors.” Id. § 7545(o)(9)(B)(ii).
In 2011, DOE completed the 2011 Small Refinery
Exemption Study (the 2011 Study) required by
§ 7545(o)(9)(A)(ii)(I). DOE concluded that a showing of
disproportionate economic hardship “must encompass two
broad components: a high cost of compliance relative to the
industry average, and an effect sufficient to cause a significant
impairment of the refinery operations.” J.A. 26. The 2011
Study also developed a scoring methodology to determine
whether a small refinery satisfies those standards. That
methodology assigns a score to twelve metrics, which are then
used to produce two index scores: a disproportionate impacts
index and a viability index. The disproportionate impacts
index measures the structural impacts a small refinery would
likely face in achieving compliance, while the viability index
assesses how compliance would affect the refinery’s ability to
remain competitive and profitable. If a small refinery
receives a score greater than 1 on both indices, it faces
disproportionate economic hardship under DOE’s standard.
Applying that methodology in 2011, DOE concluded that
fourteen small refineries—including WRC—faced
disproportionate economic hardship. DOE directed EPA to
extend the exemption for two additional years (from 2010 to
2012) for those fourteen refineries pursuant to
§ 7545(o)(9)(A)(II).
Up through 2012, RINs sold at low prices reflecting the
cost of corn ethanol (the most widely used renewable fuel)
relative to that of conventional fuel. But beginning in 2013,
the nature of the ethanol RIN market changed due to a so-
called “ethanol blendwall” or “E10 blendwall.” Conventional
engines can handle only a certain percentage (about 10%) of

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ethanol in fuel. In 2013, the statutory renewable fuels volume
requirements exceeded the amount of ethanol that the
transportation market could absorb. Because of the ethanol
blendwall, RIN prices increased in 2013 and began to
fluctuate widely.
B.
WRC is a small refinery that processes about 14,000
barrels of crude oil per day. Its output places it 117th in size
out of the 132 refineries in the United States. In 2013,
WRC’s blending capacity enabled it to satisfy about one-third
of its RIN requirements through in-house blending. The
company thus primarily relies on the RIN market to achieve
compliance. Before 2011, WRC qualified for the blanket
small refinery exemption and was not required to comply with
the renewable fuels program. WRC then qualified for a two
year extension of its exemption pursuant to the 2011 DOE
Study, deferring its compliance obligations to 2013.
In August 2013, WRC filed an economic hardship
petition under 42 U.S.C. § 7545(o)(9)(B), requesting that EPA
extend WRC’s hardship exemption for another two years
(2013 and 2014). WRC emphasized the financial stress
caused by the skyrocketing price of RINs. Pursuant to the
statutory directive requiring EPA to “consult” with DOE in
evaluating hardship petitions, id. § 7545(o)(9)(B)(ii), EPA
submitted WRC’s data to DOE and asked DOE to evaluate
whether WRC should receive an extension. Applying the
methodology established in the 2011 Study, DOE concluded
that WRC scored higher than 1 on the disproportionate
impacts index but less than 1 on the viability index. Because
the viability index fell below the threshold of 1, DOE
declined to recommend that EPA extend WRC’s exemption.

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On January 31, 2013, EPA issued a decision denying
WRC’s request for extension of its hardship exemption. After
setting forth DOE’s method for reviewing hardship petitions,
EPA explained that it would “consider all information
submitted by a petitioner” but that “DOE’s evaluation of
[WRC’s] survey[] [would be] the primary factor in EPA’s
determination.” J.A. 322. “DOE has expertise in evaluating
economic conditions at U.S. refineries,” EPA observed, “and
DOE used its expertise to develop a survey form and
assessment process to identify when disproportionate
economic hardship exists in the context of the renewable fuel
standard program.” Id. EPA therefore would “accord
considerable deference to DOE’s analysis of disproportionate
economic hardship in deciding whether or not to grant a
petition for extension.” Id. After summarizing the data
submitted by WRC, EPA incorporated DOE’s
recommendation into its decision, observing that “DOE’s
evaluation indicates that the disproportionate impacts
index . . . exceeds the hardship threshold, but the viability
index . . . does not.” J.A. 329-31. EPA then performed a
“qualitative[]” review to “ascertain if the information
[submitted by WRC] is consistent with the finding of no
disproportionate economic hardship.” J.A. 331. Concluding
that WRC’s financial data was “indeed consistent with that
finding,” EPA denied the petition. Id. WRC now petitions
this court for review of EPA’s decision.
II.
We first address WRC’s challenge to EPA’s
interpretation of the statutory term “disproportionate
economic hardship.” 42 U.S.C. § 7545(o)(9)(B). EPA
construed that term in conformity with DOE’s scoring
indices, and it therefore required WRC to show that
compliance both would impose disproportionate economic

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effects and would pose some threat to the viability of the
refinery. WRC contends that the statute requires EPA “to
grant exemptions when a small refinery faces disproportionate
economic hardship—that is, a hardship that is out of
proportion to that faced by larger refineries.” Pet’r’s Br. 24.
Consideration of a viability index, WRC argues, is
inconsistent with that statutory mandate. We disagree.
We consider WRC’s statutory argument under the two-
step Chevron framework. Under the first step, if “Congress
has directly spoken to the precise question at issue,” the
agency “must give effect to the unambiguously expressed
intent of Congress.” Chevron, U.S.A., Inc. v. Natural Res.
Def. Council, Inc., 467 U.S. 837, 842-43 (1984). WRC
contends that EPA’s reliance on a viability index is invalid at
Chevron step one because it contradicts the plain language of
§ 7545(o)(9)(B).
The statute, however, contains no definition of the term
“disproportionate economic hardship.” See 42 U.S.C.
§ 7545(o)(1). Congress instead gave EPA general guidance
on the evaluation of economic hardship petitions under
§ 7545(o)(9)(B). In particular, Congress required EPA to
consult with DOE and to “consider the findings of the [2011
Study] and other economic factors” when evaluating petitions.
Id. § 7545(o)(9)(B)(ii). The statute gives no further
instruction and identifies no particular economic factors or
metrics to be considered. That sort of statutory silence about
the particular factors that an agency must consider conveys
“nothing more than a refusal to tie the agency’s hands.”
Monroe Energy, LLC v. EPA, 750 F.3d 909, 915 (D.C. Cir.
2014). As long as EPA consults with DOE and considers the
2011 Study and “other economic factors,” EPA retains
substantial discretion to decide how to evaluate hardship

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petitions. We therefore reject WRC’s Chevron step-one
challenge.
Alternatively, WRC contends that EPA’s reliance on a
viability index should be rejected at the second step of the
Chevron framework. At Chevron step two, we must satisfy
ourselves that EPA’s method of evaluating “disproportionate
economic hardship” is “based on a permissible construction of
the statute.” Chevron, 467 U.S. at 843. We conclude that it
is.
EPA’s decision to incorporate the 2011 Study’s
methodology into its evaluation—including the viability
index—is entirely reasonable. The statute, as noted, requires
EPA to consult with DOE and “consider the findings of the
[2011 Study] and other economic factors” in evaluating an
economic hardship petition. 42 U.S.C. § 7545(o)(9)(B)(ii).
EPA interpreted the term “disproportionate economic
hardship” in conformity with the 2011 Study because “[t]he
basis for any grant of an exemption extension by EPA in
response to an individual petition is the same as the basis of
evaluation in the [2011 Study]—disproportionate economic
hardship.” J.A. 322. EPA’s rationale accords with the well-
established presumption that “a given term is used to mean
the same thing throughout a statute.” Mohamad v.
Palestinian Auth., 132 S. Ct. 1702, 1708 (2012).
Even considered on its own terms, EPA’s interpretation
of the phrase “disproportionate economic hardship” is wholly
reasonable. DOE concluded, and EPA agreed, that the
relative costs of compliance alone cannot demonstrate
economic hardship because all refineries face a direct cost
associated with participation in the program. Of course, some
refineries will face higher costs than others, but whether those
costs impose disproportionate hardship on a given refinery

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presents a different question. DOE determined that the best
way to measure “hardship” entailed examining the impact of
compliance costs on a refinery’s ability to maintain
profitability and competitiveness—i.e., viability—in the long
term. EPA adopted DOE’s understanding, and that choice
lies well within the agency’s discretion.
III.
WRC next contends that we should vacate EPA’s
decision because DOE changed its scoring practice without
adequate notice or explanation. We are unpersuaded.
Under DOE’s methodology for evaluating economic
hardship petitions, a refinery must score above 1 on both the
viability index and the disproportionate impacts index in order
to demonstrate “disproportionate economic hardship.” The
viability index in turn reflects three component scores. Those
scores measure: (i) whether compliance costs would
eliminate efficiency gains to the refinery; (ii) whether
individual special events would adversely affect the refinery;
and (iii) whether compliance costs would likely lead to
shutdown of the refinery. The three scores are added together
and divided by 6 to produce a final viability index value.
Thus, a score of 10 on any one component would secure a
score exceeding 1 on the viability index.
In 2011, DOE awarded one of only two scores—0 (no
impact) or 10 (impact)—on the first component metric (the
one concerning efficiency gains). For that year, DOE gave
WRC a score of 10 on that metric, guaranteeing a viability
score of greater than 1 and ultimately leading to WRC’s
receipt of a hardship exemption. When evaluating WRC’s
2013 petition, however, DOE assigned WRC a score of 5
(moderate impact) for the efficiency-gains metric and a 0 on

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the other two metrics, resulting in a viability index value of
less than 1. In a footnote, EPA explained that DOE “already
used intermediate scores of 5 in some . . . metrics, and
believes it is also appropriate to use intermediate scores [for
the efficiency-gains metric] to more accurately characterize
the impacts of compliance costs.” J.A. 321. WRC raises both
substantive and procedural challenges to EPA’s reliance in
2013 on an intermediate score for the efficiency-gains metric.
As to substance, WRC contends that the addition of an
intermediate score was arbitrary and capricious because there
was no explanation for the change in scoring practice. We
disagree. Judicial review of a “change in agency policy is no
stricter than our review of an initial agency action.” White
Stallion Energy Ctr. LLC v. EPA, 748 F.3d 1222, 1235 (D.C.
Cir. 2014) (citing FCC v. Fox Television Stations, Inc., 556
U.S. 502, 514-16 (2009)). An agency must “provide reasoned
explanation for its action,” which normally requires “that it
display awareness that it is changing position.” Fox
Television, 556 U.S. at 515 (emphasis omitted). Here, EPA
acknowledged the change and explained that DOE added an
“intermediate score[]” in order to “more accurately
characterize the impacts of compliance costs . . . on a
refinery.” J.A. 321 n.4. WRC contends that EPA provided a
description of the change rather than an explanation of it. But
a change is not invalid merely because it is readily explained.
The change at issue here fits in that category: as EPA
explained, the addition of an intermediate score to the
efficiency-gains metric allows for more nuanced and accurate
characterization of the impact of compliance costs. That is a
reasonable explanation for the change.
WRC’s procedural challenge asserts that DOE’s decision
to use an intermediate score (and EPA’s adoption of that
decision) required notice and comment rulemaking. That

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argument turns on WRC’s contention that the addition of an
intermediate score for the efficiency-gains metric
fundamentally altered the operation of the scoring matrix.
According to WRC, under the preexisting system, any impact
on efficiency, no matter how insubstantial, would produce a
score of 10 on the efficiency-gains metric (which, in turn,
would result in a viability index exceeding 1). Whereas any
impact on efficiency once qualified WRC for a hardship
exemption, WRC claims, it must now demonstrate significant
hardship. Consequently, WRC asserts that the addition of the
intermediate score did not merely round out the existing
scoring method, but instead worked a substantive change of a
kind requiring notice and comment.
The 2011 Study belies WRC’s understanding of the old
system. The efficiency-gains metric was never understood to
require a score of 10 in the event of any impact on efficiency,
regardless of its magnitude. According to the 2011 Study, the
efficiency-gains metric assesses whether “the totality of
factors . . . would reduce the profitability of the firm enough
to impair future efficiency improvements.” J.A. 59 (emphasis
added). If a refinery were to face “significant constraints on
efficiency improvements,” it might be placed “at risk” even
though reductions in profitability would not lead to
“immediate shutdown.” Id. The 2011 Study thus indicates
that the efficiency-gains metric aimed to protect against
“significant” effects on efficiency, a position entirely
consistent with DOE’s decision to use an intermediate score
to denote “moderate impact” in its 2013 evaluation. The 2011
Study also recognized that “[r]efineries that receive a[n]
extension of their exemption” could take steps to “reduc[e]
the impact” of future compliance costs. Id. As a result,
“refineries that currently score high” on the efficiency-gains
metric would “likely see a reduction in the scoring of this
category in the future.” Id. DOE’s award of an intermediate

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score when evaluating 2013 petitions therefore was fully
consistent with the 2011 Study. It follows that DOE did not
substantively change the efficiency-gains metric in the way
WRC suggests.
Even assuming that DOE’s addition of an intermediate
score amounted to a substantive modification, WRC points us
to no authority suggesting that the decision to make available
a more refined score within an already-existing metric
requires notice-and-comment procedures. We see no basis for
creating such a rule here. Nothing in § 7545(o)(9)(B)
compelled DOE to apply the exact same methodology—in
every particular—that it had used in 2011. Instead, the statute
merely called for EPA to consult with DOE and to “consider”
the results of the 2011 Study when evaluating individual
hardship petitions. 42 U.S.C. § 7545(o)(9)(B)(ii). EPA asked
DOE to examine WRC’s petition, and both EPA and DOE
certainly “considered” the 2011 Study in doing so. Congress
placed no limits on how DOE should provide its consultation
to EPA under § 7545(o)(9)(B)(ii), and DOE’s consultation did
not purport to establish rights or obligations of WRC. As a
result, we find no reason to conclude that DOE was obligated
to engage in notice-and-comment procedures before adding a
finer gradation within a preexisting scoring range.
IV.
We next consider WRC’s contention that EPA
erroneously considered (or failed to consider) various
economic factors when reviewing WRC’s petition. While
§ 7545(o)(9)(B) calls for EPA to consider “other economic
factors” in evaluating hardship petitions, the statute contains
no requirement to consider any particular factors. “In the
absence of any express or implied statutory directive to
consider particular factors,” EPA retains broad discretion to

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choose which “economic factors” it will (and will not)
consider. Monroe Energy, 750 F.3d at 915. EPA acted
within its discretion here.
A.
WRC first asserts that EPA failed adequately to consider
the high cost of purchasing RINs relative to producing them
by blending. WRC’s argument amounts to a substantive
disagreement with the manner in which EPA chose to account
for RIN costs in its review. In particular, WRC disagrees
with the RIN price estimates EPA used in evaluating WRC’s
petition. We see no inadequacy in EPA’s consideration of the
cost of purchasing RINs. To be sure, EPA declined to rely on
WRC’s initial RIN estimates; but that was because WRC
averaged only two months of RIN prices to produce an
“average” substantially exceeding normal RIN prices. EPA
instead reasonably relied on an updated estimate submitted by
WRC in October, 2013. In reaching its final decision,
moreover, EPA noted that “RIN prices have declined
significantly” since WRC submitted its initial hardship
petition and projected that RIN prices would continue to
decrease. J.A. 328 n.13. EPA therefore adequately
considered the cost of purchasing RINs in its decision.
B.
In EPA’s independent evaluation of WRC’s financial
data, the agency observed that “WRC perceived that sufficient
funds were available in 2012 for it to make a substantial
discretionary dividend payment.” J.A. 332. The funds used
to pay those discretionary dividends, EPA reasoned, “could
have been used to pay for [compliance] projects.” J.A. 331.
WRC argues that discretionary dividends paid in 2012 have
“little relevance to whether [WRC] would face a

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disproportionate economic hardship from regulatory
compliance in 2013.” Pet’r’s Br. 43. And even if those
dividend payments were relevant, WRC contends it should
not have been faulted for failing to prepare for unforeseeable
increases in RIN prices. We disagree.
Although it was exempt from the renewable fuels
program in 2012, WRC remained an obligated party covered
by the statute. See 40 C.F.R. § 80.1406(a). And EPA
reasonably expected WRC to make preparations to comply
with its 2013 obligations during the company’s five-year
exemption period. The discretionary dividend payment
indicated that WRC elected to distribute profits to its owners
rather than use profits to prepare for approaching compliance
obligations. Allowing small refineries to perpetuate that
manner of self-inflicted hardship would conflict with the
terms of the statute, which contemplate a “[t]emporary
exemption” for small refineries with an eye toward eventual
compliance with the renewable fuels program for all
refineries. 42 U.S.C. § 7545(o)(9)(A) (emphasis added).
EPA reasonably considered the compliance efforts made (and
not made) during WRC’s five-year exemption in evaluating
WRC’s petition for a further extension of its exemption.
C.
WRC next claims that EPA erred in assessing the
refinery’s cash flow by looking to WRC’s net income rather
than its adjusted Earnings Before Interest, Taxes,
Depreciation, and Amortization (EBITDA). WRC further
contends that “EPA should have adjusted EBITDA to account
for the unavoidable cash outlays of capital expenditures, loan
principal repayments, and interest payments.” Pet’r’s Br. 51-
52. But EPA did consider EBITDA (in addition to net
income) in evaluating WRC’s finances. For instance, the

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agency noted that WRC “will again be profitable in 2013,”
citing both net income and EBITDA. J.A. 332. And while
WRC may believe that an adjusted EBITDA would provide a
better measure of cash flow, it cannot succeed in its challenge
unless it demonstrates that EPA’s measure was unreasonable.
As WRC itself acknowledged in correspondence with EPA,
however, “EBITDA . . . is the standard basis for evaluating
the economic health of a refining company.” J.A. 138; see
Pet’r’s Br. 51. EPA therefore acted reasonably when it chose
to consider unadjusted EBITDA in evaluating WRC’s
petition.
D.
While most refineries are corporations, WRC is an LLC
and is therefore a pass-through entity for tax purposes. WRC
contends that EPA should have accounted for income taxes
paid by the unit holders of WRC’s holding company. Failure
to account for income taxes paid by unit holders, WRC
argues, caused EPA to overstate WRC’s net income relative
to other refineries. But the pertinent statutory text requires
EPA to consider whether the small refinery itself faces
disproportionate economic hardship. See 42 U.S.C.
§ 7545(o)(9)(A)-(B). In that light, it was reasonable for EPA
to confine its evaluation to the finances of the refinery without
considering taxes paid by third parties.
V.
WRC finally challenges EPA’s decision based on two
miscalculations in EPA’s independent analysis of WRC’s
financial data. EPA concedes the two errors, but argues that
we should nevertheless deny WRC’s petition because the
errors were harmless. This court will affirm an agency’s
decision despite errors when “it is clear that . . . the agency

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would have reached the same ultimate result” had the errors
not been made. Salt River Project Agric. Improvement &
Power Dist. v. United States, 762 F.2d 1053, 1061 n.8 (D.C.
Cir. 1985). Although WRC bears the burden of establishing
that the errors were prejudicial, that is not “a particularly
onerous requirement.” Jicarilla Apache Nation v. U.S. Dep’t
of Interior, 613 F.3d 1112, 1121 (D.C. Cir. 2010). “Often the
circumstances of the case will make clear to the appellate
judge” that an error was prejudicial, “and nothing further need
be said.” Shinseki v. Sanders, 556 U.S. 396, 410 (2009).
Here, because the conceded errors significantly alter
important figures in EPA’s independent analysis of WRC’s
financial data, we cannot conclude with sufficient certainty
that the agency would have made the same decision absent its
errors.
While DOE’s recommendation serves as the “primary”
factor in EPA’s determination, J.A. 322, EPA also conducted
an independent, “qualitative” review of WRC’s financial data,
J.A. 331. That independent review aimed to determine
whether WRC’s financial data supported a finding of no
disproportionate economic hardship. EPA concluded that the
information submitted by WRC was “consistent” with such a
finding. J.A. 331. Two key factors EPA considered in
reaching that conclusion were (i) that WRC’s projected 2013
net income was “significantly greater” than its projected RIN
costs, and (ii) that WRC’s net refining margins compared
favorably to those of other refineries that petitioned for a
hardship exemption. J.A. 331-32. EPA now concedes it
made substantial mathematical errors in calculating both
WRC’s projected 2013 net income and its net refining
margins.
With regard to the first error, EPA sought to exclude
“hedge impacts” (here, gains and losses realized from

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investment positions in crude oil) from the company’s net
income. As WRC points out, however, EPA made a
computational error when it added, rather than subtracted,
WRC’s hedge impacts in calculating net income excluding
hedges. EPA concluded that compliance would not
“significantly impact” WRC’s viability because “WRC
projected . . . that they will have a [2013] net income . . .
significantly greater than [the] projected 2013 purchased RIN
cost.” J.A. 331 (emphasis added). EPA now concedes that it
accidentally overstated WRC’s projected 2013 net income,
and that the correct net income figure was less than half of the
figure EPA relied on in its decision. EPA contends that we
can nonetheless sustain its decision because, even using the
correct figure, the projections indicated that WRC would be
profitable in 2013. But given that EPA’s error resulted in a
substantial overstatement of net income, we are unable to
conclude with adequate certainty that EPA still would have
regarded WRC’s net income as “significantly greater” than
projected RIN costs.
EPA also urges us to deem its error harmless because the
error did not infect DOE’s recommendation to EPA. We
cannot accept that argument. It is uncontested that EPA
retained ultimate and independent authority to grant or deny
economic hardship petitions under § 7545(o)(9)(B).
According to EPA’s decision, its independent analysis aimed
to determine whether “the information submitted by WRC”
was “consistent with the finding of no disproportionate
economic impact.” J.A. 331. Had EPA concluded that
WRC’s financial information was inconsistent with that
finding, it presumably would have granted WRC’s petition
notwithstanding DOE’s recommendation. Although EPA
considered several factors in the course of concluding that
WRC’s information was “indeed consistent” with DOE’s
recommendation, id., “[w]hat weight [EPA] gave to those

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[factors] is impossible to discern.” PDK Labs. Inc. v. DEA,
362 F.3d 786, 799 (D.C. Cir. 2004). Accordingly, we cannot
conclude that EPA “would have reached the same ultimate
result” had it correctly calculated WRC’s projected 2013 net
income. Salt River Project, 762 F.2d at 1061 n.8.
EPA also acknowledges a second error in its analysis. As
EPA explains, it “should have accounted for realized hedge
impacts in determining [WRC’s] net refining margins and in
comparing its average refining margin[s] to those of other
small refineries.” Resp't Br. at 68. As a result of that second
error, EPA significantly overstated WRC’s average net
refining margin per barrel for 2012 and 2013. In light of our
conclusion that EPA’s first error cannot be considered
harmless, we have no occasion to apply harmless-error
analysis to EPA’s second error: the agency must redo its
analysis in any event based on the first error. In doing so,
EPA presumably would also correct the second error by
incorporating correct net refining margins.
* * * * *
For the foregoing reasons, we vacate EPA’s decision and
remand for further consideration consistent with this opinion.
So ordered.

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