ENVIRONMENTAL APPEALS BOARD

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C.

In re Phillips 66 Company

)

Docket No. CAA-HQ-2024-8445

FINAL ORDER

Pursuant to 40 C.F.R. § 22.18(b)-(c) of EPA’s Consolidated Rules of Practice, the

attached Consent Agreement resolving this matter is incorporated by reference into this Final

Order and is hereby ratified.

The Respondent is ORDERED to comply with all terms of the Consent Agreement,

effective immediately.

So ordered.

ENVIRONMENTAL APPEALS BOARD

Dated: ____________________

________________________________

Aaron P. Avila

Environmental Appeals Judge

January 3, 2025

The two-member panel ratifying this matter is composed of Environmental Appeals

Judges Aaron P. Avila and Wendy L. Blake.

Clerk, Environmental Appeals Board

INITIALS ________________________

Jan 03, 2025

ENVIRONMENTAL APPEALS BOARD

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C.

IN THE MATTER OF:

Docket No. CAA-HQ-2024-8445

PHILLIPS 66 COMPANY

Respondent.

CONSENT AGREEMENT

I. PRELIMINARY STATEMENT

This is a civil administrative penalty assessment proceeding instituted under Sections

205(c)(1) and 211(d)(1) of the Clean Air Act (CAA), 42 U.S.C. §§ 7524(c)(1) and

7545(d)(1). The issuance of this Consent Agreement and attached Final Order (CAFO)

simultaneously commences and concludes this proceeding. 40 C.F.R. §§ 22.13(b) and

22.18(b)(2)-(3).

The Complainant in this matter is the United States Environmental Protection Agency

(EPA). The authority to sign consent agreements memorializing settlements between the

EPA and respondents under Section 205(c) of the CAA, 42 U.S.C. § 7524(c), has been

delegated to the Assistant Administrator of the Office of Enforcement and Compliance

Assurance. This authority has been redelegated to the Director of the Office of Civil

Enforcement, who further redelegated the authority to the Director of the Air

Enforcement Division. EPA Delegation 7-6-A.

The Respondent in this matter is the Phillips 66 Company (Phillips 66). The Respondent

is a corporation organized under the laws of Delaware with its corporate headquarters

located at 2231 City West Blvd., Houston, Texas 77043. As relevant here, the

Respondent operates a fuel manufacturing facility located in Rodeo, California that, at the

time of the violations, produced petroleum products, including diesel. The facility has

since transitioned to only producing renewable fuels.

The Complainant and Respondent (collectively, the Parties), having agreed to settle this

action, consent to the issuance of the attached Final Order ratifying this Consent

Agreement before taking testimony and without adjudication of any issues of law or fact

herein, and agree to comply with the terms of this Consent Agreement and the attached

Final Order.

II. JURISDICTION

This Consent Agreement is entered into under Sections 205(c)(1) and 211(d)(1) of the

CAA, 42 U.S.C. §§ 7524(c)(1) and 7545(d)(1), and the

Consolidated Rules of Practice

Governing the Administrative Assessment of Civil Penalties and the Revocation/

Termination or Suspension of Permits

, as codified at 40 C.F.R. Part 22 (Consolidated

Rules).

The EPA may administratively assess a civil penalty if the penalty sought is less than

$460,926. 42 U.S.C. §§ 7524(c)(1) and 7545(d)(1); 40 C.F.R. § 19.4.

The Environmental Appeals Board is authorized to ratify this Consent Agreement

memorializing the settlement between the Parties in a Final Order. 40 C.F.R.

§§ 22.4(a)(1) and 22.18(b); EPA Delegation 7-41-C.

The Consolidated Rules provide that where the parties agree to settlement of one or more

causes of action before the filing of a complaint, a proceeding may be simultaneously

commenced and concluded by the issuance of a Consent Agreement and Final Order.

40 C.F.R. §§ 22.13(b) and 22.18(b)(2)-(3).

III.

GOVERNING LAW

This proceeding arises under Part A of Title II of the CAA, Sections 202-219, 42 U.S.C.

§§ 7521–7554, and its implementing regulations (40 C.F.R. Part 1090). The CAA and its

implementing regulations aim to reduce emissions from mobile sources of air pollution

by, among other things, reducing emissions from fuel used in motor vehicles, nonroad

vehicles, and engines, and ensuring that fuel used in motor vehicles, nonroad vehicles,

and engines does not harm the emissions control technology necessary to meet emissions

standards. The Alleged Violations of Law, stated below, relate to sampling, testing, and

reporting requirements that ensure the programmatic integrity of EPA’s oversight of

diesel fuel. A summary of the law and regulations that govern these allegations follows

below.

10.

Definitions:

(a) “Compliance period” means the calendar year (January 1 through December

31). 40 C.F.R. § 1090.80.

(b) “Diesel fuel” means any of the following: (1) Any fuel commonly or

commercially known as diesel fuel; (2) Any fuel (including nonpetroleum

diesel fuel or a fuel blend that contains nonpetroleum diesel fuel) that is

intended or used to power a vehicle or engine that is designed to operate using

diesel fuel; (3) Any fuel that conforms to the specifications of ASTM D975

(incorporated by reference in 40 C.F.R. § 1090.95) and is made available for

use in a vehicle or engine designed to operate using diesel fuel. 40 C.F.R.

§ 1090.80.

operates, controls, or supervises a fuel manufacturing facility where diesel

fuel is produced or imported. 40 C.F.R. § 1090.80.

(d) “Fuel manufacturer” means any person that owns, leases, operates, controls,

or supervises a fuel manufacturing facility. Fuel manufacturers include

refiners, importers, blending manufacturers, and transmix processors. 40

C.F.R. § 1090.80.

(e) “Fuel manufacturing facility” means any facility where fuels are produced,

imported, or recertified. Fuel manufacturing facilities include refineries, fuel

blending facilities, transmix processing facilities, import facilities, and any

facility where fuel is recertified. 40 C.F.R. § 1090.80.

(f) Ultra-low-sulfur diesel (ULSD) means diesel fuel that is certified to meet the

standards in 40 C.F.R. § 1090.305. 40 C.F.R. § 1090.80.

11.

Section 211 of the CAA, 42 U.S.C. § 7545, and its implementing regulations contain

numerous provisions to ensure that only compliant fuels are produced and distributed in

the United States.

12.

Under Section 211(c)(1) of the CAA, 42 U.S.C. § 7545(c)(1), the EPA may adopt a fuel

control if: (a) the emission products of the fuel cause or contribute to air pollution that

may reasonably be anticipated to endanger public health or welfare; or (b) the emission

products of the fuel will significantly impair emissions control systems in general use or

emissions control systems that would be in general use were the fuel control to be

adopted.

13.

Pursuant to its authority under Section 211(c)(1) of the CAA, 42 U.S.C. § 7545(c)(1), the

EPA promulgated regulations that require fuel manufacturers to perform testing as

needed to certify fuel.

See

40 C.F.R. § 1090.1310.

14.

Test results with manual sampling are valid only after demonstrating homogeneity. To

demonstrate homogeneity for diesel fuel, refiners must either measure API gravity using

ASTM D287, ASTM D1298, ASTM D4052, or ASTM D7777; or measure the sulfur

content as specified in § 1090.1360.

See

40 C.F.R. §§ 1090.1335(b)(4) and 1090.1337(e).

15.

Diesel fuel manufacturers must submit certain information to the EPA for each

compliance period, including the sulfur content of each batch.

See

40 C.F.R. § 1090.935.

16.

The presumed sulfur value of 1,000 ppm for diesel fuel must be reported when a person

fails to comply with the sampling or testing requirements and must be reported, unless

EPA, in its sole discretion, approves a different value. 40 C.F.R. § 1090.1710(g).

17.

Any person who, after November 2, 2015, where penalties are assessed on or after

December 27, 2023, violates the regulations prescribed under Section 211(c) of the CAA,

42 U.S.C. § 7545(c), including the diesel homogeneity and reporting regulations at 40

C.F.R. Part 1090, is subject to a civil penalty up to $57,617 per day per violation, plus the

economic benefit or savings resulting from each violation. 42 U.S.C. § 7545(d)(1); 40

C.F.R. § 19.4. Such penalties are assessed in accordance with Sections 205(b) and (c) of

the CAA, 42 U.S.C. §§ 7524(b) and (c). 42 U.S.C. § 7545(d)(1).

IV. STIPULATED FACTS

18.

Phillips 66 owns and operates a “fuel manufacturing facility,” as defined in 40 C.F.R.

§ 1090.80, in Rodeo, California that, at the time of the violations, produced petroleum-

based diesel.

19.

Respondent is a “person” as defined in Section 302(e) of the CAA, 42 U.S.C. § 7602(e).

20.

Respondent is a “fuel manufacturer” as defined in 40 C.F.R. § 1090.80.

21.

During the week of February 27, 2023, the EPA conducted an on-site inspection of

Phillips 66 for compliance with CAA § 211 and the fuels regulations promulgated under

40 C.F.R. Parts 80 and 1090.

22.

On February 13, 2024, the EPA issued Phillips 66 a notice of violation (NOV) pursuant

to Sections 205 and 211 of the CAA, 42 U.S.C. §§ 7524 and 7545, for violations of the

40 C.F.R. Part 1090 fuels regulations.

V. ALLEGED VIOLATIONS OF LAW

23.

A fuel manufacturer is required to perform sampling and testing to certify that each batch

of diesel fuel it produces meets the applicable fuel standards. 40 C.F.R. § 1090.1310. By

failing to demonstrate homogeneity for diesel batches produced at its Rodeo Refinery

during compliance years 2021, 2022, and two months of 2023, Phillips 66 violated the

requirements at 40 C.F.R. §§ 1090.1335(b)(4) and 1090.1337(e), which state that

certification test results are only valid after demonstrating homogeneity.

24.

By failing to report the presumed sulfur value of 1,000 ppm for batches of ULSD

produced at the Rodeo Refinery during compliance years 2021, 2022, and two months of

2023, Phillips 66 violated the requirement at 40 C.F.R. § 1090.1710(g) that when a

person fails to comply with the sampling or testing requirements, the presumed sulfur

value of 1,000 ppm must be reported.

VI. TERMS OF AGREEMENT

25.

For the purpose of this proceeding, as required by 40 C.F.R. § 22.18(b)(2), Respondent:

admits that the EPA has jurisdiction over this matter as stated above; admits to the

stipulated facts stated above; neither admits nor denies the alleged violations of law

stated above; consents to the assessment of a civil penalty as stated below; consents to

any conditions specified in this Consent Agreement; waives any right to contest the

alleged violations of law; and waives its rights to appeal the Final Order ratifying this

Consent Agreement.

26.

By signing this consent agreement, respondent waives any rights or defenses that

respondent has or may have for this matter to be resolved in federal court, including but

not limited to any right to a jury trial, and waives any right to challenge the lawfulness of

the final order accompanying the consent agreement.

27.

For the purpose of this proceeding, Respondent:

(a)

Agrees that this Consent Agreement states a claim upon which relief may be

granted against Respondent;

(b)

Waives any and all remedies, claims for relief, and otherwise available rights to

judicial or administrative review that Respondent may have with respect to any

issue of fact or law set forth in this Consent Agreement;

(c)

Waives any rights it may possess at law or in equity to challenge the authority of

the EPA to bring a civil action in a United States District Court to enforce this

Consent Agreement or Final Order, or both, and to seek an additional penalty for

such noncompliance, and agrees that federal law will govern in any such civil

action;

(d)

Consents to personal jurisdiction in any action to enforce this Consent Agreement

or Final Order, or both, in the United States District Court for the District of

Columbia;

(e)

Agrees that it may not delegate duties under this Consent Agreement to any other

party without the written consent of the EPA, which may be granted or withheld

at the EPA’s unfettered discretion. If the EPA so consents, the Consent

Agreement is binding on the party or parties to whom the duties are delegated;

(f)

Acknowledges that this Consent Agreement constitutes an enforcement action for

purposes of considering Respondent’s compliance history in any subsequent

enforcement actions;

(g)

Acknowledges that this Consent Agreement and attached Final Order will be

available to the public and agrees that it does not contain any confidential

business information or personally identifiable information;

(h)

Acknowledges that its tax identification number may be used for collecting or

reporting any delinquent monetary obligation arising from this Consent

Agreement (

see

31 U.S.C. § 7701);

(i)

Certifies the information it has supplied concerning this matter was at the time of

submission and to the best of its knowledge, true, accurate, and complete; and

(j)

Acknowledges there are significant penalties for knowingly submitting false,

fictitious, or fraudulent information, including the possibility of fines and

imprisonment (

see

18 U.S.C. § 1001).

28.

For purposes of this proceeding, the Parties each agree that:

(a)

This Consent Agreement constitutes the entire agreement and understanding of

the Parties and supersedes any prior agreements or understandings, whether

written or oral, among the Parties with respect to the subject matter of this

Consent Agreement;

(b)

This Consent Agreement may be signed in any number of counterparts, each of

which will be deemed an original and, when taken together, constitute one

agreement; the counterparts are binding on each of the Parties individually as

fully and completely as if the Parties had signed one single instrument, so that the

rights and liabilities of the Parties will be unaffected by the failure of any of the

undersigned to execute any or all of the counterparts; any signature page and any

copy of a signed signature page may be detached from any counterpart and

attached to any other counterpart of this Consent Agreement;

(c)

Its undersigned representative is fully authorized by the Party whom he or she

represents to bind that Party to this Consent Agreement and to execute it on behalf

of that Party;

(d)

Each Party’s obligations under this Consent Agreement and attached Final Order

constitute sufficient consideration for the other Party’s obligations under this

Consent Agreement and attached Final Order; and

(e)

Each Party will bear its own costs and attorney fees in the action resolved by this

Consent Agreement and attached Final Order.

29.

Respondent agrees to pay to the United States a civil penalty of $292,595 (Civil Penalty).

30.

Respondent agrees to pay the Civil Penalty to the United States within 30 calendar days

following the issuance of the attached Final Order (i.e., the effective date of this Consent

Agreement and attached Final Order).

31.

Respondent agrees to pay the Civil Penalty in the manner specified below:

(a)

Pay the Civil Penalty using any method provided on the following website:

http://www2.epa.gov/financial/additional-instructions-making-payments-epa

;

(b)

Identify each and every payment with “Docket No. CAA-HQ-2024-8445”; and

(c)

Within 24 hours of payment, email proof of payment to Griff Brown at

Brown.Griffith@epa.gov

(“proof of payment” means, as applicable, a copy of the

check, confirmation of credit card or debit card payment, confirmation of wire or

automated clearinghouse transfer, and any other information required to

demonstrate that payment has been made according to the EPA requirements, in

the amount due, and identified with “Docket No. CAA-HQ-2024-8445”).

32.

As a condition of settlement, Respondent agrees that it will be liable for stipulated

penalties to the EPA for failure to pay the Civil Penalty, or any portion thereof, when

due, or provide proof of such payment: $1,000 per day for each day during the first 15

days; and $2,000 per day thereafter. All stipulated penalties must be paid in the manner

specified in Paragraph 31 of this Agreement.

VII.

EFFECT OF CONSENT AGREEMENT AND ATTACHED FINAL ORDER

33.

In accordance with 40 C.F.R. § 22.18(c), Respondent’s full compliance with this Consent

Agreement will only resolve Respondent’s liability for federal civil penalties for the

violations and facts specifically alleged above.

34.

Failure to pay the full amount of the Civil Penalty assessed under this Consent

Agreement may subject Respondent to a civil action to collect any unpaid portion of the

proposed Civil Penalty and interest. In order to avoid the assessment of interest,

administrative costs, and a late payment penalty in connection with such Civil Penalty, as

described in the following Paragraph of this Consent Agreement, Respondent must timely

pay the Civil Penalty.

35.

If Respondent fails to timely pay any portion of the Civil Penalty assessed by the attached

Final Order, the EPA may:

(a)

Request that the Attorney General bring a civil action in an appropriate district

court to recover: the amount assessed; interest at rates established pursuant to 26

U.S.C. § 6621(a)(2); the United States’ enforcement expenses; and a 10-percent

quarterly nonpayment penalty (42 U.S.C. § 7524(c)(6));

(b)

Refer the debt to a credit reporting agency or a collection agency (40 C.F.R.

§§ 13.13, 13.14, and 13.33);

(c)

Collect the debt by administrative offset (i.e., the withholding of money payable

by the United States to, or held by the United States for, a person to satisfy the

debt the person owes the Government), which includes, but is not limited to,

referral to the Internal Revenue Service for offset against income tax refunds (

see

40 C.F.R. Part 13, Subparts C and H); and

(d)

Suspend or revoke Respondent’s licenses or other privileges, or suspend or

disqualify Respondent from doing business with the EPA or engaging in

programs the EPA sponsors or funds (40 C.F.R. § 13.17).

36.

Penalties paid pursuant to this Consent Agreement and attached Final Order are not

deductible for federal tax purposes. 28 U.S.C. § 162(f).

37.

This Consent Agreement and attached Final Order apply to and are binding on the

Parties. Successors and assigns of Respondent are also bound if they are owned, in whole

or in part, directly or indirectly, or otherwise controlled by Respondent. Nothing in the

previous sentence adversely affects any right of the Complainant under applicable law to

assert successor or assignee liability against Respondent’s successor or assignee.

38.

This Consent Agreement shall not confer any rights or obligations upon any person other

than the Parties and shall not be enforceable by any other person except the Parties

hereto.

39.

Nothing in this Consent Agreement relieves Respondent of the duty to comply with all

applicable provisions of the CAA or other federal, state, or local laws or statutes, or

restricts the EPA’s authority to seek compliance with any applicable laws or regulations,

nor will it be construed to be a ruling on, or determination of, any issue related to any

federal, state, or local permit.

40.

Nothing in this Consent Agreement shall be construed to limit the power of the

Complainant to undertake any action against Respondent or any person in response to

conditions that may present an imminent and substantial endangerment to public health,

welfare, or the environment.

41.

Any violation of the Final Order issued by the Environmental Appeals Board in this

matter may result in a civil judicial action to collect the civil penalty as provided in

Section 205(c)(6) of the CAA, 42 U.S.C. § 7524(c)(6). The EPA may use any

information submitted under the Consent Agreement and attached Final Order in an

administrative, civil judicial, or criminal action.

42.

The EPA reserves the right to revoke this Consent Agreement and accompanying Civil

Penalty if, and to the extent the EPA finds, after signing this Consent Agreement that any

information provided by Respondent was or is materially false or inaccurate, and the EPA

reserves the right to pursue, assess, and enforce legal and equitable remedies for the

Alleged Violations of Law. The EPA will give Respondent written notice of such

termination, which will be effective upon mailing.

43.

The Parties agree to submit this Consent Agreement to the Environmental Appeals Board

with a request that it be ratified and incorporated into the attached Final Order.

44.

The Parties agree to issuance of the attached Final Order. Upon filing of the Consent

Agreement and attached Final Order with the Environmental Appeals Board, the EPA

will transmit a copy of the filed Consent Agreement and Final Order to the Respondent.

This Consent Agreement and attached Final Order will become effective after issuance of

the Final Order by the Environmental Appeals Board and filing with the Hearing Clerk.

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____________________________________

The foregoing Consent Agreement, In the Matter of: Phillips 66 Company, Docket No. CAA

HQ-2024-8445, is Hereby Stipulated, Agreed, and Approved for Ratification.

For Complainant:

Digitally signed by MARY

GREENE

Date: 2024.12.31 15:26:15 -05'00'

MARY GREENE

Mary E. Greene

'LUHFWRU

Air Enforcement Division

Office of Civil Enforcement

Office of Enforcement and Compliance Assurance

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue, NW (MC-2242A)

Washington, DC 20460

Digitally signed by LORRAINE

BAER

LORRAINE BAER

Date: 2024.12.31 15:36:13 -05'00'

Lorraine Baer

Attorney-Adviser

Fuels Enforcement Branch

Air Enforcement Division

Office of Enforcement and Compliance Assurance

U.S. Environmental Protection Agency

1200 Pennsylvania Ave. NW

Washington, DC 20460

CERTIFICATE OF SERVICE

I certify that copies of the foregoing “Consent Agreement” and “Final Order,” in the

matter of Phillips 66 Company, Docket No. CAA-HQ-2024-8445, were sent to the following

persons in the manner indicated:

By E-mail:

Donna Carvalho

Phillips 66 Company

2331 CityWest Blvd.

Houston, TX 77042

E-mail:

Donna.H.Carvalho@p66.com

Lorraine Baer

Air Enforcement Division

Office of Civil Enforcement

Office of Enforcement and Compliance Assurance

U.S. Environmental Protection Agency

1200 Pennsylvania Ave., NW

Washington, DC 20004

E-mail:

Baer.Lorraine@epa.gov

Dated: ____________________

________________________________

Tommie Madison

Clerk of the Board

Jan 03, 2025

Phillips 66 Consent Agreement

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