Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Except as described below, there were no material changes during the nine months ended September 30, 2025 to the risk factors identified in the Company’s fiscal 2024 Annual Report on Form 10-K.
The availability and cost of RINs and other required credits could have an adverse effect on our financial condition and results of operations.
Pursuant to the 2007 Energy Independence and Security Act, the EPA promulgated the RFS-2 (“RFS”) regulations reflecting the increased volume of renewable fuels mandated to be blended into the nation's fuel supply. The regulations, in part, require refiners to add annually increasing amounts of “renewable fuels” to their petroleum products or purchase credits, known as RINs, in lieu of such blending. The RFS imposes a substantial financial obligation on each of our four small refineries. The cost of complying with the RFS is one of our highest operational costs, including significant additional costs to finance our compliance. These costs are highly volatile and unlike other refining companies Delek is not able to pass through its high compliance costs to its customers.
Delek is an obligated party under the RFS, which requires us to obtain RINs to satisfy our annual Renewable Volume Obligation (“RVO”). While we are able to obtain many of the RINs required for compliance by blending renewable fuels manufactured by third parties or by our own biodiesel plants, we must also purchase RINs on the open market in order to comply with the quantity of renewable fuels we are required to blend under the RFS. The price and number of RINs an obligated party must acquire are impacted by government regulation requiring such credits, and also may be impacted by small refiner exemptions (“SREs”) granted by the EPA. In past years, the price of RINs has been highly volatile and the EPA’s decisions on SRE hardship petitions have been unduly delayed. Increasing RINs prices, inconsistent administration of the RFS by the EPA, and Delek’s market position has prevented us from passing through compliance costs of the program in the past and will likely continue in the future. While we cannot predict the future prices of RINs, the costs to obtain the necessary number of RINs could be material. Our future operating results are significantly dependent on the EPAs granting of SREs on a timely basis. If we are unable to pass the costs of compliance with the RFS on to our customers, if sufficient RINs are unavailable for purchase, if we have to pay a significantly higher price for RINs or if we are otherwise unable to meet the RFS mandates, our refinery operations, financial condition and results of operations could be adversely affected.
In the past, we have received SREs under the RFS program for certain of our refineries. In August 2025, the EPA granted full and partial exemptions for certain of our refineries related to obligations for the 2019-2024 calendar years. We were able to use some of these RINs to satisfy our obligation for previous compliance periods. However, because RINs are valid for a one-year period, a majority of the refunded RINs had expired and therefore cannot be used or sold for value to offset future compliance obligations. The relief received also was not sufficient to offset our 2025 compliance obligation and thus Delek’s refineries will need to seek relief from the EPA for the hardship imposed by the RFS for the 2025 compliance year.
In September and October 2025, certain of our subsidiaries filed lawsuits against the EPA in the United States Court of Appeals for the District of Columbia seeking to overturn the EPA’s August 2025 denial that the Krotz Springs Refinery was ineligible for an exemption for the 2024 compliance year, and seeking additional relief for the EPA’s decision to refund expired RINs. These lawsuits remain pending, and we are unable to estimate the outcome or the costs we may incur at this time.
In August 2025, the EPA provided an updated framework for evaluation of future SRE petitions, which may ultimately include reallocating waived volumes to other obligated parties. This updated framework may be subject to legal challenge, and we cannot predict the extent to
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Risk Factors
which any such challenge may impact the EPA’s timeliness in responding to such petitions in the future. Moreover, even if the new approach survives any future legal challenges, we cannot guarantee that such an exemption will be obtained for any of our refineries in future years, which could result in increased costs and adversely impact future results of operations and our business strategy.
In addition, the RFS regulations are highly complex and evolving, requiring us to periodically update our compliance systems. The RFS regulations require the EPA to determine and publish the applicable annual volume and percentage standards for each compliance year by November 30 for the forthcoming year, and such blending percentages could be higher or lower than amounts estimated and accrued for in our consolidated financial statements. The future cost of RINs is difficult to estimate until such time as the EPA finalizes the applicable standards for the forthcoming compliance year. Moreover, in addition to increased price volatility in the RINs market, there have been multiple instances of RINs fraud occurring in the marketplace over the past several years. The EPA has initiated several enforcement actions against refiners who purchase fraudulent RINs, resulting in substantial costs to the refiner. While the EPA promulgated a rule in June 2019 aiming to improve transparency in the market for RINs, we cannot predict with certainty our exposure to increased RINs costs in the future, nor can we predict the extent by which costs associated with RFS-2 regulations will impact our future results of operations.
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