[Federal Register Volume 85, Number 25 (Thursday, February 6, 2020)]
[Rules and Regulations]
[Pages 7016-7085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00431]
[[Page 7015]]
Vol. 85
Thursday,
No. 25
February 6, 2020
Part II
Environmental Protection Agency
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40 CFR Parts 79 and 80
Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based
Diesel Volume for 2021 and Other Changes; Final Rule
Federal Register / Vol. 85 , No. 25 / Thursday, February 6, 2020 /
Rules and Regulations
[[Page 7016]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 79 and 80
[EPA-HQ-OAR-2019-0136; FRL-10003-79-OAR]
RIN 2060-AU42
Renewable Fuel Standard Program: Standards for 2020 and Biomass-
Based Diesel Volume for 2021 and Other Changes
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: Under section 211 of the Clean Air Act, the Environmental
Protection Agency (EPA) is required to set renewable fuel percentage
standards every year. This action establishes the annual percentage
standards for cellulosic biofuel, biomass-based diesel, advanced
biofuel, and total renewable fuel that apply to gasoline and diesel
transportation fuel produced or imported in the year 2020. Relying on
statutory waiver authority that is available when the projected
cellulosic biofuel production volume is less than the applicable volume
specified in the statute, EPA is establishing volume requirements for
cellulosic biofuel, advanced biofuel, and total renewable fuel that are
below the statutory volume targets. We are also establishing the
applicable volume of biomass-based diesel for 2021. In addition, we are
finalizing changes to the percentage standard calculations to account
for volumes of gasoline and diesel we project will be exempted from the
renewable volume obligations. Finally, this action finalizes several
regulatory changes to the Renewable Fuel Standard (RFS) program
including new pathways, flexibilities for regulated parties, and
clarifications of existing regulations.
DATES: This final rule is effective on April 6, 2020.
ADDRESSES: The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2019-0136. All documents in the docket are
listed on the https://www.regulations.gov website. Although listed in
the index, some information is not publicly available, e.g., CBI or
other information whose disclosure is restricted by statute. Certain
other material is not available on the internet and will be publicly
available only in hard copy form. Publicly available docket materials
are available electronically through https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: 734-214-4131; email address:
[email protected].
SUPPLEMENTARY INFORMATION: Entities potentially affected by this final
rule are those involved with the production, distribution, and sale of
transportation fuels, including gasoline and diesel fuel or renewable
fuels such as ethanol, biodiesel, renewable diesel, and biogas.
Potentially affected categories include:
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NAICS \1\ Examples of potentially affected
Category codes SIC \2\ codes entities
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Industry................................... 324110 2911 Petroleum refineries.
Industry................................... 325193 2869 Ethyl alcohol manufacturing.
Industry................................... 325199 2869 Other basic organic chemical
manufacturing.
Industry................................... 424690 5169 Chemical and allied products
merchant wholesalers.
Industry................................... 424710 5171 Petroleum bulk stations and
terminals.
Industry................................... 424720 5172 Petroleum and petroleum products
merchant wholesalers.
Industry................................... 221210 4925 Manufactured gas production and
distribution.
Industry................................... 454319 5989 Other fuel dealers.
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\1\ North American Industry Classification System (NAICS).
\2\ Standard Industrial Classification (SIC).
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be affected by this
final action. This table lists the types of entities that EPA is now
aware could potentially be affected by this action. Other types of
entities not listed in the table could also be affected. To determine
whether your entity would be affected by this action, you should
carefully examine the applicability criteria in 40 CFR part 80. If you
have any questions regarding the applicability of this action to a
particular entity, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.
Outline of This Preamble
I. Executive Summary
A. Approach To Setting Volume Requirements
B. Cellulosic Biofuel
C. Advanced Biofuel
D. Total Renewable Fuel
E. 2021 Biomass-Based Diesel
F. Annual Percentage Standards
G. Amendments to the RFS and Fuels Programs Regulations
H. Response To Remand of 2016 Standards Rulemaking
II. Authority and Need for Waiver of Statutory Applicable Volumes
A. Statutory Authorities for Reducing Volume Targets
1. Cellulosic Waiver Authority
2. General Waiver Authority
B. Severability
C. Treatment of Carryover RINs
1. Carryover RIN Bank Size
2. EPA's Decision Regarding the Treatment of Carryover RINs
III. Cellulosic Biofuel Volume for 2020
A. Statutory Requirements
B. Cellulosic Biofuel Industry Assessment
1. Review of EPA's Projection of Cellulosic Biofuel in Previous
Years
2. Potential Domestic Producers
3. Potential Foreign Sources of Cellulosic Biofuel
4. Summary of Volume Projections for Individual Companies
C. Projection From the Energy Information Administration
D. Cellulosic Biofuel Volume for 2020
1. Liquid Cellulosic Biofuel
2. CNG/LNG Derived From Biogas
3. Total Cellulosic Biofuel in 2020
IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020
A. Volumetric Limitation on Use of the Cellulosic Waiver
Authority
B. Attainable Volumes of Advanced Biofuel
1. Imported Sugarcane Ethanol
2. Other Advanced Biofuel
3. Biodiesel and Renewable Diesel
a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve
Advanced Biofuel Volume
b. Historical Supply of Biodiesel and Renewable Diesel
c. Consideration of Production Capacity and Distribution
Infrastructure
d. Consideration of the Availability of Advanced Feedstocks
e. Biodiesel and Renewable Diesel Imports and Exports
f. Attainable and Reasonably Attainable Volumes of Advanced
Biodiesel and Renewable Diesel
C. Volume Requirement for Advanced Biofuel
D. Volume Requirement for Total Renewable Fuel
V. Impacts of 2020 Volumes on Costs
[[Page 7017]]
A. Illustrative Costs Analysis of 2020 Final Volumes Compared to
the 2020 Statutory Volumes Baseline
B. Illustrative Cost Analysis of the 2020 Final Volumes Compared
to the 2019 Final Volumes
VI. Biomass-Based Diesel Volume for 2021
A. Statutory Requirements
B. Review of Implementation of the Program and the 2021
Applicable Volume of Biomass-Based Diesel
C. Consideration of Statutory Factors in CAA Section
211(o)(2)(B)(ii)(I)-(VI) for 2021 and Determination of the 2021
Biomass-Based Diesel Volume
D. BBD Volume Requirement for 2021
VII. Percentage Standards for 2020
A. Calculation of Percentage Standards
B. Small Refineries and Small Refiners
1. Changes to the Projected Volume of Gasoline and Diesel for
Exempt Small Refineries
2. Projecting the Exempted Volume of Gasoline and Diesel in 2020
C. Final Standards
VIII. Administrative Actions
A. Assessment of the Domestic Aggregate Compliance Approach
B. Assessment of the Canadian Aggregate Compliance Approach
IX. Amendments to the RFS and Fuels Program Regulations
A. Clarification of Diesel RVO Calculations
1. Overview
2. Downstream Re-Designation of Certified Non-Transportation 15
ppm Distillate Fuel to MVNRLM Diesel Fuel
B. Pathway Petition Conditions
C. Esterification Pretreatment Pathway
D. Distillers Corn Oil and Distillers Sorghum Oil Pathways
E. Clarification of the Definition of Renewable Fuel Exporter
and Associated Provisions
F. REGS Rule Provisions
1. Flexibilities for Renewable Fuel Blending for Military Use
2. Heating Oil Used for Cooling
3. Separated Food Waste Plans
4. Additional Registration Deactivation Justifications
5. New RIN Retirement Section
6. New Pathway for Co-Processing Biomass With Petroleum to
Produce Co-Processed Cellulosic Diesel, Jet Fuel, and Heating Oil
7. Other Revisions to the Fuels Program
a. Testing Revisions
b. Oxygenate Added Downstream in Tier 3
c. Technical Corrections and Clarifications
X. Public Participation
XI. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs
C. Paperwork Reduction Act (PRA)
D. Regulatory Flexibility Act (RFA)
E. Unfunded Mandates Reform Act (UMRA)
F. Executive Order 13132: Federalism
G. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
H. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
J. National Technology Transfer and Advancement Act (NTTAA)
K. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
L. Congressional Review Act (CRA)
XII. Statutory Authority
I. Executive Summary
The Renewable Fuel Standard (RFS) program began in 2006 pursuant to
the requirements in Clean Air Act (CAA) section 211(o) that were added
through the Energy Policy Act of 2005 (EPAct). The statutory
requirements for the RFS program were subsequently modified through the
Energy Independence and Security Act of 2007 (EISA), leading to the
publication of major revisions to the regulatory requirements on March
26, 2010.\1\ EISA's stated goals include moving the United States
(U.S.) toward ``greater energy independence and security [and]
increas[ing] the production of clean renewable fuels.'' \2\
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\1\ 75 FR 14670, March 26, 2010.
\2\ Public Law 110-140, 121 Stat. 1492 (2007) (``EISA'').
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The statute includes annual volume targets and requires EPA to
translate those volume targets (or alternative volume requirements
established by EPA in accordance with statutory waiver authorities)
into compliance obligations that obligated parties must meet every
year. In this action we are establishing the applicable volumes for
cellulosic biofuel, advanced biofuel, and total renewable fuel for
2020, and biomass-based diesel (BBD) for 2021.\3\
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\3\ The 2020 BBD volume requirement was established in the 2019
final rule. 83 FR 63704 (December 11, 2018).
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We are also finalizing changes to the percentage standard
calculations to account for volumes of gasoline and diesel we project
will be exempted from the renewable volume obligations, and
establishing the annual percentage standards (also known as ``percent
standards'') for cellulosic biofuel, BBD, advanced biofuel, and total
renewable fuel that would apply to gasoline and diesel produced or
imported in 2020.\4\
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\4\ For a list of the statutory provisions related to the
determination of applicable volumes, see the 2018 final rule (82 FR
58486, December 12, 2017; Table I.A-2).
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Finally, we are finalizing several regulatory changes to the RFS
program to facilitate the implementation of this program going forward
including new pathways, flexibilities for regulated parties, and
clarifications of existing regulations.
Today, nearly all gasoline used for transportation purposes
contains 10 percent ethanol (E10), and on average diesel fuel contains
nearly 5 percent of biodiesel and renewable diesel.\5\ However, the
market has fallen well short of the statutory volumes for cellulosic
biofuel, resulting in shortfalls in the advanced biofuel and total
renewable fuel volumes. In this action, we are establishing a volume
requirement for cellulosic biofuel at the level we project to be
available for 2020, along with an associated applicable percentage
standard. For advanced biofuel and total renewable fuel, we are
finalizing volume requirements using the ``cellulosic waiver
authority'' that result in advanced biofuel and total renewable fuel
volume requirements that are lower than the statutory targets by the
same magnitude as the reduction in the cellulosic biofuel reduction.
This would effectively maintain the implied statutory volumes for non-
cellulosic biofuel and conventional biofuel.\6\
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\5\ Average biodiesel and/or renewable diesel blend percentages
based on EIA's October 2019 Short Term Energy Outlook (STEO) and
EPA's Moderated Transaction System (EMTS).
\6\ The statutory total renewable fuel, advanced biofuel and
cellulosic biofuel requirements for 2020 are 30.0, 15.0 and 10.5
billion gallons respectively. This implies a conventional renewable
fuel applicable volume (the difference between the total renewable
fuel and advanced biofuel volumes) of 15.0 billion gallons, and a
non-cellulosic advanced biofuel applicable volume (the difference
between the advanced biofuel and cellulosic biofuel volumes) of 4.5
billion gallons.
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The resulting volume requirements for 2020 are shown in Table I-1.
Relative to the levels finalized for 2019, the 2020 volume requirements
for cellulosic biofuel, advanced biofuel and total renewable fuel would
be higher by approximately 170 million gallons. This entire increase
for each category is attributable to the increased projection of
cellulosic biofuel production in 2020 (see Section III for a further
discussion of our cellulosic biofuel projection). We are also
establishing the volume requirement for BBD for 2021 at 2.43 billion
gallons. This volume is equal to the BBD volume finalized for 2020.
[[Page 7018]]
Table I-1--Final Volume Requirements a
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2020 Statutory 2020 Proposed 2020 Final 2021 Final
2019 b volumes volumes volumes volumes
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Cellulosic biofuel (billion 0.42 10.50 0.54 0.59 n/a
gallons).......................
Biomass-based diesel (billion 2.1 >=1.0 c N/A c 2.43 2.43
gallons).......................
Advanced biofuel (billion 4.92 15.00 5.04 5.09 n/a
gallons).......................
Renewable fuel (billion gallons) 19.92 30.00 20.04 20.09 n/a
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a All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent.
b The 2019 volume requirements for cellulosic biofuel, advanced biofuel, and renewable fuel were established in
the 2019 final rule (83 FR 63704, December 11, 2018). The 2019 BBD volume requirement was established in the
2018 final rule (82 FR 58486, December 12, 2017).
c The 2020 BBD volume requirement of 2.43 billion gallons was established in the 2019 final rule (83 FR 63704,
December 11, 2018).
A. Approach To Setting Volume Requirements
For advanced biofuel and total renewable fuel, we are reducing the
statutory volumes based on the ``cellulosic waiver authority'' that
result in advanced biofuel and total renewable fuel volume requirements
that are lower than the statutory targets by the same magnitude as the
reduction in the cellulosic biofuel applicable volume. Further
discussion of our cellulosic waiver authority is found in Section II.
This follows the same general approach as in the 2018 and 2019 final
rules, as well as the 2020 proposed rule. The volumes for cellulosic
biofuel, advanced biofuel, and total renewable fuel exceed the required
volumes for these fuel types in 2019.
B. Cellulosic Biofuel
The CAA requires EPA to annually determine the projected volume of
cellulosic biofuel production for the following year. If the projected
volume of cellulosic biofuel production is less than the applicable
volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA
must lower the applicable volume used to set the annual cellulosic
biofuel percentage standard to the projected volume available. In this
rule we are establishing a cellulosic biofuel volume requirement of
0.59 billion ethanol-equivalent gallons for 2020 based on our
projection. This volume is 0.17 billion ethanol-equivalent gallons
higher than the cellulosic biofuel volume finalized for 2019. Our
projection in Section III considers many factors, including the
estimate of cellulosic biofuel production received from the Energy
Information Administration (EIA); \7\ RIN generation data for past
years and 2019 to date that is available to EPA through the EPA
Moderated Transaction System (EMTS); the information we have received
regarding individual facilities' capacities, production start dates,
and biofuel production plans; a review of cellulosic biofuel production
relative to EPA's projections in previous annual rules; and EPA's own
engineering judgment. To project cellulosic biofuel production for 2020
we used the same general methodology as in the 2018 and 2019 final
rules, together with updated data.
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\7\ Letter from Linda Capuano, EIA Administrator to Andrew
Wheeler, EPA Administrator. October 9, 2019. Available in docket
EPA-HQ-OAR-2019-0136.
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C. Advanced Biofuel
If we reduce the applicable volume of cellulosic biofuel below the
volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the
authority to reduce the applicable volumes of advanced biofuel and
total renewable fuel by the same or a lesser amount. We refer to this
as the ``cellulosic waiver authority.'' The conditions that caused us
to reduce the 2019 volume requirement for advanced biofuel below the
statutory target remain relevant in 2020.
As in the 2019 final rule, we investigated the projected
availability of non-cellulosic advanced biofuels in 2020. In Section
IV, we describe our consideration of many factors, including:
The ability of the market to make advanced biofuels
available,
The ability of the standards we set to bring about market
changes in the time available,
The potential impacts associated with diverting biofuels
and/or biofuel feedstocks from current uses to the production of
advanced biofuel used in the U.S.,
The fact that the biodiesel tax credit is currently not
available for 2020,
Current tariffs on imports of biodiesel from Argentina and
Indonesia and the proposal to change those tariffs, and
The cost of advanced biofuels
We also considered the size of the carryover RIN bank. Based on
these considerations, we have determined that the statutory volume
target for advanced biofuel should be reduced by the same amount as the
reduction in the statutory volume target for cellulosic biofuel,
consistent with our July 29, 2019, proposal (``the July 29 proposal'').
Specifically, the statutory volume target for advanced biofuel should
be reduced by 9.91 billion gallons. This maintains the implied
statutory volume requirement for non-cellulosic advanced biofuel of 4.5
billion gallons, and results in a final advanced biofuel volume
requirement for 2020 of 5.09 billion gallons, which is 0.17 billion
gallons higher than the advanced biofuel volume requirement for 2019.
D. Total Renewable Fuel
As we have articulated in previous annual standard-setting
rulemakings,\8\ we believe that the cellulosic waiver authority is best
interpreted to require equal reductions in advanced biofuel and total
renewable fuel. Consistent with previous years, we are reducing total
renewable fuel by the same amount as the reduction in advanced biofuel,
such that the resulting implied volume requirement for conventional
renewable fuel would be 15 billion gallons, the same as the implied
volume requirement in the statute. The result is that the final 2020
volume requirement is 20.09 billion gallons.
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\8\ See, e.g., 83 FR 63704 (December 11, 2018).
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E. 2021 Biomass-Based Diesel
In EISA, Congress specified increasing applicable volumes of BBD
through 2012. Beyond 2012, Congress stipulated that EPA, in
coordination with DOE and USDA, was to establish the BBD volume based
on a review of the implementation of the program during calendar years
specified in the tables in CAA 211(o)(B)(i) and other statutory
factors, provided that the required volume for BBD could not be less
than 1.0 billion gallons. Starting in 2013, EPA has set the BBD volume
requirement above the statutory minimum, most recently resulting in
2.43 billion gallons for 2020. In this rule we are maintaining the BBD
volume for 2021 at 2.43 billion gallons.
[[Page 7019]]
Given current and recent market conditions, the advanced biofuel
requirement is driving the production and use of biodiesel and
renewable diesel volumes over and above volumes required through the
separate BBD standard, and we expect this to continue. While EPA
continues to believe it is appropriate to maintain the opportunity for
other advanced biofuels to compete for market share, the vast majority
of the advanced biofuel obligations in recent years have been satisfied
with BBD. Thus, after a review of implementation of the program to date
and considering the statutory factors, we are establishing, in
coordination with USDA and DOE, an applicable volume of BBD for 2020 of
2.43 billion gallons.
F. Annual Percentage Standards
The renewable fuel standards are expressed as a volume percentage
and are used by each refiner and importer of fossil-based gasoline or
diesel to determine their renewable fuel volume obligations.
Four separate percentage standards are required under the RFS
program, corresponding to the four separate renewable fuel categories
shown in Table I-1. The specific formulas we use in calculating the
renewable fuel percentage standards are contained in the regulations at
40 CFR 80.1405. On October 28, 2019, we proposed changes to our
percentage standard formulas in 40 CFR 80.1405. (``October 28
Proposal''). These changes were intended to project the exempted volume
of gasoline and diesel due to small refinery exemptions, regardless of
whether we grant those exemptions prior or after the annual rule. For
2020, we proposed to project exempt volumes are based on a three-year
average of the relief recommended by the Department of Energy (DOE) for
2016-2018. In this action, we are finalizing these proposed changes.
These changes result in increases to the percentage standards as
compared to the percentage standards in the July 29 proposal.
Consistent with these changes, we are also announcing our general
policy approach to small refinery exemptions going forward, including
for now-pending 2019 petitions as well as for future 2019 and 2020
petitions. Although final decisions on any exemption petition must
await EPA's receipt and adjudication of those petitions, EPA intends to
grant relief consistent with DOE's recommendations where appropriate.
This policy extends to DOE's recommendations of partial (50%) relief:
Where appropriate, we intend to grant 50% relief where DOE recommends
50% relief.
The volume of transportation gasoline and diesel used to calculate
the proposed percentage standards was based on Energy Information
Administration's (EIA) October 2019 Short Term Energy Outlook (STEO),
minus an estimate of fuel consumption in Alaska. The final applicable
percentage standards for 2020 are shown in Table I.B.6-1. Details,
including the projected gasoline and diesel volumes used, can be found
in Section VII.
Table I.F-1--Final 2020 Percentage Standards
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Percentage
standards
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Cellulosic biofuel...................................... 0.34%
Biomass-based diesel.................................... 2.10
Advanced biofuel........................................ 2.93
Renewable fuel.......................................... 11.56
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G. Amendments to the RFS and Fuels Programs Regulations
In implementing the RFS program EPA has identified several areas
where regulatory changes would assist EPA in implementing the RFS
program in future years. EPA requested comment on several of these
regulatory changes in the July 29 proposal: Clarification of diesel RVO
calculations, pathway petition conditions, a biodiesel esterification
pathway, distillers corn oil and distillers sorghum oil pathways, and
renewable fuel exporter provisions. Each of these regulatory changes is
discussed in greater detail in Section IX.
Additionally, we proposed a number of changes to the RFS
regulations as part of the proposed Renewables Enhancement and Growth
Support (REGS) Rule.\9\ EPA noted that it was considering finalizing
several of those proposed changes along with the 2020 RVO final
rule,\10\ and are now finalizing the REGS Rule provisions listed below.
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\9\ See 81 FR 80828 (November 16, 2016).
\10\ See 84 FR 36765 (July 29, 2019).
Flexibilities for Renewable Fuel Blending for Military Use
(REGS Section VIII.E)
Heating Oil Used for Cooling (REGS Section VIII.F)
Separated Food Waste Plans (REGS Section VIII.G)
Additional Registration Deactivation Justifications (REGS
Section VIII.J)
New RIN Retirement Section (REGS Section VIII.L)
New Pathway for Co-Processing Biomass With Petroleum To
Produce Cellulosic Diesel, Jet Fuel, and Heating Oil (REGS Section
VIII.M)
Other Revisions to the Fuels Program (REGS Section IX)
The other provisions proposed in the REGS Rule remain under
consideration but are not being finalized at this time.
H. Response to Remand of 2016 Standards Rulemaking
In 2015, EPA established the total renewable fuel standard for
2016, relying in part on the general waiver authority under a finding
of inadequate domestic supply.\11\ Several parties challenged that
action, and the U.S. Court of Appeals for the D.C. Circuit, in
Americans for Clean Energy v. EPA, 864 F.3d 691 (2017) (hereafter
``ACE''), vacated EPA's use of the general waiver authority under a
finding of inadequate domestic supply, finding that such use exceeded
EPA's authority under the Clean Air Act. Specifically, EPA had
impermissibly considered demand-side factors in its assessment of
inadequate domestic supply, rather than limiting that assessment to
supply-side factors. The court remanded the rule back to EPA for
further consideration in light of the court's ruling.
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\11\ See 80 FR 77420 (December 14, 2015); CAA section
211(o)(7)(A)(ii).
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In the July 29 proposal, we proposed that the applicable 2016
volume requirement for total renewable fuel and the associated
percentage standard should not be changed. In light of the many
comments received, we are still actively considering this issue. We are
therefore not taking final agency action on this issue in today's final
rule. We are instead deferring action on this issue to a separate
action, which we anticipate in early 2020.
II. Authority and Need for Waiver of Statutory Applicable Volumes
The CAA provides EPA with the authority to promulgate volume
requirements below the applicable volume targets specified in the
statute under specific circumstances. This section discusses those
authorities. As described in the executive summary, we are setting the
volume requirement for cellulosic biofuel at the level we project to be
available for 2020, and an associated applicable percentage standard.
For advanced biofuel and total renewable fuel, we are setting volume
requirements and associated applicable percentage standards, based on
use of the ``cellulosic waiver authority'' that would result in
advanced biofuel and total renewable fuel volume requirements that are
equivalent to the reduction in the cellulosic biofuel
[[Page 7020]]
reduction. This would effectively maintain the implied statutory
volumes for non-cellulosic advanced and conventional renewable fuel.
A. Statutory Authorities for Reducing Volume Targets
In CAA section 211(o)(2), Congress specified increasing annual
volume targets for total renewable fuel, advanced biofuel, and
cellulosic biofuel for each year through 2022. However, Congress also
recognized that under certain circumstances it would be appropriate for
EPA to set volume requirements at a lower level than reflected in the
statutory volume targets, and thus provided waiver provisions in CAA
section 211(o)(7). Congress also specified increasing annual volume
targets for BBD through 2012 and authorized EPA to set volume
requirements for subsequent years (i.e., after 2012) in coordination
with USDA and DOE, and based upon consideration of specified factors.
1. Cellulosic Waiver Authority
Section 211(o)(7)(D)(i) of the CAA provides that if EPA determines
that the projected volume of cellulosic biofuel production for a given
year is less than the applicable volume specified in the statute, then
EPA must reduce the applicable volume of cellulosic biofuel required to
the projected volume available for that calendar year. In making this
projection, EPA may not ``adopt a methodology in which the risk of
overestimation is set deliberately to outweigh the risk of
underestimation'' but must make a projection that ``takes neutral aim
at accuracy.'' API v. EPA, 706 F.3d 474, 479, 476 (D.C. Cir. 2013).
Pursuant to this provision, EPA has set the cellulosic biofuel
requirement lower than the statutory volume for each year since 2010.
As described in Section III.D, the projected volume of cellulosic
biofuel production for 2020 is less than the 10.5 billion gallon volume
target in the statute. Therefore, for 2020, we are finalizing a
cellulosic biofuel volume lower than the statutory applicable volume,
in accordance with this provision.
CAA section 211(o)(7)(D)(i) also provides EPA with the authority to
reduce the applicable volume of total renewable fuel and advanced
biofuel in years when it reduces the applicable volume of cellulosic
biofuel under that provision. The reduction must be less than or equal
to the reduction in cellulosic biofuel. For 2020, we are reducing the
applicable volumes of advanced biofuel and total renewable fuel under
this authority.
EPA has used the cellulosic waiver authority to lower the advanced
biofuel and total renewable fuel volumes every year since 2014 as a
result of waiving the cellulosic volumes. Further discussion of the
cellulosic waiver authority, and EPA's interpretation of it, can be
found in the preamble to the 2017 final rule.\12\
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\12\ See 81 FR 89752-89753 (December 12, 2016); see also API v.
EPA, 706 F.3d 474 (D.C. Cir. 2013) (requiring that EPA's cellulosic
biofuel projections reflect a neutral aim at accuracy); Monroe
Energy v. EPA, 750 F.3d 909, 915-16 (D.C. Cir. 2014) (affirming
EPA's broad discretion under the cellulosic waiver authority to
reduce volumes of advanced biofuel and total renewable fuel);
Americans for Clean Energy v. EPA (``ACE''), 864 F.3d 691, 730-735
(D.C. Cir. 2017) (same); Alon Refining Krotz Spring, Inc. v. EPA,
936 F.3d 628, 662-663 (D.C. Cir. 2019) (same); American Fuel &
Petrochemical Manufacturers v. EPA, 937 F.3d 559, 577-78 (D.C. Cir.
2019) (same).
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In this action we are using the cellulosic waiver authority to
reduce the statutory volume targets for advanced biofuel and total
renewable fuel by equal amounts, consistent with our long-held
interpretation of this provision and our approach in setting the 2014-
2019 standards. This approach considers the Congressional objectives
reflected in the volume tables in the statute, and the environmental
objectives that generally favor the use of advanced biofuels over non-
advanced biofuels.\13\ As described in Section IV, we are reducing the
advanced biofuel volume under the cellulosic waiver authority by the
amount of the reduction in cellulosic biofuel and providing an equal
reduction under the cellulosic waiver authority in the applicable
volume of total renewable fuel. We are taking this action both because
we do not believe that the statutory volumes can be achieved, and
because we believe that backfilling of the shortfall in cellulosic with
advanced biofuel would not be appropriate in light of concerns about
high costs of the advanced biofuels and the potential for feedstock
switching. The volumes of advanced biofuel and total renewable fuel
resulting from this exercise of the cellulosic waiver authority provide
for an implied volume allowance for conventional renewable fuel of 15
billion gallons, and an implied volume allowance for non-cellulosic
advanced biofuel of 4.5 billion gallons, equal to the implied statutory
volumes for 2020. As discussed in Section IV, we also believe that the
resulting volume of advanced biofuel is attainable, and that the
resulting volume of total renewable fuel can be made available by the
market.
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\13\ See 81 FR 89752-89753 (December 12, 2016). See also 78 FR
49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015).
Advanced biofuels are required to have lifecycle GHG emissions that
are at least 50% less than the baseline defined in EISA. Non-
advanced biofuels are required to have lifecycle GHG emissions that
are at least 20% less than the baseline defined in EISA unless the
fuel producer meets the grandfathering provisions in 40 CFR 80.1403.
Beginning in 2015, all growth in the volumes established by Congress
come from advanced biofuels.
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2. General Waiver Authority
Section 211(o)(7)(A) of the CAA provides that EPA, in consultation
with the Secretary of Agriculture and the Secretary of Energy, may
waive the applicable volumes specified in the Act in whole or in part
based on a petition by one or more States, by any person subject to the
requirements of the Act, or by the EPA Administrator on his own motion.
Such a waiver must be based on a determination by the Administrator,
after public notice and opportunity for comment that: (1)
Implementation of the requirement would severely harm the economy or
the environment of a State, a region, or the United States; or (2)
there is an inadequate domestic supply.
EPA received comments requesting that EPA should use the general
waiver authority to further reduce volumes under findings of inadequate
domestic supply and/or severe harm to the economy or environment, as
well as comments to the contrary. Based on our review of the comments
and updated data, and consistent with EPA's rationale and decisions in
setting the 2019 standards, we decline to exercise our discretion to
reduce volumes under the general waiver authority. Further discussion
of these issues is found in the Response To Comments (``RTC'')
document.\14\
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\14\ See also ``Endangered Species Act No Effect Finding for the
2020 Final Rule.''
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B. Severability
The various portions of this rule are severable. Specifically, the
following portions are severable from each other: The percentage
standards for 2020 (described in Section VII); the 2021 BBD volume
requirement (Section VI); the administrative actions (Section VIII);
and the regulatory amendments (Section IX). In addition, each of the
regulatory amendments is severable from the other regulatory
amendments. If any of the above portions is set aside by a reviewing
court, we intend the remainder of this action to remain effective. For
instance, if a reviewing court sets aside one of the regulatory
amendments, we intend for the 2020 percentage standards to go into
effect.
C. Treatment of Carryover RINs
Consistent with our approach in the rules establishing the RFS
standards for
[[Page 7021]]
2013 through 2019, we have also considered the availability and role of
carryover RINs in setting the cellulosic biofuel, advanced biofuel, and
total renewable fuel volume requirements for 2020. Neither the statute
nor EPA regulations specify how or whether EPA should consider the
availability of carryover RINs in exercising our statutory
authorities.\15\ As noted in the context of the rules establishing the
RFS standards for 2014 through 2019, we believe that a bank of
carryover RINs is extremely important in providing obligated parties
compliance flexibility in the face of substantial uncertainties in the
transportation fuel marketplace, and in providing a liquid and well-
functioning RIN market upon which success of the entire program
depends.\16\ Carryover RINs provide flexibility in the face of a
variety of unforeseeable circumstances that could limit the
availability of RINs and reduce spikes in compliance costs, including
weather-related damage to renewable fuel feedstocks and other
circumstances potentially affecting the production and distribution of
renewable fuel. On the other hand, carryover RINs can be used for
compliance purposes, and in the context of the 2013 RFS rulemaking we
noted that an abundance of carryover RINs available in that year,
together with possible increases in renewable fuel production and
import, justified maintaining the advanced and total renewable fuel
volume requirements for that year at the levels specified in the
statute.\17\ In general, we have authority to consider the size of the
carryover RIN bank in deciding whether and to what extent to exercise
any of our discretionary waiver authorities.\18\ EPA's approach to the
consideration of carryover RINs in exercising our cellulosic waiver
authority was affirmed in Monroe Energy and ACE.\19\
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\15\ CAA section 211(o)(5) requires that EPA establish a credit
program as part of its RFS regulations, and that the credits be
valid for obligated parties to show compliance for 12 months as of
the date of generation. EPA implemented this requirement through the
use of RINs, which can be used to demonstrate compliance for the
year in which they are generated or the subsequent compliance year.
Obligated parties can obtain more RINs than they need in a given
compliance year, allowing them to ``carry over'' these excess RINs
for use in the subsequent compliance year, although our regulations
limit the use of these carryover RINs to 20 percent of the obligated
party's RVO. For the bank of carryover RINs to be preserved from one
year to the next, individual carryover RINs are used for compliance
before they expire and are essentially replaced with newer vintage
RINs that are then held for use in the next year. For example,
vintage 2018 carryover RINs must be used for compliance in 2019, or
they will expire. However, vintage 2019 RINs can then be ``banked''
for use in 2020.
\16\ See 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55
(December 12, 2016), 82 FR 58493-95 (December 12, 2017), and 83 FR
63708-10 (December 11, 2018).
\17\ See 79 FR 49793-95 (August 15, 2013).
\18\ These discretionary waiver authorities include the
discretionary portion of the cellulosic waiver authority, CAA
section 211(o)(7)(D)(i) (``the Administrator may also reduce the
applicable volume of renewable fuel and advanced biofuels
requirement''), the general waiver authority, CAA section
211(o)(7)(A) (``The Administrator . . . may waive the
requirements''), and the BBD waiver authority with regard to the
extent of the reduction in the BBD volume, CAA section
211(o)(7)(E)(ii) (``the Administrator . . . shall issue an order to
reduce . . . the quantity of biomass-based diesel . . . by an
appropriate quantity'').
\19\ Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014); ACE,
864 F.3d at 713.
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The RIN system was established in accordance with CAA section
211(o)(5), which authorizes the generation of credits by any person who
refines, blends, or imports renewable fuel in excess of the
requirements of the statute.\20\ In the RFS1 and RFS2 rulemakings, we
also established a 20 percent rollover cap on the amount of an
obligated party's RVO that can be met using previous-year RINs.\21\ In
implementing the RFS program, we have observed that an adequate
carryover RIN bank serves to make the RIN market liquid wherein RINs
are freely traded in an open market making them readily available and
accessible to those obligated parties who need them for compliance at
prices established by that open market. Just as the economy as a whole
functions best when individuals and businesses prudently plan for
unforeseen events by maintaining inventories and reserve money
accounts, we believe that the RFS program functions best when
sufficient carryover RINs are held in reserve for potential use by the
RIN holders themselves, or for possible sale to others that may not
have established their own carryover RIN reserves. Were there to be too
few RINs in reserve, then even minor disruptions causing shortfalls in
renewable fuel production or distribution, or higher than expected
transportation fuel demand (requiring greater volumes of renewable fuel
to comply with the percentage standards that apply to all volumes of
transportation fuel, including the unexpected volumes) could lead to
the need for a new waiver of the standards and higher compliance costs,
undermining the market certainty so critical to the RFS program.
Moreover, a significant drawdown of the carryover RIN bank leading to a
scarcity of RINs may stop the market from functioning in an efficient
manner (i.e., one in which there are a sufficient number of reasonably
available RINs for obligated parties seeking to purchase them), even
where the market overall could satisfy the standards. For all of these
reasons, the collective carryover RIN bank provides a necessary
programmatic buffer that both facilitates individual compliance,
provides for smooth overall functioning of the program, and is
consistent with the statutory provision allowing for the generation and
use of credits.\22\
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\20\ See 75 FR 14670 (March 26, 2010) and 72 FR 23900 (May 1,
2007).
\21\ See 75 FR 14734-35 (March 26, 2010) and 72 FR 23934-35 (May
1, 2007).
\22\ Here we use the term ``buffer'' as shorthand reference to
all of the benefits that are provided by a sufficient bank of
carryover RINs.
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1. Carryover RIN Bank Size
We estimate that there are currently approximately 3.48 billion
total carryover RINs available, an increase of 1.29 billion RINs from
the previous estimate of 2.19 billion total carryover RINs in the July
29 proposal.\23\ We also estimate that there are currently
approximately 680 million advanced carryover RINs available (which are
a subset of the 3.48 billion total carryover RINs), an increase of 290
million RINs from the previous estimate in the July 29 proposal. This
increase in the carryover RIN bank is primarily the result of the
millions of RINs that were unretired by small refineries that were
granted hardship exemptions after the July 29 proposal.\24\ These
volumes of carryover RINs are approximately 17 percent of the 2020
total renewable fuel volume requirement and 13 percent of the 2020
advanced biofuel volume requirement, which are less than the 20 percent
maximum limit permitted by the RFS regulations to be carried over for
use in complying with the 2020 standards.\25\
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\23\ The calculations performed to estimate the number of
carryover RINs currently available can be found in the memorandum,
``Carryover RIN Bank Calculations for 2020 Final Rule,'' available
in the docket.
\24\ Information about the number of small refinery exemptions
(SREs) granted and the volume of RINs not required to be retired as
a result of those exemptions can be found at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
\25\ See 40 CFR 80.1427(a)(5).
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However, there remains considerable uncertainty surrounding the
ultimate size of the carryover RIN bank available for compliance with
the 2020 standards for several reasons, including the possibility of
additional small refinery exemptions, higher or lower than expected
transportation fuel demand (requiring greater or lower volumes of
renewable fuel to comply with the percentage standards that apply to
all
[[Page 7022]]
volumes of transportation fuel), and the impact of 2019 RFS compliance
on the bank of carryover RINs. In addition, we note that there have
been enforcement actions in past years that have resulted in the
retirement of carryover RINs to make up for the generation and use of
invalid RINs and/or the failure to retire RINs for exported renewable
fuel. Future enforcement actions could have similar results and require
that obligated parties and/or renewable fuel exporters settle past
enforcement-related obligations in addition to complying with the
annual standards, thereby potentially creating demand for RINs greater
than can be accommodated through actual renewable fuel blending in
2020. In light of these uncertainties, the net result could be a bank
of total carryover RINs larger or smaller than 17 percent of the 2020
total renewable fuel volume requirement, and a bank of advanced
carryover RINs larger or smaller than 13 percent of the 2020 advanced
biofuel volume requirement.
2. EPA's Decision Regarding the Treatment of Carryover RINs
We have evaluated the volume of carryover RINs currently available
and considered whether it would justify an intentional drawdown of the
carryover RIN bank in setting the 2020 volume requirements. We also
carefully considered the comments received, including comments on the
role of carryover RINs under our waiver authorities and the policy
implications of our decision.\26\ For the reasons described throughout
Section II.C, we do not believe we should intentionally draw down the
carryover RIN bank in setting the 2020 volumes. The current bank of
carryover RINs provides an important and necessary programmatic and
cost spike buffer that will both facilitate individual compliance and
provide for smooth overall functioning of the program. We believe that
a balanced consideration of the possible role of carryover RINs in
achieving the statutory volumes for cellulosic biofuel, advanced
biofuel, and total renewable fuel, versus maintaining an adequate bank
of carryover RINs for important programmatic functions, is appropriate
when EPA exercises its discretion under its statutory authorities, and
that the statute does not specify the extent to which EPA should
require a drawdown in the bank of carryover RINs when it exercises its
waiver authorities. Therefore, for the reasons noted above and
consistent with the approach we took in the rules establishing the RFS
standards for 2014 through 2019, we have decided to maintain our
proposed approach and are not setting the 2020 volume requirements at
levels that would envision an intentional drawdown in the bank of
carryover RINs. We note that we may or may not take a similar approach
in future years; we will assess the situation on a case-by-case basis
going forward and take into account the size of the carryover RIN bank
in the future and any lessons learned from implementing past rules.
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\26\ In their comments on the 2020 NPRM, parties generally
expressed two opposing points of view. Commenters representing
obligated parties supported EPA's proposed decision to not assume a
drawdown in the bank of carryover RINs in determining the
appropriate volume requirements, reiterating the importance of
maintaining the carryover RIN bank in order to provide obligated
parties with necessary compliance flexibilities, better market
trading liquidity, and a cushion against future program uncertainty.
Commenters representing renewable fuel producers, however, stated
that not accounting for carryover RINs goes against Congressional
intent of the RFS program to increase renewable fuel volumes every
year and deters investment in cellulosic and advanced biofuels. A
full description of comments received, and our detailed responses to
them, is available in the RTC document in the docket.
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III. Cellulosic Biofuel Volume for 2020
In the past several years, production of cellulosic biofuel has
continued to increase. Cellulosic biofuel production reached record
levels in 2018, driven largely by CNG and LNG derived from biogas.\27\
The projected volume of cellulosic biofuel production in 2019 is even
higher that the volume produced in 2018. Production of liquid
cellulosic biofuel has also increased in recent years, even as the
total production of liquid cellulosic biofuels remains much smaller
than the production volumes of CNG and LNG derived from biogas (see
Figure III-1). This section describes our assessment of the volume of
qualifying cellulosic biofuel that we project will be produced or
imported into the U.S. in 2020, and some of the uncertainties
associated with those volumes.
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\27\ The majority of the cellulosic RINs generated for CNG/LNG
are sourced from biogas from landfills; however, the biogas may come
from a variety of sources including municipal wastewater treatment
facility digesters, agricultural digesters, separated municipal
solid waste (MSW) digesters, and the cellulosic components of
biomass processed in other waste digesters.
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[[Page 7023]]
[GRAPHIC] [TIFF OMITTED] TR06FE20.000
In order to project the volume of cellulosic biofuel production in
2020, we considered numerous factors, including EIA's projection of
cellulosic biofuel production in 2020, the accuracy of the
methodologies used to project cellulosic biofuel production in previous
years, data reported to EPA through EMTS, and information we collected
through meetings with representatives of facilities that have produced
or have the potential to produce qualifying volumes of cellulosic
biofuel in 2020.
There are two main elements to the cellulosic biofuel production
projection: Liquid cellulosic biofuel and CNG/LNG derived from biogas.
To project the range of potential production volumes of liquid
cellulosic biofuel we used the same general methodology as the
methodology used in the 2018 and 2019 final rules. We have adjusted the
percentile values used to select a point estimate within a projected
production range for each group of companies based on updated
information (through September 2019) with the objective of improving
the accuracy of the projections. To project the production of
cellulosic biofuel RINs for CNG/LNG derived from biogas, we used the
same general year-over-year growth rate methodology as in the 2018 and
2019 final rules, with updated RIN generation data through September
2019. This methodology reflects the mature status of this industry, the
large number of facilities registered to generate cellulosic biofuel
RINs from these fuels, and EPA's continued attempts to refine its
methodology to yield estimates that are as accurate as possible. This
methodology is an improvement on the methodology that EPA used to
project cellulosic biofuel production for CNG/LNG derived from biogas
in the 2017 and previous years (see Section III.B for a further
discussion of the accuracy of EPA's methodology in previous years). The
methodologies used to project the production of liquid cellulosic
biofuels and cellulosic CNG/LNG derived from biogas are described in
more detail in Sections III.D-1 and III.D-2.
The balance of this section is organized as follows. Section III.A
provides a brief description of the statutory requirements. Section
III.B reviews the accuracy of EPA's projections in prior years, and
also discusses the companies EPA assessed in the process of projecting
qualifying cellulosic biofuel production in the U.S. Section III.C
discusses EIA's projection of cellulosic biofuel production in 2020.
Section III.D discusses the methodologies used by EPA to project
cellulosic biofuel production in 2020 and the resulting projection of
0.59 billion ethanol-equivalent gallons.
A. Statutory Requirements
CAA section 211(o)(2)(B)(i)(III) states the statutory volume
targets for cellulosic biofuel. The volume of cellulosic biofuel
specified in the statute for 2020 is 10.5 billion gallons. The statute
provides that if EPA determines, based on a letter provided to the EPA
by EIA, that the projected volume of cellulosic biofuel production in a
given year is less than the statutory volume, then EPA shall reduce the
applicable volume of cellulosic biofuel to the projected volume
available during that calendar year.\28\
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\28\ CAA section 211(o)(7)(D)(i). The U.S. Court of Appeals for
the District of Columbia Circuit evaluated this requirement in API
v. EPA, 706 F.3d 474, 479-480 (D.C. Cir. 2013), in the context of a
challenge to the 2012 cellulosic biofuel standard. The Court stated
that in projecting potentially available volumes of cellulosic
biofuel EPA must apply an ``outcome-neutral methodology'' aimed at
providing a prediction of ``what will actually happen.'' Id. at 480,
479. The Court also determined that Congress did not require
``slavish adherence by EPA to the EIA estimate'' and that EPA could
``read the phrase `based on' as requiring great respect but allowing
deviation consistent with that respect.'' In addition, EPA has
consistently interpreted the term ``projected volume of cellulosic
biofuel production'' in CAA section 211(o)(7)(D)(i) to include
volumes of cellulosic biofuel likely to be made available in the
U.S., including from both domestic production and imports (see,
e.g., 80 FR 77420 (December 14, 2015) and 81 FR 89746 (December 12,
2016)). This interpretation is consistent with the statutory
direction to establish the cellulosic volume at the ``projected
volume available.'' We do not believe it would be reasonable to
include in the projection all cellulosic biofuel produced throughout
the world, regardless of likelihood of import to the U.S., since
volumes that are not imported would not be available to obligated
parties for compliance and including them in the projection would
render the resulting volume requirement and percentage standards
unachievable through the use of cellulosic biofuel RINs.
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[[Page 7024]]
In addition, if EPA reduces the required volume of cellulosic
biofuel below the level specified in the statute, we may reduce the
applicable volumes of advanced biofuels and total renewable fuel by the
same or a lesser volume,\29\ and we are also required to make
cellulosic waiver credits available.\30\ Our consideration of the 2020
volume requirements for advanced biofuel and total renewable fuel is
presented in Section IV.
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\29\ CAA section 211(o)(7)(D)(i).
\30\ See CAA section 211(o)(7)(D)(ii); 40 CFR 80.1456.
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B. Cellulosic Biofuel Industry Assessment
In this section, we first explain our general approach to assessing
facilities or groups of facilities (which we collectively refer to as
``facilities'') that have the potential to produce cellulosic biofuel
in 2020. We then review the accuracy of EPA's projections in prior
years. Next, we discuss the criteria used to determine whether to
include potential domestic and foreign sources of cellulosic biofuel in
our projection for 2020. Finally, we provide a summary table of all
facilities that we expect to produce cellulosic biofuel in 2020.
In order to project cellulosic biofuel production for 2020, we have
tracked the progress of a number of potential cellulosic biofuel
production facilities, located both in the U.S. and in foreign
countries. We considered a number of factors, including EIA's
projection of cellulosic biofuel production in 2020, information from
EMTS, the registration status of potential biofuel production
facilities as cellulosic biofuel producers in the RFS program, publicly
available information (including press releases and news reports), and
information provided by representatives of potential cellulosic biofuel
producers. As discussed in greater detail in Section III.D.1, our
projection of liquid cellulosic biofuel is based on a facility-by-
facility assessment of each of the likely sources of cellulosic biofuel
in 2020, while our projection of CNG/LNG derived from biogas is based
on an industry-wide assessment. To make a determination of which
facilities are most likely to produce liquid cellulosic biofuel and
generate cellulosic biofuel RINs in 2020, each potential producer of
liquid cellulosic biofuel was investigated further to determine the
current status of its facilities and its likely cellulosic biofuel
production and RIN generation volumes for 2020. Both in our discussions
with representatives of individual companies and as part of our
internal evaluation process, we gathered and analyzed information
including, but not limited to, the funding status of these facilities,
current status of the production technologies, anticipated construction
and production ramp-up periods, facility registration status, and
annual fuel production and RIN generation targets.
1. Review of EPA's Projection of Cellulosic Biofuel in Previous Years
As an initial matter, it is useful to review the accuracy of EPA's
past cellulosic biofuel projections. The record of actual cellulosic
biofuel production, including both cellulosic biofuel (which generate
D3 RINs) and cellulosic diesel (which generate D7 RINs), and EPA's
projected production volumes from 2015-2019 are shown in Table III.B-1.
These data indicate that EPA's projection was lower than the actual
number of cellulosic RINs made available in 2015,\31\ higher than the
actual number of RINs made available in 2016 and 2017, and lower than
the actual number of RINs made available in 2018. Based on our current
projection of cellulosic biofuel production for 2019 based on data
through September 2019, EPA's projection of cellulosic biofuel in 2019
also appears likely to be lower than actual RIN generation in 2019. The
fact that the projections made using this methodology have been
somewhat inaccurate, under-estimating the actual number of RINs made
available in 2015, 2018, and likely 2019, and over-estimating in 2016
and 2017, reflects the inherent difficulty with projecting cellulosic
biofuel production. It also emphasizes the importance of continuing to
make refinements to our projection methodology in order to make our
projections more accurate.
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\31\ EPA only projected cellulosic biofuel production for the
final three months of 2015, since data on the availability of
cellulosic biofuel RINs (D3+D7) for the first nine months of the
year were available at the time the analyses were completed for the
final rule.
Table III.B.1-1--Projected and Actual Cellulosic Biofuel Production (2015-2018)
[Million gallons] a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected volume \b\ Actual production volume \c\
-----------------------------------------------------------------------------------------------
Liquid CNG/LNG Total Liquid CNG/LNG Total
cellulosic derived from cellulosic cellulosic derived from cellulosic
biofuel biogas biofuel \d\ biofuel biogas biofuel \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015 \e\................................................ 2 33 35 0.5 52.8 53.3
2016.................................................... 23 207 230 4.1 186.2 190.3
2017.................................................... 13 298 311 11.8 239.5 251.3
2018.................................................... 14 274 288 10.6 303.2 313.8
2019 \f\................................................ 20 399 418 15.5 418.2 433.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ As noted in Section III.A. above, EPA has consistently interpreted the term ``projected volume of cellulosic biofuel production'' to include volumes
of cellulosic biofuel likely to be made available in the U.S., including from both domestic production and imports. The volumes in this table
therefore include both domestic production of cellulosic biofuel and imported cellulosic biofuel.
\b\ Projected volumes for 2015 and 2016 can be found in the 2014-2016 Final Rule (80 FR 77506, 77508, December 14, 2015); projected volumes for 2017 can
be found in the 2017 Final Rule (81 FR 89760, December 12, 2016); projected volumes for 2018 can be found in the 2018 Final Rule (82 FR 58503,
December 12, 2017); projected volumes for 2019 can be found in the 2019 Final Rule (83 FR 63704, December 11, 2018).
\c\ Actual production volumes are the total number of RINs generated minus the number of RINs retired for reasons other than compliance with the annual
standards, based on EMTS data.
\d\ Total cellulosic biofuel may not be precisely equal to the sum of liquid cellulosic biofuel and CNG/LNG derived from biogas due to rounding.
\e\ Projected and actual volumes for 2015 represent only the final 3 months of 2015 (October-December) as EPA used actual RIN generation data for the
first 9 months of the year.
[[Page 7025]]
\f\ Actual production in 2019 is a projection based on actual data from January-September 2019 and a projection of likely production for October-
December 2019.
EPA's projections of liquid cellulosic biofuel were higher than the
actual volume of liquid cellulosic biofuel produced each year from 2015
to 2018.\32\ Depending on liquid cellulosic biofuel production in the
last 3 months or 2019, our projection for 2019 may ultimately be an
over-projection or under-projection of actual production, however at
this time it appears likely to result in an over-projection. As a
result of the over-projections in 2015-2016 (and the anticipated over-
projection in 2017), and in an effort to take into account the most
recent data available and make the liquid cellulosic biofuel
projections more accurate, EPA adjusted our methodology in the 2018
final rule.\33\ The adjustments to our methodology adopted in the 2018
final rule resulted in a projection that is close to the volume of
liquid cellulosic biofuel produced in 2018 and appear likely to result
in a reasonably accurate projection in 2019. In this final rule we are
again applying the approach we first used in the 2018 final rule: Using
percentile values based on actual production in previous years,
relative to the projected volume of liquid cellulosic biofuel in these
years. We have adjusted the percentile values to project liquid
cellulosic biofuel production based on actual liquid cellulosic biofuel
production in 2016 to 2019. We believe that the use of the methodology
(described in more detail in Section III.D.1), with the adjusted
percentile values, results in a projection that reflects a neutral aim
at accuracy since it accounts for expected growth in the near future by
using historical data that is free of any subjective bias.
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\32\ We note, however, that because the projected volume of
liquid cellulosic biofuel in each year was very small relative to
the total volume of cellulosic biofuel, these over-projections had a
minimal impact on the accuracy of our projections of cellulosic
biofuel for each of these years.
\33\ 82 FR 58486 (December 12, 2017).
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We next turn to the projection of CNG/LNG derived from biogas. For
2018 and 2019, EPA used an industry-wide approach, rather than an
approach that projects volumes for individual companies or facilities,
to project the production of CNG/LNG derived from biogas. EPA used a
facility-by-facility approach to project the production of CNG/LNG
derived from biogas from 2015-2017. Notably the facility-by-facility
methodology resulted in significant over-estimates of CNG/LNG
production in 2016 and 2017, leading EPA to develop the alternative
industry wide projection methodology first used in 2018. This updated
approach reflects the fact that this industry is far more mature than
the liquid cellulosic biofuel industry, with a far greater number of
potential producers of CNG/LNG derived from biogas. In such cases,
industry-wide projection methods can be more accurate than a facility-
by-facility approach, especially as macro market and economic factors
become more influential on total production than the success or
challenges at any single facility. The industry-wide projection
methodology slightly under-projected the production of CNG/LNG derived
from biogas in 2018 and appears likely to slightly under-project the
production of these fuels in 2019. However, the difference between the
projected and actual production volume of these fuels was smaller than
in 2017.
As further described in Section III.D.2, EPA is again projecting
production of CNG/LNG derived from biogas using the industry-wide
approach. We calculate a year-over-year rate of growth in the renewable
CNG/LNG industry and apply this year-over-year growth rate to the total
number of cellulosic RINs generated and available to be used for
compliance with the annual standards in 2018 to estimate the production
of CNG/LNG derived from biogas in 2020.\34\ We have applied the growth
rate to the number of available 2018 RINs generated for CNG/LNG derived
from biogas as data from this year allows us to adequately account for
not only RIN generation, but also for RINs retired for reasons other
than compliance with the annual standards. While more recent RIN
generation data is available, the retirement of RINs for reasons other
than compliance with the annual standards generally lags RIN
generation, sometimes by up to a year or more.
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\34\ To project the volume of CNG/LNG derived from biogas in
2020, we multiply the number of 2018 RINs generated for these fuels
and available to be used for compliance with the annual standards by
the calculated growth rate to project production of these fuels in
2019 and then multiply the resulting number by the growth rate again
to project the production of these fuels in 2020.
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The production volumes of cellulosic biofuel in previous years also
highlight that the production of CNG/LNG derived from biogas has been
significantly higher than the production of liquid cellulosic biofuel
in previous years. This is likely the result of a combination of
several factors, including the mature state of the technology used to
produce CNG/LNG derived from biogas relative to the technologies used
to produce liquid cellulosic biofuel and the relatively low production
cost of CNG/LNG derived from biogas (discussed in further detail in
Section V). These factors are unlikely to change in 2020. While we
project production volumes of liquid cellulosic biofuel and CNG/LNG
derived from biogas separately, the actual volume of each fuel type
produced may be higher or lower than projected.
2. Potential Domestic Producers
There are several companies and facilities located in the U.S. that
have either already begun producing cellulosic biofuel for use as
transportation fuel, heating oil, or jet fuel at a commercial
scale,\35\ or are anticipated to be in a position to do so at some time
during 2020. The RFS program provides a strong financial incentive for
domestic cellulosic biofuel producers to sell any fuel they produce for
domestic consumption.\36\ To date nearly all cellulosic biofuel
produced in the U.S. has been used domestically \37\ and all the
domestic facilities we have contacted in deriving our projections
intend to produce fuel on a commercial scale for domestic consumption
and plan to use approved pathways. These factors give us a high degree
of confidence that cellulosic biofuel RINs will be generated for all
cellulosic biofuel produced by domestic commercial scale facilities. To
generate RINs, each of these facilities must be registered with EPA
under the RFS program and comply with all the regulatory requirements.
This includes using an approved RIN-generating pathway and verifying
that their feedstocks meet the definition of renewable biomass. Most of
the domestic companies and facilities considered in our assessment of
potential cellulosic biofuel producers in 2019 have already
successfully
[[Page 7026]]
completed facility registration, and have successfully generated
RINs.\38\ A brief description of each of the domestic companies (or
group of companies for cellulosic CNG/LNG producers and the facilities
using Edeniq's technology) that EPA believes may produce commercial-
scale volumes of RIN generating cellulosic biofuel by the end of 2020
can be found in a memorandum to the docket for this final rule.\39\
General information on each of these companies or group of companies
considered in our projection of the potentially available volume of
cellulosic biofuel in 2020 is summarized in Table III.B.4-1.
---------------------------------------------------------------------------
\35\ For a further discussion of EPA's decision to focus on
commercial scale facilities, rather than R&D and pilot scale
facilities, see the 2019 proposed rule (83 FR 32031, July 10, 2018).
\36\ According to data from EMTS, the average price for a 2019
cellulosic biofuel RINs sold in 2019 (through September 2019) was
$1.30. Alternatively, obligated parties can satisfy their cellulosic
biofuel obligations by purchasing an advanced (or biomass-based
diesel) RIN and a cellulosic waiver credit. The average price for a
2019 advanced biofuel RINs sold in 2019 (through September 2019) was
$0.43 while the price for a 2019 cellulosic waiver credit is $1.77
(EPA-420-B-18-052).
\37\ The only known exception was a small volume of fuel
produced at a demonstration scale facility exported to be used for
promotional purposes.
\38\ Most of the facilities listed in Table III.B.3-1 are
registered to produce cellulosic (D3 or D7) RINs with the exception
of several of the producers of CNG/LNG derived from biogas and Red
Rock Biofuels. EPA is unaware of any outstanding issues that would
reasonably be expected to prevent these facilities from registering
as cellulosic biofuel producers and producing qualifying cellulosic
biofuel in 2020.
\39\ ``Cellulosic Biofuel Producer Company Descriptions (May
2019),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-
2019-0136.
---------------------------------------------------------------------------
3. Potential Foreign Sources of Cellulosic Biofuel
In addition to the potential sources of cellulosic biofuel located
in the U.S., there are several foreign cellulosic biofuel companies
that may produce cellulosic biofuel in 2020. These include facilities
owned and operated by Beta Renewables, Enerkem, Ensyn, GranBio, and
Raizen. All of these facilities use fuel production pathways that have
been approved by EPA for cellulosic RIN generation provided eligible
sources of renewable feedstock are used and other regulatory
requirements are satisfied. These companies would therefore be eligible
to register their facilities under the RFS program and generate RINs
for any qualifying fuel imported into the U.S. While these facilities
may be able to generate RINs for any volumes of cellulosic biofuel they
import into the U.S., demand for the cellulosic biofuels they produce
is expected to be high in their own local markets.
EPA's projection of cellulosic biofuel production in 2020 includes
cellulosic biofuel that is projected to be imported into the U.S. in
2020, including potential imports from all the registered foreign
facilities under the RFS program. We believe that due to the strong
demand for cellulosic biofuel in local markets and the time necessary
for potential foreign cellulosic biofuel producers to register under
the RFS program and arrange for the importation of cellulosic biofuel
to the U.S., cellulosic biofuel imports from foreign facilities not
currently registered to generate cellulosic biofuel RINs are generally
highly unlikely in 2020. For purposes of our 2020 cellulosic biofuel
projection we have excluded potential volumes from foreign cellulosic
biofuel production facilities that are not currently registered under
the RFS program.
Cellulosic biofuel produced at three foreign facilities (Ensyn's
Renfrew facility, GranBio's Brazilian facility, and Raizen's Brazilian
facility) generated cellulosic biofuel RINs for fuel exported to the
U.S. since 2017; projected volumes from each of these facilities are
included in our projection of available volumes for 2020. EPA has also
included projected volume from two additional foreign facilities. These
two facilities (Enerkem's Canadian facility and Ensyn's Port-Cartier,
Quebec facility) have both completed the registration process as
cellulosic biofuel producers. We believe that it is appropriate to
include volume from these facilities in light of their proximity to the
U.S., the proven technology used by these facilities, the volumes of
cellulosic biofuel exported to the U.S. by the company in previous
years (in the case of Ensyn), and the company's stated intentions to
market fuel produced at these facilities to qualifying markets in the
U.S. All of the facilities included in EPA's cellulosic biofuel
projection for 2020 are listed in Table III.B.4-1.
4. Summary of Volume Projections for Individual Companies
General information on each of the cellulosic biofuel producers (or
group of producers, for producers of CNG/LNG derived from biogas and
producers of liquid cellulosic biofuel using Edeniq's technology) that
factored into our projection of cellulosic biofuel production for 2020
is shown in Table III.B.4-1. This table includes both facilities that
have already generated cellulosic RINs, as well as those that have not
yet generated cellulosic RINs, but are projected to do so by the end of
2020. As discussed above, we have focused on commercial-scale
cellulosic biofuel production facilities. Each of these facilities (or
group of facilities) is discussed further in a memorandum to the
docket.\40\
---------------------------------------------------------------------------
\40\ ``Cellulosic Biofuel Producer Company Descriptions (May
2019),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-
2019-0136.
Table III.B.4-1--Projected Producers of Cellulosic Biofuel for U.S. Consumption in 2020 \41\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Facility capacity
Company name Location Feedstock Fuel (million gallons Construction start First production
per year) \42\ date \43\
--------------------------------------------------------------------------------------------------------------------------------------------------------
CNG/LNG Producers \44\.......... Various........... Biogas............ CNG/LNG........... Various........... Various........... Various.
Edeniq.......................... Various........... Corn Kernel Fiber. Ethanol........... Various........... Various........... October 2016.
Enerkem......................... Edmonton, AL, Separated MSW..... Ethanol........... \45\ 10........... 2012.............. September
Canada. 2017.\46\
Ensyn........................... Renfrew, ON, Wood Waste........ Heating Oil....... 3................. 2005.............. 2014.
Canada.
Ensyn........................... Port-Cartier, QC, Wood Waste........ Heating Oil....... 10.5.............. June 2016......... January 2018.
Canada.
GranBio......................... S[atilde]o Miguel Sugarcane bagasse. Ethanol........... 21................ Mid 2012.......... September 2014.
dos Campos,
Brazil.
QCCP/Syngenta................... Galva, IA......... Corn Kernel Fiber. Ethanol........... 4................. Late 2013......... October 2014.
Red Rock Biofuels............... Lakeview, OR...... Wood Waste........ Diesel, Jet Fuel, 15................ July 2018......... 1Q 2020.
Naphtha.
Raizen.......................... Piracicaba City, Sugarcane bagasse. Ethanol........... 11................ January 2014...... July 2015.
Brazil.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 7027]]
C. Projection From the Energy Information Administration
---------------------------------------------------------------------------
\41\ Despite generating cellulosic RINs in previous years Poet-
DSM's facility has not been included in Table III.B.4-1 after
announcing their plans to suspend commercial production at this
facility.
\42\ The Facility Capacity is generally equal to the nameplate
capacity provided to EPA by company representatives or found in
publicly available information. Capacities are listed in physical
gallons (rather than ethanol-equivalent gallons). If the facility
has completed registration and the total permitted capacity is lower
than the nameplate capacity, then this lower volume is used as the
facility capacity.
\43\ Where a quarter is listed for the first production date EPA
has assumed production begins in the middle month of the quarter
(i.e., August for the 3rd quarter) for the purposes of projecting
volumes.
\44\ For more information on these facilities see ``December
2019 Assessment of Cellulosic Biofuel Production from Biogas
(2020),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-
OAR-2019-0136.
\45\ The nameplate capacity of Enerkem's facility is 10 million
gallons per year. However, we anticipate that a portion of their
feedstock will be non-biogenic municipal solid waste (MSW). RINs
cannot be generated for the portion of the fuel produced from non-
biogenic feedstocks. We have taken this into account in our
production projection for this facility (See ``May 2019 Liquid
Cellulosic Biofuel Projections for 2020 CBI'').
\46\ This date reflects the first production of ethanol from
this facility. The facility began production of methanol in 2015.
---------------------------------------------------------------------------
Section 211(o)(3)(A) of the CAA requires EIA to ``provide to the
Administrator of the Environmental Protection Agency an estimate, with
respect to the following calendar year, of the volumes of
transportation fuel, biomass-based diesel, and cellulosic biofuel
projected to be sold or introduced into commerce in the United
States.'' EIA provided these estimates to EPA on October 9, 2019.\47\
With regard to domestically produced cellulosic ethanol, the EIA
estimated that the available volume in 2020 would be 7 million gallons.
In its letter, EIA did not identify the facilities on which their
estimate of liquid cellulosic biofuel production was based. EIA did,
however, indicate in the letter that it only included domestic
production of cellulosic ethanol in their projections. These EIA
projections, therefore, do not include cellulosic biofuel produced by
foreign entities and imported into the U.S., nor estimates of
cellulosic diesel, cellulosic heating oil or CNG/LNG produced from
biogas, which together represent approximately 99 percent of our
projected cellulosic biofuel volume for 2020. When limiting the scope
of our projection to the companies assessed by EIA, we note that our
volume projections are similar. EPA projects approximately 5 million
gallons of cellulosic ethanol will be produced domestically in 2020.
---------------------------------------------------------------------------
\47\ Letter from Linda Capuano, EIA Administrator to Andrew
Wheeler, EPA Administrator. October 9, 2019. Available in docket
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
D. Cellulosic Biofuel Volume for 2020
1. Liquid Cellulosic Biofuel
For our 2020 liquid cellulosic biofuel projection, we use the same
general approach as we have in projecting these volumes in previous
years. We begin by first categorizing potential liquid cellulosic
biofuel producers in 2020 according to whether or not they have
achieved consistent commercial scale production of cellulosic biofuel
to date. We refer to these facilities as consistent producers and new
producers, respectively. Next, we define a range of likely production
volumes for 2020 for each group of companies. Finally, we use a
percentile value to project from the established range a single
projected production volume for each group of companies in 2020. As in
the 2018 and 2019 final rules, we calculated percentile values for each
group of companies based on the past performance of each group relative
to our projected production ranges. This methodology is briefly
described in this section and is described in detail in memoranda to
the docket.\48\
---------------------------------------------------------------------------
\48\ ``December 2019 Liquid Cellulosic Biofuel Projections for
2020 CBI'' and ``Calculating the Percentile Values Used to Project
Liquid Cellulosic Biofuel Production for the 2020 FRM,'' memorandums
from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
We first separate the list of potential producers of cellulosic
biofuel (listed in Table III.B.4-1) into two groups according to
whether the facilities have achieved consistent commercial-scale
production and cellulosic biofuel RIN generation. We next defined a
range of likely production volumes for each group of potential
cellulosic biofuel producers. The low end of the range for each group
of producers reflects actual RIN generation data over the last 12
months for which data were available at the time our technical
assessment was completed (October 2018-September 2019).\49\ For
potential producers that have not yet generated any cellulosic RINs,
the low end of the range is zero. For the high end of the range, we
considered a variety of factors, including the expected start-up date
and ramp-up period, facility capacity, and the number of RINs the
producer expects to generate in 2020.\50\ The projected range for each
group of companies is shown in Tables III.D.1-1 and III.D.1-2.\51\
---------------------------------------------------------------------------
\49\ Consistent with previous years, we have considered whether
there is reason to believe any of the facilities considered as
potential cellulosic biofuel producers for 2020 is likely to produce
a smaller volume of cellulosic biofuel in 2020 than in the previous
12 months for which data are available. At this time, EPA is not
aware of any information that would indicate lower production in
2020 from any facility considered than in the previous 12 months for
which data are available. Despite generating cellulosic RINs in
previous years Poet-DSM's facility has not been included in our
projection of cellulosic biofuel production in 2020 after announcing
their plans to suspend commercial production at this facility.
\50\ As in our 2015-2019 projections, EPA calculated a high end
of the range for each facility (or group of facilities) based on the
expected start-up date and a six-month straight-line ramp-up period.
The high end of the range for each facility (or group of facilities)
is equal to the value calculated by EPA using this methodology, or
the number of RINs the producer expects to generate in 2020,
whichever is lower.
\51\ More information on the data and methods EPA used to
calculate each of the ranges in these tables in contained in
``December 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI''
memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-
0136. We have not shown the projected ranges for each individual
company. This is because the high end of the range for some of these
companies are based on the company's production projections, which
they consider confidential business information (CBI). Additionally,
the low end of the range for facilities that have achieved
consistent commercial scale production is based on actual RIN
generation data in the most recent 12 months, which is also claimed
as CBI.
Table III.D.1-1--2020 Production Ranges for New Producers of Liquid
Cellulosic Biofuel
[Million ethanol-equivalent gallons]
------------------------------------------------------------------------
Low end of the High end of the
Companies included range range a
------------------------------------------------------------------------
Enerkem, Ensyn (Port Cartier 0 30
facility), BioEnergy, Red Rock
Biofuels.............................
------------------------------------------------------------------------
a Rounded to the nearest million gallons.
[[Page 7028]]
Table III.D.1-2--2020 Production Ranges for Consistent Producers of
Liquid Cellulosic Biofuel
[Million ethanol-equivalent gallons]
------------------------------------------------------------------------
Low end of the High end of the
Companies included range a range b
------------------------------------------------------------------------
Facilities using Edeniq's technology 10 36
(registered facilities), Ensyn
(Renfrew facility), GranBio, QCCP/
Syngenta, Raizen.....................
------------------------------------------------------------------------
a Rounded to the nearest million gallons.
After defining likely production ranges for each group of
companies, we next determined the percentile values to use in
projecting a production volume for each group of companies. We
calculated the percentile values using actual production data from 2016
through 2019.\52\ The first full year in which EPA used the current
methodology for developing the range potential production volumes for
each company was 2016, while 2019 is the most recent year for which we
have data.
---------------------------------------------------------------------------
\52\ To calculate the percentile value that would have resulted
in a projection equal to actual production for 2019 we projected
actual liquid cellulosic biofuel production for 2019 using data
through September 2019 and an updated projection of liquid
cellulosic biofuel production for October-December 2019.
---------------------------------------------------------------------------
For each group of companies and for each year from 2016-2019, Table
III.C.1-3 shows the projected ranges for liquid cellulosic biofuel
production (from the 2014-16, 2017, 2018, and 2019 final rules), actual
production, and the percentile values that would have resulted in a
projection equal to the actual production volume.
Table III.D.1-3--Projected and Actual Liquid Cellulosic Biofuel Production in 2016-2019
[Million gallons]
----------------------------------------------------------------------------------------------------------------
Actual
Low end of the High end of production Actual
range the range \53\ percentile
----------------------------------------------------------------------------------------------------------------
New Producers \54\
----------------------------------------------------------------------------------------------------------------
2016............................................ 0 76 1.06 1st
2017............................................ 0 33 8.79 27th
2018............................................ 0 47 2.87 6th
2019............................................ 0 10 0.00 0th
Average a....................................... N/A N/A N/A 9th
----------------------------------------------------------------------------------------------------------------
Consistent Producers \55\
----------------------------------------------------------------------------------------------------------------
2016............................................ 2 5 3.28 43rd
2017............................................ 3.5 7 3.02 -14th
2018............................................ 7 24 7.74 4th
2019............................................ 14 44 15.51 5th
Average a....................................... N/A N/A N/A 10th
----------------------------------------------------------------------------------------------------------------
a We have not averaged the low and high ends of the ranges, or actual production, as we believe it is more
appropriate to average the actual percentiles from 2016-2019 rather than calculating a percentile value for
2016-2019 in aggregate. This approach gives equal weight to the accuracy of our projections for each year from
2016-2019, rather than allowing the average percentiles calculated to be dominated by years with greater
projected volumes.
Based upon this analysis, EPA has projected cellulosic biofuel
production from new producers at the 9th percentile of the calculated
range and from consistent producers at the 10th percentile.\56\ These
percentiles are calculated by averaging the percentiles that would have
produced cellulosic biofuel projections equal to the volumes produced
by each group of companies in 2016-2019. Prior to 2016, EPA used
different methodologies to project available volumes of cellulosic
biofuel and thus believes it inappropriate to calculate percentile
values based on projections from those years.\57\
---------------------------------------------------------------------------
\53\ Actual production is calculated by subtracting RINs retired
for any reason other than compliance with the RFS standards from the
total number of cellulosic RINs generated.
\54\ Companies characterized as new producers in the 2014-2016,
2017, 2018, and 2019 final rules were as follows: Abengoa (2016),
CoolPlanet (2016), DuPont (2016, 2017), Edeniq (2016, 2017), Enerkem
(2018, 2019), Ensyn Port Cartier (2018, 2019), GranBio (2016, 2017),
IneosBio (2016), and Poet (2016, 2017).
\55\ Companies characterized as consistent producers in the
2014-2016, 2017, 2018, and 2019 final rules were as follows: Edeniq
Active Facilities (2018, 2019), Ensyn Renfrew (2016-2019), GranBio
(2018, 2019), Poet (2018, 2019), Quad County Corn Processors/
Syngenta (2016-2019), and Raizen (2019).
\56\ For more detail on the calculation of the percentile values
used in this final rule see ``Calculating the Percentile Values Used
to Project Liquid Cellulosic Biofuel Production for 2020 FRM,''
available in EPA docket EPA-HQ-OAR-2019-0136.
\57\ EPA used a similar projection methodology for 2015 as in
2016-2018, however we only projected cellulosic biofuel production
volume for the final 3 months of the year, as actual production data
were available for the first 9 months. We do not believe it is
appropriate to consider data from a year for which 9 months of the
data were known at the time the projection was made in determining
the percentile values used to project volume over a full year.
---------------------------------------------------------------------------
We then used these percentile values, together with the ranges
determined for each group of companies discussed above, to project a
volume for each group of companies in 2020. These calculations are
summarized in Table III.D.1-4.
[[Page 7029]]
Table III.D.1-4--Projected Volume of Liquid Cellulosic Biofuel in 2020
[Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
High end of
Low end of the the range a Percentile Projected
range a volume a
----------------------------------------------------------------------------------------------------------------
Liquid Cellulosic Biofuel Producers; Producers 0 30 9th 3
without Consistent Commercial Scale Production.
Liquid Cellulosic Biofuel Producers; Producers 10 36 10th 13
with Consistent Commercial Scale Production....
---------------------------------------------------------------
Total....................................... N/A N/A N/A b 15
----------------------------------------------------------------------------------------------------------------
a Volumes rounded to the nearest million gallons.
b Volumes do not add due to rounding.
2. CNG/LNG Derived From Biogas
For 2020, EPA is using the same industry wide projection approach
as used for 2018 and 2019 based on a year-over-year growth rate to
project production of CNG/LNG derived from biogas used as
transportation fuel.\58\ EPA calculated the year-over-year growth rate
in CNG/LNG derived from biogas by comparing RIN generation from October
2018 to September 2019 (the most recent 12 months for which data are
available) to RIN generation in the 12 months that immediately precede
this time period (October 2017 to September 2018). The growth rate
calculated using this data is 37.9 percent.\59\ These RIN generation
volumes are shown in Table III.D.2-1.
---------------------------------------------------------------------------
\58\ Historically RIN generation for CNG/LNG derived from biogas
has increased each year. It is possible, however, that RIN
generation for these fuels in the most recent 12 months for which
data are available could be lower than the preceding 12 months. We
believe our methodology accounts for this possibility. In such a
case, the calculated rate of growth would be negative.
\59\ This growth rate is higher than the growth rates used to
project CNG/LNG volumes in the 2019 final rule (29.0%, see 83 FR
63717, December 11, 2018) and the 2018 final rule (21.6%, see 82 FR
58502, December 12, 2017).
Table III.D.2-1--Generation of Cellulosic Biofuel RINs for CNG/LNG Derived From Biogas
[Million gallons] \60\
----------------------------------------------------------------------------------------------------------------
RIN generation (October 2017-September RIN generation (October 2018-September
2018) 2019) Year-over-year increase
----------------------------------------------------------------------------------------------------------------
278,134,565 383,605,247 37.9%
----------------------------------------------------------------------------------------------------------------
EPA then applied this 37.9 percent year-over-year growth rate to
the total number of 2018 cellulosic RINs generated and available for
compliance for CNG/LNG. This methodology results in a projection of
576.8 million gallons of CNG/LNG derived from biogas in 2020. In this
rule, as in the 2018 and 2019 final rules, we are again applying the
calculated year-over-year rate of growth to the volume of CNG/LNG
actually supplied in 2018 (taking into account actual RIN generation as
well as RINs retired for reasons other than compliance with the annual
volume obligations) to provide an updated projection of the production
of these fuels in 2019, and then applying the rate of growth to this
updated 2019 projection to project the production of these fuels in
2020.\61\
---------------------------------------------------------------------------
\60\ Further detail on the data used to calculate each of these
numbers in this table, as well as the projected volume of CNG/LNG
derived from biogas used as transportation fuel in 2020 can be found
in ``December 2019 Assessment of Cellulosic Biofuel Production from
Biogas (2020)'' memorandum from Dallas Burkholder to EPA Docket PA-
HQ-OAR-2019-0136.
\61\ To calculate this value, EPA multiplied the number of 2018
RINs generated and available for compliance for CNG/LNG derived from
biogas (303.2 million), by 1.379 (representing a 37.9 percent year-
over-year increase) to project production of CNG/LNG in 2019, and
multiplied this number (418.2 million RINs) by 1.379 again to
project production of CNG/LNG in 2020.
---------------------------------------------------------------------------
We believe that projecting the production of CNG/LNG derived from
biogas in this manner appropriately takes into consideration the actual
recent rate of growth of this industry, and that this growth rate
accounts for both the potential for future growth and the challenges
associated with increasing RIN generation from these fuels in future
years. This methodology may not be appropriate to use as the projected
volume of CNG/LNG derived from biogas approaches the total volume of
CNG/LNG that is used as transportation fuel, as RINs can be generated
only for CNG/LNG used as transportation fuel. We do not believe that
this is yet a constraint as our projection for 2020 is below the total
volume of CNG/LNG that is currently used as transportation fuel.\62\
---------------------------------------------------------------------------
\62\ EPA is aware of several estimates for the quantity of CNG/
LNG that will be used as transportation fuel in 2020. As discussed
in a paper prepared by Bates White for the Coalition for Renewable
Gas (``Renewable Natural Gas Supply and Demand for Transportation.''
Bates White Economic Consulting, April 5, 2019) these estimates
range from nearly 600 million ethanol-equivalent gallons in 2020
(February 2019 STEO) to over 1.5 billion gallons (Fuels Institute--
US Share). As discussed in further detail in a memorandum to the
docket (``December 2019 Assessment of Cellulosic Biofuel Production
from Biogas (2020)'' memorandum from Dallas Burkholder to EPA Docket
EPA-HQ-OAR-2019-0136) we believe the higher projections are likely
to be more accurate. Thus, the volume of CNG/LNG used as
transportation fuel would not appear to constrain the number of RINs
generated for this fuel in 2020.
---------------------------------------------------------------------------
3. Total Cellulosic Biofuel in 2020
After projecting production of cellulosic biofuel from liquid
cellulosic biofuel production facilities and producers of CNG/LNG
derived from biogas, EPA combined these projections to project total
cellulosic biofuel production for 2020. These projections are shown in
Table III.D.3-1. Using the methodologies described in this section, we
project that 0.59 billion ethanol-equivalent gallons of qualifying
cellulosic biofuel will be produced in 2020. We believe that projecting
overall production in 2020 in the manner described above results in a
neutral estimate (neither biased to produce a projection that is too
high nor too low) of likely cellulosic biofuel production in 2020.
[[Page 7030]]
Table III.D.3-1--Projected Volume of Cellulosic Biofuel in 2020
------------------------------------------------------------------------
Projected
volume a
------------------------------------------------------------------------
Liquid Cellulosic Biofuel Producers; Producers without 3
Consistent Commercial Scale Production (million
gallons)...............................................
Liquid Cellulosic Biofuel Producers; Producers with 13
Consistent Commercial Scale Production (million
gallons)...............................................
CNG/LNG Derived from Biogas (million gallons)........... 577
---------------
Total (billion gallons)............................. 0.59
------------------------------------------------------------------------
a Rounded to the nearest million gallons.
Unlike in previous years, we have rounded the final projected
volume of cellulosic biofuel to the nearest 10 million gallons as
proposed. This is consistent with the volumes in the tables containing
the statutory volume targets for cellulosic biofuel through 2022, which
also specify volumes to no more than the nearest 10 million gallons
(and in many cases only to the nearest 100 million gallons). While in
previous years we have rounded the required cellulosic biofuel volume
to the nearest million gallon, the projected volume of cellulosic
biofuel has grown such that this level of precision is unnecessary, and
likely unfounded. By rounding to the nearest 10 million gallons the
total projected volume of cellulosic biofuel is affected in the most
extreme case by only 5 million gallons, or approximately 1 percent of
the total projected volume. The uncertainty in the projected volume of
cellulosic biofuel is significantly higher than any error introduced by
rounding the projected volume to the nearest 10 million gallons.
IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020
The national volume targets for advanced biofuel and total
renewable fuel to be used under the RFS program each year through 2022
are specified in CAA section 211(o)(2)(B)(i)(I) and (II). Congress set
annual renewable fuel volume targets that envisioned growth at a pace
that far exceeded historical growth and, for years after 2011,
prioritized that growth as occurring principally in advanced biofuels
(contrary to previous growth patterns where most growth was in
conventional renewable fuel). Congressional intent is evident in the
fact that the implied statutory volume requirement for conventional
renewable fuel is 15 billion gallons for all years after 2014, while
the advanced biofuel volume requirements, driven largely by growth in
cellulosic biofuel, continue to grow each year through 2022 to a total
of 21 billion gallons. Early growth in conventional renewable fuels was
expected to provide a bridge to the new, more beneficial cellulosic
biofuels in the later years.\63\
---------------------------------------------------------------------------
\63\ See, for instance, comments from Growth Energy where they
note that `` . . . producers of starch ethanol . . . are leading
investors in cellulosic biofuels, which may be derived from corn.''
Page 31 of ``Comments from Growth Energy on proposed 2018
standards,'' available in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
Due to a projected shortfall in the availability of cellulosic
biofuel, and consistent with our long-held interpretation that the
cellulosic waiver authority is best interpreted to provide equal
reductions to advanced biofuel and total renewable fuel volumes, we are
reducing the statutory volume targets for both advanced biofuel and
total renewable fuel for 2020 by the maximum amount permitted under the
cellulosic waiver authority, 9.91 billion gallons. Section IV.A
explains the volumetric limitation on our use of the cellulosic waiver
authority to reduce advanced biofuel and total renewable fuel volumes.
Section IV.B presents our technical analysis of the reasonably
attainable and attainable volumes of advanced biofuel. Sections IV.C
and IV.D further explain our decision to exercise the maximum
discretion available under the cellulosic waiver authority to reduce
advanced biofuel and total renewable fuel, respectively.
To begin, we have evaluated the capabilities of the market and are
making a finding that the 15.0 billion gallons specified in the statute
for advanced biofuel cannot be reached in 2020. This is primarily due
to the expected continued shortfall in cellulosic biofuel; production
of this fuel type has consistently fallen short of the statutory
targets by 90 percent or more, and as described in Section III, we
project that it will fall far short of the statutory target of 10.5
billion gallons in 2020. For this and other reasons described in this
section we are reducing the advanced biofuel statutory target by 9.91
billion gallons for 2020.
In previous years when we have used the cellulosic waiver
authority, we have determined the extent to which we should reduce
advanced biofuel volumes by considering a number of different factors
under the broad discretion which that authority provides, including:
The availability of advanced biofuels (e.g., historic data on
domestic supply, expiration of the biodiesel blenders' tax credit,
potential imports of biodiesel in light of the Commerce Department's
determination on tariffs on biodiesel imports from Argentina and
Indonesia, potential imports of sugarcane ethanol, and anticipated
changes in the production of feedstocks for advanced biodiesel and
renewable diesel)
The energy security and greenhouse gas (GHG) impacts of
advanced biofuels
The availability of carryover RINs
The intent of Congress as reflected in the statutory volumes
tables to substantially increase the use of advanced biofuels over time
Increased costs associated with the use of advanced biofuels,
and
The increasing likelihood of adverse unintended impacts
associated with use of advanced biofuel volumes achieved through
diversion of foreign fuels or substitution of advanced feedstocks from
other uses to biofuel production.
Before the 2018 standards were set, the consideration of these
factors led us to conclude that it was appropriate to set the advanced
biofuel standard in a manner that would allow the partial backfilling
of missing cellulosic volumes with non-cellulosic advanced
biofuels.\64\ In the 2018 and 2019 standards final rules, we concluded
that partial backfilling of missing cellulosic biofuel volumes with
advanced biofuel was not warranted, primarily due to a shortfall in
reasonably attainable volumes of advanced biofuels, high costs, the
potential for feedstock switching and/or foreign fuel diversion which
could compromise GHG benefits and disrupt markets, and an interest in
preserving the existing carryover RIN bank.65 66
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\64\ For instance, see 81 FR 89750 (December 12, 2016).
\65\ See 82 FR 58504 (December 12, 2017).
\66\ See 83 FR 63719 (December 11, 2018).
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[[Page 7031]]
For 2020, we have determined that the concerns surrounding partial
backfilling of missing cellulosic biofuel with advanced biofuel remain
valid. As a result, we are reducing the statutory volume target for
advanced biofuel by the same amount as the reduction in cellulosic
biofuel. This results in the non-cellulosic component of the advanced
biofuel volume requirement being equal to 4.50 billion gallons in 2020,
which is the same as the implied statutory volume requirement for non-
cellulosic advanced biofuel for 2020.
The impact of our exercise of the cellulosic waiver authority is
that after waiving the statutory volume target for cellulosic biofuel
down to the projected available level, and then reducing the statutory
volume target for advanced biofuel by the same amount, the resulting
volume requirement for advanced biofuel for 2020 is 5.09 billion
gallons. This volume requirement is 170 million gallons more than the
applicable volume used to derive the 2019 percentage standard.
Furthermore, after applying the same reduction to the statutory volume
target for total renewable fuel, the volume requirement for total
renewable fuel is also 170 million gallons more than the applicable
volume used to derive the 2019 percentage standard. These increases are
entirely attributable to a 170 million gallon increase in the
cellulosic biofuel volume requirement. The implied volumes of non-
cellulosic advanced biofuel and conventional renewable fuel will remain
the same as in 2019 at 4.5 and 15 billion gallons respectively.
A. Volumetric Limitation on Use of the Cellulosic Waiver Authority
As described in Section II.A, when making reductions in advanced
biofuel and total renewable fuel under the cellulosic waiver authority,
the statute limits those reductions to no more than the reduction in
cellulosic biofuel. As described in Section III.C, we are establishing
a 2020 applicable volume for cellulosic biofuel of 590 million gallons,
representing a reduction of 9,910 million gallons from the statutory
target of 10,500 million gallons. As a result, 9,910 million gallons is
the maximum volume reduction for advanced biofuel and total renewable
fuel that is permissible using the cellulosic waiver authority. Use of
the cellulosic waiver authority to this maximum extent would result in
volumes of 5.09 and 20.09 billion gallons for advanced biofuel and
total renewable fuel, respectively.
Table IV.A-1--Lowest Permissible Volumes Using Only the Cellulosic
Waiver Authority
[Million gallons]
------------------------------------------------------------------------
Advanced Total renewable
biofuel fuel
------------------------------------------------------------------------
Statutory target....................... 15,000 30,000
Maximum reduction permitted under the 9,910 9,910
cellulosic waiver authority...........
Lowest 2020 volume requirement 5,090 20,090
permitted using only the cellulosic
waiver authority......................
------------------------------------------------------------------------
We are authorized under the cellulosic waiver authority to reduce
the advanced biofuel and total renewable fuel volumes ``by the same or
a lesser'' amount as the reduction in the cellulosic biofuel
volume.\67\ As discussed in Section II.A, EPA has broad discretion in
using the cellulosic waiver authority in instances where its use is
authorized under the statute, since Congress did not specify factors
that EPA must consider in determining whether to use the authority to
reduce advanced biofuel or total renewable fuel, nor what the
appropriate volume reductions (within the range permitted by statute)
should be. Thus, we have the authority to set the 2020 advanced biofuel
volume requirement at a level that is designed to partially backfill
for the shortfall in cellulosic biofuel. However, as discussed below,
we do not believe this would be appropriate for 2020.
---------------------------------------------------------------------------
\67\ CAA section 211(o)(7)(D)(i).
---------------------------------------------------------------------------
B. Attainable Volumes of Advanced Biofuel
We have evaluated whether it would be appropriate to require 5.09
billion ethanol-equivalent gallons of advanced biofuel for 2020. In
doing so, we have considered both attainable and reasonably attainable
volumes of advanced biofuel to inform our exercise of the cellulosic
\68\ waiver authority. As we explained in the 2019 final rule, both
``reasonably attainable'' and ``attainable'' are terms of art defined
by EPA.\69\ Volumes described as ``reasonably attainable'' are those
that can be reached with minimal market disruptions, increased costs,
reduced GHG benefits, and diversion of advanced biofuels or advanced
biofuel feedstocks from existing uses. Volumes described as
``attainable,'' in contrast, are those we believe can be reached but
would likely result in market disruption, higher costs, and/or reduced
GHG benefits. Neither ``reasonably attainable'' nor ``attainable'' are
meant to convey the ``maximum achievable'' level, which, as we
explained in the 2017 final rule, we do not consider to be an
appropriate target under the cellulosic waiver authority.\70\ Finally,
we note that our assessments of the ``reasonably attainable'' and
``attainable'' volumes of non-cellulosic advanced biofuels are not
intended to be as exacting as our projection of cellulosic biofuel
production, described in Section III of this rule.\71\
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\68\ 83 FR 63704, 63721 (December 11, 2019).
\69\ Our consideration of ``reasonably attainable'' volumes is
not intended to imply that ``attainable'' volumes are unreasonable
or otherwise inappropriate. As we explain in this section, we
believe that an advanced biofuel volume of 5.09 billion gallons,
although not reasonably attainable, is attainable, and that
establishing such volume is an appropriate exercise of our
cellulosic waiver authority.
\70\ 81 FR 89762 (December 12, 2016). The maximum achievable
volume may be relevant to our consideration of whether to exercise
the general waiver authority on the basis of inadequate domestic
supply. However, for 2020, we have determined that after exercising
our cellulosic waiver authority to the full extent permitted, the
resulting advanced biofuel volume is attainable. Therefore, further
reductions using the general waiver authority on the basis of
inadequate domestic supply are not necessary.
\71\ The statute directs EPA to lower the cellulosic biofuel
volume to the projected production level where that level falls
short of the statutory volume. Under API v. EPA, 706 F.3d 474, 479-
80 (D.C. Cir. 2013), we must project this production level with
neutral aim at accuracy, that is, make a technical determination
about the market's ability to produce cellulosic biofuels. By
contrast, the discretionary portion of the cellulosic waiver
authority does not explicitly require EPA to project the
availability of advanced biofuels, but instead confers broad
discretion on EPA. Moreover, while we have chosen to estimate
reasonably attainable and attainable volumes of advanced biofuel,
these volumes do not equate to projected production alone. Rather,
in exercising the discretionary portion of the cellulosic waiver
authority, we also consider a range of policy factors--such as
costs, greenhouse gas emissions, energy security, market
disruptions, etc., as described throughout this section.
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[[Page 7032]]
As in prior rulemakings, we begin by considering what volumes of
advanced biofuels are reasonably attainable. In ACE, the Court noted
that in assessing what volumes are ``reasonably attainable,'' EPA had
considered the availability of feedstocks, domestic production
capacity, imports, and market capacity to produce, distribute, and
consume renewable fuel.\72\ These considerations include both demand-
side and supply-side factors.\73\ We are taking a similar approach for
2020. We are establishing the advanced biofuel volume requirement at a
level that takes into consideration both the benefits and drawbacks of
an increase in the implied non-cellulosic advanced biofuel volume
requirement, as well as the ability of the market to make such
increased volumes available.
---------------------------------------------------------------------------
\72\ See ACE, 864 F.3d at 735-36.
\73\ See id. at 730-35.
---------------------------------------------------------------------------
Our individual assessments of reasonably attainable volumes of each
type of advanced biofuel reflect this approach. As discussed in further
detail in this section, we find that 70 million gallons of imported
advanced ethanol, 50 million gallons of other advanced biofuels, and
2.77 billion gallons of advanced biodiesel and renewable diesel are
reasonably attainable. Together with our projected volume of 590
million gallons of cellulosic biofuel, the sum of these volumes is 5.00
billion gallons.\74\ This is the volume of advanced biofuel that we
believe is reasonably attainable.
---------------------------------------------------------------------------
\74\ 0.07 + 0.05 + 2.77 x 1.55 + 0.59 = 5.00.
---------------------------------------------------------------------------
As described in Section IV.A above, 5.09 billion gallons is the
lowest level that we could set under the cellulosic waiver authority.
Since the volume that we have determined to be reasonably attainable--
5.00 billion gallons--is less than the lowest volume we can set under
the cellulosic waiver authority, we also have considered whether the
market can make more than 5.00 billion gallons of advanced biofuel,
notwithstanding the potential for feedstock/fuel diversions. That is,
we assess whether 5.09 billion gallons is merely ``attainable,'' as
opposed to ``reasonably attainable.'' In particular, we assess whether
additional volumes of advanced biodiesel and renewable diesel are
attainable. We conclude that 2.83 billion gallons of advanced biodiesel
and renewable diesel are attainable, notwithstanding potential
feedstock/fuel diversions. This quantity of advanced biodiesel and
renewable diesel, together with the cellulosic biofuel, sugarcane
ethanol, and other advanced biofuels described above, will enable the
market to make available 5.09 billion gallons of advanced biofuels.
1. Imported Sugarcane Ethanol
The predominant available source of advanced biofuel other than
cellulosic biofuel and BBD has historically been imported sugarcane
ethanol. Imported sugarcane ethanol from Brazil is the predominant form
of imported ethanol and the only significant source of imported
advanced ethanol. In setting the 2019 standards, we estimated that 100
million gallons of imported sugarcane ethanol would be reasonably
attainable.\75\ This was based on a combination of data from recent
years demonstrating relatively low import volumes and older data
indicating that higher volumes were possible. We also noted the high
variability in ethanol import volumes in the past (including of
Brazilian sugarcane ethanol), increasing gasoline consumption in
Brazil, and variability in Brazilian production of sugar as reasons
that it would be inappropriate to assume that sugarcane ethanol imports
would reach the much higher levels suggested by some stakeholders.
---------------------------------------------------------------------------
\75\ 83 FR 63704 (December 11, 2018).
---------------------------------------------------------------------------
At the time of the 2019 standards final rule, we used available
data from a portion of 2018 to estimate that import volumes of
sugarcane ethanol were likely to fall significantly below the 200
million gallons we had assumed when we set the 2018 standards. Since
the 2019 final rule, new data reveals a continued trend of low imports.
Specifically, import data for all of 2018 is now available and
indicates that imports of sugarcane ethanol reached just 54 million
gallons.
[[Page 7033]]
[GRAPHIC] [TIFF OMITTED] TR06FE20.001
Data for 2019 through August indicate that advanced ethanol imports
reached 95 million gallons. While we cannot project precisely what
total import volumes will be by the end of 2019, as a first
approximation is may be reasonable to assume that the monthly rate of
import is consistent throughout the year. If so, then total 2019
imports could be 143 million gallons.
However, there is little evidence that the increase potentially
exhibited in 2019 would continue into 2020 as there is no consistent
upward or downward trend after 2013. Moreover, several factors create
disincentives for increasing imports above the levels in recent years,
including the E10 blendwall, the potential existence of a recurring tax
credit for biodiesel and renewable diesel with which sugarcane ethanol
competes within the advanced biofuel category, and the fact that
imported sugarcane ethanol typically costs more than corn ethanol.\76\
As a result of these factors and the lower levels that have occurred in
recent years, we believe it would be appropriate to reduce the expected
volume of imported sugarcane ethanol below 100 million gallons.
---------------------------------------------------------------------------
\76\ The difference between D5 and D6 RIN prices can also
influence the relative attractiveness to consumers of advanced
ethanol compared to conventional ethanol. However, there has been
considerable variability in this particular RIN price difference
over the last few years.
---------------------------------------------------------------------------
Imports of sugarcane ethanol appear to have stabilized in the 2014
to 2018 timeframe in comparison to previous years. The average for
these years is 67 million gallons. Due to the difficulty in precisely
projecting future import volumes as described further below, we believe
that a rounded value of 70 million gallons would be more appropriate
and thus we use 70 million gallons of imported sugarcane ethanol for
the purposes of projecting reasonably attainable volumes of advanced
biofuel for 2020. We believe the volume of fuel imported in previous
years is a reasonable way to project the reasonably attainable volume
of sugarcane ethanol in 2020.
In the July 29 proposal, we projected that 60 million gallons of
imported sugarcane ethanol would be available in 2020. Our revised
estimate of 70 million gallons reflects updated data on 2018 imports as
well as a more robust quantitative approach to calculating recent
actual imports.
We note that the future projection of imports of sugarcane ethanol
is inherently imprecise and that actual imports in 2020 could be lower
or higher than 70 million gallons. Factors that could affect import
volumes include uncertainty in the Brazilian political climate, weather
and harvests in Brazil, world ethanol demand and prices, constraints
associated with the E10 blendwall in the U.S., the status of the
biodiesel tax credit which affects the economic attractiveness of
sugarcane ethanol's primary competitor, world demand for and prices of
sugar, and the cost of sugarcane ethanol relative to that of corn
ethanol. After considering these factors, and in light of the high
degree of variability in historical imports of sugarcane ethanol, we
believe that 70
[[Page 7034]]
million gallons is reasonably attainable for 2020.\77\
---------------------------------------------------------------------------
\77\ Given the relatively small volumes of sugarcane ethanol we
are projecting (approximately 1 percent of the advanced biofuel
standard), even a significant deviation in its actual availability
would likely have negligible impact on the market's ability to meet
the advanced biofuel volumes.
---------------------------------------------------------------------------
2. Other Advanced Biofuel
In addition to cellulosic biofuel, imported sugarcane ethanol, and
advanced biodiesel and renewable diesel, there are other advanced
biofuels that can be counted in the determination of reasonably
attainable volumes of advanced biofuel for 2020. These other advanced
biofuels include non-cellulosic CNG, naphtha, heating oil, and
domestically produced advanced ethanol. However, the supply of these
fuels has been relatively low in the last several years.
Table IV.B.2-1--Historical Supply of Other Advanced Biofuels
[Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
Domestic
CNG/LNG Heating oil Naphtha ethanol Total \a\
----------------------------------------------------------------------------------------------------------------
2013............................ 26 0 3 23 52
2014............................ 20 0 18 26 64
2015............................ 0 1 24 25 50
2016............................ 0 2 27 27 56
2017............................ 2 2 32 26 62
2018............................ 0 1 18 27 46
----------------------------------------------------------------------------------------------------------------
\a\ Excludes consideration of D5 renewable diesel, as this category of renewable fuel is considered as part of
biodiesel and renewable diesel as discussed in Section IV.B.3.
The significant decrease after 2014 in CNG/LNG from biogas as
advanced biofuel with a D code of 5 is due to the re-categorization in
2014 of landfill biogas from advanced (D code 5) to cellulosic (D code
3).\78\ Subsequently, total supply of these other advanced biofuels has
exhibited no consistent trend during 2015 to 2018. The average during
those four years was 54 million gallons. However, due to the high
variability, and consistent with the approach we are taking for
estimating volumes of imported sugarcane ethanol, we believe that this
average should be rounded to the nearest 10 million gallons. As a
result, we have used 50 million gallons to represent other advanced
biofuels in the context of estimating attainable volumes of advanced
biofuel.\79\ As with sugarcane ethanol, we have not conducted an in-
depth assessment of the volume of other advanced biofuels that could be
made available to the U.S. without diverting this fuel from other
markets. We believe the volume of fuel supplied in previous years is a
reasonable way to project the reasonably attainable volume of other
advanced biofuels in 2020.
---------------------------------------------------------------------------
\78\ 79 FR 42128 (July 18, 2014).
\79\ As with sugarcane ethanol, given the relatively small
volumes of other advanced biofuels we are projecting (approximately
1% of the advanced biofuel standard), even a significant deviation
in its actual availability would likely have negligible impact on
the market's ability to meet the advanced biofuel volumes.
---------------------------------------------------------------------------
We acknowledge that, in the July 29 proposal, we proposed using 60
million gallons of other advanced biofuel in estimating attainable
volumes of advanced biofuel. This value was based on the same data
shown in Table IV.B.2-1, but using a more qualitative approach wherein
60 million gallons was deemed representative of both historical volumes
and those that could be attained in 2020. For this final rule we have
chosen to use a mathematical approach that is consistent with the
approach we have taken for imported sugarcane ethanol, and which we
believe represents a more robust methodology for making future
projections. As the change in the projected 2020 volume of other
advanced biofuel is very small, we do not believe this change in
approach meaningfully affects the broader assessment of advanced
biofuel volumes. Moreover, we note that this final action uses a volume
of imported sugarcane ethanol that is 10 million gallons higher than
that proposed, while simultaneously using a volume of other advanced
that is 10 million gallons lower than that proposed. The net effect on
projections of advanced biofuel for both of these changes combined is
zero.
We recognize that the potential exists for additional volumes of
advanced biofuel from sources such as jet fuel, liquefied petroleum gas
(LPG), butanol, and liquefied natural gas (as distinct from CNG), as
well as non-cellulosic CNG from biogas produced in digesters. However,
since they have been produced, if at all, in only de minimis and
sporadic amounts in the past, we do not have a reasonable basis for
projecting substantial volumes from these sources in 2020.\80\
---------------------------------------------------------------------------
\80\ No RIN-generating volumes of these other advanced biofuels
were produced in 2018, and less than 1 million gallons total in
prior years.
---------------------------------------------------------------------------
3. Biodiesel and Renewable Diesel
Having projected the available volume of cellulosic biofuel, and
the reasonably attainable volumes of imported sugarcane ethanol and
``other'' advanced biofuels, we next assess the availability of
advanced biodiesel and renewable diesel by considering a wide range of
factors. First, we calculate the amount of advanced biodiesel and
renewable diesel that would be needed to meet the 5.09 billion ethanol-
equivalent gallon advanced requirement were we to exercise our maximum
discretion under the cellulosic waiver authority discussed in Section
IV.A. This calculation, shown in Table IV.B.3-1, helps inform the
exercise of our waiver authorities. Second, we consider the historical
availability of these fuels, including the impacts of biodiesel tax
policy and tariffs. Third, we consider other factors that could
potentially limit the availability of these fuels including the
production capacity of advanced biodiesel and renewable diesel
production facilities, and the ability for the market to distribute and
use these fuels. Fourth, we assess the availability of advanced
feedstocks. As part of this analysis, we consider the volume of
advanced biodiesel and renewable diesel that can be made available with
minimal diversions of advanced feedstocks and biofuels from existing
uses, i.e., the reasonably attainable volume of advanced biodiesel and
renewable diesel. We calculate this volume based on our projection of
growth in qualifying feedstocks and on the reasonably attainable volume
calculated in the 2019 final rule. Fifth, we consider how changes to
the import and export of advanced biodiesel and
[[Page 7035]]
renewable diesel could impact the available volume of these fuels.
These analyses support three key findings. First, were EPA to
exercise the cellulosic waiver authority to the maximum extent, we
would require an advanced biofuel volume of 5.09 billion ethanol-
equivalent gallons, of which we estimate 4.37 billion ethanol-
equivalent gallons (2.83 billion actual gallons of biodiesel and
renewable diesel) would be met by advanced biodiesel and renewable
diesel. Second, the reasonably attainable volume of advanced biodiesel
and renewable diesel, which can be achieved with minimal diversions of
advanced feedstocks and biofuels (2.77 billion gallons) is slightly
lower than this volume. This finding, together with the high cost of
advanced biofuels, supports our decision to exercise the cellulosic
waiver authority to the maximum extent and not to permit backfilling of
missing cellulosic volumes with additional advanced biofuels. Third,
2.83 billion gallons of advanced biodiesel and renewable diesel are
attainable by the market. These findings, together with additional
discussions in the RTC document and docket memoranda, supports our
decisions to neither require the use of additional volumes of advanced
biofuel to backfill for the shortfall in cellulosic biofuel nor to
further waive volumes under the general waiver authority.\81\
---------------------------------------------------------------------------
\81\ We note that we have not attempted to determine the maximum
achievable volume of these fuels. While the maximum achievable
volume of advanced biodiesel and renewable diesel in 2020 is likely
greater than 2.83 billion gallons we do not believe it would be
appropriate to require a greater volume of these fuels due to the
high cost and increased likelihood of adverse unintended impacts
associated with these fuels.
---------------------------------------------------------------------------
a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve
Advanced Biofuel Volume
We begin by calculating the volume of advanced biodiesel and
renewable diesel that would be needed to meet the 2020 advanced biofuel
volume were EPA to exercise the cellulosic waiver authority to the
maximum extent. This important benchmark informs EPA's consideration of
our waiver authorities, albeit as only one factor among many.
Specifically, in past annual rules where the reasonably attainable
volume of biodiesel and renewable diesel has exceeded this benchmark,
as was the case in 2017 and 2018, EPA has considered whether or not to
allow additional volumes of these fuels to backfill for missing
cellulosic biofuel volumes. By contrast, where the reasonably
attainable volume of advanced biodiesel and renewable diesel has been
less than this benchmark, as was the case in 2019, this weighs in favor
of exercising the cellulosic waiver authority to the maximum extent so
as to minimize diversions of advanced biofuels and feedstocks and the
associated harms and the need for additional volumes of high cost
advanced biofuel. Relatedly, were EPA to find that volume of advanced
biodiesel and renewable diesel needed to meet this benchmark is not
attainable, that would weigh in favor of EPA exercising its discretion
under additional waiver authorities, to the extent available, to make
further reductions to the advanced biofuel volume.
As shown in Table IV.B.3-1, were EPA to exercise the cellulosic
waiver authority to the maximum extent, the required volume of advanced
biofuel would be 5.09 billion ethanol-equivalent gallons. After
subtracting from this volume the available volume of cellulosic biofuel
and reasonably attainable volumes of imported sugarcane ethanol and
``other'' advanced biofuels, we estimate that approximately 2.83
billion gallons of advanced biodiesel and renewable diesel would be
needed to meet the 2020 advanced biofuel volume.
---------------------------------------------------------------------------
\82\ To calculate the volume of advanced biodiesel and renewable
diesel that would generate the 4.37 billion RINs needed to meet the
advanced biofuel volume EPA divided the 4.37 billion RINs by 1.55,
which is the approximate average (weighted by the volume of these
fuels expected to be produced in 2020) of the equivalence values for
biodiesel (generally 1.5) and renewable diesel (generally 1.7).
Table IV.B.3-1--Determination of Volume of Biodiesel and Renewable
Diesel Needed in 2020 To Achieve 5.09 Billion Gallons of Advanced
Biofuel
[Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------
------------------------------------------------------------------------
Target 2020 advanced biofuel volume requirement absent 5,090
any backfilling of missing cellulosic biofuel..........
Cellulosic biofuel...................................... 590
Imported sugarcane ethanol.............................. 70
Other advanced.......................................... 50
Calculated advanced biodiesel and renewable diesel 4,380\2,826
needed (ethanol-equivalent gallons/physical gallons)
\82\...................................................
------------------------------------------------------------------------
b. Historical Supply of Biodiesel and Renewable Diesel
We next consider the volumes of advanced biodiesel and renewable
diesel supplied in previous years, as well as the impacts of biodiesel
tax policy and tariffs on these volumes. A review of the volumes of
advanced biodiesel and renewable diesel used in previous years is
especially useful in projecting the potential availability of these
fuels, since there are a number of complex and inter-related factors
beyond simply total production capacity (including the availability of
advanced biodiesel and renewable diesel feedstocks,\83\ the expiration
of the biodiesel tax credit, changes to tariffs on biodiesel from
Argentina and Indonesia, import and distribution infrastructure, and
other market-based factors) that could affect the supply of advanced
biodiesel and renewable diesel. While historic data and trends alone
are insufficient to project the volumes of biodiesel and renewable
diesel that could be provided in future years, historic data can serve
as a useful reference in considering future volumes.
---------------------------------------------------------------------------
\83\ Throughout this section we refer to advanced biodiesel and
renewable diesel as well as advanced biodiesel and renewable diesel
feedstocks. In this context, advanced biodiesel and renewable diesel
refer to any biodiesel or renewable diesel for which RINs can be
generated that satisfy an obligated party's advanced biofuel
obligation (i.e., D4 or D5 RINs). While cellulosic diesel (D7) can
also contribute towards an obligated party's advanced biofuel
obligation, these fuels are discussed in Section III rather than in
this section. An advanced biodiesel or renewable feedstock refers to
any of the biodiesel, renewable diesel, jet fuel, and heating oil
feedstocks listed in Table 1 to 40 CFR 80.1426 or in petition
approvals issued pursuant to section 80.1416, that can be used to
produce fuel that qualifies for D4 or D5 RINs. These feedstocks
include, for example, soy bean oil; oil from annual cover crops; oil
from algae grown photosynthetically; biogenic waste oils/fats/
greases; non-food grade corn oil; camelina sativa oil; and canola/
rapeseed oil (See pathways F, G, and H of Table 1 to section
80.1426).
---------------------------------------------------------------------------
Past experience suggests that a high percentage of the biodiesel
and renewable diesel used in the U.S. (from both domestic production
and imports) qualifies as advanced biofuel.\84\ In
[[Page 7036]]
previous years, biodiesel and renewable diesel produced in the U.S.
have been almost exclusively advanced biofuel.\85\ Volumes of imported
biodiesel and renewable diesel, which include both advanced and
conventional biodiesel and renewable diesel, have varied significantly
from year to year, as they are impacted both by domestic and foreign
policies, as well as many economic factors. Production, import, export,
and total volumes of advanced biodiesel and renewable diesel are shown
in Table IV.B.3-2, while volumes of conventional biodiesel and
renewable diesel are shown in the following Table IV.B.3-3.
---------------------------------------------------------------------------
\84\ From 2011 through 2018 approximately 96 percent of all
biodiesel and renewable diesel supplied to the U.S. (including
domestically produced and imported biodiesel and renewable diesel)
qualified as advanced biodiesel and renewable diesel (14,214 million
gallons of the 14,869 million gallons) according to EMTS data. This
section focuses on the availability of advanced biodiesel and
renewable diesel to meet the advanced biofuel volume. For a
discussion of the availability of all biodiesel and renewable diesel
that could be used to meet the total renewable fuel volume see
``Updated market impacts of biofuels in 2020,'' memorandum from
David Korotney to docket EPA-HQ-OAR-2019-0136.
\85\ From 2011 through 2018 over 99.9 percent of all the
domestically produced biodiesel and renewable diesel supplied to the
U.S. qualified as advanced biodiesel and renewable diesel (12,268
million gallons of the 12,275 million gallons) according to EMTS
data.
\86\ For this final rule EPA reviewed the data available in EMTS
and updated historical renewable fuel production and RIN generation
data. This updated data can be found in ``Historical RIN supply as
of 8-12-19,'' memorandum from David Korotney to EPA docket EPA-HQ-
OAR-2019-0136. Tables in this final rule that contain historical
data (such as Tables IV.B.3-2, IV.B.3-3, VI.B.1-1 and VI.B.1-2) have
been updated accordingly.
Table IV.B.3-2 \86\--Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2019
[Million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 2012 2013 2014 \b\ 2015 \b\ 2016 2017 2018 2019 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel................................... 969 984 1,364 1,296 1,245 1,581 1,530 1,843 1825
(Annual Change)...................................... (N/A) (+15) (+380) (-68) (-51) (+336) (-51) (+313) (-18)
Domestic Renewable Diesel............................ 59 50 112 158 174 236 251 306 531
(Annual Change)...................................... (N/A) (-9) (+62) (+46) (+16) (+62) (+15) (+55) (+225)
Imported Biodiesel................................... 43 39 153 130 261 562 462 175 246
(Annual Change)...................................... (N/A) (-4) (+114) (-23) (+131) (+301) (-100) (-287) (+71)
Imported Renewable Diesel............................ 0 28 145 130 120 165 191 178 256
(Annual Change)...................................... (N/A) (+28) (+117) (-15) (-10) (+45) (+26) (-13) (+78)
Exported Biodiesel and Renewable Diesel.............. 32 68 84 87 94 129 166 154 122
(Annual Change)...................................... (N/A) (+36) (+16) (+3) (+7) (+35) (+37) (-12) (-32)
--------------------------------------------------------------------------------------------------
Total \d\........................................ 1,039 1,033 1,690 1,627 1,706 2,415 2,268 2,348 2,736
(Annual Change).................................. (N/A) (-6) (+657) (-63) (+79) (+709) (-147) (+80) (+388)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the
RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ Data for 2019 is based on actual production and import data through September 2019, and a projection for October-December 2019. For more information
on how the volumes for 2019 were determined see ``Projecting Advanced Biofuel Production and Imports for 2019 (November 2019),'' Memorandum from
Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.
\d\ Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports.
Table IV.B.3-3--Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2019
[Million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 2012 2013 2014 \b\ 2015 \b\ 2016 2017 2018 2019 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel................................... 2 0 1 1 0 0 0 0 0
(Annual Change)...................................... (N/A) (-2) (+1) (+0) (-1) (+0) (+0) (+0) (+0)
Domestic Renewable Diesel............................ 0 0 0 0 0 0 0 0 0
(Annual Change)...................................... (N/A) (+0) (+0) (+0) (+0) (+0) (+0) (+0) (+0)
Imported Biodiesel................................... 0 0 31 52 74 113 0 0 0
(Annual Change)...................................... (N/A) (+0) (+31) (+21) (+22) (+39) (-113) (+0) (+0)
Imported Renewable Diesel............................ 0 0 70 2 87 45 2 1 0
(Annual Change)...................................... (N/A) (+0) (+70) (-68) (+85) (-42) (-43) (-1) (-1)
Exported Biodiesel and Renewable Diesel.............. 0 0 0 0 1 1 0 0 0
(Annual Change)...................................... (N/A) (+0) (+0) (+0) (+1) (+0) (-1) (+0) (+0)
--------------------------------------------------------------------------------------------------
Total \d\........................................ 2 0 102 55 160 157 2 1 0
(Annual Change).................................. (N/A) (-2) (+102) (-47) (+105) (-3) (-155) (-1) (-1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with
the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ While a significant number of D6 RINs have been generated for biodiesel and renewable diesel in 2019 in recent years nearly all of these RINs have
later been retired for reasons other than compliance with the volume obligations. Since D6 RIN prices have been relatively low in 2019 and the
biodiesel tax credit is currently not available we are not projecting any production or import of D6 biodiesel or renewable diesel in 2019.
\d\ Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports.
[[Page 7037]]
As we explained above, to meet an advanced biofuel volume of 5.09
billion ethanol-equivalent gallons we project that the market would
supply 2.83 billion gallons of advanced biodiesel and renewable diesel.
This volume (2.83 billion gallons) is approximately 90 million gallons
greater than the volume of these fuels projected to be supplied in 2019
based on data through September 2019. Since 2011, the year-over-year
changes in the volume of advanced biodiesel and renewable diesel used
in the U.S. have varied greatly, from a low of 147 million fewer
gallons from 2016 to 2017 to a high of 709 million additional gallons
from 2015 to 2016. These changes were likely influenced by multiple
factors such as the cost of biodiesel feedstocks and petroleum diesel,
the status of the biodiesel blenders tax credit, growth in marketing of
biodiesel at high volume truck stops and centrally fueled fleet
locations, demand for biodiesel and renewable diesel in other
countries, biofuel policies in both the U.S. and foreign countries, and
the volumes of renewable fuels (particularly advanced biofuels)
required by the RFS. This historical information does not indicate that
the maximum previously observed increase of 709 million gallons of
advanced biodiesel and renewable diesel would be reasonable to expect
in 2020, nor does it indicate that the low (or negative) growth rates
observed in other years would recur. Rather, these data illustrate both
the magnitude of the changes in advanced biodiesel and renewable diesel
in previous years and the significant variability in these changes.
The historic data indicates that the biodiesel tax policy in the
U.S. can have a significant impact on the volume of biodiesel and
renewable diesel used in the U.S. in any given year.\87\ While the
biodiesel blenders tax credit has applied in each year from 2010 to
2017, it has only been prospectively in effect during the calendar year
in 2011, 2013, and 2016, while other years it has been applied
retroactively. Each of the years in which the biodiesel blenders tax
credit was in effect during the calendar year (2013 and 2016) resulted
in significant increases in the volume of advanced biodiesel and
renewable diesel used in the U.S. over the previous year (656 million
gallons and 742 million gallons respectively). However, following these
large increases in 2013 and 2016, there was little to no growth in the
use of advanced biodiesel and renewable diesel in the following years.
More recent data from 2019 suggests that while the availability of the
tax credit certainly incentivizes an increasing supply of biodiesel and
renewable diesel, supply increases can also occur in the absence of the
tax credit, likely as the result of the incentives provided by the RFS
program and other economic factors. The availability of this tax credit
also provides biodiesel and renewable diesel with a competitive
advantage relative to other advanced biofuels that do not qualify for
the tax credit.\88\
---------------------------------------------------------------------------
\87\ We note that the status of the tax credit does not impact
our assessment of the reasonably attainable volume of advanced
biodiesel and renewable diesel in 2020 as that assessment is
primarily based on feedstock availability. The status of the tax
credit could potentially affect the maximum achievable volume of
these fuels, but our assessment demonstrates that 2.83 billion
gallons of advanced biodiesel and renewable diesel is attainable
whether or not the tax credit is renewed prospectively (or
retrospectively) for 2020.
\88\ For a further discussion of the impact of the tax credit on
the supply of biodiesel and renewable diesel, see the discussion
from the proposed rule (84 FR 36783, July 29, 2019).
---------------------------------------------------------------------------
Another important factor highlighted by the historic data is the
tariffs imposed by the U.S. on biodiesel imported from Argentina and
Indonesia. In December 2017 the U.S. International Trade Commission
adopted tariffs on biodiesel imported from Argentina and Indonesia.\89\
According to data from EIA,\90\ no biodiesel was imported from
Argentina or Indonesia since September 2017, after a preliminary
decision to impose tariffs on biodiesel imported from these countries
was announced in August 2017. As a result of these tariffs, total
imports of biodiesel into the U.S. were significantly lower in 2018
than they had been in 2016 and 2017. The decrease in imported biodiesel
did not, however, result in a decrease in the volume of advanced
biodiesel and renewable diesel supplied to the U.S. in 2018. Instead,
higher domestic production of advanced biodiesel and renewable diesel,
in combination with lower exported volumes of domestically produced
biodiesel, resulted in an overall increase in the volume of advanced
biodiesel and renewable diesel supplied in 2018. On July 9, 2019, the
Department of Commerce published a preliminary determination to reduce
the countervailing duty on biodiesel imported from Argentina.\91\ If
finalized this could result in increasing volumes of biodiesel imports
from Argentina in future years.
---------------------------------------------------------------------------
\89\ ``Biodiesel from Argentina and Indonesia Injures U.S.
Industry, says USITC,'' Available online at: https://www.usitc.gov/press_room/news_release/2017/er1205ll876.htm.
\90\ See ``EIA Biomass-Based Diesel Import Data'' available in
docket EPA-HQ-OAR-2019-0136.
\91\ 84 FR 32714 (July 9, 2019).
---------------------------------------------------------------------------
The historical data suggests that the 2.83 billion gallons of
advanced biodiesel and renewable diesel projected to be used to meet an
advanced biofuel volume of 5.09 billion ethanol-equivalent gallons is
attainable. This would represent a projected increase of approximately
90 million gallons from 2019 to 2020. This increase is less than the
average increase in the volume of advanced biodiesel and renewable
diesel used in the U.S. from 2011 through 2019 (212 million gallons per
year) and significantly less than the highest annual increase during
this time (742 million gallons from 2015 to 2016). We note, however,
that this assessment does not consider the sources of feedstock that
would be used to meet this increase, or the potential impacts of
supplying 2.83 billion gallons of advanced biodiesel and renewable
diesel, which are discussed in greater detail in the following
sections.
c. Consideration of Production Capacity and Distribution Infrastructure
After reviewing the historical volume of advanced biodiesel and
renewable diesel used in the U.S., EPA next considers other factors
that may impact the production, import, and use of advanced biodiesel
and renewable diesel in 2020. The production capacity of registered
advanced biodiesel and renewable diesel production facilities is highly
unlikely to limit the production of these fuels, as the total
production capacity for biodiesel and renewable diesel at registered
facilities in the U.S. (4.1 billion gallons) exceeds the volume of
these fuels that are projected to be needed to meet the advanced
biofuel volume for 2020 after exercising the cellulosic waiver
authority (2.83 billion gallons).\92\ Significant registered production
also exists internationally. Similarly, the ability for the market to
distribute and use advanced biodiesel and renewable diesel appears
unlikely constrain the growth of these fuels to a volume lower than
2.83 billion gallons. The investments required to distribute and use
this volume of biodiesel and renewable diesel are expected to be
manageable by the marketplace given the RIN value incentive, as this
volume is approximately 90 million gallons greater than the volume of
biodiesel and renewable diesel produced, imported, and used in the U.S.
in 2019. The magnitude of the increase projected
[[Page 7038]]
from 2019 to 2020 (90 million gallons) is much smaller than the
increases observed in previous years. These factors further support our
finding that 2.83 billion gallons of advanced biodiesel and renewable
diesel is attainable.
---------------------------------------------------------------------------
\92\ The production capacity of the sub-set of biodiesel and
renewable diesel producers that generated RINs in 2018 is
approximately 2.9 billion gallons. See ``Biodiesel and Renewable
Diesel Registered Capacity (March 2019)'' Memorandum from Dallas
Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
d. Consideration of the Availability of Advanced Feedstocks
We next consider the availability of advanced feedstocks that can
be used to produce advanced biodiesel and renewable diesel. This
assessment has two parts. First, we assess whether there are sufficient
advanced feedstocks to produce 2.83 billion gallons of advanced
biodiesel and renewable diesel. We find that the quantity of feedstocks
exceeds the amount needed to do so, further supporting our conclusion
that 2.83 billion gallons of advanced biodiesel and renewable diesel is
attainable. Second, we assess whether the growth in advanced feedstocks
suffices to produce 2.83 billion gallons of advanced biodiesel and
renewable diesel without diverting advanced feedstocks or biofuels from
existing uses, i.e., the reasonably attainable volume. We find that the
reasonably attainable volume falls slightly short at 2.77 billion
gallons.
We believe the most reliable source for projecting the expected
increase in virgin vegetable oils in the U.S. is USDA's World
Agricultural Supply and Demand Estimates (WASDE). At the time of our
assessment for this rule, the October 2019 version was the most current
version of the WASDE report. The October 2019 WASDE projects that
production of vegetable oil in the U.S. in the 2019/2020 market year
will be sufficient to produce approximately 3.6 billion gallons of
biodiesel and renewable diesel (including both advanced and
conventional biofuels) if the entire volume of vegetable oil was used
to produce these fuels. Additional advanced biodiesel and renewable
diesel could also be produced from waste fats, oils, and greases as
they have been in past years.\93\ Thus, the availability of domestic
vegetable oils, in combination the potential to source additional
feedstocks from waste fats, oils, and greases, supports our conclusion
that 2.83 billion gallons of advanced biodiesel and renewable diesel is
attainable.
---------------------------------------------------------------------------
\93\ See ``Projections of FOG biodiesel and renewable diesel
2015-2018,'' memorandum from David Korotney to EPA Docket, EPA-HQ-
OAR-2019-0136.
---------------------------------------------------------------------------
In addition, the global production of vegetable oil projected in
the 2019/2020 marketing year in the October 2019 WASDE would be
sufficient to produce approximately 59.3 billion gallons of biodiesel
and renewable diesel (including both advanced and conventional
biofuels).\94\ While it would not be reasonable to assume that all, or
even a significant portion, of global vegetable oil production globally
or domestically could be available to produce biodiesel or renewable
diesel supplied to the U.S. for a number of reasons,\95\ the large
global supply of vegetable oil further indicates that 2.83 billion
gallons of advanced biodiesel and renewable diesel is attainable in
2020.
---------------------------------------------------------------------------
\94\ The October 2019 WASDE projects production of vegetable
oils in 2019/2020 in the U.S. and the World to be 12.58 and 207.50
million metric tons respectively. To convert projected vegetable oil
production to potential biodiesel and renewable diesel production we
have used a conversion of 7.7 pounds of feedstock per gallon of
biodiesel or renewable diesel (World Agricultural Supply and Demand
Estimates. United States Department of Agriculture, Office of the
Chief Economist. October 10, 2019. ISSN 1554-9089). In addition,
global production of biodiesel is projected to be 44.2 billion
liters (11.7 billion gallons) in 2020 according to the July 2019
OECD-FAO Agricultural Outlook. Based on the projected production of
biodiesel by country we estimate that over 80% of this biodiesel
(all biodiesel except that produced in Columbia, Indonesia,
Malaysia, and Thailand) could qualify as advanced biofuel if the
feedstocks meet the definition of renewable biomass.
\95\ These reasons include the demand for vegetable oil in the
food, feed, and industrial markets both domestically and globally;
constraints related to the production, import, distribution, and use
of significantly higher volumes of biodiesel and renewable diesel;
and the fact that biodiesel and renewable diesel produced from much
of the vegetable oil available globally would not qualify as an
advanced biofuel under the RFS program.
---------------------------------------------------------------------------
We now turn to the reasonably attainable volume of advanced
biodiesel and renewable diesel, which we find to be 2.77 billion
gallons. This volume represents the amount of advanced biodiesel and
renewable diesel that can be supplied without relying on the diversion
of advanced biofuels and feedstocks from existing uses and the
associated harms of such diversions. We calculate this volume by
summing the reasonable attainable volume from last year's final rule
(2.61 billion gallons) with the volume that can be produced from the
projected increase in advanced feedstocks from 2019 to 2020 (159
million gallons).\96\
---------------------------------------------------------------------------
\96\ As discussed in more detail in this section, this 159
million gallons increase is projected to be comprised of 94 million
gallons from increased vegetable oil production, 17 million gallons
from distillers corn oil, and 48 million gallons from waste fats,
oils, and greases.
---------------------------------------------------------------------------
We acknowledge that an increase in the required use of advanced
biodiesel and renewable diesel could be realized through the production
or collection of additional advanced feedstocks, a diversion of
advanced feedstocks from other uses, or a diversion of advanced
biodiesel and renewable diesel from existing markets in other
countries. As already explained, the volume of advanced biodiesel and
renewable diesel and their corresponding feedstocks projected to be
produced globally exceeds the volume projected to be required in 2020
(2.83 billion gallons of advanced biodiesel and renewable diesel and
the corresponding volume of advanced feedstocks) by a significant
margin. However, we expect that increases in advanced biofuel and
renewable fuel volumes beyond those that can be produced from the
projected growth in advanced feedstock production and/or consumption
(e.g., by diverting advanced feedstocks or advanced biodiesel and
renewable diesel from existing markets and uses) would be increasingly
likely to incur adverse unintended impacts.\97\
---------------------------------------------------------------------------
\97\ The volume of advanced biodiesel and renewable diesel
projected to be used to meet the advanced biofuel volume (2.83
billion gallons) is approximately 1 billion gallons greater than the
volume of these fuels we projected would be used to meet the
advanced biofuel volume for 2022 in the 2010 RFS final rule analyses
(1.82 billion gallons). For a further discussion of this issue see
Section 4.2.2.4 of the RTC.
---------------------------------------------------------------------------
This is because of several factors, notably the potential
disruption of the current biogenic fats, oils, and greases market, the
associated cost impacts to other industries resulting from feedstock
diversion, and the potential adverse effect on lifecycle GHG emissions
and energy security associated with feedstocks for biofuel production
that would have been used for other purposes and which must then be
backfilled with other feedstocks.\98\ Similarly, increasing the supply
of biodiesel and renewable diesel to the U.S. by diverting fuel that
would otherwise have been used in other countries results in higher
lifecycle GHG emissions than if the supply of these fuels was increased
by an increased collection of waste fats and oils or increased
production of feedstocks that are byproducts of other industries,
especially if this diversion results in increased consumption of
petroleum fuels in the countries that would have otherwise consumed the
biodiesel or renewable diesel. By assessing the expected growth in the
production of advanced feedstocks, we are attempting to minimize the
incentives for the RFS program to increase the supply of advanced
[[Page 7039]]
biodiesel and renewable diesel through feedstock switching or diverting
biodiesel and renewable diesel from foreign markets to the U.S.
---------------------------------------------------------------------------
\98\ For instance, see the draft GHG assessment of palm oil
biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012). We
believe palm or petroleum-derived products would likely be used to
replace advanced biodiesel and renewable diesel diverted to the U.S.
as these products are currently the lowest cost substitutes.
---------------------------------------------------------------------------
Advanced biodiesel and renewable diesel feedstocks include both
waste oils, fats, and greases; and oils from planted crops. The
projected growth in these feedstocks is expected to be modest relative
to the volume of these feedstocks that is currently being used to
produce biodiesel and renewable diesel. Most of the waste oils, fats,
and greases that can be recovered economically are already being
recovered and used in biodiesel and renewable diesel production or for
other purposes. The availability of animal fats will likely increase
with beef, pork, and poultry production. Most of the vegetable oil used
to produce advanced biodiesel and renewable diesel that is sourced from
planted crops comes from crops primarily grown for purposes other than
providing feedstocks for biodiesel and renewable diesel, such as for
livestock feed, with the oil that is used as feedstock for renewable
fuel production a co-product.\99\ This is true for soybeans and corn,
which are the two largest sources of feedstock from planted crops used
for biodiesel production in the U.S.\100\ We do not believe that the
increased demand for soybean oil or corn oil caused by a higher 2020
advanced biofuel standard would result in an increase in soybean or
corn prices large enough to induce significant changes in agricultural
activity.\101\ However, production of these feedstocks is likely to
increase over time as crop yields, oil extraction rates, and demand for
the primary products increase.
---------------------------------------------------------------------------
\99\ For example, corn oil is a co-product of corn grown
primarily for animal feed or ethanol production, while soy and
canola are primarily grown as livestock feed.
\100\ According to EIA data 7,542 million pounds of soy bean oil
and 2,085 million pounds of corn oil were used to produce biodiesel
in the U.S. in 2018. Other significant sources of feedstock were
yellow grease (1,668 million pounds), canola oil (total volume
withheld, but monthly data suggests greater than 700 million
pounds), and white grease (618 million pounds).''Monthly Biodiesel
Production Report with Data for February 2019,'' U.S. Energy
Information Administration. April 2019.
\101\ This position is supported by several commenters,
including the American Soybean Association (EPA-HQ-OAR-2019-0136-
0177) and the Nebraska Soybean Association (EPA-HQ-OAR-2019-0136-
0117).
---------------------------------------------------------------------------
Based on the October 2019 WASDE report the projected increase in
vegetable oil production in the U.S. from the 2018/2019 marketing year
to the 2019/2020 marketing year is 0.33 million metric tons per
year.\102\ This additional quantity of vegetable oils could be used to
produce approximately 94 million additional gallons of advanced
biodiesel or renewable diesel in 2020 relative to 2019.\103\
---------------------------------------------------------------------------
\102\ U.S. vegetable oil production is projected to be 12.25
million metric tons in the 2018/2019 agricultural marketing year and
12.58 million metric tons in the 2019/2020 agricultural marketing
year.
\103\ To calculate this volume, we have used a conversion of 7.7
pounds of feedstock per gallon of biodiesel or renewable diesel.
This is based on the expected conversion of soybean oil (http://extension.missouri.edu/p/G1990), which is the largest source of
feedstock used to produce advanced biodiesel and renewable diesel.
Conversion rates for other types of vegetable oils used to produce
biodiesel and renewable diesel are similar to those for soybean oil.
---------------------------------------------------------------------------
In the 2019 final rule we also noted that the WASDE projected a
decrease in trade of both oilseeds and vegetable oils. The projected
decrease in oilseed trade was likely due to tariffs enacted by China on
soybean exports from the U.S. While the projected trade in oilseeds is
expected to increase slightly from 2018/2019 to 2019/2020, trade in
vegetable oils is projected to decrease by 0.12 million metric tons
from 2018/2019 to 2019/2020. If converted to biodiesel, this volume of
vegetable oils could be used to produce approximately 34 million
additional gallons of advanced biodiesel or renewable diesel in 2020
relative to 2019. As in the 2019 final rule, we did not include in our
projection of the reasonably attainable volumes the potential biodiesel
or renewable diesel that could theoretically be produced from the
oilseeds and vegetable oil projected to remain in the U.S. due to
changes in trade of these products. This is because any biodiesel and
renewable diesel produced from soybeans previously exported are
necessarily diverted from other uses (even if the reason for this
diversion is the tariffs, rather than the RFS program), and biodiesel
produced from these diverted feedstocks is therefore more likely to
have the adverse unintended effects as previously discussed.
In addition to virgin vegetable oils, we also expect increasing
volumes of distillers corn oil \104\ to be available for use in 2020.
The WASDE report does not project distillers corn oil production, so
EPA must use an alternative source to project the growth in the
production of this feedstock. For this final rule we use results from
the World Agricultural Economic and Environmental Services (WAEES)
model to project the growth in the production of distillers corn
oil.\105\ In assessing the likely increase in the availability of
distillers corn oil from 2019 to 2020, the authors of the WAEES model
considered the effects of an increasing adoption rate of distillers
corn oil extraction technologies at domestic ethanol production
facilities, as well as increased corn oil extraction rates enabled by
advances in this technology. The WAEES model projects that production
of distillers corn oil will increase by approximately 130 million
pounds from the 2018/2019 to the 2019/2020 agricultural marketing year.
This quantity of feedstock could be used to produce approximately 17
million gallons of advanced biodiesel or renewable diesel. We believe
it is reasonable to use these estimates from the WAEES model for these
purposes based on the projected increase in the use of corn oil
extraction and corn oil yield increases.
---------------------------------------------------------------------------
\104\ Distillers corn oil is non-food grade corn oil produced by
ethanol production facilities.
\105\ For the purposes of this rule, EPA relied on WAEES
modeling results submitted as comments by the National Biodiesel
Board on the 2020 proposed rule (Kruse, J., ``Implications of an
Alternative 2021 Biomass Based Diesel Volume Obligation for Global
Agriculture and Biofuels,'' August 26, 2019, World Agricultural
Economic and Environmental Services (WAEES)).
---------------------------------------------------------------------------
While much of the increase in advanced biodiesel and renewable
diesel feedstocks produced in the U.S. from 2019 to 2020 is expected to
come from virgin vegetable oils and distillers corn oil, increases in
the supply of other sources of advanced biodiesel and renewable diesel
feedstocks, such as biogenic waste fats, oils, and greases (FOG), could
also occur. In scenarios with increases to the advanced biofuel and
biomass-based diesel volume requirements in 2020 and 2021 the WAEES
model projects minimal increases in the volume of biodiesel produced
from total other fats and oils in the 2018/2019 and 2019/2020 marketing
years.\106\ Conversely, an assessment conducted by LMC International in
2017 and submitted in comments on our 2018 proposed rule projected that
the waste oil supply in the U.S. could increase by approximately 2.4
million metric tons from 2016 to 2022.\107\ This estimate represents a
growth rate of approximately 0.4 billion tons per year, or enough
feedstock to produce approximately 115 million gallons of biodiesel and
renewable diesel per year. This estimate, however, only accounts for
potential sources of feedstock and
[[Page 7040]]
not for the economic viability of recovering waste oils.
---------------------------------------------------------------------------
\106\ The WAEES model projects a 7 million gallon increase in
2019/2020 and a 16 million gallon increase in 2020/2021. See Kruse,
J., ``Implications of an Alternative Biomass Based Diesel Volume
Obligation for Global Agriculture and Biofuels,'' August 26, 2019,
World Agricultural Economic and Environmental Services.
\107\ LMC International. Global Waste Grease Supply. August 2017
(EPA-HQ-OAR-2017-0091-3880).
---------------------------------------------------------------------------
To project the increase in the use of biogenic FOG we used
historical data to determine the increase in the use of these
feedstocks to produce biodiesel and renewable diesel. From 2015-2018,
advanced biodiesel and renewable diesel produced from biogenic FOG
increased by an average of 48 million gallons per year.\108\ This
annual increase is higher than the increase in the use of these
feedstocks projected by the WAEES model, but lower than the potential
increase projected by LMC. We have included an additional 48 million
gallons of advanced biodiesel and renewable diesel from FOG in our
assessment of the reasonably attainable volume for 2020, consistent
with the observed annual increase in advanced biodiesel and renewable
diesel produced from these feedstocks in recent years.
---------------------------------------------------------------------------
\108\ ``Projections of FOG biodiesel and renewable diesel 2015-
2018,'' memorandum from David Korotney to EPA Docket, EPA-HQ-OAR-
2019-0136.
---------------------------------------------------------------------------
In total, we project that increases in feedstocks produced in the
U.S. are sufficient to produce approximately 159 million more gallons
of advanced biodiesel and renewable diesel in 2020 relative to 2019.
This number includes 94 million gallons from increased vegetable oil
production, 17 million gallons from increased corn oil production, and
48 million gallons from increased waste oil collection. This increase
does not include the projected 34 million gallons of biodiesel that
could be produced from the projected reduction in vegetable oil trade
since decreases in exported volumes of vegetable oils represent
feedstocks diverted from use in other countries. Our projection also
does not consider factors that could potentially affect the
availability of advanced biofuel feedstocks that could be used to
produce biodiesel or renewable diesel, such as changes in the volume of
vegetable oils used in food markets or other non-biofuel industries. In
our 2019 final rule, we determined that 2.61 billion gallons of
advanced biodiesel and renewable diesel were reasonably attainable in
2019,\109\ therefore our projection of the reasonably attainable volume
of advanced biodiesel and renewable diesel in 2020 is 2.77 billion
gallons.\110\
---------------------------------------------------------------------------
\109\ 83 FR 63704 (December 11, 2018).
\110\ We calculated the reasonably attainable volume for 2020 by
adding the projected increase in advanced feedstocks (159 million
gallons) to the reasonably attainable volume of these fuels we
projected for 2019 (2.61 billion gallons). Another possible approach
would be to add the 159-million-gallon increment in the reasonably
attainable volume to the volume we now project to be used in 2019,
2.74 billion gallons (rather than the reasonably attainable volume
we projected for 2019). This would result in a reasonably attainable
volume of 2.90 billion gallons. While this approach uses more recent
data on the availability of advanced biodiesel and renewable diesel
in 2019, it does not account for whether or not the additional use
of these fuels in 2019, beyond the reasonably attainable volume
calculated in the 2019 final rule, resulted in diversions of
advanced biofuels or feedstocks. In any event, even were we to adopt
this approach, it would make no difference to our final decision on
the volumes as (1) the difference in the calculated reasonably
attainable volume is slight, (2) the high costs of advanced
biodiesel and renewable diesel would justify exercising the maximum
cellulosic waiver in any event, and (3) the volume we are finalizing
is attainable under either approach.
---------------------------------------------------------------------------
e. Biodiesel and Renewable Diesel Imports and Exports
EPA next considered potential changes in the imports of advanced
biodiesel and renewable diesel produced in other countries. In previous
years, significant volumes of foreign produced advanced biodiesel and
renewable diesel have been supplied to markets in the U.S. (see Table
IV.B.2-1). These significant imports were likely the result of a strong
U.S. demand for advanced biodiesel and renewable diesel, supported by
the RFS standards, the low carbon fuel standard (LCFS) in California,
the biodiesel blenders tax credit, and the opportunity for imported
biodiesel and renewable diesel to realize these incentives. We have not
included the potential for increased (or decreased) volumes of imported
advanced biodiesel and renewable diesel in our projection of the
reasonably attainable volume for 2020. As discussed previously, any
increases in the import of advanced biodiesel and renewable diesel is
necessarily diverted from other markets. There is also a far higher
degree of uncertainty related to the availability and production of
advanced biodiesel and renewable diesel in foreign countries, as this
supply can be affected by a number of unpredictable factors such as the
imposition of tariffs and increased incentives for the use of these
fuels in other countries (such as tax incentives or blend mandates).
EPA also lacks the data necessary to determine the quantity of these
fuels that would otherwise be produced and used in other countries, and
thus the degree to which the RFS standards are simply diverting this
fuel from use in other countries as opposed to incentivizing additional
production.
While we do not consider changes in imports or exports of advanced
biodiesel and renewable diesel in our projection of the reasonably
attainable volume, changes to the volume of these fuels that is
imported and exported could potentially impact the attainable volume.
Imports of advanced biodiesel and renewable diesel are projected to
increase by 150 million gallons from 2018 to 2019 (from approximately
350 million gallons in 2018 to approximately 500 million gallons in
2019, see Table IV.B.3-2). At the same time, data through July 2019
suggests that the U.S. will export approximately 122 million gallons of
domestically produced biodiesel in 2019.\111\ Increased imports and/or
decreased exports of these fuels in 2020 could contribute to the market
supplying 2.83 billion gallons of advanced biodiesel and renewable
diesel. The higher volumes of imported advanced biodiesel and renewable
diesel in previous years (shown in Table IV.B.3-2) suggest that these
changes are possible, especially if the tariffs on biodiesel imported
from Argentina are reduced. Thus the potential for increased imports
and decreased exports further supports our determination that 2.83
billion gallons of advanced biodiesel and renewable diesel is
attainable.
---------------------------------------------------------------------------
\111\ Projection is based on EIA data on exports of biomass-
based diesel (biodiesel) through July 2019. For more detail on this
projection see ``Projecting Advanced Biofuel Production and Imports
for 2019 (November 2019),'' memorandum from Dallas Burkholder to EPA
docket EPA-HQ-OAR-2019-0136.
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While changes to the volumes of imports/exports of advanced
biodiesel and renewable could supply the approximately 60 million
gallon difference between the reasonably attainable volume of these
fuels (2.77 billion gallons) and the volume needed to meet an advanced
biofuel volume of 5.09 billion ethanol-equivalent gallons (2.83 billion
gallons), these changes are not without impacts. Diverting this fuel to
markets in the U.S. may be complicated as doing so would likely require
higher prices for these fuels in the U.S. to divert the fuels from
foreign markets that are presumably more profitable currently. It may
also be more difficult and costly to distribute this additional volume
of biodiesel and renewable diesel to domestic markets than the current
foreign markets. Finally, reducing advanced biodiesel and renewable
diesel exports may indirectly result in the decreased availability of
imported volumes of these fuels, as other countries seek to replace
volumes previously imported from the U.S.
f. Attainable and Reasonably Attainable Volumes of Advanced Biodiesel
and Renewable Diesel
In sum, the 2.83 billion gallons of advanced biodiesel and
renewable
[[Page 7041]]
diesel projected to be needed to achieve an advanced biofuel volume of
5.09 billion ethanol-equivalent gallons are attainable. We have reached
this conclusion based on our analysis of the above factors, including
historical supply of biodiesel and renewable diesel, the impacts of tax
policy and tariffs, production capacity and distribution
infrastructure, availability of advanced feedstocks, and imports and
exports. By contrast, we find that only 2.77 billion gallons of
advanced biodiesel and renewable diesel are reasonably attainable. This
estimate is based on our analysis of growth in qualifying feedstocks,
and represents the volume that can be supplied with minimal diversions
of advanced biofuels and feedstocks from existing uses, and the
associated harms of such diversions. These assessments support EPA's
decision to establish the advanced biofuel volume for 2020 at 5.09
billion gallons, a volume which neither requires the use of EPA's
general waiver authority nor the use of additional volumes of advanced
biofuel in place of cellulosic biofuel.
C. Volume Requirement for Advanced Biofuel
In exercising the cellulosic waiver authority for 2017 and earlier,
we determined it was appropriate to require a partial backfilling of
missing cellulosic volumes with volumes of non-cellulosic advanced
biofuel we determined to be reasonably attainable, notwithstanding the
increase in costs associated with those decisions.\112\ For the 2018
and 2019 standards, in contrast, we placed a greater emphasis on costs
in the context of balancing the various considerations, ultimately
concluding that the applicable volume requirement should be based on
the maximum reduction permitted under the cellulosic waiver authority,
effectively preventing any backfilling of missing cellulosic biofuel
with advanced biofuel. In setting the 2019 standards, we also found
that greater volumes of advanced biofuel would be attainable but did
not believe that requiring higher volumes would be appropriate as such
volumes were not reasonably attainable and would lead to diversion of
advanced feedstocks or biofuels and the associated harms.
---------------------------------------------------------------------------
\112\ See, e.g., Renewable Fuel Standards for 2014, 2015 and
2016, and the Biomass-Based Volume for 2017: Response to Comments
(EPA-420-R-15-024, November 2015), pages 628-631, available in
docket EPA-HQ-OAR-2015-0111-3671.
---------------------------------------------------------------------------
For 2020, we are following the same approach as in 2018 and 2019
and exercising the cellulosic waiver authority to reduce the advanced
biofuel requirement by the maximum extent permitted. This results in an
advanced biofuel volume of 5.09 billion gallons. This also preserves
the implied statutory volume target for non-cellulosic advanced biofuel
at 4.5 billion gallons, identical to that for 2019. As in the 2019
standards, we are taking this approach for two reasons, each of which
is an independent and sufficient justification. First, as in 2019, the
reasonably attainable volume of advanced biofuel for 2020 falls short
of the volume resulting from the maximum exercise of the cellulosic
authority. It is thus appropriate to exercise the cellulosic waiver
authority to the maximum extent to minimize the harms associated with
advanced biofuel and feedstock diversions.
Second, even if greater volumes of advanced biofuel are reasonably
attainable, the high cost of these fuels independently justifies
reducing the advanced biofuel volume for 2020 by the maximum amount
permitted under the cellulosic waiver authority. In the 2019 final rule
we presented illustrative cost projections for sugarcane ethanol and
soybean biodiesel in 2019, the two advanced biofuels that would be most
likely to provide the marginal increase in volumes of advanced biofuel
in 2019 in comparison to 2018. Sugarcane ethanol results in a cost
increase compared to gasoline that ranges from $0.39-$1.04 per ethanol-
equivalent gallon. Soybean biodiesel results in a cost increase
compared to diesel fuel that ranges from $0.74-$1.23 per ethanol-
equivalent gallon. Thus, the cost of these renewable fuels is high as
compared to the petroleum fuels they displace.
In conclusion, we believe that a 2020 advanced biofuel volume
requirement of 5.09 billion ethanol-equivalent gallons is appropriate
following our assessment of volumes that are attainable and in
consideration of carryover RINs, potential feedstock/fuel diversions,
and costs. Comments requesting higher or lower volumes are addressed in
the separate Response to Comments document.
D. Volume Requirement for Total Renewable Fuel
As discussed in Section II.A.1, we believe that the cellulosic
waiver provision is best interpreted as requiring that the advanced
biofuel and total renewable fuel volumes be reduced by equal amounts.
For the reasons we have previously articulated, we believe this
interpretation is consistent with the statutory language and best
effectuates the objectives of the statute, including the environmental
objectives that generally favor the use of advanced biofuels over non-
advanced biofuels and the legislative intent reflected in the statutory
volume tables.\113\ If we were to reduce the total renewable fuel
volume requirement by a lesser amount than the advanced biofuel volume
requirement, we would effectively increase the opportunity for
conventional biofuels to participate in the RFS program beyond the
implied statutory volume of 15 billion gallons. Applying an equal
reduction of 9.91 billion gallons to both the statutory target for
advanced biofuel and the statutory target for total renewable fuel
results in a total renewable fuel volume of 20.09 billion gallons as
shown in Table IV.A-1. This volume of total renewable fuel results in
an implied volume of 15 billion gallons of conventional renewable fuel,
which is the same as in the 2019 final rule. We have investigated the
different ways that the market could respond to a total renewable fuel
volume requirement of 20.09 billion gallons in a memorandum to the
docket.\114\ \115\
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\113\ See 81 FR 89752-89753 (December 12, 2016). See also 78 FR
49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015).
\114\ ``Updated market impacts of biofuels in 2020,'' memorandum
from David Korotney to docket EPA-HQ-OAR-2019-0136. In prior
actions, similar analyses to those described in this memorandum
indicated that the market was capable of both producing and
consuming the required volume of renewable fuels, and that as a
result there was no basis for finding an inadequate domestic supply
of total renewable fuel. See 82 FR 34229 & n.82 (July 21, 2017).
Given the D.C. Circuit's decision in ACE, however, assessment of
demand-side constraints is no longer relevant for determining
inadequate domestic supply. Even so, we believe consideration of the
ways that the market could make this volume available may still be
generally relevant to whether and how EPA exercises its waiver
authorities, such as our consideration of whether the volumes will
cause severe economic harm.
\115\ We note that the previously cited memorandum discusses the
potential for total ethanol consumption in 2020, but does not make
specific projections for E0, E15 and E85. Volumes of these ethanol
blends are highly dependent upon consumer demand and retail
distribution infrastructure. In prior annual rules, we assessed
volumes of these blends in determining whether and to what extent to
exercise the inadequate domestic supply waiver prong of the general
waiver authority. The D.C. Circuit's decision ACE precludes
assessment of demand-side constraints in determining inadequate
domestic supply. While we could still assess such blend volumes in
deciding whether and to what extent to exercise our other
discretionary waiver authorities, and in evaluating the market's
ability to meet the total renewable fuel requirement, doing so is
not necessary. In terms of the market's ability to satisfy the total
renewable fuel requirement, the more relevant consideration is
whether the pool-wide ethanol volume, together with volumes of other
biofuels, suffices. We note that EPA does not establish separate
standards for E0, E15, or E85. Moreover, there has historically been
a lack of reliable data on volumes of these blends, making reliance
on the pool-wide ethanol volume a more technically robust approach.
---------------------------------------------------------------------------
We note that the statute provides other authorities for EPA to
reduce the required volumes beyond that permitted
[[Page 7042]]
by the cellulosic waiver. As explained in Section II of this rule and
in Section 2 of the Response to Comments document, we do not believe it
is appropriate to further reduce volumes under the general waiver
authority.
We acknowledge that there is some uncertainty regarding whether the
market will actually make available 5.09 billion ethanol-equivalent
gallons of advanced biofuel or 20.09 billion ethanol-equivalent gallons
of total renewable fuel in 2020. In the event that the market is not
able to meet these volume requirements with biofuels produced and used
in 2020, the carryover RIN bank represents a source of RINs that could
help obligated parties meet them if the market fails to supply
sufficient advanced biofuels. As discussed in greater detail in Section
II.B.1, carryover RINs provide obligated parties compliance flexibility
in the face of substantial uncertainties in the transportation fuel
marketplace and provide a liquid and well-functioning RIN market upon
which success of the entire program depends. We currently estimate that
there are approximately 680 million advanced biofuel carryover RINs and
2.80 billion non-advanced (D6) carryover RINs available.
V. Impacts of 2020 Volumes on Costs
In this section, EPA presents its assessment of the illustrative
costs of this final RFS annual rulemaking. It is important to note that
these illustrative costs do not attempt to capture the full impacts of
this final rule. We frame the analyses we have performed for this rule
as ``illustrative'' so as not to give the impression of comprehensive
estimates. These estimates are provided for the purpose of showing how
the cost to produce a gallon of a ``representative'' renewable fuel
compares to the cost of fossil fuels (e.g., petroleum-derived fuels).
There are a significant number of caveats that must be considered when
interpreting these illustrative cost estimates. For example, there are
many different feedstocks that could be used to produce biofuels, and
there is a significant amount of heterogeneity in the costs associated
with these different feedstocks and fuels. Some renewable fuels may be
cost competitive with the fossil fuels they replace; however, we do not
have cost data on every type of feedstock and every type of fuel.
Therefore, we do not attempt to capture this range of potential costs
in our illustrative estimates.
The renewable fuel volumes for which we provide cost estimates are
described in Section III. In this section, we estimate illustrative
costs for two different cases. In the first case, we provide
illustrative cost estimates by comparing the final 2020 RFS renewable
fuel volumes to 2020 RFS statutory renewable fuel volumes. In the
second case, we examine the final 2020 RFS renewable fuel volumes to
the final 2019 RFS renewable fuel volumes to estimate changes in the
annual costs of the final 2020 RFS annual rule in comparison to the
final 2019 RFS annual rule.\116\
---------------------------------------------------------------------------
\116\ This action imposes renewable fuel standards only for
2020. However, solely for E.O. 13771 purposes in this section, we
estimate the costs of the relevant volumes as though they applied in
future years as well. Therefore, we use the term ``annual costs'' in
this section.
---------------------------------------------------------------------------
A. Illustrative Costs Analysis of 2020 Final Volumes Compared to the
2020 Statutory Volumes Baseline
In this section, EPA provides illustrative cost estimates that
compare the final 2020 RFS cellulosic renewable volume requirement to
the 2020 RFS cellulosic statutory renewable fuel volume that would be
required absent the exercise of our cellulosic waiver authority under
CAA section 211(o)(7)(D)(i). As described in Section III, we are
finalizing a cellulosic volume of 0.59 billion gallons for 2020, using
our cellulosic waiver authority to waive the statutory cellulosic
volume of 10.5 billion gallons by 9.91 billion gallons. Estimating the
cost savings from renewable fuel volumes that are not projected to be
produced is inherently challenging. EPA has taken the relatively
straightforward methodology of multiplying the waived cellulosic volume
by the wholesale per-gallon costs of cellulosic biofuel production
relative to the fossil fuels they displace.
While there may be growth in other cellulosic renewable fuel
sources, we believe it is appropriate to use cellulosic ethanol
produced from corn kernel fiber at an existing corn starch ethanol
production facility as representative of cellulosic renewable fuel. As
explained in Section III, we believe that production of the major
alternative cellulosic biofuel--compressed natural gas/liquefied
natural gas (CNG/LNG)-derived from biogas--is constrained in 2020 due
to a limitation in the number of vehicles capable of using this form of
fuel.\117\
---------------------------------------------------------------------------
\117\ See Section III.D.2 for a further discussion of the
quantity of CNG/LNG projected to be used as transportation fuel in
2020.
---------------------------------------------------------------------------
EPA uses a ``bottom-up'' engineering cost analysis to quantify the
costs of producing a gallon of cellulosic ethanol derived from corn
kernel fiber. There are multiple processes that could yield cellulosic
ethanol from corn kernel fiber. EPA assumes a cellulosic ethanol
production process that generates biofuel using distiller's grains, a
co-product of generating corn starch ethanol that is commonly dried and
sold into the feed market as distillers dried grains with solubles
(DDGS), as the renewable biomass feedstock. We assume an enzymatic
hydrolysis process with cellulosic enzymes to break down the cellulosic
components of the distiller's grains. This process for generating
cellulosic ethanol is similar to approaches currently used by industry
to generate cellulosic ethanol at a commercial scale, and we believe
these cost estimates are likely representative of the range of
different technology options being developed to produce ethanol from
corn kernel fiber. We then compare the per-gallon costs of the
cellulosic ethanol to the fossil fuel that would be replaced at the
wholesale stage, since that is when the two are blended together.
These cost estimates do not consider taxes, retail margins, or
other costs or transfers that occur at or after the point of blending.
Transfers are payments within society and are not additional costs
(e.g., RIN payments are one example of a transfer payment). We do not
attempt to estimate potential cost savings related to avoided
infrastructure costs (e.g., the cost savings of not having to provide
pumps and storage tanks associated with higher-level ethanol blends).
When estimating per-gallon costs, we consider the costs of gasoline on
an energy-equivalent basis as compared to ethanol, since more ethanol
gallons must be consumed to travel the same distance as on gasoline due
to the ethanol's lower energy content.
Table V.A-1 below presents the cellulosic fuel cost savings
associated with this final rule that are estimated using this
approach.\118\ The per-gallon cost differences for cellulosic ethanol
range from $0.46-$3.30 per ethanol-equivalent gallon ($/EEG).\119\
Given that commercial cellulosic ethanol production is still at an
early stage in its deployment, these cost estimates have a significant
range. Multiplying the per-
[[Page 7043]]
gallon cost differences by the amount of cellulosic biofuel waived in
this final rule results in approximately $4.6-$33 billion in cost
savings.
---------------------------------------------------------------------------
\118\ Details of the data and assumptions used can be found in a
Memorandum available in the docket entitled ``Cost Impacts of the
Final 2020 Annual Renewable Fuel Standards'', Memorandum from
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in
docket EPA-HQ-OAR-2019-0136.
\119\ For the purposes of the cost estimates in this section,
EPA has not attempted to adjust the price of the petroleum fuels to
account for the impact of the RFS program, since the changes in the
renewable fuel volume are relatively modest in comparison to the
quantity of fuel associated with the petroleum market. Rather, we
have used the wholesale price projections for gasoline and diesel as
reported in EIA's October 2019 STEO.
Table V.A-1--Illustrative Costs Analysis of 2020 Final Cellulosic
Volumes Compared to the 2020 Statutory Volumes
------------------------------------------------------------------------
------------------------------------------------------------------------
Cellulosic Volume Required (Million Ethanol- 590
Equivalent Gallons)..............................
Change in Required Cellulosic Biofuel from 2020 (9,910)
Statutory Volume (Million Ethanol-Equivalent
Gallons).........................................
Cost Difference Between Cellulosic Corn Kernel $0.46-$3.30
Fiber Ethanol and Gasoline Per-Gallon ($/Ethanol-
Equivalent Gallons) \120\ ($/EEG) \121\..........
Annual Change in Overall Costs (Million $) \122\.. $(4,600)-$(33,000)
------------------------------------------------------------------------
B. Illustrative Cost Analysis of the 2020 Final Volumes Compared to the
2019 Final Volumes
---------------------------------------------------------------------------
\120\ For this table and all subsequent tables in this section,
approximate costs in per-gallon cost difference estimates are
rounded to the cents place.
\121\ Since the proposed rule, we have updated these per-gallon
and total annual cost differences based on EIA's updated projections
for petroleum gasoline costs in 2020 from the October Short-Term
Energy Outlook.
\122\ For this table and all subsequent tables in this section,
approximate resulting costs (other than in per-gallon cost
difference estimates) are rounded to two significant figures.
---------------------------------------------------------------------------
In this section, we provide illustrative cost estimates for the
final 2020 RFS volumes compared to the final 2019 RFS volumes. In
comparison to the final 2019 RFS volumes, the final 2020 RFS volumes
result in an overall increase of 172 million ethanol-equivalent gallons
of cellulosic biofuel derived from CNG/LNG from landfill biogas. To
estimate the cost of production of CNG/LNG derived from landfill gas
(LFG), EPA uses Version 3.2 of the Landfill Gas Energy Cost Model, or
LFGcost-Web.\123\ LFGcost-Web is a software tool developed by EPA's
Landfill Methane Outreach Program (LMOP) to conduct initial economic
feasibility analysis of developing LFG energy recovery projects in the
United States. The default inputs and cost estimates by LFGcost-Web are
based on typical project designs and for typical landfill situations.
The Model attempts to include all equipment, site work, permits,
operating activities, and maintenance that would normally be required
for constructing and operating a typical project.
---------------------------------------------------------------------------
\123\ The current version of this model and user's manual are
downloadable from the LMOP website. https://www.epa.gov/lmop/download-lfgcost-web/.
---------------------------------------------------------------------------
Table V.B-1 presents estimates of per energy-equivalent gallon
costs for producing CNG/LNG derived from landfill biogas relative to
natural gas at the wholesale level. These per-gallon costs are then
multiplied by the increase in the final 2020 RFS cellulosic biofuel
volume relative to the 2019 final RFS cellulosic biofuel volume to
obtain an estimate of costs of using increased qualities of CNG/LNG
from landfill biogas. An estimate of overall costs associated with the
increase in the cellulosic biofuel volume is calculated as the range of
$(1.1)-$17 million.
Table V.B-1--Illustrative Costs Analysis of the 2020 Final Cellulosic
Volume Compared to the 2019 Cellulosic Volume \124\
------------------------------------------------------------------------
------------------------------------------------------------------------
Cellulosic Volume
------------------------------------------------------------------------
Change in Volume (Million Ethanol-Equivalent 172
Gallons).........................................
------------------------------------------------------------------------
CNG/LNG Derived from Biogas Costs
------------------------------------------------------------------------
Cost Difference Between CNG/LNG Derived from $(0.01)-$0.10
Landfill Biogas and Natural Gas Per Gallon ($/
Ethanol-Equivalent Gallons) ($/EEG)..............
Annual Increase in Overall Costs (Million $)...... $(1.1)-$17
------------------------------------------------------------------------
The annual volume-setting process encourages consideration of the
RFS program on a piecemeal (i.e., year-to-year) basis, which may not
reflect the full, long-term costs and benefits of the program. For the
purposes of this final rule, other than the estimates of costs of
producing a ``representative'' renewable fuel compared to cost of
fossil fuel, EPA did not quantitatively assess other direct and
indirect costs or benefits of changes in renewable fuel volumes. These
direct and indirect costs and benefits may include infrastructure
costs, investment, climate change impacts, air quality impacts, and
energy security benefits, which all to some degree may be affected by
the annual volumes. For example, we do not have a quantified estimate
of the lifecycle GHG or energy security benefits for a single year
(e.g., 2020). Also, there are impacts that are difficult to quantify,
such as rural economic development and employment changes from more
diversified fuel sources, that are not quantified in this rulemaking.
While some of these impacts were analyzed in the 2010 final rulemaking
that established the current RFS program, we have not analyzed these
impacts for the 2020 volume requirements.\125\
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\124\ For the proposed 2020 annual RFS rule, we estimated that
there would be an increase of cellulosic biofuel derived from CNG/
LNG from landfill biogas of 126 million gallons (ethanol-equivalent)
compared to the 2019 final annual RFS volumes. The total costs of
the proposed 2020 cellulosic volume compared to 2019 RFS cellulosic
volume range from $(3.2)-$10 million. In this final rule, both the
projected volume increase of CNG/LNG derived from biogas and the
cost of natural gas to which this fuel is compared have been
updated.
\125\ RFS2 Regulatory Impact Analysis (RIA). U.S. EPA 2010,
Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis.
EPA-420-R-10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332.
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VI. Biomass-Based Diesel Volume for 2021
In this section we discuss the BBD applicable volume for 2021. We
are setting this volume in advance of those for other renewable fuel
categories in light of the statutory requirement in CAA section
211(o)(2)(B)(ii) to establish the applicable volume of BBD for years
after 2012 no later than 14 months before the applicable volume will
apply. We are not at this time setting the BBD
[[Page 7044]]
percentage standards that would apply to obligated parties in 2021 but
intend to do so in late 2020, after receiving EIA's estimate of
gasoline and diesel consumption for 2021. At that time, we will also
set the percentage standards for the other renewable fuel types for
2021. Although the BBD applicable volume sets a floor for required BBD
use, because the BBD volume requirement is nested within both the
advanced biofuel and the total renewable fuel volume requirements, any
BBD produced can be used to satisfy both of these other applicable
volume requirements, even beyond the mandated BBD volume.
A. Statutory Requirements
The statute establishes applicable volume targets for years through
2022 for cellulosic biofuel, advanced biofuel, and total renewable
fuel. For BBD, applicable volume targets are specified in the statute
only through 2012. For years after those for which volumes are
specified in the statute, EPA is required under CAA section
211(o)(2)(B)(ii) to determine the applicable volume of BBD, in
coordination with the Secretary of Energy and the Secretary of
Agriculture, based on a review of the implementation of the program
during calendar years for which the statute specifies the volumes and
an analysis of the following factors:
1. The impact of the production and use of renewable fuels on the
environment, including on air quality, climate change, conversion of
wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
2. The impact of renewable fuels on the energy security of the
United States;
3. The expected annual rate of future commercial production of
renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and BBD);
4. The impact of renewable fuels on the infrastructure of the
United States, including deliverability of materials, goods, and
products other than renewable fuel, and the sufficiency of
infrastructure to deliver and use renewable fuel;
5. The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
6. The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
The statute also specifies that the volume requirement for BBD
cannot be less than the applicable volume specified in the statute for
calendar year 2012, which is 1.0 billion gallons.\126\ The statute does
not, however, establish any other numeric criteria, and provides EPA
discretion over how to weigh the importance of the often competing
factors and the overarching goals of the statute when the EPA sets the
applicable volumes of BBD in years after those for which the statute
specifies such volumes. In the period 2013-2022, the statute specifies
increasing applicable volumes of cellulosic biofuel, advanced biofuel,
and total renewable fuel, but provides no numeric criteria, beyond the
1.0 billion gallon minimum, on the level at which BBD volumes should be
set.
---------------------------------------------------------------------------
\126\ See CAA section 211(o)(2)(B)(v).
---------------------------------------------------------------------------
In establishing the BBD and cellulosic standards as nested within
the advanced biofuel standard, Congress clearly intended to support
development of BBD and especially cellulosic biofuels, while also
providing an incentive for the growth of other non-specified types of
advanced biofuels. In general, the advanced biofuel standard provides
an opportunity for other advanced biofuels (advanced biofuels that do
not qualify as cellulosic biofuel or BBD) to compete with cellulosic
biofuel and BBD to satisfy the advanced biofuel standard after the
cellulosic biofuel and BBD standards have been met.
In Alon Refining Krotz Spring, Inc. v. EPA, the D.C. Circuit
affirmed EPA's approach to setting the 2017 BBD volume as ``consistent
with the structure and purposes of the statute.'' \127\ In today's
rule, we have applied the same general methodology upheld in Alon with
updated information. Similar to the rule reviewed in Alon, today's rule
finds that it is the advanced biofuel standard, when set in 2021, that
will drive the use of BBD in 2021. Furthermore, in light of the
benefits of incentivizing other advanced biofuels, we choose to
preserve the existing gap for other advanced biofuels, and accordingly
establish the BBD volume at the same level as for 2020: 2.43 billion
gallons.
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\127\ Alon Refining Krotz Springs, Inc. v. EPA, 936 F.3d 628,
666 (D.C. Cir 2019).
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B. Review of Implementation of the Program and the 2021 Applicable
Volume of Biomass-Based Diesel
One of the considerations in determining the BBD volume for 2021 is
a review of the implementation of the program to date, as it affects
BBD. This review is required by the CAA, and also provides insight into
the capabilities of the industry to produce, import, export,
distribute, and use BBD. It also helps us to understand what factors,
beyond the BBD standard, may incentivize the availability of BBD. In
reviewing the program, we assess numerous regulatory, economic, and
technical factors, including the availability of BBD in past years
relative to the BBD and advanced standards; the prices of BBD,
advanced, and conventional RINs; the competition between BBD and other
advanced biofuels in meeting the portion of the advanced standard not
required to be met by BBD or cellulosic RINs; the maturation of the BBD
industry over the course of the RFS program; and the effects of the BBD
standard on the production and development of both BBD and other
advanced biofuels.
Table VI.B.1-1 shows, for 2011-2019, the number of BBD RINs
generated, the number of RINs retired due to export, the number of RINs
retired for reasons other than compliance with the annual BBD
standards, and the consequent number of available BBD RINs; for 2011-
2019, the BBD and advanced biofuel standards; and for 2020, the BBD and
advanced biofuel standards.
[[Page 7045]]
Table VI.B.1-1--Biomass-Based Diesel (D4) RIN Generation and Advanced Biofuel and Biomass-Based Diesel Standards in 2011-2020
[Million RINs or gallons] \128\
--------------------------------------------------------------------------------------------------------------------------------------------------------
BBD RINs Advanced
retired, Available BBD BBD biofuel
BBD RINs Exported non- BBD RINs a standard standard standard
generated BBD (RINs) compliance (gallons) b (RINs) b (RINs) b
reasons
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011......................................................... 1,692 48 102 1,542 800 1,200 1,350
2012......................................................... 1,738 102 91 1,545 1,000 1,500 2,000
2013......................................................... 2,740 125 101 2,514 1,280 1,920 2,750
2014......................................................... 2,710 134 99 2,477 1,630 c 2,490 2,670
2015......................................................... 2,796 145 45 2,606 1,730 c 2,655 2,880
2016......................................................... 4,009 203 121 3,685 1,900 2,850 3,610
2017......................................................... 3,849 257 115 3,477 2,000 3,000 4,280
2018......................................................... 3,871 247 59 3,565 2,100 3,150 4,290
d 2019....................................................... 4,381 183 0 4,198 2,100 3,150 4,920
2020......................................................... N/A N/A N/A N/A 2,430 3,645 5,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Available BBD RINs may not be exactly equal to BBD RINs Generated minus Exported RINs and BBD RINs Retired, Non-Compliance Reasons, due to rounding.
b The volumes for each year are those used as the basis for calculating the percentage standards in the final rule. They have not been retroactively
adjusted for subsequent events, such as differences between projected and actual gasoline and diesel use and exempted small refinery volumes.
c Each gallon of biodiesel qualifies for 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5
and 1.7 RINs per gallon, but generally has an equivalence value of 1.7. While some fuels that qualify as BBD generate more than 1.5 RINs per gallon,
EPA multiplies the required volume of BBD by 1.5 in calculating the percent standard per 80.1405(c). In 2014 and 2015 however, the number of RINs in
the BBD Standard column is not exactly equal to 1.5 times the BBD volume standard as these standards were established based on actual RIN generation
data for 2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015, rather than by
multiplying the required volume of BBD by 1.5. Some of the volume used to meet the BBD standard in these years was renewable diesel, with an
equivalence value higher than 1.5.
d 2019 ``BBD RINs generated,'' ``Exported BBD,'' and ``BBD RINs retired, Non-compliance reason'' are projected based on data through September 2019.
In reviewing historical BBD RIN generation and use, we see that the
number of RINs available for compliance purposes exceeded the volume
required to meet the BBD standard in 2011-13 and 2016-19.\129\
Additional production and use of biodiesel was likely driven by a
number of factors, including demand to satisfy the advanced biofuel and
total renewable fuels standards, the biodiesel tax credit,\130\ and
various other State and local incentives and mandates allowing for
favorable blending economics. Moreover, additional production of BBD,
beyond the volumes shown in the above table, was exported.
---------------------------------------------------------------------------
\128\ Available BBD RINs Generated, Exported BBD RINs, and BBD
RINs Retired for Non-Compliance Reasons information from EMTs.
\129\ The number of RINs available in 2014 and 2015 was
approximately equal to the number required for compliance in those
years, as the standards for these years were finalized at the end of
November 2015 and EPA's intent at that time was to set the standards
for 2014 and 2015 to reflect actual BBD use. See 80 FR 77490-92,
77495 (December 14, 2015).
\130\ The biodiesel tax credit was reauthorized in January 2013.
It applied retroactively for 2012 and for the remainder of 2013. It
was once again extended in December 2014 and applied retroactively
to all of 2014 as well as to the remaining weeks of 2014. In
December 2015 the biodiesel tax credit was authorized and applied
retroactively for all of 2015 as well as through the end of 2016. In
February 2018 the biodiesel tax credit was authorized and applied
retroactively for all of 2017. The biodiesel tax credit is not
currently in place for 2018, 2019, or 2020.
---------------------------------------------------------------------------
The prices paid for advanced biofuel and BBD RINs beginning in
early 2013 through September 2019 (the last month for which data is
available) also support the conclusion that the advanced biofuel, and
in some periods the total renewable fuel standards, provide a
sufficient incentive for additional biodiesel volume beyond what is
required by the BBD standard. Because the BBD standard is nested within
the advanced biofuel and total renewable fuel standards, and therefore
can help to satisfy three RVOs, we would expect the price of BBD RINs
to exceed that of advanced and conventional renewable RINs.\131\ If,
however, BBD RINs are being used (or are expected to be used) by
obligated parties to satisfy their advanced biofuel obligations, above
and beyond the BBD standard, we would expect the prices of advanced
biofuel and BBD RINs to converge.\132\ Further, if BBD RINs are being
used (or are expected to be used) to satisfy obligated parties' total
renewable fuel obligation, above and beyond their BBD and advanced
biofuel requirements, we would expect the price for all three RIN types
to converge.
---------------------------------------------------------------------------
\131\ This is because when an obligated party retires a BBD RIN
(D4) to help satisfy their BBD obligation, the nested nature of the
BBD standard means that this RIN also counts towards satisfying
their advanced and total renewable fuel obligations. Advanced RINs
(D5) count towards both the advanced and total renewable fuel
obligations, while conventional RINs (D6) count towards only the
total renewable fuel obligation.
\132\ We would still expect D4 RINs to be valued at a slight
premium to D5 and D6 RINs in this case (and D5 RINs at a slight
premium to D6 RINs) to reflect the greater flexibility of the D4
RINs to be used towards the BBD, advanced biofuel, and total
renewable fuel standard. This pricing has been observed over the
past several years.
---------------------------------------------------------------------------
When examining RIN price data from 2011 through September 2019,
shown in Figure VI.B.2-1, we see that beginning in early 2013 and
through September 2019 the advanced RIN (D5) price and BBD (D4) RIN
prices were approximately equal. Similarly, from early 2013 through
late 2016 the conventional renewable fuel (D6) RIN and BBD RIN prices
were approximately equal. This demonstrates that the advanced biofuel
standard, and in some periods the total renewable fuel standard, are
capable of incentivizing increased BBD volumes beyond the BBD standard.
The advanced biofuel standard has incentivized additional volumes of
BBD since 2013, while the total standard had incentivized additional
volumes of BBD from 2013 through 2016.\133\ We do note, however,
[[Page 7046]]
that in 2011-2012 the BBD RIN price was significantly higher than both
the advanced biofuel and conventional renewable fuel RIN prices. At
this time, the E10 blendwall had not yet been reached, and it was
likely more cost effective for most obligated parties to satisfy the
portion of the advanced biofuel requirement that exceeded the BBD and
cellulosic biofuel requirements with advanced ethanol.
---------------------------------------------------------------------------
\133\ Although we did not issue a rule establishing the final
2013 standards until August of 2013, we believe that the market
anticipated the final standards, based on EPA's July 2011 proposal
and the volume targets for advanced and total renewable fuel
established in the statute. (76 FR 38844, 38843 July 1, 2011).
Similarly, for 2014 and 2015, although we issued the final standards
in late 2015, the proposed rule incentivized the market to use BBD
volumes exceeding the proposed BBD standard to help satisfy the
proposed advanced and total standards. See 80 FR 33100 (2014-16
standards proposed June 10, 2015); 78 FR 71732 (2014 standards
proposed Nov. 29, 2013).
[GRAPHIC] [TIFF OMITTED] TR06FE20.002
We also examined the opportunity for advanced biofuels other than
BBD and cellulosic biofuels, as shown in Table VI.B.1-2. We believe it
is important to preserve this opportunity for other advanced biofuels,
and we are conscious of public comments claiming that BBD volume
requirements that are a significant portion of the advanced volume
requirements effectively disincentivize the future development of other
promising advanced biofuel pathways.\134\ A variety of different types
of advanced biofuels, rather than a single type such as BBD, would
increase energy security (e.g., by increasing the diversity of
feedstock sources used to make biofuels, thereby reducing the impacts
associated with a shortfall in a particular type of feedstock) and
increase the likelihood of the development of lower cost advanced
biofuels that meet the same GHG reduction threshold as BBD.\135\
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\134\ See, e.g., Comments from Advanced Biofuel Association,
available in EPA docket EPA-HQ-OAR-2018-0167-1277.
\135\ All types of advanced biofuel, including BBD, must achieve
lifecycle GHG reductions of at least 50 percent. See CAA section
211(o)(1)(B)(i), (D).
Table VI.B.1-2--Opportunity for and RIN Generation of ``Other'' Advanced Biofuels
[Million RINs]
----------------------------------------------------------------------------------------------------------------
Available BBD (D4)
Opportunity for Available advanced RINs in excess of
``other'' advanced (D5) RINs the BBD requirement
biofuels \a\ \b\
----------------------------------------------------------------------------------------------------------------
2011............................................ 150 223 342
2012............................................ 500 597 45
2013............................................ 829 548 594
2014 \c\........................................ 147 143 -13
2015 \c\........................................ 102 147 -49
2016............................................ 530 98 835
[[Page 7047]]
2017............................................ 969 144 477
2018............................................ 852 178 415
2019 \d\........................................ 1,352 310 1,048
----------------------------------------------------------------------------------------------------------------
\a\ The opportunity for ``other'' advanced biofuel is calculated by subtracting the number of cellulosic biofuel
and BBD RINs required each year from the number of advanced biofuel RINs required. This portion of the
advanced standard can be satisfied by advanced (D5) RINs, BBD RINs in excess of those required by the BBD
standard, or cellulosic RINs in excess of those required by the cellulosic standard.
\b\ The available BBD (D4) RINs in excess of the BBD requirement is calculated by subtracting the required BBD
volume (multiplied by 1.5 to account for the equivalence value of biodiesel) required each year from the
number of BBD RINs available for compliance in that year. This number does not include carryover RINs, nor do
we account for factors that may impact the number of BBD RINs that must be retired for compliance, such as
differences between the projected and actual volume of obligated gasoline and diesel. The required BBD volume
has not been retroactively adjusted for subsequent events, such as differences between projected and actual
gasoline and diesel use and exempted small refinery volumes.
\c\ The 2014 and 2015 volume requirements were established in November 2015 and were set equal to the number of
RINs projected to be available for each year.
\d\ Available advanced RINs and available D4 RINs in excess of the BBD requirement are projected based on data
through September 2019.
In each year since 2016, there has been a significant gap for other
advanced biofuels, but this gap has nonetheless been dominated by BBD.
While the RFS volumes created the opportunity for up to 530 million,
969 million, 852 million, and 1,352 million gallons of ``other''
advanced for 2016, 2017, 2018, and 2019 respectively to be used to
satisfy the advanced biofuel obligation, only 98 million, 144 million,
178 million, and 310 million gallons of ``other'' advanced biofuels
were generated. This is significantly less than the volumes of
``other'' advanced available in 2012-2013. Despite creating space
within the advanced biofuel standard for ``other'' advanced, in recent
years, only a small fraction of that space has been filled with
``other'' advanced, and BBD continues to fill most of the gap between
the BBD standard and the advanced standard. Thus, there does not appear
to be a compelling reason to increase the ``space'' maintained for
``other'' advanced biofuel volumes.
This conclusion is consistent with our approach in the 2019 final
rule, when we established the 2019 advanced biofuel volume and the 2020
BBD volume. The overall volume of non-cellulosic advanced biofuel
increased by 500 million gallons for 2019. For the 2020 BBD volume, we
determined that it was appropriate to also increase the BBD volume by
the same energy-equivalent amount (330 million physical gallons) as it
would preserve the space already available for other advanced biofuels
to compete in 2018 (850 million RINs). This space is many times the
amount of other advanced biofuels used in each year starting from 2016.
In this action, we are maintaining the implied non-cellulosic
advanced biofuel standard for 2021 that is presented in the statute,
and that is equivalent to the implied non-cellulosic advanced biofuel
standard for 2020. For the 2021 BBD volume, we thus find that it is
appropriate to maintain the BBD volume for 2021 at 2.43 billion
gallons. Even in an optimistic scenario, we do not believe that the use
of other advanced biofuels will approach 850 million gallons by 2021.
We recognize, however, the dynamic nature of the fuels marketplace, and
the impact that the BBD blender's tax credit can have on the relative
economics of BBD versus other advanced biofuels, so going forward we
intend to assess the appropriate space for other advanced biofuels in
subsequent rules setting BBD volumes.
At the same time, the rationale for preserving the ``space'' for
``other'' advanced biofuels remains. We note that the BBD industry in
the U.S. and abroad has matured since EPA first increased the required
volume of BBD beyond the statutory minimum in 2013.\136\ To assess the
maturity of the biodiesel industry, EPA compared information on BBD RIN
generation by company in 2012 and 2018 (the most recent year for which
complete RIN generation by company is available). In 2012, the annual
average RIN generation per company producing BBD was about 11 million
RINs (about 7.3 million gallons) with approximately 50 percent of
companies producing less than 1 million gallons of BBD a year.\137\
Since that time, the BBD industry has matured in a number of critical
areas, including growth in the size of companies, the consolidation of
the industry, and more stable funding and access to capital. By 2018,
the average BBD RIN generation per company had climbed to over 36
million RINs (23.7 million gallons) annually, more than a 3-fold
increase. Only 20 percent of the companies produced less than 1 million
gallons of BBD in 2017.\138\
---------------------------------------------------------------------------
\136\ See also generally 84 FR 36794-95 (further explaining our
approach in establishing the 2013 BBD volume and our experience
since that time).
\137\ ``BBD RIN Generation by Company in 2012 and 2018,''
available in EPA docket EPA-HQ-OAR-2019-0136.
\138\ Id.
---------------------------------------------------------------------------
We recognize that the space for other advanced biofuels in 2021
will ultimately depend on the 2021 advanced biofuel volume. While EPA
is not establishing the advanced biofuel volume for 2021 in this
action, we anticipate that the non-cellulosic advanced biofuel volume
for 2021, when established, will be greater than 3.65 billion gallons
(equivalent to 2.43 billion gallons of BBD, after applying the 1.5
equivalence ratio). This expectation is consistent with our actions in
previous years. Accordingly, we expect that the 2021 advanced biofuel
volume, together with the 2021 BBD volume established today, will
continue to preserve a considerable portion of the advanced biofuel
volume that could be satisfied by either additional gallons of BBD or
by other unspecified and potentially less costly types of qualifying
advanced biofuels.
C. Consideration of Statutory Factors in CAA Section
211(o)(2)(B)(ii)(I)-(VI) for 2021 and Determination of the 2021
Biomass-Based Diesel Volume
As in past annual standard-setting rulemakings, we find that
additional volumes of BBD would displace other advanced biofuel, due to
the nested
[[Page 7048]]
nature of the standards,\139\ as opposed to petroleum fuels. More
specifically, for a given advanced biofuel standard, greater or lesser
BBD volume requirements generally do not change the amount of advanced
biofuel used to displace petroleum fuels; the total volume of advanced
biofuels is unchanged regardless of the BBD volume requirement. Thus
increasing the BBD volume requirement would result in the displacement
of other types of advanced biofuels that could have been used to meet
the advanced biofuels volume requirement.
---------------------------------------------------------------------------
\139\ The BBD volume requirement is nested within the advanced
biofuel requirement, and the advanced biofuel requirement is, in
turn, nested within the total renewable fuel volume requirement. See
CAA section 211(o)(2)(B)(i)(IV), (II). This means that any BBD
produced can be used to satisfy both these other applicable volume
requirements even beyond the BBD volume requirement.
---------------------------------------------------------------------------
As a result, as in past assessments of the factors articulated in
CAA 211(o)(2)(B)(ii)(I)-(VI), we consider BBD in comparison to other
advanced biofuels, and not in comparison to petroleum diesel. Our
primary assessment of the statutory factors is that because the BBD
requirement is nested within the advanced biofuel volume requirement,
we expect that the 2021 advanced volume requirement will determine the
level of BBD use, production, and imports that occur in 2021.
Therefore, we continue to believe that approximately the same overall
volume of BBD would likely be supplied in 2021 regardless of the 2021
BBD volume requirement. In the long-term, however, leaving adequate
room for growth of other advanced biofuels could have a beneficial
impact on certain statutory factors. Notably, this incentivizes the
development of other advanced biofuels with potentially superior cost,
climate, environmental, and other characteristics, relative to BBD. We
present a detailed analysis of the statutory factors for the BBD volume
requirement in a memorandum to the docket.\140\
---------------------------------------------------------------------------
\140\ ``Memorandum to docket: Statutory Factors Assessment for
the 2021 Biomass-Based Diesel (BBD) Applicable Volumes.'' See Docket
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
D. BBD Volume Requirement for 2021
Based on the above analysis, we are setting the applicable volume
of BBD at 2.43 billion gallons for 2021. We believe this volume sets
the appropriate floor for BBD, and that the volume of BBD actually used
in 2021 will be driven by the level of the advanced biofuel and
potentially the total renewable fuel standards that the Agency will
establish for 2021. In addition, despite providing a significant degree
of space for ``other'' advanced biofuels in recent years, far smaller
volumes of ``other'' advanced have been utilized to meet the advanced
standard. The BBD volume we are finalizing today continues to preserve
the existing gap between the advanced biofuel volume and the sum of the
cellulosic biofuel and BBD volumes. We believe this provides sufficient
incentive to producers of ``other'' advanced biofuels, while also
acknowledging that the advanced standard has been met predominantly
with biomass-based diesel. Namely, this would allow other advanced
biofuels to continue to compete with excess volumes of BBD for market
share under the advanced biofuel standard. This would provide
significant long term certainty for investments in other advanced
biofuels that over time could compete with BBD to fill the advanced
biofuel standard. In sum, our assessment of the statutory factors and
the implementation of the program supports a volume of 2.43 billion
gallons.
VII. Percentage Standards for 2020
The renewable fuel standards are expressed as volume percentages
and are used by each obligated party to determine their Renewable
Volume Obligations (RVOs). Since there are four separate standards
under the RFS program, there are likewise four separate RVOs applicable
to each obligated party. Each standard applies to the sum of all non-
renewable gasoline and diesel produced or imported.
Sections II through IV provide our rationale and basis for the
final volume requirements for 2020.\141\ The volumes used to determine
the final percentage standards are shown in Table VII-1.
---------------------------------------------------------------------------
\141\ The 2020 volume requirement for BBD was established in the
2019 standards final rule (83 FR 63704, December 11, 2018)
---------------------------------------------------------------------------
Table VII-1--Volumes for Use in Determining the Final 2020 Applicable
Percentage Standards
[Billion gallons]
------------------------------------------------------------------------
------------------------------------------------------------------------
Cellulosic biofuel......................................... 0.59
Biomass-based diesel....................................... 2.43
Advanced biofuel........................................... 5.09
Renewable fuel............................................. 20.09
------------------------------------------------------------------------
For the purposes of converting these volumes into percentage
standards, we generally use two decimal places to be consistent with
the volume targets as given in the statute, and similarly two decimal
places in the percentage standards. In past years we have used three
decimal places for cellulosic biofuel in both the volume requirement
and percentage standards to more precisely capture the smaller volume
projections and the unique methodology that in some cases results in
estimates of only a few million gallons for a group of cellulosic
biofuel producers (see Section III for a further discussion of the
methodology for projecting cellulosic biofuel production and our
decision to round the projected volume of cellulosic biofuel to the
nearest 10 million gallons). However, the volume requirements for
cellulosic biofuel have increased over time. We have therefore
determined that volume requirements and percentage standards for
cellulosic biofuel will now use two decimal places.
In this section, we also discuss our regulatory change to the
percent standard formulas to account for a projection of the aggregate
volume for SREs that we expect to grant for the 2020 compliance year.
This section also provides our rationale for that projection of exempt
gasoline and diesel volume. Additionally, we also provide our approach
for evaluating SREs going forward, including for the currently pending
2019 petitions and for 2020 petitions we receive in the future.
A. Calculation of Percentage Standards
The formulas used to calculate the percentage standards applicable
to producers and importers of gasoline and diesel are provided in 40
CFR 80.1405. The formulas rely on estimates of the volumes of gasoline
and diesel fuel, for both highway and nonroad uses, which are projected
to be used in the year in which the standards will apply. The projected
gasoline and diesel volumes are provided by EIA and include projections
of ethanol and biomass-based diesel used in transportation fuel.\142\
Since the percentage standards apply only to the non-renewable gasoline
and diesel produced or imported, the volumes of renewable fuel are
subtracted out of the EIA projections of gasoline and diesel.
---------------------------------------------------------------------------
\142\ Letter from Linda Capuano, EIA Administrator to Andrew
Wheeler, EPA Administrator. October 9, 2019. Available in docket
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
Transportation fuels other than gasoline or diesel, such as natural
gas, propane, and electricity from fossil fuels, are not currently
subject to the standards, and volumes of such fuels are not used in
calculating the annual percentage standards. Since under the
regulations the standards apply only to producers and importers of
gasoline and diesel, these are the transportation fuels
[[Page 7049]]
used to set the percentage standards, as well as to determine the
annual volume obligations of an individual gasoline or diesel producer
or importer under 40 CFR 80.1407.
As specified in the RFS2 final rule,\143\ the percentage standards
are based on energy-equivalent gallons of renewable fuel, with the
cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the BBD standard based on
biodiesel equivalence. However, all RIN generation is based on ethanol-
equivalence. For example, the RFS regulations provide that production
or import of a gallon of qualifying biodiesel will lead to the
generation of 1.5 RINs. The formula specified in the regulations for
calculation of the BBD percentage standard is based on biodiesel-
equivalence, and thus assumes that all BBD used to satisfy the BBD
standard is biodiesel and requires that the applicable volume
requirement be multiplied by 1.5 in order to calculate a percentage
standard that is on the same basis (i.e., ethanol-equivalent) as the
other three standards. However, BBD often contains some renewable
diesel, and a gallon of renewable diesel typically generates 1.7
RINs.\144\ In addition, there is often some renewable diesel in the
conventional renewable fuel pool. As a result, the actual number of
RINs generated by biodiesel and renewable diesel is used in the context
of our assessment of the applicable volume requirements and associated
percentage standards for advanced biofuel and total renewable fuel, and
likewise in obligated parties' determination of compliance with any of
the applicable standards. While there is a difference in the treatment
of biodiesel and renewable diesel in the context of determining the
percentage standard for BBD versus determining the percentage standard
for advanced biofuel and total renewable fuel, it is not a significant
one given our approach to determining the BBD volume requirement. Our
intent in setting the BBD applicable volume is to provide a level of
guaranteed volume for BBD, but as described in Section VII.B of the
2019 standards final rule, we do not expect the BBD standard to be
binding in 2020.\145\ That is, we expect that actual supply of BBD, as
well as supply of conventional biodiesel and renewable diesel, will be
driven by the advanced biofuel and total renewable fuel standards and
will exceed the BBD standard.
---------------------------------------------------------------------------
\143\ See 75 FR 14670 (March 26, 2010).
\144\ Under 40 CFR 80.1415(b)(4), renewable diesel with a lower
heating value of at least 123,500 Btu/gallon is assigned an
equivalence value of 1.7. A minority of renewable diesel has a lower
heating value below 123,500 BTU/gallon and is therefore assigned an
equivalence value of 1.5 or 1.6 based on applications submitted
under 40 CFR 80.1415(c)(2).
\145\ 83 FR 63704 (December 11, 2018).
---------------------------------------------------------------------------
B. Small Refineries and Small Refiners
In CAA section 211(o)(9), enacted as part of the EPAct, and amended
by EISA, Congress provided a temporary exemption to small refineries
\146\ through December 31, 2010. Congress provided that small
refineries could receive a temporary extension of the exemption beyond
2010 based either on the results of a required DOE study, or for the
reason of ``disproportionate economic hardship'' in response to small
refinery petitions submitted ``at any time.'' CAA section
211(o)(9)(B)(i).
---------------------------------------------------------------------------
\146\ A small refiner that meets the requirements of 40 CFR
80.1442 may also be eligible for an exemption.
---------------------------------------------------------------------------
Pursuant to this petition process, EPA often granted SREs for a
given compliance year after the applicable percentage standards for
that compliance year had been established. Under our prior approach to
calculating the percentage standards, we did not account for these
exemptions in establishing the percentage standards.\147\ We only
accounted for exemptions already granted at the time of the final
annual rule.\148\
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\147\ We adopted this interpretation of our regulations in the
2011 final rule. 75 FR 76804. We reaffirmed it in annual rulemakings
since then, including most recently in the 2019 final rule. 83 FR
63740; see also, e.g., 77 FR 1320, 1340; 78 FR 49794, 49825-49826;
80 FR 77420, 77511. We also proposed to follow this interpretation
in the July 29 proposal for this final rule. 84 FR 36797 (July 29,
2019).
\148\ See, e.g., 80 FR 77420, 77511 (December 14, 2015).
---------------------------------------------------------------------------
In the October 28 proposal, we proposed to modify the regulations
at 40 CFR 80.1405(c) to account for a projection of the total exempted
volume of gasoline and diesel produced at small refineries, including
for those exemptions granted after the final annual rule.\149\ We are
finalizing the change as proposed. The result is that our calculation
of the applicable percentage standards for 2020 takes into account a
projection of the total exempted volume of gasoline and diesel produced
by small refineries in 2020.
---------------------------------------------------------------------------
\149\ 84 FR 57677.
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1. Changes to the Projected Volume of Gasoline and Diesel for Exempt
Small Refineries
The formulas used to calculate the percentage standards applicable
to producers and importers of gasoline and diesel are provided in 40
CFR 80.1405(c). The formula for the percentage standard calculation for
total renewable fuel, including the definitions of the terms prior to
this action, is shown below. The formulas for the other three
percentage standards follow the same format, with the numerator of the
fraction replaced with the annual volume of cellulosic biofuel,
biomass-based diesel, and advanced biofuel, respectively. In this
action we are only modifying the definitions of the terms
GEi and DEi, which previously referred to the
amount of gasoline and diesel projected to be produced by exempt small
refineries, to now refer to the amount of gasoline and diesel projected
to be exempt. All other terms remain in the same and were not
reexamined in this rulemaking.
[GRAPHIC] [TIFF OMITTED] TR06FE20.003
Where:
StdRF,i = The renewable fuel standard for year i, in
percent.
RFVRF,i = Annual volume of renewable fuel required by 42
U.S.C. 7545(o)(2)(B) for year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
Di = Amount of diesel projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
RGi = Amount of renewable fuel blended into gasoline that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
RDi = Amount of renewable fuel blended into diesel that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
GSi = Amount of gasoline projected to be used in Alaska
or a U.S. territory, in year i, if the state or territory has opted-
in or opts-in, in gallons.
RGSi = Amount of renewable fuel blended into gasoline
that is projected to be consumed in Alaska or a U.S. territory,
[[Page 7050]]
in year i, if the state or territory opts-in, in gallons.
DSi = Amount of diesel projected to be used in Alaska or
a U.S. territory, in year i, if the state or territory has opted-in
or opts-in, in gallons.
RDSi = Amount of renewable fuel blended into diesel that
is projected to be consumed in Alaska or a U.S. territory, in year
i, if the state or territory opts-in, in gallons.
GEi = The amount of gasoline projected to be produced by
exempt small refineries and small refiners, in year i, in gallons in
any year they are exempt per Sec. Sec. 80.1441 and 80.1442.
DEi = The amount of diesel fuel projected to be produced
by exempt small refineries and small refiners in year i, in gallons,
in any year they are exempt per Sec. Sec. 80.1441 and 80.1442.
Historically, EPA has interpreted the terms GEi and
DEi to refer to the amount of gasoline and diesel projected
to be produced by small refineries that have already been granted
exemptions from their RFS obligations prior to our issuing the final
rule for the relevant compliance year.\150\ As a result of this
interpretation, any SREs granted after we issued the annual rule
containing the percentage standards for that year effectively reduced
the required volume of renewable fuel for that year. For example, in
August 2019 we granted 31 SREs for the 2018 compliance year after the
percentage standards for 2018 had been established.\151\ These SREs
reduced the obligated volume of gasoline and diesel for 2018 by 13.42
billion gallons, effectively reducing the required volume of total
renewable fuel for 2018 by 1.43 billion RINs.
---------------------------------------------------------------------------
\150\ See, e.g., 84 FR 36797 (July 29, 2019).
\151\ The percentage standards for 2018 were established in
December 2017 (82 FR 58486, December 12, 2017).
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In comments on the July 29 proposal, many commenters requested that
EPA adopt a different interpretation of the terms for the amount of
gasoline and diesel projected to be produced by exempt small refineries
in the existing percentage standard formula.\152\ Many commenters
requested that these terms refer to a projection of the exempted volume
of gasoline and diesel produced by small refineries, regardless of
whether EPA had already adjudicated such exemption petitions by the
time of the final rule. These commenters argued that this
interpretation of the regulations is reasonable and better implements
the statutory requirement that EPA must ``ensure'' the renewable fuel
volumes are met. Some commenters suggested that adjusting the
percentage standards formula is more important now than in earlier
years of the program as we have recently granted exemptions for more
significant volumes of gasoline and diesel, potentially resulting in
more significant volumes that are not being met at the time of
compliance.\153\ A petition for administrative reconsideration raised
similar issues, asking EPA to reconsider our approach for accounting
for exempted volumes through the formula at 40 CFR 80.1405(c).\154\ In
the October 28 proposal, EPA undertook a process to revisit this issue,
albeit under our inherent authority to revise or amend a rulemaking,
rather than as an exercise of our reconsideration authority under CAA
section 307(d)(7)(B).\155\
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\152\ See, e.g., comments from the Renewable Fuels Association
(Docket Item No. EPA-HQ-OAR-2019-0136-0281).
\153\ See, e.g., comments from Growth Energy (Docket Item No.
EPA-HQ-OAR-2019-0136-0312).
\154\ ``Petition for Reconsideration of 40 CFR 80.1405(c), EPA
Docket No. EPA-HQ-OAR-2005-0161, promulgated in 75 FR 14670 (Mar.
26, 2010); Petition for Reconsideration of Periodic Reviews for the
Renewable Fuel Standard Program, 82 FR 58364 (Dec. 12, 2017)'' (June
4, 2018).
\155\ See 84 FR 57680 & n.13 (explaining in greater detail the
basis for EPA's reconsideration of this issue).
---------------------------------------------------------------------------
In the October 28 proposal we proposed to change the definitions of
the two relevant terms in the percentage standard formula at 40 CFR
80.1405(c), GEi and DEi. We proposed that these
terms represent a projection of the exempted volume of gasoline and
diesel, regardless of whether we had adjudicated exemptions for that
year by the time of the final rule establishing the percentage
standards. We are finalizing these changes, and in turn, also
completing the process of revisiting this issue that we undertook as
described above in response to the above-noted administrative petition.
The term ``GEi'', representing the volume of exempt
gasoline, is now defined as ``the total amount of gasoline projected to
be exempt in year i, in gallons, per Sec. Sec. 80.1441 and 80.1442.''
Similarly, the term ``DEi'', representing the volume of
exempt diesel, is now defined as ``the total amount of diesel projected
to be exempt in year i, in gallons, per Sec. Sec. 80.1441 and
80.1442.''
We begin by explaining our legal authority to adopt the new
definitions, as well as our rationale for the change in our policy.
While the statute does not specifically require EPA to redistribute
exempted volumes in this manner, we believe that this is a reasonable
interpretation of our authority under Chevron v. NRDC.\156\ Indeed,
making this projection harmonizes various statutory provisions. The
statute authorizes small refineries to petition for and EPA to grant an
exemption based on disproportionate economic hardship ``at any time,''
\157\ while also directing EPA to promulgate standards by November 30
of the prior year to ``ensure[]'' that the renewable fuel volumes are
met.\158\ In other words, small refineries may seek and EPA may grant
hardship exemptions at any time, including after the percentage
standards are established. Meanwhile, EPA may account for a projection
of these exemptions in the annual rule to ``ensure'' the renewable fuel
volumes.\159\
---------------------------------------------------------------------------
\156\ Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837, 842-44 (1984).
\157\ CAA section 211(o)(9)(B)(i).
\158\ CAA section 211(o)(3)(B)(i); see also CAA section
211(o)(2)(A)(i), (2)(A)(iii)(I), CAA section 301(a). This
projection, moreover, is hardly unique in the RFS program as
Congress required numerous projections in the implementation of the
program. See, e.g., CAA section 211(o)(7)(D) (projection of the
volume of cellulosic biofuel production); (o)(3)(A) (projection of
the volumes of transportation fuel, biomass-based diesel, and
cellulosic biofuel).
\159\ See CAA section 211(o)(2)(A)(i), (2)(A)(iii)(I),
(3)(B)(i); see also CAA section 301(a).
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In more concrete terms, should EPA grant SREs without accounting
for them in the percentage formula, those exemptions would effectively
reduce the volumes of renewable fuel required by the RFS program,
potentially impacting renewable fuel use in the U.S.\160\ By contrast,
under our new approach, the percentage standard for each category of
renewable fuel would increase to account for a projection of the
exempted volume. These higher percentage standards would have the
effect of ensuring that the required volumes of renewable fuel are met
when small refineries are granted exemptions from their 2020
obligations after the issuance of the final rule, provided EPA's
projection of the exempted volume is accurate.
---------------------------------------------------------------------------
\160\ We note that there are other factors, besides the RFS
program, that affect renewable fuel use. See, e.g., ``Endangered
Species Act No Effect Finding for the 2020 Final Rule,'' available
in the docket for this action.
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This new approach entails a change in policy.\161\ We previously
did not account for exemptions granted after the annual rule, and at
times we even suggested that doing so was improper.\162\ We believe our
changed approach is appropriate and largely avoids the problems we
previously identified. First, we had previously stated that ``the Act
is best interpreted to require issuance of a single annual standard in
November that is applicable in the following calendar year, thereby
providing advance notice and certainty to obligated parties regarding
their
[[Page 7051]]
regulatory requirements. Periodic revisions to the standards to reflect
waivers issued to small refineries or refiners would be inconsistent
with the statutory text, and would introduce an undesirable level of
uncertainty for obligated parties.'' \163\ Today's changes are
consistent with these views. By projecting exempted volumes in advance
of issuing annual standards, we can issue a single set of standards for
each year without the need for periodic revisions and the associated
uncertainty for obligated parties.
---------------------------------------------------------------------------
\161\ FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009).
\162\ See 78 FR 49825-49826; 77 FR 1340; EPA's Br., Doc No.
1757157, D.C. Cir. No. 17-1258, AFPM v. EPA (Oct. 25, 2018) (``EPA
Br. in AFPM'').
\163\ 77 FR 1340.
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Second, we also had previously noted that ``Congress allowed for
some imprecision to exist in the actual volumes of renewable fuel that
are consumed as a result of the percentage standards that we set each
November. . . .'' \164\ Relatedly, we had noted the inherent
difficulties of projecting exempted small refinery volumes.\165\ We
still agree that Congress allowed for some imprecision to exist in the
actual required volumes of renewable fuel, and that projecting future
exempted volumes involves some uncertainty.
---------------------------------------------------------------------------
\164\ 77 FR 1340 (January 9, 2012).
\165\ EPA Br. in AFPM 72-77.
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But several recent developments persuade us to reach a different
conclusion in accounting for a projection of exempted small refinery
volumes. For one, we are projecting the aggregate exempted volume in
2020. We thus need not wrestle with the difficulties of predicting
precisely which refineries will apply or the economic circumstances of
specific refineries in 2020. We only need to estimate the total
exempted volume. Moreover, we have the benefit of additional experience
administering the RFS program and knowledge of the relatively high
levels of exempted volumes in recent years, where exempted volumes
associated with SREs granted after the annual percentage standards were
established have constituted a significant portion of the total volume
of obligated fuel, resulting in fewer RINs being used to comply with
the RFS standards.
Finally, in recent annual rulemakings, EPA has not articulated its
prospective policy to adjudicating SRE petitions for those compliance
years. For instance, in the 2018 final rule, we did not state our
policy to adjudicating 2018 SRE petitions. Instead we articulated that
policy in a separate memorandum issued after the annual rule.\166\
Since EPA's policy to adjudicating SRE petitions affects the exempted
volume, not having established this policy at the time of the annual
rule made it very challenging to project the exempted volume. In
today's rule, by contrast, we are articulating our prospective policy
to adjudicating SRE petitions (beginning with the 2019 SRE petitions
and including the 2020 SRE petitions) concurrently with issuing this
final rule. Doing so augments our ability to reasonably project the
exempted volume for 2020. We explain this policy further below.
---------------------------------------------------------------------------
\166\ ``Decision on 2018 Small Refinery Exemption Petitions,''
Memorandum from Anne Idsal, Acting Assistant Administrator, Office
of Air and Radiation to Sarah Dunham, Director, Office of
Transportation and Air Quality. August 9, 2019.
---------------------------------------------------------------------------
2. Projecting the Exempted Volume of Gasoline and Diesel in 2020
As already noted, we acknowledge the inherent uncertainty in
projecting the exempted volume. More concretely, an imprecise
projection has consequences on the actual required volume of renewable
fuel. If we over-project the volume of gasoline and diesel produced by
exempt small refineries in 2020, the actual required volumes of
renewable fuel will be higher than the volumes used in calculating the
percentage standards. By contrast, if we under-project the volume of
exempted gasoline and diesel, the actual required volumes of renewable
fuel will be lower than the volumes used in calculating the percentage
standards. If we project the volume correctly, we will ensure that, as
far as exempted small refinery volumes are concerned, the actual
required volume is equal to the volume established in this final
rule.\167\
---------------------------------------------------------------------------
\167\ The actual required volume is subject to other
uncertainties besides small refinery exemptions, such as unexpected
changes in gasoline and diesel use.
---------------------------------------------------------------------------
In selecting the methodology for projecting the exempted volume, we
thus aim to make a neutral projection of exemptions based on the
information now before us. As proposed, we are finalizing a projection
methodology based on a 2016-18 annual average of exempted volumes had
EPA strictly followed DOE recommendations in those years, including by
granting 50 percent relief where DOE recommended 50 percent relief. We
explain why we do so below, beginning with our decision to base the
projection on DOE recommendations and then our decision to use a 2016-
18 annual average. Finally, we state the projected exempt volumes of
gasoline and diesel based on this approach and the corresponding number
of RINs.
First, we choose to base the projection of exempted volumes on
DOE's recommendations for two reasons, one prospective and one
retrospective. Prospectively, this is our general approach to
adjudicating SRE petitions going forward, beginning with 2019 SRE
petitions and including 2020 SRE petitions. Our approach to evaluating
SREs going forward is to follow DOE's recommendations, including
granting partial (i.e., 50 percent) exemptions, where appropriate. The
statute authorizes EPA to evaluate petitions for SREs considering DOE's
study, recommendation, and other economic factors. While final
decisions on 2020 SREs must await EPA's receipt and adjudication of
those petitions, we generally have the statutory authority to issue a
final decision consistent with DOE's recommendation.\168\ This reading
of the statute is consistent with congressional guidance to DOE \169\
and EPA.\170\
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\168\ Other factors, such as judicial resolution of pending
decisions or subsequent Congressional direction, could potentially
affect EPA's SRE policy going forward.
\169\ See Consolidated Appropriations Act, 2016, Public Law 114-
113 (2015), Explanatory Statement to Senate amendment to H.R. 2029
Military Construction and Veterans Affairs and Related Agencies
Appropriations Act, 2016, Division D--Energy and Water Development
and Related Agencies Appropriations Act, 2016, available at https://docs.house.gov/meetings/RU/RU00/20151216/104298/HMTG-114-RU00-20151216-SD005.pdf. Congress in this Statement directed DOE, under
certain circumstances, ``to recommend to the EPA Administrator a 50
percent waiver of RFS requirements for the [small refinery]
petitioner.'' Id. at 35. Consistent with that guidance and since
2014, DOE has recommended 50 percent exemptions as it deemed
appropriate.
\170\ S. Rep. 114-281. Congress in this Report provided that
``[w]hen making decisions about small refinery exemptions under the
RFS program, the Agency is directed to follow DOE's
recommendations.'' See also Consolidated Appropriations Act, 2019,
Public Law No. 116-6 (2019), H. Rep. 116-9 at 741, continuing the
directive contained in Senate Report 114-281. See also Sen. Rep.
116-123, Department of the Interior, Environment, and Related
Agencies Appropriations Bill, 2020, Report Accompanying Sen. 2580,
at 87-88 (Sept. 26, 2019) (again ``continu[ing] the directive
contained in Senate Report 114-281 related to small refinery
relief''), available at https://www.congress.gov/116/crpt/srpt123/CRPT-116srpt123.pdf. This guidance, read together with that
discussed in the previous footnote, supports the interpretation that
DOE has authority to recommend partial exemptions for particular
small refineries, and that EPA has discretion to follow that
recommendation and grant a partial exemption.
---------------------------------------------------------------------------
We acknowledge that on August 9, 2019, we took final agency action
on 36 then-pending small refinery petitions for the 2018 compliance
year (``August 9 Memorandum Decision''),\171\ and stated that the
``best interpretation'' of the statute was that EPA should either grant
or deny petitions in full, and ``not
[[Page 7052]]
grant partial relief.'' Specifically, we observed that the statute
provided for exemptions as an ``extension of the exemption under
subparagraph (A)'', where subparagraph (A) stated that the RFS program
requirements ``shall not apply to small refineries under calendar year
2011.'' \172\ We had implemented the ``subparagraph (A)'' pre-2011
exemption as a full exemption for all qualifying small refineries.
Consistent with this interpretation, we concluded that ``when Congress
authorized the Administrator to provide an `extension' of that
exemption for the reason of [disproportionate economic hardship],
Congress intended that extension to be a full, and not partial,
exemption.'' \173\
---------------------------------------------------------------------------
\171\ ``Decision on 2018 Small Refinery Exemption Petitions,''
Memorandum from Anne Idsal, Acting Assistant Administrator, Office
of Air and Radiation to Sarah Dunham, Director, Office of
Transportation and Air Quality. August 9, 2019 (``August 9
Memorandum Decision'').
\172\ CAA section 211(o)(9)(B), (o)(9)(A).
\173\ August 9 Memorandum Decision at 2.
---------------------------------------------------------------------------
We believe, however, that this is not the only reasonable way to
adjudicate exemption petitions. Had Congress spoken directly to the
issue of the amount of relief EPA could provide to small refineries,
EPA would be bound by that directive. However, the statute is silent
with respect to EPA's authority to issue partial exemptions. Nothing in
the statute directly addresses this issue. No statutory language exists
characterizing the scope of an exemption; there are no terms employed
such as ``partial'' or ``full,'' or ``50%'' or ``100%.'' Moreover,
nothing in the statute obligates EPA to provide full relief where we
find that only partial relief is warranted.
We think there is another reasonable reading of this provision of
the statute: EPA may issue partial exemptions. Notably, EPA may
determine that only partial relief is warranted based on a particular
small refinery's circumstances. In that case, it is reasonable for the
level of relief that EPA grants to reflect that determination. For
purposes of making the projection of the aggregate exempted volume of
gasoline and diesel in 2020, and going forward, we are adopting this
interpretation of the statute,\174\ and thereby depart from the
interpretation taken in the August 9 Memorandum Decision, under which
EPA ``shall either grant or deny petitions for small refinery hardship
in full, and not grant partial relief.'' \175\ We adopt this new
approach for several reasons, consistent with FCC v. Fox Television
Stations, Inc.\176\
---------------------------------------------------------------------------
\174\ See Chevron, 467 U.S. at 842-44.
\175\ August 9 Memorandum Decision at 2.
\176\ See generally FCC, 556 U.S. at 515.
---------------------------------------------------------------------------
As already noted, this new policy would allow EPA to ensure that
the level of relief that it grants appropriately reflects the
particular small refinery's disproportionate economic hardship. This
allows EPA to more precisely calibrate its RFS policy, and to strike an
appropriate balance between furthering the production and use of
renewable fuels while granting relief to small refineries that meet the
statutory criteria. This balance, moreover, is also appropriate in
light of the above-cited recent Congressional direction.\177\
---------------------------------------------------------------------------
\177\ See supra notes 20 and 21.
---------------------------------------------------------------------------
Even independent of our prospective SRE policy, we believe this
approach is a reasonable estimate of the aggregate exempted volume
based on a retrospective review of EPA's past SRE policies. In prior
years, EPA has taken different approaches in evaluating small refinery
petitions. As noted above, in the August 9 Memorandum Decision, we
granted full exemptions to petitioners where DOE either recommended
full or 50 percent relief. That is, in cases where DOE found a small
refinery experienced either disproportionate impacts or viability
impairment, EPA found the small refinery experienced disproportionate
economic hardship and granted a full exemption. By contrast, in earlier
years of the program, we denied petitions and provided no exemption in
certain cases where DOE recommended a 50 percent exemption, finding
that disproportionate economic hardship existed only where the small
refinery experienced both disproportionate impacts and viability
impairment.\178\ Our approach to projection, then, takes a middle
ground between these prior approaches, and is a reasonable estimate of
the aggregate exempted volume in 2020.
---------------------------------------------------------------------------
\178\ See, e.g., Hermes Consol., LLC v. EPA, 787 F.3d 568, 575
(D.C. Cir. 2015).
---------------------------------------------------------------------------
We now turn to our decision to use the 2016-18 annual average under
this methodology. As we have not yet received SRE petitions for 2020,
we must estimate the aggregate amount of DOE recommended relief for
that year. To do so, it is instructive to look back at what the
exempted volumes of gasoline and diesel in previous years would have
been had EPA followed DOE's recommendations, including granting partial
exemptions. These volumes, along with the Renewable Volume Obligation
(RVO) that would have been exempted, are shown in Table VII.B-1.
Table VII.B-1--Estimated Exempted Volume of Gasoline and Diesel and Estimated RVO Exempted by Compliance Year
Following DOE's Recommendations
----------------------------------------------------------------------------------------------------------------
Estimated exempted Estimated exempted Estimated RVO
Compliance year volume of gasoline volume of diesel exempted (million
(million gallons) (million gallons) RINs)
----------------------------------------------------------------------------------------------------------------
2016.......................................... 2,450 1,930 440
2017.......................................... 5,650 3,870 1020
2018.......................................... 4,620 3,270 840
----------------------------------------------------------------------------------------------------------------
As demonstrated in Table VII.B-1, the volume of gasoline and diesel
that would have been exempted if EPA had followed DOE's recommendations
has varied significantly in previous years.\179\ This is because there
are many factors that affect the number of SREs that are granted in a
given year and the aggregate exempted volume. We believe that it is
appropriate to use an average volume of the gasoline and diesel that
would have been exempted over a three-year period as our projection of
gasoline and diesel that will be exempted in 2020, rather than the
volume of gasoline and diesel that would have been exempted in any
single year. This approach averages out the effects of unique events or
market circumstances that occurred in individual past years that may or
may not occur in 2020. Given that the last year for which we have data
on small refinery exemptions is 2018,\180\ we take the average exempted
volume from 2016-18.
---------------------------------------------------------------------------
\179\ Information about the number of SREs granted and the
volume of RINs not required to be retired as a result of those
exemptions can be found at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
\180\ To date, we have adjudicated all 2018 small refinery
exemption petitions submitted to us. EPA has not yet adjudicated any
small refinery exemptions for the 2019 or 2020 compliance years.
---------------------------------------------------------------------------
The average volume of these fuels that would have been exempted in
2016-18
[[Page 7053]]
if EPA had followed DOE's recommendations is 4,240 and 3,020 million
gallons, for gasoline and diesel fuel, respectively. We use these
values for GEi and DEi, respectively, in calculating the percentage
standards for each of the renewable fuel types. We also note that these
exempted volumes would have resulted in an average reduction to the RVO
of approximately 770 million RINs.
C. Final Standards
The formulas in 40 CFR 80.1405 for the calculation of the
percentage standards require the specification of a total of 14
variables covering factors such as the renewable fuel volume
requirements, projected gasoline and diesel demand for all states and
territories where the RFS program applies, renewable fuels projected by
EIA to be included in the gasoline and diesel demand, and projected
gasoline and diesel volumes from exempt small refineries. The values of
all the variables used for this final rule are shown in Table VII.C-1
for the applicable 2020 standards.\181\
---------------------------------------------------------------------------
\181\ To determine the 49-state values for gasoline and diesel,
the amount of these fuels used in Alaska is subtracted from the
totals provided by EIA because petroleum based fuels used in Alaska
do not incur RFS obligations. The Alaska fractions are determined
from the June 28, 2019 EIA State Energy Data System (SEDS), Energy
Consumption Estimates.
Table VII.C-1--Values for Terms in Calculation of the Final 2020
Standards \182\
(billion gallons)
------------------------------------------------------------------------
Value for 2020
Term Description standards
------------------------------------------------------------------------
RFVCB....................... Required volume of 0.59
cellulosic biofuel.
RFVBBD...................... Required volume of 2.43
biomass-based diesel
\a\.
RFVAB....................... Required volume of 5.09
advanced biofuel.
RFVRF....................... Required volume of 20.09
renewable fuel.
G........................... Projected volume of 142.68
gasoline.
D........................... Projected volume of 55.30
diesel.
RG.......................... Projected volume of 14.42
renewables in gasoline.
RD.......................... Projected volume of 2.48
renewables in diesel.
GS.......................... Projected volume of 0
gasoline for opt-in
areas.
RGS......................... Projected volume of 0
renewables in gasoline
for opt-in areas.
DS.......................... Projected volume of 0
diesel for opt-in areas.
RDS......................... Projected volume of 0
renewables in diesel
for opt-in areas.
GE.......................... Projected volume of 4.24
gasoline for exempt
small refineries.
DE.......................... Projected volume of 3.02
diesel for exempt small
refineries.
------------------------------------------------------------------------
\a\ The BBD volume used in the formula represents physical gallons. The
formula contains a 1.5 multiplier to convert this physical volume to
ethanol-equivalent volume.
---------------------------------------------------------------------------
\182\ See ``Calculation of final % standards for 2020'' in
docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
Projected volumes of gasoline and diesel, and the renewable fuels
contained within them, were provided by EIA in a letter to EPA that is
required under the statute, and represent consumption values from the
October 2019 version of EIA's Short-Term Energy Outlook.\183\ An
estimate of fuel consumed in Alaska, derived from the June 28, 2019
release of EIA's State Energy Data System (SEDS) and based on the 2017
volumes contained therein, was subtracted from the nationwide volumes.
---------------------------------------------------------------------------
\183\ ``EIA letter to EPA with 2020 volume projections 10-9-
2019,'' available in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
Using the volumes shown in Table VII.C-1, we have calculated the
final percentage standards for 2020 as shown in Table VII.C-2.
Table VII.C-2--Final Percentage Standards for 2020
------------------------------------------------------------------------
------------------------------------------------------------------------
Cellulosic biofuel......................................... 0.34%
Biomass-based diesel....................................... \a\ 2.10%
Advanced biofuel........................................... 2.93
Renewable fuel............................................. 11.56%
------------------------------------------------------------------------
\a\ Based on the ethanol-equivalent volume of BBD.
VIII. Administrative Actions
A. Assessment of the Domestic Aggregate Compliance Approach
The RFS regulations specify an ``aggregate compliance'' approach
for demonstrating that planted crops and crop residue from the U.S.
complies with the ``renewable biomass'' requirements that address lands
from which qualifying feedstocks may be harvested.\184\ In the 2010
RFS2 rulemaking, EPA established a baseline number of acres for U.S.
agricultural land in 2007 (the year of EISA enactment) and determined
that as long as this baseline number of acres was not exceeded, it was
unlikely that new land outside of the 2007 baseline would be devoted to
crop production based on historical trends and economic considerations.
The regulations specify, therefore, that renewable fuel producers using
planted crops or crop residue from the U.S. as feedstock in renewable
fuel production need not undertake individual recordkeeping and
reporting related to documenting that their feedstocks come from
qualifying lands, unless EPA determines through one of its annual
evaluations that the 2007 baseline acreage of 402 million acres
agricultural land has been exceeded.
---------------------------------------------------------------------------
\184\ 40 CFR 80.1454(g). EPA has applied this ``aggregate
compliance'' approach for the United States in annual RFS
rulemakings since establishing it in the 2010 RFS2 rule. See 75 FR
14701-04. In this annual rulemaking, we have not reexamined or
reopened this policy, including the regulations at 80.1454(g) and
80.1457. Similarly, as further explained below, we have applied this
approach for Canada since our approval of Canada's petition to use
aggregate compliance in 2011. In this rulemaking, we have also not
reexamined or reopened our decision on that petition. Any comments
on these issues are beyond the scope of this rulemaking.
---------------------------------------------------------------------------
In the 2010 RFS2 rulemaking, EPA committed to make an annual
finding concerning whether the 2007 baseline amount of U.S.
agricultural land has been exceeded in a given year. If the baseline is
found to have been exceeded, then producers using U.S. planted crops
and crop residue as feedstocks for renewable fuel production would be
required to comply with individual recordkeeping and reporting
requirements to verify
[[Page 7054]]
that their feedstocks are renewable biomass.
Based on data provided by the USDA Farm Service Agency (FSA) and
Natural Resources Conservation Service (NRCS), we have estimated that
U.S. agricultural land reached approximately 379.8 million acres in
2019 and thus did not exceed the 2007 baseline acreage of 402 million
acres. The USDA data used to make this derivation can be found in the
docket to this rule.\185\
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\185\ USDA also provided EPA with 2019 data from the
discontinued Grassland Reserve Program (GRP) and Wetlands Reserve
Program (WRP). Given this data, EPA estimated the total U.S.
agricultural land both including and omitting the GRP and WRP
acreage. In 2019, combined land under GRP and WRP totaled 2,974,573
acres. Subtracting the GRP, WRP, and Agriculture Conservation
Easement Program acreage yields an estimate of 376,853,632 acres or
approximately 376.9 million total acres of U.S. agricultural land in
2019. Omitting the GRP and WRP data yields approximately 379.8
million acres of U.S. agricultural land in 2019.
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B. Assessment of the Canadian Aggregate Compliance Approach
The RFS regulations specify a petition process through which EPA
may approve the use of an aggregate compliance approach for planted
crops and crop residue from foreign countries.\186\ On September 29,
2011, EPA approved such a petition from the Government of Canada.\187\
---------------------------------------------------------------------------
\186\ 40 CFR 80.1457.
\187\ See ``EPA Decision on Canadian Aggregate Compliance
Approach Petition'' available in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------
The total agricultural land in Canada in 2019 is estimated at 118.1
million acres. This total agricultural land area includes 95.9 million
acres of cropland and summer fallow, 12.4 million acres of pastureland
and 9.8 million acres of agricultural land under conservation
practices. This acreage estimate is based on the same methodology used
to set the 2007 baseline acreage for Canadian agricultural land in
EPA's response to Canada's petition. The data used to make this
calculation can be found in the docket to this rule. This acreage does
not exceed the 2007 baseline acreage of 122.1 million acres.
IX. Amendments to the RFS and Fuels Program Regulations
In implementing the RFS program, we have identified several changes
to the program that will assist with implementation in future years.
These regulatory changes include both revisions we proposed in the July
29 proposal--clarification of diesel RVO calculations, pathway petition
conditions, a biodiesel esterification pretreatment pathway, distillers
corn oil and distillers sorghum oil pathways, and renewable fuel
exporter provisions--and certain provisions of the 2016 REGS rule
proposal that we are finalizing here.\188\ These regulatory changes are
described in this section. Comments on these regulatory revisions from
both the 2016 REGS and 2020 RVO proposals, as well as EPA's responses,
are contained in the response to comments (RTC) document in the docket
for this action.\189\
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\188\ See 81 FR 80828 (November 16, 2016).
\189\ All comments submitted on the REGS proposal can be found
in Docket No. EPA-HQ-OAR-2016-0041. Specific comments relevant to
the provisions that were under consideration for finalization in
this action have also been added to the docket for this action
(Docket Item No. EPA-HQ-OAR-2019-0136-0002). We are only responding
to comments from the REGS proposal on the provisions that are being
finalized in this action. Comments on the remaining provisions in
the REGS proposal, as well as those on provisions listed in the July
29 proposal but that are not being finalized here, remain under
consideration. We are not responding to them in this action.
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A. Clarification of Diesel RVO Calculations
1. Overview
We are finalizing certain provisions regarding clarification of
diesel RVO calculations. Specifically, we are finalizing the ``primary
approach'' proposed in the July 29 proposal, with some modifications
based on comments received. We are not finalizing either of the two
alternative approaches presented in the July 29 proposal, after
consideration of negative comments on these two approaches.
Historically, home heating oil (HO) and diesel fuel were virtually
indistinguishable because both contained the same distillation range of
hydrocarbons and high level of sulfur. EPA's diesel fuel sulfur
regulations resulted in a distinction in the marketplace beginning in
the 1990s and concluding in 2010 with the phase-in of the ultra-low
sulfur diesel regulations for diesel fuel used in motor vehicles and
motor vehicle engines (MV diesel fuel). Similarly, beginning in 2004,
EPA promulgated requirements for diesel fuel used in nonroad,
locomotive, and marine vehicles and engines (NRLM diesel fuel) that
concluded phasing in at the end of 2014. Thus, all diesel fuel for use
in motor vehicles and motor vehicle engines, and nonroad, locomotive,
and marine vehicles and engines, is currently required to meet a 15 ppm
sulfur per-gallon standard, under regulations set out in 40 CFR part
80, subpart I \190\ (For purposes of subpart I, such diesel fuel is
also now collectively known as MVNRLM diesel fuel). We did not set
standards for HO under subpart I, with the result that it remained high
in sulfur content and cost less to produce than MVNRLM diesel fuel. As
such, subpart I also requires all parties in the distribution system to
ensure that diesel fuel containing 15 ppm sulfur or less (referred to
as 15 ppm diesel fuel, ultra-low sulfur diesel fuel, or ULSD) remains
segregated from higher sulfur fuels and to take measures to prevent
sulfur contamination of ULSD.\191\
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\190\ Subpart I includes an exception to this requirement that
allows diesel fuel used in locomotive or marine engines to meet a
500 ppm sulfur standard if the fuel is produced from transmix
processors and distributed under an approved compliance plan.
\191\ See, e.g., 40 CFR 80.610(g).
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The RFS regulations, which place an RVO on the production and
importation of diesel transportation fuel, but not on the production or
importation of HO, were promulgated in 2010 and, similar to subpart I
regulations, made the same presumption that HO and MVNRLM diesel fuel
would be segregated. The RFS regulations did not anticipate that these
fuels would become indistinguishable, have the same value in the
marketplace (apart from their RFS compliance cost), and be commingled
in the fuel distribution system. For example, 40 CFR 80.1407 set forth
requirements for obligated parties to include all products meeting the
definition of MVNRLM diesel fuel, collectively called ``diesel fuel,''
at 40 CFR 80.2(qqq) that are produced or imported during a compliance
period in the volume used to calculate their RVOs unless the diesel
fuel is not transportation fuel.\192\ Under definitions of MV and NRLM
diesel fuel, these products include diesel fuel that is ``made
available'' for use in motor vehicles and motor vehicle engines, and
nonroad, locomotive, or marine vehicles and engines.\193\
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\192\ See 40 CFR 80.1407(e) and (f).
\193\ See 40 CFR 80.2(y) and (nnn).
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When the RFS regulations were promulgated in 2010, the lower
production cost of HO relative to diesel fuel provided economic
incentive for refiners, pipelines, and terminals to produce and
distribute HO separately from diesel fuel. After we promulgated the RFS
regulations, however, many states began implementing programs designed
to reduce the sulfur content of HO to 15 ppm or less (15 ppm HO).
Currently, the majority of HO is required to meet a 15 ppm sulfur
standard under numerous state and city programs in the Northeast and
Mid-Atlantic,\194\ making HO once again indistinguishable from ULSD and
of the same economic value as MVNRLM
[[Page 7055]]
diesel fuel.\195\ Further, in 2015, additional regulations became
effective that required marine diesel fuel used in Emissions Control
Areas (ECA marine fuel) to contain 1,000 ppm sulfur or less.\196\ In
response, many companies have opted to produce and distribute ECA
marine fuel containing 15 ppm sulfur or less (15 ppm ECA marine fuel)
fungibly with 15 ppm diesel fuel, rather than invest in infrastructure
to distribute and segregate higher-sulfur ECA marine fuel. Since HO,
ECA marine fuel, and other non-transportation fuels that meet a 15 ppm
sulfur standard are essentially identical in the marketplace, we
believe that some parties in the fuel distribution system are
distributing them together--i.e., commingling MVNRLM diesel fuel with
15 ppm HO and 15 ppm ECA marine fuel.
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\194\ Connecticut, Delaware, Maine, Massachusetts, New
Hampshire, New Jersey, New York, Rhode Island, Vermont, the District
of Columbia, and the city of Philadelphia.
\195\ See the New England Fuel Institute's (NEFI) ``State Sulfur
& Bioheat Requirements for No. 2 Heating Oil in the Northeast & Mid-
Atlantic States,'' available in the docket for this action.
\196\ See 40 CFR 80.610(e)(6). ECA marine fuel is not
transportation fuel under the RFS regulations. Therefore, refiners
and importers do not incur an RVO for ECA marine fuel that they
produce or import.
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The regulations in 40 CFR part 80, subpart I, do not prohibit
parties from commingling MVNRLM diesel fuel with other 15 ppm
distillate fuel (i.e., distillate fuel that contains 15 ppm sulfur or
less) that is designated for non-transportation purposes. However,
commingled fuel must meet all of the applicable requirements in subpart
I because the resulting fuel is ``made available'' for use in motor
vehicles, or nonroad, locomotive, or marine vehicles and engines.\197\
This means that any refiner or importer that produces or imports 15 ppm
distillate fuel that is designated for non-transportation purposes and
is commingled with MVNRLM diesel fuel must also certify the fuel as
meeting the sampling, testing, reporting, and recordkeeping
requirements in subpart I.\198\
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\197\ See 40 CFR 80.2(y) and (nnn).
\198\ We have received requests from a number of regulated
parties asking the agency to amend the fuels regulations to allow
parties to more easily mix and fungibly ship HO, ECA marine fuel,
and MVNRLM fuel that meet the 15 ppm sulfur standard. In a separate
action, we intend to propose additional amendments that would
significantly streamline these regulations (see RIN 2060-AT31 in
EPA's Regulatory Agenda).
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Although this approach does not create compliance issues relating
to subpart I requirements, at proposal we explained that we were
concerned that some obligated parties (e.g., refiners and importers)
under the RFS program may be calculating RVOs without accounting for
all of their 15 ppm distillate fuel that is ultimately sold for use as
MVNRLM diesel fuel. Specifically, obligated parties may be excluding 15
ppm HO or 15 ppm ECA marine fuel from their RVO calculations, and
downstream parties may be re-designating this fuel as MVNRLM diesel
fuel and not incurring an RVO.\199\
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\199\ A similar situation exists with respect to #1 diesel fuel,
which is used/blended in the winter due to cold temperature
constraints and its often-identical counterparts of kerosene and jet
fuel.
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We also explained that with the convergence of the MVNRLM diesel
fuel, HO, and ECA marine fuel sulfur standards, some stakeholders had
expressed confusion to EPA on accounting for 15 ppm distillate fuel
that leaves the obligated party's gate designated as HO, ECA marine
fuel, or other non-transportation fuels, but is subsequently re-
designated as either MVNRLM diesel fuel or ultimately used as MVNRLM
diesel fuel by a downstream entity. Specifically, some obligated
parties had asked whether they are required to add re-designated MVNRLM
diesel fuel back to their RVO calculations while some downstream
entities had asked whether they are required to incur an RVO for MVNRLM
diesel fuel they re-designate from non-transportation fuel to
transportation fuel.
We further explained in the July 29 proposal that we intended for
any diesel fuel not used as transportation fuel, such as HO or ECA
marine fuel, to be excluded from RVO calculations in keeping with
statutory requirements.\200\ We also intended for all diesel fuel
ultimately used as transportation fuel to incur an RVO, even 15 ppm
distillate fuel that is initially designated as non-transportation fuel
and subsequently re-designated as transportation fuel by downstream
parties.\201\ Thus, existing regulations allow downstream parties who
are registered as refiners and who comply with all sampling, testing,
recordkeeping, and other refiner requirements to ``produce'' MVNRLM
diesel fuel from HO, ECA marine fuel, and other non-transportation
fuels. These refiners incur RVOs for all MVNRLM diesel fuel that they
``produce'' from the non-transportation fuel. However, we believe that
stakeholder confusion over who should account for re-designated fuel in
their RVO may be causing the omission of some re-designated MVNRLM
diesel fuel from RVO calculations altogether. Therefore, we are
revising the RFS regulations to more clearly specify how volumes of re-
designated MVNRLM diesel fuel are accounted for in obligated parties'
RVO calculations in order to ensure that the RFS mandates continue to
be met.
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\200\ See 40 CFR 80.1407(f)(8).
\201\ With the other exceptions listed in 40 CFR 80.1407(f).
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Consistent with our proposal, we are clarifying the requirement for
refiners and importers to include distillate fuel in their RVO
compliance calculations and providing exceptions for the following
three additional categories of fuel:
Distillate fuel, such as HO or ECA marine fuel, with a
sulfur content greater than 15 ppm that is clearly designated for a use
other than transportation fuel.
Distillate fuel that meets the 15 ppm sulfur standard,
that is designated for non-transportation use, and that remains
completely segregated from MVNRLM diesel fuel from the point of
production through to the point of use for a non-transportation
purpose.
Distillate fuel that meets the 15 ppm diesel sulfur
standard, that is ultimately used for non-transportation purposes, and
that does not remain completely segregated from MVNRLM diesel fuel.
As also explained in the July 29 proposal, since the first two
categories of distillate fuel above are completely segregated from
MVNRLM diesel fuel, we do not believe that they would be used as
transportation fuel and are therefore not finalizing any additional
requirements for these fuels to be excluded from a refiner or
importer's RVO compliance calculations. However, consistent with the
July 29 proposal, and as described below, because the third category of
distillate fuel is not completely segregated and is indistinguishable
from MVNRLM diesel fuel, we are finalizing additional requirements for
this type of distillate fuel to be excluded from a refiner or
importer's RVO compliance calculations.
2. Downstream Re-Designation of Certified Non-Transportation 15 ppm
Distillate Fuel to MVNRLM Diesel Fuel
Consistent with the July 29 proposal, and in order to allow
refiners and importers to exclude distillate fuel that that meets the
15 ppm diesel sulfur standard, is ultimately used for non-
transportation purposes, and does not remain completely segregated from
MVNRLM diesel fuel from their RVO calculations, we are establishing a
new category of distillate fuel: Certified non-transportation 15 ppm
distillate fuel (``certified NTDF''). We are defining certified NTDF as
distillate fuel that meets all of the following requirements:
Fuel that is certified as complying with the 15 ppm sulfur
standard, cetane/aromatics standard, and all applicable sampling,
testing, and
[[Page 7056]]
recordkeeping requirements of 40 CFR part 80, subpart I.
Fuel that is designated on the product transfer document
as 15 ppm HO, 15 ppm ECA marine fuel, or other non-transportation fuel
(e.g., jet fuel, kerosene, No. 4 fuel, or distillate fuel for export
only) with a notation that the fuel is ``15 ppm sulfur (maximum)
certified NTDF--This fuel is designated for non-transportation use.''
with no designation as MVNRLM diesel fuel.
Some commenters noted that our proposed PTD language stating,
``This fuel meets all MVNRLM diesel fuel standards'' could potentially
cause confusion as to whether the fuel qualified as MVNRLM diesel fuel
or not. We are therefore finalizing PTD language similar to that
suggested by commenters, which avoids any reference to MVNRLM diesel
fuel.
In order to prevent refiners and importers from circumventing the
requirement to incur an RVO for all transportation fuel by simply
designating transportation fuel as non-transportation fuel, we had
proposed that refiners or importers must have a reasonable expectation
that their NTDF will be used as HO, ECA marine fuel, or another non-
transportation purpose in order to exclude it from their RVO
calculations. We proposed that refiners or importers would need to meet
the following three criteria to demonstrate they have a reasonable
expectation that NTDF will not be used as transportation fuel:
The refiner or importer supplies areas that use HO, ECA
marine fuel, or 15 ppm distillate fuel for non-transportation purposes
in the quantities being supplied by the refiner or importer.
The refiner or importer has entered into a contractual
arrangement that prohibits the buyer from selling the fuel as MVNRLM
diesel fuel.
The volume of fuel designated as HO, ECA marine fuel, or
other non-transportation purposes is consistent with the refiner's or
importer's past practices or reflect changed market conditions.
We also noted that EPA may consider any other relevant information
in assessing whether a refiner or importer has a reasonable expectation
that the fuel was used for non-transportation purposes.
We received comments indicating that it would be complex and
disruptive to require refiners and importers to enter into contractual
arrangements that prohibit the buyers from selling NTDF as MVNRLM
diesel fuel. We agree with these comments and have eliminated this
criterion. In light of these comments and in order to simplify the
proposed regulations, we have also consolidated the first and third
criterion into one sentence that states ``[t]o establish a reasonable
expectation that the fuel will be used for non-transportation purposes,
a refiner or importer must, at a minimum, be able to demonstrate that
they supply areas that use heating oil, ECA marine fuel, or 15 ppm
distillate fuel for non-transportation purposes in quantities that are
consistent with past practices or changed circumstances.'' With these
changes, we are finalizing the requirement that refiners or importers
may only exclude NTDF from their compliance calculations if they have a
reasonable expectation that the fuel will be used for non-
transportation purposes.
Some commenters also noted that there is normally a noticeable
price difference between fuel sold for transportation fuel and non-
transportation fuel, and that this price difference is a relevant
consideration for determining if the fuel was intended to be sold as
transportation fuel or non-transportation fuel. We agree with this
comment and the final rule explicitly identifies price as relevant
information that EPA may consider in evaluating whether a refiner or
importer had a reasonable expectation that the fuel will be sold for
non-transportation purposes.
As previously noted, our intent is to ensure that all fuel
ultimately used as MVNRLM diesel fuel incurs an RVO. In order to
achieve this goal, we are also finalizing requirements that will allow
parties in the fuel distribution system (e.g., downstream of the
original refinery or import facility) to sell certified NTDF as MVNRLM
diesel fuel without incurring an RVO if the total volume of MVNRLM
diesel fuel delivered during each compliance period does not exceed the
amount of MVNRLM diesel fuel received during that compliance period.
Any party who re-designates certified NTDF as MVNRLM diesel fuel is a
refiner for purposes of the RFS program and is therefore required to
register as a refiner. They will also be required to calculate whether
the volume of MVNRLM diesel fuel that they deliver exceeds the volume
of MVNRLM diesel fuel that they receive, during an annual compliance
period. If a downstream party delivers a volume of MVNRLM diesel fuel
that exceeds the volume of MVNRLM diesel fuel they received during a
compliance period, they are required to treat the difference as diesel
fuel that they ``produced'' and incur an RVO on this volume. This will
enable proper accounting for the aggregate volume of non-transportation
fuel that is re-designated as MVNRLM diesel fuel under the RFS program.
This one-sided test allows MVNRLM diesel fuel to be sold as HO or ECA
marine fuel but prevents the erosion of the renewable fuel mandate.
These parties will also be subject to recordkeeping requirements to
ensure the enforceability of this program.
We received several comments recommending modifications and
clarifications to the proposed volume balance provisions, and are
finalizing the following changes in response to these comments:
We are adding an equation to the regulations that provides
specific guidance on how to calculate the volume balance. This is in
response to a comment suggesting that EPA should include a balance
equation for diesel fuel, similar to the heating oil balance in 40 CFR
80.599(c)(3) and (4). The new balance equation accounts for changes in
diesel inventory, in addition to diesel volumes in and out.
We are clarifying that the volume balance requirement
applies to each facility that is registered as a diesel refinery. This
is in response to comments suggesting that EPA clarify whether the
volume balances were applicable on a facility basis or an aggregated
basis. Our intent was that the balances apply on a facility basis and
have clarified this in the final regulations.
One commenter also recommended that the new provisions for
redesignation of certified NTDF to MVNRLM diesel fuel should apply to
the owner of the certified NTDF at the time of redesignation and not
the custody holder of the certified NTDF, or the original refiner of
the NTDF. We agree with this recommendation and have included final
rule requirements that reflect this recommendation. Since the owner of
certified NTDF would be responsible for making any decisions regarding
redesignation of NTDF to MVNRLM diesel fuel, we intend for the owner of
the certified NTDF to meet the regulatory requirements associated with
redesignation, such as registration, reporting, and incurring an RVO.
We are also finalizing corresponding reporting requirements,
including requiring refiners and importers to report the volume of
MVNRLM diesel fuel they produce or import, the volume of distillate
fuel they produce or import that is not transportation fuel, and the
volume of distillate fuel they produce or import that is certified
NTDF. We are also requiring some downstream parties who redesignate
NTDF as MVNRLM diesel fuel to submit reports to EPA identifying the
volume of MVNRLM
[[Page 7057]]
diesel fuel received, the volume of MVNRLM diesel fuel delivered, the
volume of fuel re-designated from certified NTDF to MVNRLM diesel fuel,
and the volume of MVNRLM diesel fuel redesignated to non-transportation
use. Further, for purposes of evaluating compliance, we are also:
Requiring parties who re-designate certified NTDF to
MVNRLM diesel fuel to keep all records relating to these transactions.
Prohibiting a party from exceeding its balance
requirements without incurring an RVO.
Ensuring that the attest auditors review relevant
information to ensure compliance with applicable RFS program
requirements.
Some commenters stated that it was not necessary to require that
volume balance reports and attest engagements be submitted by all
parties who redesignate certified NTDF to MVNRLM diesel fuel, and that
EPA should only require reports from those parties who redesignated a
net positive volume of certified NTDF to MVNRLM diesel fuel (i.e.,
incurred an RVO). We agree with these comments and are finalizing
provisions to require parties that only incur an RVO through
redesignation of certified NTDF to MVNRLM diesel fuel to submit volume
balance reports and meet the required attest engagements. Obligated
parties that would otherwise have an attest engagement performed (e.g.,
because they produced gasoline or diesel fuel, exported renewable
fuels, etc.) would now have the attest auditor perform the additional
attest engagement procedures for the obligated party. We believe that
the types of reports and records attest auditors review for obligated
parties annual attest engagements would already include much of the
information we are requiring and would therefore represent a minimal
increase in burden for these obligated parties. Parties that
redesignate certified NTDF to MVNRLM diesel fuel during a compliance
period but did not incur an RVO (because they redesignated an
equivalent or greater volume of MVNRLM diesel fuel to non-
transportation fuel during the compliance period) are required to
submit a short report stating that they redesignated certified NTDF to
MVNRLM diesel fuel, but did not incur an RVO. We are also not
finalizing the proposed requirement for quarterly reports, since
compliance will be on an annual basis and can be demonstrated through
annual reports.
Lastly, implementation of these new provisions will be delayed
until January 1, 2021, to allow time for updates to product codes and
tracking software used by distillate distributors. Some commenters
suggested that this would be helpful for them to avoid implementing the
new regulations in the middle of a compliance period, and we agree with
these commenters.
B. Pathway Petition Conditions
We are clarifying our authority to enforce conditions created by
requirements included in an approval document for a facility-specific
pathway petition submitted under 40 CFR 80.1416. Since December 2010,
we have approved over 100 facility-specific pathway petitions. To
qualify for the generation of RINs under an approved pathway petition,
the fuel produced under that pathway must also meet the conditions and
applicable regulatory provisions specified in EPA's petition approval
document and the other definitional and regulatory requirements for
renewable fuel specified in the CAA and EPA implementing regulations,
including for RIN generation, registration, reporting, and
recordkeeping. Common conditions include, but are not limited to,
compliance monitoring plans detailing how parties will accurately and
reliably measure and record the energy and material inputs and outputs
required to ensure fuels are produced consistent with the
specifications evaluated in the lifecycle analysis, process flow
diagrams showing the energy used for feedstock, fuel, and co-product
operations, and certifications signed by responsible corporate officers
(RCOs).
We have authority to bring an enforcement action of these
conditions under 40 CFR 80.1460(a), which prohibits producing or
importing a renewable fuel without complying with the RIN generation
and assignment requirements. The RFS regulations provide that RINs may
only be generated if the fuel qualifies for a D code pursuant to 40 CFR
80.1426(f) or an approved petition submitted under 40 CFR 80.1416.\202\
If any of the conditions required by an approval document for a pathway
petition are not met, then the fuel does not qualify for a D code per
the terms of the approval, and RINs may not be generated. These
conditions are also enforceable under 40 CFR 80.1460(b)(2), which
prohibits creating a RIN that is invalid; a RIN is invalid if it was
improperly generated.\203\ As stated above, a RIN is improperly
generated if the fuel representing the RIN does not qualify for a D
code, which is the case if a fuel producer does not follow all of the
required conditions in the pathway petition approval document.
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\202\ See 40 CFR 80.1426(a)(1)(i).
\203\ See 40 CFR 80.1431(a)(ix).
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We are adding a provision at 40 CFR 80.1426(a)(1)(iii) to clarify
that renewable fuel that qualifies for a D code pursuant to an approved
petition submitted under 40 CFR 80.1416 must be produced in compliance
with all conditions set forth in the petition approval document (in
addition to the applicable statutory requirements and requirements of
subpart M). We are also adding a prohibited act at 40 CFR 80.1460(b)(7)
for generating a RIN for fuel that fails to meet all the conditions set
forth in a petition approval document for a pathway petition submitted
under 40 CFR 80.1416 in order to provide more clarity regarding our
ability to bring enforcement actions for failure to meet such
conditions.
C. Esterification Pretreatment Pathway
We are revising rows F and H of Table 1 to 40 CFR 80.1426 by
changing the existing approved production process ``Trans-
Esterification'' to be ``Transesterification with or without
esterification pretreatment.'' We are finalizing these revisions to
rows F and H without modifying the feedstocks listed in those rows, as
these changes do not make any additional feedstocks eligible beyond
those already listed in rows F and H. Table 1 to 40 CFR 80.1426
includes pathways for the production of biodiesel using specified
feedstocks and the production process transesterification.\204\
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\204\ While we expect these pathways to be used predominately
for biodiesel, they may also be used for heating oil and jet fuel.
Renewable diesel is excluded because it is by definition ``not a
mono-alkyl ester'' (40 CFR 80.1401) and that is what
transesterification produces.
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Transesterification is the most commonly used method to produce
biodiesel and involves reacting triglycerides with methanol, typically
under the presence of a base catalyst.\205\ While the main component of
oils, fats, and grease feedstocks are typically triglycerides, other
components, such as free fatty acids (FFAs), can also exist. Removal or
conversion of the FFAs is important where the traditional base-
catalyzed transesterification production process is used; if they are
not removed or converted prior to this process, FFAs will react with
base catalysts to produce soaps that inhibit the transesterification
reaction.
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\205\ Commonly used base catalysts include sodium hydroxide
(NaOH), potassium hydroxide (KOH) and sodium methoxide
(NaOCH3).
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One of the most widely used methods for treating biodiesel
feedstocks with a higher FFA content is acid catalysis. Acid catalysis
typically uses a strong
[[Page 7058]]
acid, such as sulfuric acid, to catalyze the esterification of the FFAs
prior to the transesterification of the triglycerides as a pre-
treatment step. Acid esterification can be applied to feedstocks with
FFA contents above 5 percent to produce biodiesel. Because the
transesterification of triglycerides is slow under acid catalysis, a
technique commonly used to overcome the reaction rate issue is to first
convert the FFAs through an acid esterification (also known as an acid
``pretreatment'' step), and then follow-up with the traditional base-
catalyzed transesterification of triglycerides.
Under the RFS2 final rule, biodiesel from biogenic waste oils/fats/
greases qualifies for D-codes 4 or 5 using a transesterification
process. This conclusion was based on the analysis of yellow grease as
a feedstock, where there was an acid pretreatment of the FFAs contained
in the feedstock. In fact, one of the material inputs assumed in the
modeling for the final RFS2 rule yellow grease pathway was sulfuric
acid, which is the catalyst commonly used for acid esterification.\206\
As we had not stipulated transesterification with esterification
pretreatment as a qualified production process in rows F and H to Table
1 to 40 CFR 80.1426, we are revising these entries to include
``transesterification with or without esterification pre-treatment'' as
a production process requirement so that RINs may be generated for
biodiesel produced by the esterification pretreatment, as well as for
the biodiesel produced through transesterification.\207\
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\206\ Section 2.4.7.3.3 of the Regulatory Impact Analysis for
the March 2010 final rule describes the material inputs evaluated
for biodiesel production. For conversion of yellow grease to
biodiesel, sulfuric acid accounted for 4.7 percent of the material
inputs on a mass basis (0.02 kg per gallon of biodiesel).
\207\ In 2012, we issued a direct final rule and a parallel
proposed rule (see 77 FR 700 and 77 FR 462, respectively; January 5,
2012) that would have determined that, among other regulatory
changes, biodiesel produced from esterification met the GHG
reduction requirements. Because we received adverse comment, we
withdrew the direct final rule in its entirety (see 77 FR 13009,
March 5, 2012). In the 2013 final rule based on the parallel
proposal (78 FR 14190, March 5, 2013), we decided not to finalize a
determination at that time on biodiesel produced from esterification
and noted that we would instead make a final determination at a
later time.
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In the July 29 proposal, we also proposed to add a standalone
esterification pathway to rows F and H to Table 1 to 40 CFR 80.1426,
which would allow parties who have processing units that can take
feedstocks listed in rows F and H of Table 1 to 40 CFR 80.1426 that
have high-FFA content and separate the FFAs and triglycerides for
chemical processing in separate standalone esterification and
transesterification units to generate RINs for the biodiesel produced.
However, we are not at this time finalizing the proposed standalone
esterification pathway. It remains under consideration and may be
finalized in a future action.
D. Distillers Corn Oil and Distillers Sorghum Oil Pathways
We are adding distillers corn oil and commingled distillers corn
oil and sorghum oil as feedstocks to row I of Table 1 to 40 CFR
80.1426. While the lifecycle GHG emissions associated with using a very
similar feedstock--distillers sorghum oil--as part of this pathway were
evaluated in the grain sorghum oil pathway final rule (``sorghum oil
rule''),\208\ these two feedstocks were not added to row I as part of
that rulemaking. This section discusses the addition of distillers corn
oil and commingled distillers corn oil and sorghum oil as feedstocks to
row I and presents the lifecycle GHG emissions associated with these
pathways. We also explain why the most likely effect of adding these
pathways will be to reduce the number of petitions submitted pursuant
to 40 CFR 80.1416.
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\208\ See 83 FR 37735 (August 2, 2018).
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The March 2010 RFS2 rule included pathways for biodiesel and
renewable diesel produced from non-food grade corn oil. The March 2013
Pathways I rule added pathways for heating oil and jet fuel from non-
food grade corn oil in rows F and H of Table 1 to 40 CFR 80.1426, and
added pathways for naphtha and LPG from Camelina sativa oil in row
I.\209\ The sorghum oil rule amended the RFS regulations to add a new
definition of distillers sorghum oil and to replace existing references
to non-food grade corn oil with the newly defined term ``distillers
corn oil.'' That rule also added a number of pathways to rows F and H
of Table 1 to 40 CFR 80.1426 for biodiesel, renewable diesel, jet fuel,
and heating oil produced from distillers sorghum oil and commingled
distillers sorghum and corn oil. Pathways for naphtha and LPG produced
from distillers sorghum oil via a hydrotreating process were also added
to row I of Table 1 to 40 CFR 80.1426.
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\209\ See 78 FR 14190 (March 5, 2013).
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Commingled distillers corn oil and sorghum oil was added as a
feedstock to rows F and H of Table 1 to 40 CFR 80.1426 because
distillers sorghum oil is often co-produced with distillers corn oil at
ethanol plants using a combination of grain sorghum and corn as
feedstocks for ethanol production. Due to the recovery process of the
oils from the distillers grains and solubles (DGS), where the ethanol
plant is using a feedstock that combines grain sorghum and corn, it is
not possible to physically separate the distillers sorghum and corn
oils into two streams, nor is it possible to account for the volume of
sorghum oil or corn oil in this mixture. For these and other
reasons,\210\ after concluding that distillers sorghum oil satisfies
the 50 percent GHG reduction threshold required for the advanced
biofuel and biomass-based diesel, we added both distillers sorghum oil
and ``commingled distillers corn oil and sorghum oil'' to rows F and H
of Table 1 to 40 CFR 80.1426 in the sorghum oil rule. However, unlike
rows F and H, row I did not include a pathway using ``non-food grade
corn oil'' prior to that final rule, nor did we propose to add
``distillers corn oil'' to that row in the December 2017 sorghum oil
proposed rule.\211\ Thus, in the absence of an assessment of lifecycle
emissions showing that distillers corn oil also meets the GHG reduction
threshold required for the pathways therein, in the sorghum oil rule we
decided ``it would be premature for EPA to add either distillers corn
oil or commingled distillers corn and sorghum oil as feedstocks in row
I.'' \212\ Currently, in order to generate D-code 5 RINs for naphtha
and/or LPG produced from distillers corn oil and/or commingled
distillers corn and sorghum oil, a fuel producer would first need to
petition EPA pursuant to 40 CFR 80.1416, have EPA review and approve
their requested pathway, and then submit and have EPA accept the
registration for the new pathway. Adding these feedstocks to row I
eliminates the need for these petitions.
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\210\ For the other reasons discussed in the sorghum oil rule
preamble, see 83 FR 37737-39 (August 2, 2018).
\211\ See 82 FR 61205 (December 27, 2017).
\212\ See 83 FR 37738 (August 2, 2018).
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Table IX.D-1 shows the lifecycle GHG emissions associated with
renewable diesel, jet fuel, naphtha, and LPG produced from distillers
sorghum oil. These results are based on the analysis completed for the
sorghum oil rule.\213\ The lifecycle GHG emissions associated with the
statutory baseline fuels, 2005 average diesel and gasoline, are shown
for comparison. Based on the distillers sorghum oil results, as
explained below we have concluded that naphtha and LPG produced from
distillers corn oil and commingled distillers corn and sorghum oil also
satisfy the 50 percent lifecycle GHG reduction requirement at CAA
section 211(o)(1)(B), relative to the
[[Page 7059]]
statutory petroleum baseline, to be eligible for advanced biofuel RINs.
---------------------------------------------------------------------------
\213\ See Table III.4 of the sorghum oil rule preamble (83 FR
37743, August 2, 2018).
Table IX.D-1--Lifecycle GHG Emissions Associated With Biofuels Produced From Distillers Sorghum Oil
[kgCO2-eq/mmBtu]
----------------------------------------------------------------------------------------------------------------
Renewable
Fuel diesel, jet Naphtha LPG 2005 Diesel 2005 Gasoline
fuel baseline baseline
----------------------------------------------------------------------------------------------------------------
Production Process.............. Hydrotreating
Refining
-------------------------------------------------------------------------------
Livestock Sector Impacts........ 19.4 19.4 19.4 .............. ..............
Feedstock Production............ 6.2 6.2 6.2 18.0 19.2
Feedstock Transport............. 0.3 0.3 0.3 .............. ..............
Feedstock Pretreatment.......... 0.0 0.0 0.0 .............. ..............
Fuel Production................. 8.0 8.0 8.0 .............. ..............
Fuel Distribution............... 0.8 0.8 0.8 .............. ..............
Fuel Use........................ 0.7 1.7 1.5 79.0 79.0
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Total....................... 35.4 36.4 36.2 97.0 98.2
Percent Reduction............... 64% 63% 63% .............. ..............
----------------------------------------------------------------------------------------------------------------
Although the lifecycle GHG analysis for the sorghum oil rule
focused on distillers sorghum oil, we believe it is also applicable to
distillers corn oil and commingled distillers corn oil and sorghum oil
for purposes of determining whether these satisfy the 50 percent GHG
reduction requirement. For the sorghum oil rule, we estimated the
livestock sector impacts associated with distillers sorghum oil based
on a set of assumptions about the type of feed that would need to
backfill for the reduction in mass of de-oiled DGS as compared to full-
oil DGS. For that analysis we calculated a substitution rate for how
much corn would be needed to backfill in livestock feed for every pound
of grain sorghum oil diverted to biofuel production, by livestock type.
The amounts of corn needed to replace each pound of extracted sorghum
oil were largely based on studies that evaluated the nutritional values
of regular and reduced-oil distillers grains produced as a co-product
of corn starch ethanol.\214\ Given that the underlying data for our
distillers sorghum oil assessment was largely based on studies
conducted on corn ethanol co-products, we believe it is appropriate to
apply the same results to similar pathways using distillers corn oil
feedstock. Based on the similarities between the two products and how
they are produced (i.e., co-produced at ethanol plants), we are also
assuming that the lifecycle GHG emission for distillers corn oil and
distillers sorghum oil are the same for the other lifecycle stages
evaluated (e.g., feedstock production, fuel production).
---------------------------------------------------------------------------
\214\ See Table III.2 (Full-Oil and Reduced-Oil Sorghum
Distillers Grains with Solubles Displacement Ratios) of the sorghum
oil rule (83 FR 37741, August 2, 2018) and accompanying footnote
number 36, which lists the sources for the data in that table.
---------------------------------------------------------------------------
One difference between distillers corn oil and sorghum oil is the
rate of oil recovered per pound of corn versus grain sorghum processed.
The distillers sorghum oil petition submitted by the National Sorghum
Producers reported that 0.67 pounds of distillers sorghum oil are
recovered per bushel of grain sorghum processed to ethanol, whereas
0.84 pounds of distillers corn oil is extracted per bushel of
corn.\215\ Adjusting for this difference results in slightly lower
livestock sector GHG emissions associated with naphtha and LPG produced
from distillers corn oil.\216\ Based on this adjustment the results in
Table IX.D-1 change from a 63 percent GHG reduction for naphtha and LPG
produced from distillers sorghum oil to a 64 percent reduction for
naphtha and LPG production from distillers corn oil. We have therefore
concluded that these pathways satisfy the 50 percent GHG reduction
requirement to qualify as advanced biofuel under the RFS program and
are adding ``distillers corn oil'' and ``commingled distillers corn oil
and sorghum oil'' as feedstocks in row I to Table 1 to 40 CFR 80.1426.
---------------------------------------------------------------------------
\215\ See Table 4 of ``Grain Sorghum Oil Pathway Petition,''
Docket Item No. EPA-HQ-OAR-2017-0655-0005.
\216\ The source of the difference is the amount of corn needed
to replace one pound of full-oil versus reduced-oiled DDGS in beef
cattle diets. In our analysis for the sorghum oil rule, we assumed,
based on the best available data provided by NSP, USDA, and
commenters, that reduced-oil DDGS are replaced at a lower rate
(1.173 lbs corn per lbs DDGS) than full-oil DDGS (1.196 lbs corn per
lbs DDGS). Increasing the rate of oil extraction produces less de-
oiled DDGS and requires corn replacement at the lower rate of 1.173.
Thus, all else equal, higher rates of oil extraction result in lower
GHG emissions per pound of oil extracted. It is possible this effect
would disappear if we had higher resolution data on corn
displacement ratios for DDGS with different oil contents, but such
data are currently not available.
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E. Clarification of the Definition of Renewable Fuel Exporter and
Associated Provisions
We are finalizing our proposed clarification of the definition of
``exporter of renewable fuel.'' These changes are meant to ensure
appropriate flexibility for market participants to meet export
obligations and to ensure RINs are properly retired, as well to as to
clarify exporter obligations for parties who transfer renewable fuel
between the 48 states or Hawaii and an approved opt-in area (i.e.,
Alaska or the U.S. territories were any of them to opt-in).
The RFS regulations require an exporter of renewable fuel to
acquire sufficient RINs to comply with all applicable RVOs incurred
from the volumes of the renewable fuel exported.\217\ We previously
defined ``exporter of renewable fuel'' in 40 CFR 80.1401 as: ``(1) A
person that transfers any renewable fuel from a location within the
contiguous 48 states or Hawaii to a location outside the contiguous 48
states and Hawaii; and (2) A person that transfers any renewable fuel
from a location in the contiguous 48 states or Hawaii to Alaska or a
United
[[Page 7060]]
States territory, unless that state or territory has received an
approval from the Administrator to opt in to the renewable fuel program
pursuant to Sec. 80.1443.'' \218\
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\217\ In this rulemaking, we did not reexamine our well-settled
policy of exporter RVOs, which generally require exporters to retire
RINs for biofuels they export. We established this policy when we
promulgated the regulations implementing the RFS1 and RFS2 programs
in 2007 and 2010. See 72 FR 23936 (May 1, 2007); 75 FR 14724 (March
26, 2010). We did not reexamine this issue in this rulemaking, and
comments on it are beyond the scope of the rulemaking. We are not
making any substantive changes to the relevant provisions,
particularly those at 40 CFR 80.1430(a) or (b). Consistent with our
long-standing policy, exporters of renewable fuel must continue to
acquire sufficient RINs to comply with all applicable RVOs.
\218\ 75 FR 14865 (March 26, 2010).
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We are revising these regulations for two key reasons. First,
during implementation of the RFS program, we have observed contract
structuring practices that may have eroded compliance assurance.
Notably, we have observed instances of export transactions in which
parties have sold renewable fuel for export to entities purporting to
accept RIN retirement obligations that were then not fulfilled by the
buyer. These instances demonstrate that the RFS program could benefit
from regulatory changes designed to ensure that exporter obligations
are fulfilled. Therefore, we are revising the definition to resolve any
potential ambiguity and clarify which parties may and may not be liable
for exporter obligations in order to ensure exporter obligations are
fulfilled.
Second, the previous definition could have been construed to
include parties who transfer renewable fuel from the contiguous 48
states and Hawaii, to an area (either Alaska or a U.S. territory) that
has received an approval to opt-in to the RFS program. We did not
intend to impose a RIN retirement obligation on these parties. We are
therefore clarifying how exporter obligations apply to renewable fuel
transferred between the 48 states and Hawaii, and opt-in areas.
To achieve these goals when we developed the proposal, we initially
considered whether to amend the RFS program regulations consistent with
the Foreign Trade Regulations (FTR) and other federal export-related
regulations, such as United States Principal Party in Interest (USPPI)
and Foreign Principal Party in Interest (FPPI).\219\ While there were
some commenters that suggested adopting those terms, we chose not to do
so for the following reasons. The FTR and other export-related
obligations in other federal programs use a traditional definition of
``export'' where exported goods leave the U.S. The RFS program
addresses obligations incurred through the transfer of renewable fuel
from areas covered by the program to both domestic and foreign areas
not covered by the program. For instance, the transport of goods from
Oregon to Alaska would not qualify as export under most federal export
regulations, but the transport of biofuel from Oregon, a covered area,
to Alaska, a non-covered area (unless Alaska chooses to opt in), would
qualify as export under the RFS program. In addition, if we merely
adopted the FTR approach to allow allocation of exporter obligations
among parties to an export transaction, we have concerns that a party
that is insolvent or lacking assets in the U.S. could undertake those
obligations, and enforcement efforts could become overly resource
intensive where the fuel has left the country. For these reasons, we do
not believe it would be appropriate to amend the RFS program
regulations to define an exporter as the USPPI or the FPPI.
---------------------------------------------------------------------------
\219\ See, e.g., 15 CFR 772.1 (defining exporter as ``[t]he
person in the United States who has the authority of a principal
party in interest to determine and control the sending of items out
of the United States''). We also considered and rejected other
alternatives, which we discuss further in the RTC document in the
docket for this action.
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In reviewing the FTR, we also considered the concept of routed
export transactions and the associated flexibility for parties to an
export transaction to structure that transaction to place some
responsibilities with an FPPI.\220\ We believe that this framework is
reflective of market custom, practice, and capability to contractually
allocate liabilities and indemnities among parties to a commercial
transaction. We prefer regulations that accommodate these
flexibilities, while also balancing the need to protect RFS program
integrity. Specifically, we want to allow parties to an export
transaction to allocate RFS program exporter obligations as they see
fit among themselves, but we also want to protect against contract
structuring that may erode compliance assurance.
---------------------------------------------------------------------------
\220\ Routed export transaction is the term used to describe an
export transaction in which an FPPI directs the movement of goods
out of the U.S. and authorizes a U.S. agent to file certain
information required by the FTR.
---------------------------------------------------------------------------
Therefore, we are revising the definition of ``exporter of
renewable fuel'' to mean ``all buyers, sellers, and owners of the
renewable fuel in any transaction that results in renewable fuel being
transferred from a covered location to a destination outside of the
covered locations.'' In conjunction with this revision, we are creating
a definition of ``covered location'' as ``the contiguous 48 states,
Hawaii, and any state or territory that has received an approval from
the Administrator to opt-in to the RFS program under Sec. 80.1443.''
As described above, this revised definition permits contract
flexibilities frequently employed in export transactions with respect
to export obligations under other regulatory programs, such as the FTR.
All buyers, sellers, and owners of the renewable fuel in a transaction
that results in renewable fuel being transferred from a covered
location to a destination outside of any covered location may
contractually allocate RFS program obligations, indemnities, and
pricing as they see fit in light of the regulatory requirements. At the
same time, the revised definition provides enhanced compliance
assurance so as to maintain a level playing field among would-be
exporters and ensures RIN retirement so as to maintain the integrity of
that market in accordance with the regulatory requirements. Ultimately,
the revised definition contributes to satisfying Congress's mandate
that EPA promulgate regulations that ``ensure'' the nationally-
applicable renewable fuel volumes are met.\221\ We note, moreover, that
the existing RFS regulations provide that ``[n]o person shall cause
another person to commit an act in violation of any prohibited act
under this section.'' \222\ We believe that this prohibition coupled
with the revised definitions will deter parties from engaging in sham
transactions to evade RIN retirement obligations by transferring
ownership of renewable fuels to undercapitalized entities that do not
meet their RIN retirement obligations. This includes the specific
earlier-described practices we have already observed. The revised
definition also clarifies how exporter obligations apply to transfers
to and from the contiguous 48 states and Hawaii, and opt-in areas
(i.e., Alaska and U.S. territories were they to opt-in). Notably, it
avoids imposing exporter obligations on biofuels transferred from the
48 states and Hawaii to an opt-in area.
---------------------------------------------------------------------------
\221\ CAA section 211(o)(2)(A)(i); see also CAA section 301(a).
\222\ See 40 CFR 80.1460(c).
---------------------------------------------------------------------------
Under the revised definition, multiple parties may meet the
definition of an exporter of renewable fuel for the same volume of
renewable fuel. In addition, although the definition uses the term
``transaction,'' in many cases there may be more than one discrete
exchange or interaction that results in a volume of renewable fuel
being exported. We intend the regulatory term ``transaction'' to cover
all those exchanges and interactions in which the buyers, sellers, and
owners know or have reason to know will result in renewable fuel being
transferred from a covered location to a destination outside of any
covered location.\223\ For instance, a person holding title to
renewable fuel in the U.S. may sell renewable fuel to another person
(either inside or outside of the
[[Page 7061]]
covered areas) and cause the renewable fuel to leave the covered areas.
Further, that buyer and seller may have a third party hold title to the
renewable fuel during transit out of the covered areas. In this case,
the buyer and the seller, both of whom are also owners of the renewable
fuel, and the third-party holding company, as another owner of the
renewable fuel in the transaction, would be jointly-and-severally
liable for complying with the exporter provisions.\224\
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\223\ To clarify this point, we have revised the regulatory text
from the proposed ``a transaction'' to ``any transaction'' in this
final rulemaking.
\224\ This example is meant to be a stylized illustration of how
our regulations could apply. It is not meant to exhaustively detail
the entities that could meet the definition of exporter of renewable
fuel in this type of transaction. To the extent that other parties
meet the definition of exporter of renewable fuel, they would also
be subject to the exporter provisions.
---------------------------------------------------------------------------
However, our revised regulations create broad flexibility for
parties to assign responsibilities as they see fit among themselves in
structuring an export transaction. These parties may contractually
allocate RIN retirement, and associated registration, reporting, and
attest engagement obligations, to any one of the parties that meets the
definition of an exporter of renewable fuel. The party undertaking
these requirements would then register as an exporter of renewable fuel
as set forth in 40 CFR 80.1450(a). This approach is also consistent
with our approach to the term ``refiner,'' under which multiple parties
could be considered the refiner of a batch of fuel. In such instances,
we have stated that each party meeting the definition of refiner will
be held jointly-and-severally liable for refiner requirements, and we
are adopting a consistent approach for exporters of renewable
fuel.\225\ However, our revised regulations create broad flexibility
for parties to assign responsibilities as they see fit among themselves
in structuring an export transaction. These parties may contractually
allocate RIN retirement, and associated registration, reporting, and
attest engagement obligations, to any one of the parties that meets the
definition of an exporter of renewable fuel. The party undertaking
these requirements would then register as an exporter of renewable fuel
as set forth in 40 CFR 80.1450(a). This approach is also consistent
with our approach to the term ``refiner,'' under which multiple parties
could be considered the refiner of a batch of fuel. In such instances,
we have stated that each party meeting the definition of refiner will
be held jointly-and-severally liable for refiner requirements, and we
are adopting a consistent approach for exporters of renewable
fuel.\226\
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\225\ See ``Consolidated List of Reformulated Gasoline and Anti-
Dumping Questions and Answers: July 1, 1994 through November 10,
1997,'' EPA420-R-03-009, at 256 (July 2003) (discussing a scenario
in which two parties would be considered refiners and would be
independently responsible for all refinery requirements, which would
only need to be met once).
\226\ See ``Consolidated List of Reformulated Gasoline and Anti-
Dumping Questions and Answers: July 1, 1994 through November 10,
1997,'' EPA420-R-03-009, at 256 (July 2003) (discussing a scenario
in which two parties would be considered refiners and would be
independently responsible for all refinery requirements, which would
only need to be met once).
---------------------------------------------------------------------------
EPA does not consider a person to be an exporter of renewable fuel
if that person does not know and does not have reason to know that the
renewable fuel will be exported. For instance, a renewable fuel
producer who produces a batch of fuel, generates RINs, and sells the
renewable fuel with attached RINs into the fungible fuel distribution
system would not be considered an exporter of renewable fuel under the
revised definition unless they know or have reason to know that the
batch of fuel would be exported. More specifically, the mere fact that
a producer introduces renewable fuels into the stream of commerce,
coupled with the fact that a significant portion of domestically
produced biofuel is exported, does not make the producer an exporter of
renewable fuel.
We are also finalizing minor, non-substantive changes throughout
the RFS regulations to more consistently use the term ``exporter of
renewable fuel'' rather than the term ``exporter.'' These clarifying
edits reflect that the ``exporter of renewable fuel'' may be different
than the ``exporter'' under other state and federal regulatory
programs.
F. REGS Rule Provisions
We are finalizing a number of changes to the RFS and fuels programs
that were previously proposed in the REGS rule,\227\ and that we listed
in the preamble to July 29 proposal as candidates for finalization in
this action.\228\ In reaching our final decisions on these provisions
we considered relevant comments on both the 2016 REGS proposal and the
July 29 proposal. As noted in the July 29 proposal, we believe these
provisions to be relatively straightforward and would reduce the burden
of RFS program implementation. Commenters were generally supportive of
these provisions and we are largely finalizing them as proposed;
changes to the final provisions relative to the 2016 REGS proposal are
discussed in detail in the following sections.
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\227\ See 81 FR 80828 (November 16, 2016).
\228\ We are not taking final action at this time on several
changes from the REGS proposal that were listed in the July 29
proposal (Allowing Production of Biomass-Based Diesel From Separated
Food Waste (REGS Section VIII.C), RFS Facility Ownership Changes
(REGS Section VIII.H), Public Access to Information (REGS Section
VIII.O), and Redesignation of Renewable Fuel on a PTD for Non-
Qualifying Uses (REGS Section VIII.R), and certain portions of Other
Revisions to the Fuels Program (REGS Section IX), primarily related
to test methods). These provisions, along with the other provisions
in the REGS proposal that are not being finalized here, remain under
consideration and may be finalized in a future action.
---------------------------------------------------------------------------
1. Flexibilities for Renewable Fuel Blending for Military Use
We are amending 40 CFR 80.1440 to provide new flexibilities for
parties that blend renewable fuel to produce fuels for use as
transportation fuel, heating oil, or jet fuel under a national security
exemption or that sell neat renewable fuel for use in vehicles,
engines, and equipment that have a national security exemption for
emissions certification. Specifically, these parties will be able to
delegate to an upstream party the RIN-related responsibilities (i.e.,
RIN separation, reporting, recordkeeping, and attest engagement
requirements) associated with the renewable fuel. These parties could
include the U.S. Military itself, or contractors working for the U.S.
Military. The RFS program has a provision that allows blenders that
handle and blend small volumes of renewable fuel per year (less than
250,000 gallons per year) to delegate RIN-related responsibilities to
an upstream party. We have received a number of inquiries from parties
that have wished to provide renewable fuel, either neat or blended into
transportation fuel, for use by the U.S. Military as part of Department
of Defense (DOD) renewable military initiatives. One obstacle to this
use of renewable fuel by the DOD is that, unlike other EPA fuels
programs, there were no exemptions related to national security uses in
the RFS regulatory program.
We believe that it is appropriate to allow DOD or its contractors
to delegate RFS RIN responsibilities to upstream parties; doing so
removes a potential obstacle to the use of renewable fuels by DOD and
will promote use of renewable fuel by the military. Therefore, we are
finalizing similar upstream delegation provisions for neat and blended
renewable fuels supplied to DOD under a national security exemption as
those already in place for small renewable fuel blenders.
2. Heating Oil Used for Cooling
We are expanding the definition of heating oil in 40 CFR 80.1401 to
include fuels that differ from those meeting the current definition
only because they are used to cool, rather than heat, interior spaces
of homes or buildings. The first
[[Page 7062]]
sentence of the definition of heating oil thus now reads: ``A fuel oil
that is used to heat or cool interior spaces of homes or buildings to
control ambient climate for human comfort.'' We are also making minor
modifications to the registration, reporting, PTD, and recordkeeping
requirements for renewable heating oil to correspond with this change.
We had received questions related to the use of renewable heating oil
in equipment that cools interior spaces and believe that displacing the
use of petroleum based fuel oil with renewable heating oil for cooling
is consistent with CAA section 211(o)'s provision for home heating oil
to be treated as additional renewable fuel and should be allowed.
3. Separated Food Waste Plans
We are amending the RFS registration procedures for separated food
waste plans at 40 CFR 80.1450(b)(1)(vii)(B) and the recordkeeping
requirements for separated food waste at 40 CFR 80.1454(j). We are also
adding requirements for renewable fuel produced from biogenic waste
oils/fats/greases at 40 CFR 80.1450(b)(1)(vii)(B) and 80.1454(d)(4) and
(j).
The RFS regulations promulgated in the RFS2 rulemaking required
that separated food waste plans include: ``(1) The location of any
municipal waste facility or other facility from which the waste stream
consisting solely of separated food waste is collected; and (2) A plan
documenting how the waste will be collected, how the cellulosic and
non-cellulosic portions of the waste will be quantified, and for
ongoing verification that such waste consists only of food waste (and
incidental other components such as paper and plastics) that is kept
separate since generation from other waste materials.'' \229\ In
addition to the initial submission of separated food waste plans during
RFS registration, we also required that renewable fuel producers using
separated food waste feedstock update the registration information
whenever there was a change to the plan, including to the location(s)
of establishments from which the separated food waste is collected, and
in some cases the newly updated plan must have been reviewed by a
third-party engineer in accordance with EPA registration procedures. We
have received numerous company updates for production facilities with
separated food waste plans, and some parties noted that the requirement
to identify and update suppliers of feedstocks through a plan was
overly burdensome.
---------------------------------------------------------------------------
\229\ See 40 CFR 80.1450(b)(1)(vii)(B).
---------------------------------------------------------------------------
Recognizing that business relationships for recovery of food wastes
evolve and that a renewable fuel producer may elect over time to
purchase feedstocks from different or multiple parties, we are removing
the requirement to provide the location of every facility from which
separated food waste feedstock is collected as part of the information
required for registration. Removing this registration requirement
alleviates the need for numerous company registration updates as a
facility's feedstock supplier list evolves, as well as makes it easier
for EPA to review renewable fuel producers' separated food waste plans
in a timely manner. However, the recordkeeping section of the
regulations requires renewable fuel producers to keep documents
associated with feedstock purchases and transfers that identify where
the feedstocks were produced; these documents must be sufficient to
verify that the feedstocks meet the definition of renewable
biomass.\230\ Thus, renewable fuel producers will still be required to
maintain records that demonstrate that they used a qualifying feedstock
to produce renewable fuels for the generation of RINs pursuant to the
recordkeeping requirements at 40 CFR 80.1454(d)(4) and (j). We are also
adding a provision at 40 CFR 80.1454(j)(1)(ii) that will require
renewable fuel producers to maintain records demonstrating the location
of any establishment from which the waste stream is collected. Since
many renewable fuel producers receive wastes used as feedstocks from an
aggregator, we interpret the term ``location'' to mean the physical
address that the aggregator obtained the wastes used as feedstocks
from, not the physical or company address of the aggregator.
---------------------------------------------------------------------------
\230\ See 40 CFR 80.1454(d)(4) and (j).
---------------------------------------------------------------------------
In addition to removing the registration requirement to provide the
locations of establishments from which separated food waste is
collected, we are also modifying the registration regulations to
require that separated food waste plans identify the type(s) of
separated food waste(s) to be used and the type(s) of establishment(s)
the waste will be collected from. For instance, CAA section 211(o)
identifies ``recycled cooking and trap grease'' as a type of separated
food waste. Examples of types of establishments could be restaurants,
slaughterhouses, or specific food production plants (the kind of food
production should be provided). We believe this information is
necessary for EPA to determine at registration whether a renewable fuel
producer can make fuel from its proposed feedstock under currently
approved separated food waste pathways. Without this information, we
would not know what the specific feedstock is (e.g., tallow, yellow
grease, etc.) or whether it qualifies as a separated food waste.
We are also requiring under 40 CFR 80.1450(b)(1)(vii)(B) that
producers of renewable fuels made from biogenic waste oils/fats/greases
that are not separated food waste submit a plan at registration with
the same requirements as the plan for producers of renewable fuels made
from separated food waste. We are henceforth referring to such plans as
``waste oils/fats/greases feedstock plans.'' There is significant
overlap between the two categories of feedstock, with a considerable
quantity of biogenic waste oils/fats/greases qualifying as renewable
biomass as a result of its additional qualification as separated food
waste. For these reasons, as a matter of practice we have required
parties intending to use biogenic waste oils/fats/greases as a
renewable fuel feedstock to submit separated food waste plans at
registration. In addition to helping EPA determine if the feedstock in
question meets renewable biomass requirements, we have found that the
plans help us assess whether the feedstocks specified by a prospective
producer qualify as biogenic waste oils/fats/greases. This assessment
is made on a case-by-case basis. This amendment conforms the
regulations to EPA's current practice. A party fully describing its
feedstock in a separated food waste plan will not be required to submit
an additional waste oils/fats/greases plan. Since most, if not all,
producers of renewable fuel from biogenic waste oils/fats/greases have
submitted a separated food waste plan at registration, we do not
believe that this revision will add much, if any, burden to existing
registered facilities. Those few registered producers using biogenic
waste oils/fats/greases that have not previously submitted a separated
food waste plan at registration or in a subsequent registration update
will be required to do so as part of their next periodic registration
update.
In addition to adding the registration requirement for a waste
oils/fats/greases feedstock plan to 40 CFR 80.1540(b)(1)(vii)(B), we
are also adding the same recordkeeping requirements for biogenic oils/
fats/greases as for separated food waste at 40 CFR 80.1454(d)(4) and
(j), and providing further clarity that the locations from which
separated food waste or biogenic oils/fats/greases was sourced is a
recordkeeping requirement.
[[Page 7063]]
4. Additional Registration Deactivation Justifications
We are adding additional circumstances in which EPA may deactivate
the registration of any party required to register under 40 CFR
80.1450. These amendments will help parties better understand when EPA
intends to restrict a party's participation in the RFS program as well
as the procedures that will be used in such circumstances.
In July 2014, we finalized requirements that described
circumstances under which EPA may deactivate a company registration and
an administrative process to initiate deactivation that provides
companies an opportunity to respond to and/or submit the required
information in a timely manner.\231\ Since finalizing these
requirements, we have identified a number of other cases in which it is
appropriate to deactivate the registration of a company. In addition,
we believe the provisions should be extended to cover deactivation of
registrations for any party required to register with EPA under 40 CFR
80.1450 (e.g., third-party auditors).\232\ Specifically, we are
amending 40 CFR 80.1450(h)(1) to provide that EPA may deactivate
registrations of a party for the following reasons in addition to those
previously listed:
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\231\ Under this administrative process, the party has 14
calendar days from the date of the notification to correct the
deficiencies identified or explain why there is no need for
corrective action. See 40 CFR 80.1450(h)(2)(i).
\232\ In the REGS proposal, we proposed to use the term
``company, third-party auditor, or third-party engineer'' in the
registration deactivation provisions; however, we are now using the
term ``party'' to refer more generally to any person that may be
required to register with EPA.
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The party fails to comply with the registration
requirements of 40 CFR 80.1450.
The party fails to submit any required report within
thirty days of the required submission date.
The party fails to pay a penalty or to perform any
requirements under the terms of a court order, administrative order,
consent decree, or administrative settlement agreement between the
party and EPA.
The party submits false or incomplete information.
The party denies EPA access or prevents EPA from
completing authorized activities under CAA section 114 despite our
presenting a warrant or court order. This includes a failure to provide
reasonable assistance.
The party fails to keep or provide EPA with the records
required in 40 CFR part 80, subpart M.
The party otherwise circumvents the intent of the CAA or
40 CFR part 80, subpart M.
These deactivation circumstances are consistent with cases where
EPA may deny or revoke a certificate of conformity under 40 CFR
1051.255(c) and 86.442-78 for engines and vehicles manufactured in or
imported into the U.S. In addition, we are finalizing requirements that
state that in instances of willful violation of an applicable
requirement or those in which public health, interest, or safety
requires otherwise, EPA may also deactivate the registration of a party
without providing notice to the party prior to deactivation and will
send written notification to the RCO describing the reasons for the
deactivation. Parties can still submit new registrations after
appropriate actions are taken by the party to remedy the deficiency.
5. New RIN Retirement Section
We are creating a new section in the RFS regulations for RIN
retirements. The regulations have specific sections that address when
and how parties may generate and separate RINs. However, the cases
where parties must retire RINs were identified in various sections
throughout the regulations. The new section of the RFS regulations for
RIN retirements, 40 CFR 80.1434, simply organizes these current
sections into one place and will provide beneficial clarification by
enumerating the specific instances in which a party must retire RINs in
a new section of the regulations and by making those retirements
consistent with how parties administratively retire RINs in EMTS. We
are aware of some confusion for some parties causing those parties to
improperly retire RINs or fail to retire RINs when they have a
responsibility to do so under the regulations. Improper retirements can
lead to a time-consuming remediation process, both for EPA and
responsible parties. This new section organizes these requirements into
one location in the regulations to make the circumstances under which
RINs must be retired simpler to locate and understand. The section also
includes new regulatory language for cases requiring RIN retirement
that are identified in EMTS, but may not be clear in the regulations,
given their current organization (e.g., in the case of contaminated or
spoiled fuel). Our intent is not to add additional burden on parties
that must retire RINs under the RFS program, but rather to make the
regulations consistent with how parties already retire RINs in EMTS and
help reduce potential confusion regarding the situations in which
parties must retire RINs.
We are finalizing the elements of the new RIN retirement section at
40 CFR 80.1434 as proposed, with the exception of the provisions for
expired RINs and redesignated renewable fuel, which we are not
finalizing because we have determined they are not necessary for
program implementation at this time.
6. New Pathway for Co-Processing Biomass With Petroleum To Produce Co-
Processed Cellulosic Diesel, Jet Fuel, and Heating Oil
We are creating a new definition of ``co-processed cellulosic
diesel'' to refer to biodiesel or non-ester renewable diesel fuels that
meet the definition for cellulosic biofuel but not the definition of
biomass-based diesel. We are also finalizing new pathways that allow
co-processed cellulosic diesel, jet fuel, and heating oil that are
derived from co-processing biomass with petroleum to qualify as
cellulosic biofuel and generate cellulosic (D-code 3) RINs, provided
certain production process requirements are satisfied. Fuels that meet
the cellulosic diesel definition will continue to be able to generate
D7 RINs, while fuels that meet the co-processed cellulosic diesel
definition but not the cellulosic diesel definition due to co-
processing with petroleum will be able to generate D3 RINs. Fuels
produced through co-processing with petroleum will also be required to
meet, among other requirements, the requirements of 40 CFR
80.1426(f)(4) to determine the number of RINs that can be generated.
While pathways existed for renewable gasoline and gasoline
blendstock (row M in Table 1 to 40 CFR 80.1426) and naphtha (row N in
Table 1 to 40 CFR 80.1426) produced from cellulosic biomass that is co-
processed with petroleum, there was no pathway for diesel, jet fuel, or
heating oil produced in this manner. The pathway for cellulosic diesel,
jet fuel, and heating oil (Pathway L in Table 1 to 40 CFR 80.1426)
excludes processes that co-process renewable biomass and petroleum. To
qualify as cellulosic diesel, a fuel must meet the requirements for
both cellulosic biofuel and biomass-based diesel. The definition of
biomass-based diesel explicitly excludes renewable fuels that are
derived from co-processing biomass with petroleum, and therefore a
process that produced diesel, jet fuel, or heating oil by co-processing
renewable biomass with petroleum could not qualify as biomass-based
diesel or cellulosic diesel under Pathway L in Table 1 to 40 CFR
80.1426. However, cellulosic biofuels other than cellulosic diesel are
not
[[Page 7064]]
prohibited from being derived from biomass co-processed with petroleum.
In the 2016 REGS proposed rule, we proposed to add a new row U to
Table 1 to 40 CFR 80.1426 that would have allowed for cellulosic
diesel, jet fuel and heating oil produced from any of the feedstocks
listed in row L via any process that co-processes renewable biomass
with petroleum and converts cellulosic biomass to fuel to qualify for
cellulosic biofuel (D-code 3) RINs.\233\ While most commenters
supported this proposed addition, several commenters disagreed. The
dissenting commenters stated that EPA had not conducted a sufficient
lifecycle GHG analysis to support the pathways proposed for row U.
After reviewing these comments, we have decided to finalize a narrower
set of pathways for co-processed cellulosic diesel. Instead of adding a
new row U to Table 1 to 40 CFR 80.1426, we are instead adding ``Co-
Processed Cellulosic Diesel, Jet Fuel, and Heating Oil'' as fuel types
in row M. Thus, as we had proposed, we are finalizing new pathways for
co-processed cellulosic diesel, jet fuel, and heating oil, but for a
narrower set of feedstocks and production process requirements.
Compared to the proposed row U, row M contains the same feedstocks
except that it does not include any energy grasses (i.e., switchgrass,
miscanthus, energy cane, Arundo donax, Pennisetum purpureum), and row M
contains a more narrowly defined set of production process
requirements. Note that the energy grass feedstocks are the only ones
in the proposed row U that include significant indirect land use change
emissions based on EPA's lifecycle GHG analysis of switchgrass for the
March 2010 RFS2 rule. Finalizing this narrower set of pathways
addresses the commenters concerns about insufficient analysis because
approval of these pathways is supported by the extensive analyses that
we conducted for a previous rule.
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\233\ Another part of the 2016 REGS proposal, which we are not
finalizing here, would have amended the definition of ``cellulosic
diesel'' so that it no longer required that such fuel meet the
definition of biomass-based diesel.
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The pathways in row M were approved in the March 2013 Pathways I
rule and may include fuels produced through the co-processing renewable
biomass and petroleum.\234\ The analysis supporting that rulemaking
found that the pathways evaluated for corn stover feedstock reduced
lifecycle GHG emissions by at least 65 to 129 percent compared to the
statutory petroleum baseline, and the results for corn stover were
extended to the other feedstocks listed in row M. We are now extending
those results to cover co-processed cellulosic diesel, jet fuel, and
heating oil produced from the same feedstocks and processes listed in
row M. The analysis for the March 2013 Pathways I rule did not
explicitly evaluate co-processing but the upgrading processes were
modeled as using the same types of equipment and processes as petroleum
refining.\235\ Indeed, the analysis was largely based on a report that
evaluated processes that co-produce gasoline and diesel products.\236\
The most likely processes in row M to include co-processing are the
ones that have upgrading as the final step, as upgrading is a common
part of petroleum refining. Our analysis for the March 2013 Pathways I
rule estimated a 67 percent GHG reduction compared to conventional
gasoline for renewable gasoline and renewable gasoline blendstock
produced from corn stover through catalytic pyrolysis and upgrading.
Producing cellulosic diesel instead of renewable gasoline through this
same pathway would produce similar results satisfying the 60 percent
GHG reduction threshold. When energy allocation is used for GHG
accounting, which is the approach we have used for co-produced RIN
generating fuels,\237\ co-produced gasoline and diesel products will
have the same, or nearly the same GHG emissions per unit of energy.
Studies looking at petroleum refining have also found that upgrading to
diesel fuel is less GHG-intensive than upgrading to gasoline.\238\
Based on these assessments we conclude that the lifecycle GHG emissions
associated with the new pathways being added to row M satisfy the
statutory 60 percent GHG reduction requirement to qualify as cellulosic
biofuel. In summary, the analyses conducted for the March 2013 Pathways
I rule support the addition of ``co-processed cellulosic diesel, jet
fuel and heating oil'' as feedstocks to row M of Table 1 to 40 CFR
80.1426, and commenters did not provide sufficient data or information
to support a different conclusion.
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\234\ See 78 FR 14190 (March 5, 2013).
\235\ Kinchin, Christopher. Catalytic Fast Pyrolysis with
Upgrading to Gasoline and Diesel Blendstocks. National Renewable
Energy Laboratory (NREL). 2011. EPA-HQ-OAR-2011-0542-0007
\236\ Id.
\237\ See for example discussion of hydrotreated camelina oil in
that March 2013 Pathways I rule at 78 FR 14198.
\238\ For example, for the 2010 RFS2 rule EPA estimated slightly
lower refining emissions (9.2 gCO2e/MJ) for 2005 average U.S.
gasoline than for 2005 U.S. average diesel (9.0 gCO2e/MJ). Other
studies have found an even larger reduction for refining diesel as
compared to gasoline. See for example: Cooney, G., et al. (2017).
``Updating the U.S. Life Cycle GHG Petroleum Baseline to 2014 with
Projections to 2040 Using Open-Source Engineering-Based Models.''
Environmental Science & Technology 51(2): 977-987. While this may be
different when biogenic feedstocks are used, it is reasonable to
conclude that any differences would not be large enough to
disqualify the fuel from satisfying the 60 percent GHG reduction
threshold.
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The 2016 REGS proposal also included a revised definition for
``cellulosic diesel'' and a new term, ``cellulosic biomass-based
diesel.'' \239\ These proposed revisions would have, among other
things, removed the requirement for ``cellulosic diesel'' to meet the
definitions of both cellulosic biofuel and biomass-based diesel. The
new term, ``cellulosic biomass-based diesel,'' would have effectively
replaced ``cellulosic diesel'' and would have required that the
renewable fuel meet both definitions. However, after considering the
implementation issues associated with revising an existing definition
within EPA's IT systems (e.g., changing existing registrations), we
have decided not to finalize either of the definitional changes
proposed in the 2016 REGS rule. Instead, we are accomplishing the same
result by leaving the definition of ``cellulosic diesel'' as-is and are
adding a new term, ``co-processed cellulosic diesel,'' which is, among
other things, a renewable fuel that meets the definitions of cellulosic
biofuel and either biodiesel or non-ester renewable diesel.\240\
Importantly, co-processed cellulosic diesel can be produced as a result
of co-processing cellulosic feedstocks with petroleum and is eligible
for D-code 3 RINs, but not D-code 7 RINs. It is thus ``co-processed
cellulosic diesel, jet fuel, and heating oil'' that we are adding to
row M of Table 1 to 40 CFR 80.14626.
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\239\ 81 FR 80927 (November 16, 2016).
\240\ This new definition for ``co-processed cellulosic diesel''
is essentially the same as the revised definition of ``cellulosic
diesel'' that we proposed in the 2016 REGS proposal; creating a new
term rather than revising an existing definition allows us to avoid
legacy issues within our IT system.
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7. Other Revisions to the Fuels Program
a. Testing Revisions
We are removing the requirement for periodic resubmitting of non-
voluntary consensus standard body (non-VCSB) test methods that have not
been approved by VCSBs in 40 CFR 80.585(d)(4). Currently, non-VCSB test
methods are required to resubmit accuracy and precision qualification
information every 5 years if the non-VCSB test method has not been
approved by a VCSB organization. At this time, VCSBs, such as ASTM,
have yet to qualify any non-VCSB test methods for measuring the sulfur
content in diesel, gasoline, or butane. Moreover, we require minimal
statistical quality control requirements on every
[[Page 7065]]
type test method approved under the diesel sulfur accuracy and
precision requirements \241\ to ensure proper test method
instrumentation use is as intended in practice. We are, therefore,
amending the regulatory requirement by eliminating the provision for
non-VCSB test methods to re-submit accuracy and precision qualification
information every 5 years.
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\241\ See 40 CFR 80.584.
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We are also removing the sunset date for designated primary test
methods in 40 CFR 80.47. EPA fuels regulations exempted those
designated primary test methods that were in use prior to October 28,
2013, from meeting the accuracy and precision qualification
requirements.\242\ We provided this sunset exemption date in the Tier 3
final rule because we were confident that test facilities were
utilizing designated primary test methods prior to this date. However,
since the statistical quality control (SQC) requirements at 40 CFR
80.47 are intended to ensure proper utilization of designated primary
test methods in practice, we are removing this sunset exemption date.
This action exempts all designated primary test methods from the
accuracy and precision requirements of 40 CFR 80.47.
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\242\ See, e.g., 40 CFR 80.47(j)(2).
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b. Oxygenate Added Downstream in Tier 3
After the Tier 3 final rule was published,\243\ we received several
questions concerning the language at 40 CFR 80.1603(d) about accounting
for downstream oxygenate blending in refiners' and importers' average
annual sulfur calculations. Specifically, some refiners asked whether
40 CFR 80.1603(d) is consistent with the related reformulated gasoline
(RFG) provisions for downstream oxygenate blending in 40 CFR 80.69.
Currently, refiners may certify RFG after the addition of oxygenate to
the reformulated blendstock for oxygenate blending (RBOB) sample at the
refinery lab (creating a so-called ``hand blend''), as allowed in 40
CFR 80.69(a). The Tier 3 regulations at 40 CFR 80.1603(d) require that
refiners and importers account for downstream oxygenate blending to any
gasoline or blendstock for oxygenate blending (BOB) by volume weighting
the sulfur content of the gasoline or BOB with the sulfur content of
the added oxygenate. Under the Tier 3 regulations, refiners and
importers may either rely upon test results of batches of oxygenate
supplied by the producer of the oxygenate or use an assumed value of
5.00 ppm added at 10 volume percent ethanol concentration if actual
sulfur results are not available. These refiners and importers
suggested that the regulatory language at 40 CFR 80.1603(d) may be
interpreted to continue to allow the use of hand-blended RBOB samples
for determining oxygenate sulfur content added downstream by arguing
that the language at 40 CFR 80.1603(d) only applied to conventional
gasoline and conventional blendstock for oxygenate blending (CBOB).
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\243\ See 79 FR 23414 (April 28, 2014).
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We intended for the downstream oxygenate blending regulations at 40
CFR 80.1603(d) to apply to all gasoline and BOBs, not just conventional
gasoline and CBOB. In the preamble to the Tier 3 final rule, we
explained that the ``final rule requires that in determining their
compliance with today's sulfur standards, refiners and importers must
either use the actual sulfur content of the denatured fuel ethanol
(DFE) established through testing of the DFE actually blended or assume
a 5 ppm sulfur content for the DFE added downstream. To prevent
potential bias, a refiner or importer must choose to use only one
method during each annual compliance period.'' \244\ The regulations at
40 CFR 80.101(d)(4) set forth the criteria that a refiner must meet to
include downstream ethanol in their conventional gasoline compliance
calculations, and 40 CFR 80.69 sets forth the criteria a refiner must
meet to include downstream ethanol in their RFG or RBOB compliance
calculations. If a refiner satisfies these criteria, 40 CFR 80.1603(d)
sets forth the mechanism for accounting for downstream ethanol in
annual compliance calculations for all gasoline and BOBs. This section
of the regulations was designed to ensure that all refiners calculate
their annual average sulfur levels by including the ethanol that is
actually added to their gasoline or BOBs, or to use the default value
of 5 ppm sulfur content. This would alleviate the need for refiners to
use hand blends prepared with ethanol that has less sulfur than is
actually blended with the refiner's gasoline or BOB for their
compliance calculations.
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\244\ See 79 FR 23544 (April 28, 2014).
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Although we believe that 40 CFR 80.1603(d) clearly applies to all
gasoline and BOBs, not just RFG or RBOB, we are making minor amendments
to ensure that these requirements are as clear as possible to the
regulated community. We are also making minor amendments to the Tier 3
sulfur reporting requirements at 40 CFR 80.1652 to better accommodate
the inclusion of downstream oxygenate blending in annual average sulfur
compliance demonstrations. These added requirements will help align the
reported batch information with the annual average compliance report
and is necessary to ensure that refiners met both the per-gallon and
annual average sulfur standards.
c. Technical Corrections and Clarifications
We are making numerous technical corrections to EPA's fuels
programs. These amendments are being made to correct inaccuracies and
oversights in the current regulations. These changes are described in
Table IX.F.7-2 below.
Table IX.F.7-2--Miscellaneous Technical Corrections and Clarifications
to Title 40
------------------------------------------------------------------------
Part and section of Title 40 Description of revision
------------------------------------------------------------------------
79.51(f)(6)(iii), 79.59(a)(1), Redirecting the mailing
80.27(e)(1)(i), 80.69(a)(11)(viii)(C), addresses to the new address
80.93(d)(4), 80.174(b), 80.174(c), section in 80.10.
80.235(b), 80.290(b), 80.533(b),
80.574(b), 80.595(b), 80.607(a),
80.855(c)(2), 80.1285(b), 80.1340(b),
80.1415(c)(4), 80.1441(h), 80.1442(i),
80.1443(d)(2), 80.1449(d),
80.1454(h)(6)(iii), 80.1501(b)(5)(i),
80.1501(b)(5)(ii), 80.1622(g),
80.1625(c)(2), and 80.1656(h).
80.10.................................. Adding a new address section
that reflects the address
change.
80.27(b)............................... Clarifying the Performance-
Based Analytical Test Method
Approach (PBATMA)
implementation for Reid vapor
pressure (RVP) compliance
assurance measurements.
[[Page 7066]]
80.46.................................. Clarifying that the PBATMA
requirements in 80.47 are now
effective, removing the VCSB
alternative analytical test
methods from 80.46, as the
VCSB analytical test methods
in 80.46 must now meet the
requirements in 80.47.
80.47(b)(2)(i) and 80.47(b)(2)(ii)..... Clarifying accuracy criterion
for sulfur in gasoline by
adding examples with accuracy
criterion.
80.47(b)(3), 80.47(c)(3), 80.47(d)(2), Removing the reference to the
80.47(e)(2), 80.47(f)(2), 80.47(g)(2), October 28, 2013, date and
80.47(h)(2), 80.47(i)(2), 80.47(j)(2), making the designated primary
and 80.47(l)(4). test methods exempt from the
applicable accuracy and
precision requirements of 40
CFR 80.47, given that there
are SQC requirements for these
methods that will verify if
they are being carried out
properly.
80.47(c)(2)(i) and 80.47(c)(2)(ii)..... Clarifying accuracy criterion
for sulfur in butane by adding
examples with accuracy
criterion.
80.47(l)(2)(i)......................... Clarifying that test facilities
meet applicable precision
requirements for VCSB method
defined and non-VCSB absolute
fuel parameters.
80.47(n)(1)(i), 80.47(o)(1)(i), Removing the accuracy SQC
80.47(p)(1)(i), and 80.47(p)(2)(i). requirement for pre-treatment
and assessment of results from
the check standard testing
after at least 15 testing
occasions as described in
section 8.2 of ASTM D6299.
80.47(n)(1)(ii), 80.47(o)(1)(ii), and Clarifying the expanded
80.47(p)(1)(ii). uncertainty of the accepted
reference value of consensus
named fuels shall be included
in the accuracy SQC
qualification criterion.
80.47(o)(1)(i)......................... Clarifying participation in a
commercially available Inter
Laboratory Crosscheck Program
(ILCP) at least three times a
year meeting the ASTM D6299
requirements for ILCP check
standards that meet the
requirements for absolute
differences between test
results and the accepted
reference value of the check
standard based on the
designated primary test method
obtained through participation
in the ILCP satisfies the
accuracy SQC requirement as
well as appropriate
calculation for adherence to
SQC criteria. Also clarifying
the accuracy SQC criteria is
0.75 times the published
reproducibility of the
applicable designated primary
test method for each method
defined fuel parameter to be
consistent with non-VCSB
method defined fuel parameter
accuracy SQC requirements.
80.47(n)(2)(i), 80.47(o)(2)(i), and Clarification in Precision SQC
80.47(p)(3)(i). requirements that the test
facility's long term precision
standard deviation, as
demonstrated by control
charts, is expected to meet
applicable precision criterion
for the test method.
80.585(d)(1) and (2)................... Removing reference to expired
provisions related to approval
of test methods approved by
VCSBs.
80.1240(a)(1)(i) and 80.1603(f)(1)..... Clarifying that gasoline
benzene and sulfur credits
must be used for compliance
purposes (i.e., retired)
instead of simply being
obtained.
80.1401................................ Adding definition of foreign
renewable fuel producer, non-
renewable feedstock, non-RIN-
generating foreign producer,
and RIN-generating foreign
producer; amended by revising
the definition of foreign
ethanol producer and renewable
fuel.
80.1426(a)(2), 80.1426(c)(4)-(5), Applying the new and revised
80.1450(b), 80.1450(d)(1), 80.1451(b), definitions in 80.1401.
80.1451(b)(1)(ii)(D),
80.1451(g)(1)(ii)(D), 80.1454(q),
80.1466, 80.1472(b)(3)(i),
80.1472(b)(3)(ii)(B), and
80.1472(b)(3)(iii).
80.1440................................ Adding a new paragraph related
to RIN responsibilities for
renewable fuel used for
purposes subject to national
security exemptions.
80.1450(b)(1)(ix)(A), Clarifying the term
80.1451(b)(1)(ii)(I), ``denaturant'' to mean
80.1451(g)(1)(ii)(I), 80.1452(b)(11), ``ethanol denaturant.''
and 80.1464(b)(1)(ii).
80.1450(g)(9).......................... Clarifying the third-party
auditor registration updates
language to make QAP updates
consistent with registration
updates.
80.1466(d)(3)(ii)...................... Revising erroneous reference
for third-party independence
requirements from
80.65(e)(2)(iii) to
80.65(f)(2)(iii).
80.1469(f)(1).......................... Clarifying to clearly link
updates to quality assurance
plans with updates to a third-
party auditor's registration
under 80.1450(g)(9).
80.1501(b)(3)(i)....................... Clarifying that the word
``ATTENTION'' should be in
black font, not orange.
80.1600................................ Removing the duplicative
definition of ``Ethanol
denaturant,'' which is already
defined in 80.2(iiii).
80.1609(a)............................. Revising cross-reference to
80.1603(d)(3).
80.1616(c)(3).......................... Clarifying that Tier 2 credits
generated from January 1, 2017
through December 31, 2019,
must be used between January
1, 2017 and December 31, 2019.
80.1650(b)(3).......................... Clarifying that the oxygenate
blender registration dates
also apply to persons who
blend oxygenate into CBOB and
conventional gasoline.
80.1650(e)(1)(iii)(A) and Clarifying that records are
80.1650(g)(1)(iii)(A). kept at the oxygenate
production ``facility''
(instead of the oxygenate
production ``refinery'').
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[[Page 7067]]
X. Public Participation
Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on July 29, 2019 (84 FR 36762) and the supplemental notice of
proposed rulemaking published on October 28, 2019. We also held public
hearings on July 31, 2019 and October 30, 2019, at which many parties
provided both verbal and written testimony. All comments received, both
verbal and written, are available in Docket ID No. EPA-HQ-OAR-2019-0136
and we considered these comments in developing the final rule. Public
comments and EPA responses are discussed throughout this preamble and
in the accompanying RTC document, which is available in the docket for
this action.
XI. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
This action is a significant regulatory action that was submitted
to the Office of Management and Budget (OMB) for review. Any changes
made in response to OMB recommendations have been documented in the
docket. EPA prepared an analysis of illustrative costs associated with
the 2020 percentage standards. This analysis is presented in Section V.
B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs
This action is considered an Executive Order 13771 regulatory
action. Details on the estimated costs of the 2020 percentage standards
can be found in EPA's analysis of the illustrative costs. This analysis
is presented in Section V.
C. Paperwork Reduction Act (PRA)
The existing Information Collection Request (ICR) covering the RFS
program is entitled ``Recordkeeping and Reporting for the Renewable
Fuel Standard Program,'' EPA ICR No. 2546.01, OMB Control Number 2060-
0725; expires August 31, 2022. The existing RFS ICR covers
registration, recordkeeping, and reporting requirements currently in 40
CFR part 80, subpart M. The changes affecting RVO calculations will not
change the recordkeeping and reporting burdens vis-[agrave]-vis the
existing collection. However, certain of the amendments in this action
will result in an additional burden. The information collection
activities related to the amendments to the RFS regulations in this
rule have been submitted for approval to the Office of Management and
Budget (OMB) under the PRA. You can find a copy of the ICR in the
docket for this rule, identified by EPA ICR Number 2595.02, OMB Control
Number 2060-NEW, and it is briefly summarized here. The parties for
whom we anticipate an increase in burden are generally described as RIN
generators (specifically, those who are producers of renewable fuel)
due the amendments related to pathways, and those who are generally
described as obligated parties (specifically, those who are refiners
and importers) due to the provisions for certified NTDF. The supporting
statement clearly indicates the amendments and includes detailed tables
with regulatory burden laid out by type of party, regulatory citation,
description of information to be collected, estimated burden in hours
and dollars, and reporting form or format. Certain amendments in this
action are related to non-RFS fuels programs, but these amendments are
mostly technical corrections (e.g., address corrections) and do not
impose any additional recordkeeping and reporting burden.
The Following Summarizes the Burden
Respondents/affected entities: The respondents to this information
collection are RIN generators and obligated parties under the RFS
program, and fall into the following general industry categories:
Petroleum refineries, ethyl alcohol manufacturers, other basic organic
chemical manufacturing, chemical and allied products merchant
wholesalers, petroleum bulk stations and terminals, petroleum and
petroleum products merchant wholesalers, gasoline service stations, and
marine service stations.
Respondent's obligation to respond: Mandatory.
Estimated number of respondents: 6,042.
Total number of responses: 357,512.
Frequency of response: Annually and occasionally.
Total estimated burden: 32,548 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
Total estimated cost: $3,511,813 (per year).
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves
this ICR, EPA will announce that approval in the Federal Register and
publish a technical amendment to 40 CFR part 9 to display the OMB
control number for the approved information collection activities
contained in this final rule.
D. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, the impact of concern is any significant
adverse economic impact on small entities. An agency may certify that a
rule will not have a significant economic impact on a substantial
number of small entities if the rule relieves regulatory burden, has no
net burden, or otherwise has a positive economic effect on the small
entities subject to the rule.
With respect to the amendments to the RFS regulations and other
fuels programs, this action makes relatively minor corrections and
modifications to those regulations, and we do not anticipate that there
will be any significant adverse economic impact on directly regulated
small entities.
The small entities directly regulated by the annual percentage
standards associated with the RFS volumes are small refiners, which are
defined at 13 CFR 121.201. With respect to the 2020 percentage
standards, we have evaluated the impacts on small entities from two
perspectives: As if the standards were a standalone action or if they
are a part of the overall impacts of the RFS program as a whole.
When evaluating the standards as if they were a standalone action
separate and apart from the original rulemaking that established the
RFS2 program, the standards could be viewed as increasing the
cellulosic biofuel, advanced biofuel, and total renewable fuel volume
requirements by 170 million gallons between 2019 and 2020. To evaluate
the impacts of the volume requirements on small entities relative to
2019, we have conducted a screening analysis \245\ to assess whether we
should make a finding that this action will not have a significant
economic impact on a substantial number of small entities. Currently
available information shows that the impact on small entities from
implementation of this rule will not be significant. We have reviewed
and
[[Page 7068]]
assessed the available information, which shows that obligated parties,
including small entities, are generally able to recover the cost of
acquiring the RINs necessary for compliance with the RFS standards
through higher sales prices of the petroleum products they sell than
would be expected in the absence of the RFS program.\246\ This is true
whether they acquire RINs by purchasing renewable fuels with attached
RINs or purchase separated RINs. The costs of the RFS program are thus
generally being passed on to consumers in the highly competitive
marketplace. Even if we were to assume that the cost of acquiring RINs
was not recovered by obligated parties, and we used the maximum values
of the costs discussed in Section V and the gasoline and diesel fuel
volume projections and wholesale prices from the October 2019 version
of EIA's Short Term Energy Outlook, along with current wholesale
biofuel prices, a cost-to-sales ratio test shows that the costs to
small entities of the RFS standards are far less than 1 percent of the
value of their sales.
---------------------------------------------------------------------------
\245\ ``Screening Analysis for the Final Renewable Fuel
Standards for 2020,'' memorandum from Dallas Burkholder and Nick
Parsons to EPA Air Docket EPA-HQ-OAR-2018-0205.
\246\ For a further discussion of the ability of obligated
parties to recover the cost of RINs see ``Denial of Petitions for
Rulemaking to Change the RFS Point of Obligation,'' EPA-420-R-17-
008, November 2017.
---------------------------------------------------------------------------
While the screening analysis described above supports a
certification that this rule will not have a significant economic
impact on small refiners, we continue to believe that it is more
appropriate to consider the standards as a part of our ongoing
implementation of the overall RFS program. When considered this way,
the impacts of the RFS program as a whole on small entities were
addressed in the RFS2 final rule, which was the rule that implemented
the entire program as required by EISA 2007.\247\ As such, the Small
Business Regulatory Enforcement Fairness Act (SBREFA) panel process
that took place prior to the 2010 rule was also for the entire RFS
program and looked at impacts on small refiners through 2022.
---------------------------------------------------------------------------
\247\ 75 FR 14670 (March 26, 2010).
---------------------------------------------------------------------------
For the SBREFA process for the RFS2 final rule, we conducted
outreach, fact-finding, and analysis of the potential impacts of the
program on small refiners, which are all described in the Final
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners,
including small refiners, through the year 2022 and found that the
program would not have a significant economic impact on a substantial
number of small entities, and that this impact was expected to decrease
over time, even as the standards increased. For gasoline and/or diesel
small refiners subject to the standards, the analysis included a cost-
to-sales ratio test, a ratio of the estimated annualized compliance
costs to the value of sales per company. From this test, we estimated
that all directly regulated small entities would have compliance costs
that are less than one percent of their sales over the life of the
program (75 FR 14862, March 26, 2010).
We have determined that this final rule will not impose any
additional requirements on small entities beyond those already
analyzed, since the impacts of this rule are not greater or
fundamentally different than those already considered in the analysis
for the RFS2 final rule assuming full implementation of the RFS
program. This rule increases the 2020 cellulosic biofuel, advanced
biofuel, and total renewable fuel volume requirements by 170 million
gallons relative to the 2019 volume requirements, but those volumes
remain significantly below the statutory volume targets analyzed in the
RFS2 final rule. Compared to the burden that would be imposed under the
volumes that we assessed in the screening analysis for the RFS2 final
rule (i.e., the volumes specified in the Clean Air Act), the volume
requirements in this rule reduce burden on small entities. Regarding
the BBD standard, we are maintaining the volume requirement for 2021 at
the same level as the 2020 volume requirement we finalized in the 2019
final rule.\248\ While this volume is an increase over the statutory
minimum value of 1 billion gallons, the BBD standard is a nested
standard within the advanced biofuel category, which we are
significantly reducing from the statutory volume targets. As discussed
in Section VI, the BBD volume requirement is below what is anticipated
to be produced and used to satisfy the advanced biofuel requirement.
The net result of the standards being finalized in this action is a
reduction in burden as compared to implementation of the statutory
volume targets assumed in the RFS2 final rule analysis.
---------------------------------------------------------------------------
\248\ Moreover, we note that the 2021 BBD volume only
establishes the maximum BBD volume for that year and may be adjusted
in subsequent actions. This volume does not directly regulate any
entity. We intend to translate this volume, subject to any
appropriate adjustments, into a percentage standard in the 2021
annual rulemaking. We also acknowledge that today's action does
impose the 2020 BBD percentage standard. As we explain in Section VI
and in the preamble to the 2019 final rule, this percentage standard
is not practically binding, as we expect obligated parties to rely
on BBD RINs, in excess of this standard, to satisfy the 2020
advanced biofuel standard. Thus, any impact on directly regulated
entities from the 2020 BBD percentage standard is subsumed into the
impact of the 2020 advanced biofuel standard. As we explain in this
section and the screening memo, we find that the 2020 advanced
biofuel standard will not have a significant economic impact on a
substantial number of small entities under the RFA.
---------------------------------------------------------------------------
While the rule will not have a significant economic impact on a
substantial number of small entities, there are compliance
flexibilities in the program that can help to reduce impacts on small
entities. These flexibilities include being able to comply through RIN
trading rather than renewable fuel blending, 20 percent RIN rollover
allowance (up to 20 percent of an obligated party's RVO can be met
using previous-year RINs), and deficit carry-forward (the ability to
carry over a deficit from a given year into the following year,
provided that the deficit is satisfied together with the next year's
RVO). In the RFS2 final rule, we discussed other potential small entity
flexibilities that had been suggested by the SBREFA panel or through
comments, but we did not adopt them, in part because we had serious
concerns regarding our authority to do so.
Additionally, we realize that there may be cases in which a small
entity may be in a difficult financial situation and the level of
assistance afforded by the program flexibilities is insufficient. For
such circumstances, the program provides hardship relief provisions for
small entities (small refiners), as well as for small refineries.\249\
As required by the statute, the RFS regulations include a hardship
relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small
refinery to petition for an extension of its small refinery exemption
at any time based on a showing that the refinery is experiencing a
``disproportionate economic hardship.'' EPA regulations provide similar
relief to small refiners that are not eligible for small refinery
relief (see 40 CFR 80.1442(h)). We have currently identified a total of
9 small refiners that own 11 refineries subject to the RFS program, all
of which are also small refineries.
---------------------------------------------------------------------------
\249\ See CAA section 211(o)(9)(B).
---------------------------------------------------------------------------
We evaluate these petitions on a case-by-case basis and may approve
such petitions if it finds that a disproportionate economic hardship
exists. In evaluating such petitions, we consult with the U.S.
Department of Energy and consider the findings of DOE's 2011 Small
Refinery Study and other economic factors. To date, EPA has adjudicated
petitions for exemption from 37 small refineries for the 2018 RFS
standards (10 of which are owned by a small refiner).\250\ We have not
yet
[[Page 7069]]
adjudicated any small refinery exemption petitions for the 2019 or 2020
RFS standards.
---------------------------------------------------------------------------
\250\ Information about the number of SREs granted can be found
at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
---------------------------------------------------------------------------
In sum, this final rule will not change the compliance
flexibilities currently offered to small entities under the RFS program
(including the small refinery hardship provisions we continue to
implement) and available information shows that the impact on small
entities from implementation of this rule will not be significant
viewed either from the perspective of it being a standalone action or a
part of the overall RFS program. We have therefore concluded that this
action will not have any significant adverse economic impact on
directly regulated small entities.
E. Unfunded Mandates Reform Act (UMRA)
This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action
implements mandates specifically and explicitly set forth in CAA
section 211(o) and we believe that this action represents the least
costly, most cost-effective approach to achieve the statutory
requirements.
F. Executive Order 13132: Federalism
This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.
G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications as specified in
Executive Order 13175. This action will be implemented at the Federal
level and affects transportation fuel refiners, blenders, marketers,
distributors, importers, exporters, and renewable fuel producers and
importers. Tribal governments will be affected only to the extent they
produce, purchase, or use regulated fuels. Thus, Executive Order 13175
does not apply to this action.
H. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that EPA has reason to believe may disproportionately affect children,
per the definition of ``covered regulatory action'' in section 2-202 of
the Executive Order. This action is not subject to Executive Order
13045 because it implements specific standards established by Congress
in statutes (CAA section 211(o)) and does not concern an environmental
health risk or safety risk.
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action establishes the required
renewable fuel content of the transportation fuel supply for 2020,
consistent with the CAA and waiver authorities provided therein. The
RFS program and this rule are designed to achieve positive effects on
the nation's transportation fuel supply, by increasing energy
independence and security and lowering lifecycle GHG emissions of
transportation fuel.
J. National Technology Transfer and Advancement Act (NTTAA)
This rulemaking does not involve technical standards.
K. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
EPA believes that this action does not have disproportionately high
and adverse human health or environmental effects on minority
populations, low income populations, and/or indigenous peoples, as
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).
This regulatory action does not affect the level of protection provided
to human health or the environment by applicable air quality standards.
This action does not relax the control measures on sources regulated by
the RFS and other fuels regulations.
L. Congressional Review Act (CRA)
This action is subject to the CRA, and the EPA will submit a rule
report to each House of the Congress and to the Comptroller General of
the United States. This action is a ``major rule'' as defined by 5
U.S.C. 804(2).
XII. Statutory Authority
Statutory authority for this action comes from sections 114, 203-
05, 208, 211, and 301 of the Clean Air Act, 42 U.S.C. 7414, 7522-24,
7542, 7545, and 7601.
List of Subjects
40 CFR Part 79
Environmental protection, Fuel additives, Gasoline, Motor vehicle
pollution, Penalties, Reporting and recordkeeping requirements.
40 CFR Part 80
Environmental protection, Administrative practice and procedure,
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports,
Oil imports, Petroleum, Renewable fuel.
Dated: December 19, 2019.
Andrew R. Wheeler,
Administrator.
For the reasons set forth in the preamble, EPA amends 40 CFR parts
79 and 80 as follows:
PART 79--REGISTRATION OF FUEL AND FUEL ADDITIVES
0
1. The authority citation for part 79 continues to read as follows:
Authority: 42 U.S.C. 7414, 7524, 7545 and 7601.
Subpart F--Testing Requirements for Registration
0
2. Section 79.51 is amended by revising the last sentence of paragraph
(f)(6)(iii) to read as follows:
Sec. 79.51 General requirements and provisions.
* * * * *
(f) * * *
(6) * * *
(iii) * * * The registrants' communications should be sent to the
following address: Attn: Fuel/Additives Registration, U.S.
Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Mail Code
6405A, Washington, DC 20460.
* * * * *
0
3. Section 79.59 is amended by revising the last sentence of paragraph
(a)(1) introductory text to read as follows:
Sec. 79.59 Reporting requirements.
(a) * * *
(1) * * * Forms for submitting this data may be obtained from EPA
at the following address: Attn: Fuel/Additives Registration, U.S.
Environmental Protection Agency, 1200 Pennsylvania Ave., NW, Mail Code
6405A, Washington, DC 20460.
* * * * *
[[Page 7070]]
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
0
4. The authority citation for part 80 continues to read as follows:
Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).
Subpart A--General Provisions
0
5. Section 80.10 is added to read as follows:
Sec. 80.10 Addresses.
(a) For submitting notifications, applications, petitions, or other
communications with EPA, use one of the following addresses for
mailing:
(1) For U.S. Mail: Attn: [TITLE AS DIRECTED], U.S. Environmental
Protection Agency, 1200 Pennsylvania Ave. NW, Mail Code 6405A,
Washington, DC 20460.
(2) For commercial service: Attn: [TITLE AS DIRECTED], U.S.
Environmental Protection Agency, William Jefferson Clinton Building
North, Mail Code 6405A, Room 6520V, 1200 Pennsylvania Ave. NW,
Washington, DC 20004; Phone: 1-800-385-6164.
(b) [Reserved]
Subpart B--Controls and Prohibitions
0
6. Section 80.27 is amended by revising paragraphs (b) and (e)(1)(i) to
read as follows:
Sec. 80.27 Controls and prohibitions on gasoline volatility.
* * * * *
(b) Determination of compliance. Compliance with the standards
listed in paragraph (a) of this section shall be determined by the use
of the sampling methodologies specified in Sec. 80.8 and the testing
methodology specified in Sec. 80.46(c) until December 31, 2015, and
Sec. 80.47 beginning January 1, 2016.
* * * * *
(e) * * *
(1) * * *
(i) Any person may request a testing exemption by submitting an
application that includes all the information listed in paragraphs
(e)(3) through (6) of this section to the attention of ``Test
Exemptions'' to the address in Sec. 80.10(a).
* * * * *
Subpart D--Reformulated Gasoline
0
7. Section 80.46 is amended by:
0
a. Revising paragraphs (a), (b), (d), (e), (f), and (g); and
0
b. Removing and reserving paragraphs (h)(1)(iv), (v), (vii), (viii),
(x), (xiii), (xv), and (xvi).
The revisions read as follows:
Sec. 80.46 Measurement of reformulated gasoline and conventional
gasoline fuel parameters.
(a) Sulfur. Sulfur content of gasoline and butane must be
determined by use of the following methods:
(1)(i) Through December 31, 2015, the sulfur content of gasoline
must be determined by ASTM D2622.
(ii) Beginning January 1, 2016, the sulfur content of gasoline must
be determined by a test method approved under Sec. 80.47.
(2)(i) Through December 31, 2015, the sulfur content of butane must
be determined by ASTM D6667.
(ii) Beginning January 1, 2016, the sulfur content of butane must
be determined by a test method approved under Sec. 80.47.
(b) Olefins. Olefin content must be determined by use of the
following methods:
(1) Through December 31, 2015, olefin content must be determined
using ASTM D1319.
(2) Beginning January 1, 2016, olefin content must be determined by
a test method approved under Sec. 80.47.
* * * * *
(d) Distillation. Distillation parameters must be determined by use
of the following test methods:
(1) Through December 31, 2015, distillation parameters must be
determined using ASTM D86.
(2) Beginning January 1, 2016, distillation parameters must be
determined by a test method approved under Sec. 80.47. (Note: The
precision estimates for reproducibility in ASTM D86-12 do not apply;
see Sec. 80.47(h).)
(e) Benzene. Benzene content must be determined by use of the
following test methods:
(1) Through December 31, 2015, benzene content must be determined
using ASTM D3606, except that instrument parameters shall be adjusted
to ensure complete resolution of the benzene, ethanol, and methanol
peaks because ethanol and methanol may cause interference with ASTM
D3606 when present.
(2) Beginning January 1, 2016, benzene content must be determined
by a test method approved under Sec. 80.47.
(f) Aromatic content. Aromatic content must be determined by use of
the following methods:
(1) Through December 31, 2015, aromatic content must be determined
using ASTM D5769, except the sample chilling requirements in section 8
of this standard method are optional.
(2) Beginning January 1, 2016, aromatic content must be determined
by a test method approved under Sec. 80.47.
(g) Oxygen and oxygenate content analysis. Oxygen and oxygenate
content must be determined by use of the following methods:
(1) Through December 31, 2015, oxygen and oxygenate content must be
determined using ASTM D5599.
(2) Beginning January 1, 2016, oxygen and oxygenate content must be
determined by a test method approved under Sec. 80.47.
* * * * *
0
8. Section 80.47 is amended by revising paragraphs (b), (c)(2)(i) and
(ii), (c)(3), (d)(2), (e)(2), (f)(2), (g)(2), (h)(2), (i)(2), (j)(2),
(l)(2)(i), (l)(4), (n)(1), (n)(2)(i), (o)(1), (o)(2)(i), (p)(1),
(p)(2)(i), and (p)(3)(i) to read as follows:
Sec. 80.47 Performance-based Analytical Test Method Approach.
* * * * *
(b) Precision and accuracy criteria for approval for the absolute
fuel parameter of gasoline sulfur--(1) Precision. Beginning January 1,
2016, for motor vehicle gasoline, gasoline blendstock, and gasoline
fuel additives subject to the gasoline sulfur standard at Sec. Sec.
80.195 and 80.1603, the maximum allowable standard deviation computed
from the results of a minimum of 20 tests made over 20 days (tests may
be arranged into no fewer than five batches of four or fewer tests
each, with only one such batch allowed per day over the minimum of 20
days) on samples using good laboratory practices taken from a single
homogeneous commercially available gasoline must be less than or equal
to 1.5 times the repeatability ``r'' divided by 2.77, where ``r''
equals the ASTM repeatability of ASTM D7039 (Example: A 10 ppm sulfur
gasoline sample: Maximum allowable standard deviation of 20
tests<=1.5*(1.73ppm/2.77) = 0.94 ppm). The 20 results must be a series
of tests with a sequential record of analysis and no omissions. A
laboratory facility may exclude a given sample or test result only if
the exclusion is for a valid reason under good laboratory practices and
it maintains records regarding the sample and test results and the
reason for excluding them.
(2) Accuracy. Beginning January 1, 2016, for motor vehicle
gasoline, gasoline blendstock, and gasoline fuel additives subject to
the gasoline sulfur standard at Sec. Sec. 80.195 and 80.1603:
(i) The arithmetic average of a continuous series of at least 10
tests performed using good laboratory practices on a commercially
available gravimetric sulfur standard in the range of 1-10 ppm shall
not differ from the accepted reference value (ARV) of the standard by
more than 0.47 ppm sulfur,
[[Page 7071]]
where the accuracy criteria is 0.75*(1.5*r/2.77), where ``r'' is the
repeatability for ARV of the commercially available gravimetric sulfur
standard (Example: 0.75*(1.5*1.15ppm/2.77) = 0.47 ppm);
(ii) The arithmetic average of a continuous series of at least 10
tests performed using good laboratory practices on a commercially
available gravimetric sulfur standard in the range of 10-20 ppm shall
not differ from the ARV of the standard by more than 0.94 ppm sulfur,
where the accuracy criteria is 0.75*(1.5*r/2.77), where ``r'' is the
repeatability for ARV of the commercially available gravimetric sulfur
standard (Example: 0.75*(1.5*2.30ppm/2.77) = 0.94 ppm); and
(iii) In applying the tests of paragraphs (b)(2)(i) and (ii) of
this section, individual test results shall be compensated for any
known chemical interferences using good laboratory practices.
(3) The test method specified at Sec. 80.46(a)(1) is exempt from
the requirements of paragraphs (b)(1) and (2) of this section.
(c) * * *
(2) * * *
(i) The arithmetic average of a continuous series of at least 10
tests performed using good laboratory practices on a commercially
available gravimetric sulfur standard in the range of 1-10 ppm, say 10
ppm, shall not differ from the ARV of the standard by more than 0.47
ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where
``r'' is the repeatability for ARV of the commercially available
gravimetric sulfur standard (Example: 0.75*(1.5*1.15ppm/2.77) = 0.47
ppm);
(ii) The arithmetic average of a continuous series of at least 10
tests performed using good laboratory practices on a commercially
available gravimetric sulfur standard in the range of 10-20 ppm, say 20
ppm, shall not differ from the ARV of the standard by more than 0.94
ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where
``r'' is the repeatability for ARV of the commercially available
gravimetric sulfur standard (Example: 0.75*(1.5*2.30ppm/2.77) = 0.94
ppm); and
* * * * *
(3) The test method specified at Sec. 80.46(a)(2) is exempt from
the requirements of paragraphs (c)(1) and (2) of this section.
(d) * * *
(2) The test method specified at Sec. 80.46(b)(1) is exempt from
the requirements of paragraph (d)(1) of this section.
(e) * * *
(2) The test method specified at Sec. 80.46(f)(1) is exempt from
the requirements of paragraph (e)(1) of this section.
(f) * * *
(2) The test method specified at Sec. 80.46(g)(1) is exempt from
the requirements of paragraph (f)(1) of this section.
(g) * * *
(2) The test method specified at Sec. 80.46(c)(1) is exempt from
the requirements of paragraph (g)(1) of this section.
(h) * * *
(2) The test method specified at Sec. 80.46(d)(1) is exempt from
the requirements of paragraph (h)(1) of this section.
(i) * * *
(2) The test methods specified at Sec. 80.46(e)(1) are exempt from
the requirements of paragraph (i)(1) of this section.
(j) * * *
(2) The test method specified at Sec. 80.2(z) is exempt from the
requirements of paragraph (j)(1) of this section.
* * * * *
(l) * * *
(2)(i) The test facility demonstrates that the test method meets
the applicable precision information for the method-defined or non-VCSB
absolute fuel parameter as described in this section.
* * * * *
(4) The test methods specified at Sec. Sec. 80.2(z) and
80.46(a)(1), (a)(2), (b)(1), (c)(1), (d)(1), (e)(1), (f)(1), and (g)(1)
are exempt from the requirements of paragraphs (l)(1) through (3) of
this section.
* * * * *
(n) * * *
(1)(i) Accuracy SQC. Every facility shall conduct tests on every
instrument with a commercially available gravimetric reference
material, or check standard as defined in ASTM D6299 at least three
times a year using good laboratory practices. The facility must
construct ``MR'' and ``I'' charts with control lines as described in
section 8.4 and appropriate Annex sections of this standard practice.
In circumstances where the absolute difference between the mean of
multiple back-to-back tests of the standard reference material and the
ARV of the standard reference material is greater than 0.75 times the
published reproducibility of the test method, the cause of such
difference must be investigated by the facility. Records of the
standard reference materials measurements as well as any investigations
into any exceedance of these criteria must be kept for a period of five
years.
(ii) The expanded uncertainty of the ARV of consensus named fuels
shall be included in the following accuracy qualification criterion:
Accuracy qualification criterion = square root
[(0.75R)caret2 + (0.75R)caret2/L], where L = the
number of single results obtained from different labs used to calculate
the consensus ARV.
(2)(i) Precision SQC. Every facility shall conduct tests of every
instrument with a quality control material as defined in paragraph
3.2.8 in ASTM D6299 either once per week or once per every 20
production tests, whichever is more frequent. The facility must
construct and maintain an ``I'' chart as described in section 8 and
section A1.5.1 and a ``MR'' chart as described in section A1.5.4. Any
violations of control limit(s) shall be investigated by personnel of
the facility and records kept for a period of five years. The test
facility's long term site precision standard deviation, as demonstrated
by the ``I'' chart and ``M'' chart, must meet the applicable precision
criterion as described in paragraph (b)(1) or (c)(1) of this section.
* * * * *
(o) * * *
(1)(i) Accuracy SQC. Every facility shall conduct tests of every
instrument with a commercially available check standard as defined in
ASTM D6299 at least three times a year using good laboratory practices.
The check standard must be an ordinary fuel with levels of the fuel
parameter of interest close to either the applicable regulatory
standard or the average level of use for the facility. For facilities
using a VCSB designated method defined test method, the ARV of the
check standard must be determined by the respective designated test
method for the fuel parameter following the guidelines of ASTM D6299.
Facilities using a VCSB alternative method defined test method must use
the ARV of the check standard as determined in a VCSB Inter Laboratory
Crosscheck Program (ILCP) or a commercially available ILCP following
the guidelines of ASTM D6299. If the ARV is not provided in the ILCP,
accuracy must be assessed based upon the respective EPA-designated test
method using appropriate production samples. The facility must
construct ``MR'' and ``I'' charts with control lines as described in
section 8.4 and appropriate Annex sections of this standard practice.
In circumstances where the absolute difference between test results and
the ARV of the check
[[Page 7072]]
standard based on the designated primary test method is greater than
0.75 times the published reproducibility of the designated primary test
method, the cause of such difference must be investigated by the
facility. Participation in a VCSB ILCP or a commercially available ILCP
meeting the ASTM D6299 requirements for ILCP check standards, based on
the designated primary test method, at least three times a year, and,
meeting the requirements in this section for absolute differences
between the test results and the ARV of the check standard based on the
designated primary test method of less than 0.75 times the published
reproducibility of the designated primary test method obtained through
participation in the ILCP satisfies this Accuracy SQC requirement
(Examples of VCSB ILCPs: ASTM Reformulated Gasoline ILCP or ASTM motor
gasoline ILCP). Records of the standard reference materials
measurements as well as any investigations into any exceedance of these
criteria must be kept for a period of five years.
(ii) The expanded uncertainty of the ARV of consensus named fuels
shall be included in the following accuracy qualification criterion:
Accuracy qualification criterion = square root
[(0.75R)caret2 + (0.75R)caret2/L], where L = the
number of single results obtained from different labs used to calculate
the consensus ARV.
(2)(i) Precision SQC. Every facility shall conduct tests of every
instrument with a quality control material as defined in paragraph
3.2.8 in ASTM D6299 either once per week or once per every 20
production tests, whichever is more frequent. The facility must
construct and maintain an ``I'' chart as described in section 8 and
section A1.5.1 and a ``MR'' chart as described in section A1.5.4. Any
violations of control limit(s) shall be investigated by personnel of
the facility and records kept for a period of five years. The test
facility's long term site precision standard deviation, as demonstrated
by the ``I'' chart and ``M'' chart, must meet the applicable precision
criterion as described in paragraph (d)(1), (e)(1), (f)(1), (g)(1),
(h)(1), (i)(1), or (j)(1) of this section.
* * * * *
(p) * * *
(1)(i) Accuracy SQC for Non-VCSB Method-Defined test methods with
minimal matrix effects. Every facility shall conduct tests on every
instrument with a commercially available check standard as defined in
the ASTM D6299 at least three times a year using good laboratory
practices. The check standard must be an ordinary fuel with levels of
the fuel parameter of interest close to either the applicable
regulatory standard or the average level of use for the facility.
Facilities using a Non-VCSB alternative method defined test method must
use the ARV of the check standard as determined in either a VCSB Inter
Laboratory Crosscheck Program (ILCP) or a commercially available ILCP
following the guidelines of ASTM D6299. If the ARV is not provided in
the ILCP, accuracy must be assessed based upon the respective EPA
designated test method using appropriate production samples. The
facility must construct ``MR'' and ``I'' charts with control lines as
described in section 8.4 and appropriate Annex sections of this
standard practice. In circumstances where the absolute difference
between the mean of multiple back-to-back tests of the standard
reference material and the ARV of the standard reference material is
greater than 0.75 times the published reproducibility of the fuel
parameter's respective designated test method, the cause of such
difference must be investigated by the facility. Records of the
standard reference materials measurements as well as any investigations
into any exceedance of these criteria must be kept for a period of five
years.
(ii) The expanded uncertainty of the ARV of consensus named fuels
shall be included in the following accuracy qualification criterion:
Accuracy qualification criterion = square root
[(0.75R)caret2 + (0.75R)caret2/L], where L = the
number of single results obtained from different labs used to calculate
the consensus ARV.
(2)(i) Accuracy SQC for Non-VCSB Method-Defined test methods with
high sensitivity to matrix effects. Every facility shall conduct tests
on every instrument with a production fuel on at least a quarterly
basis using good laboratory practices. The production fuel must be
representative of the production fuels that are routinely analyzed by
the facility. The ARV of the production fuel must be determined by the
respective reference installation of the designated test method for the
fuel parameter following the guidelines of ASTM D6299. The facility
must construct ``MR'' and ``I'' charts with control lines as described
in section 8.4 and appropriate Annex sections of this standard
practice. In circumstances where the absolute difference between the
mean of multiple back-to-back tests of the standard reference material
and the ARV of the standard reference material is greater than 0.75
times the published reproducibility of the test method must be
investigated by the facility. Documentation on the identity of the
reference installation and its control status must be maintained on the
premises of the method-defined alternative test method. Records of the
standard reference materials measurements as well as any investigations
into any exceedances of this criterion must be kept for a period of
five years.
* * * * *
(3)(i) Precision SQC. Every facility shall conduct tests of every
instrument with a quality control material as defined in paragraph
3.2.8 in ASTM D6299 either once per week or once per every 20
production tests, whichever is more frequent. The facility must
construct and maintain an ``I'' chart as described in section 8 and
section A1.5.1 and a ``MR'' chart as described in section A1.5.4. Any
violations of control limit(s) shall be investigated by personnel of
the facility and records kept for a period of five years. The test
facility's long term site precision standard deviation, as demonstrated
by the ``I'' chart and ``M'' chart, must meet the applicable precision
criterion as described in paragraph (b)(1), (c)(1), (d)(1), (e)(1),
(f)(1), (g)(1), (h)(1), (i)(1), or (j)(1) of this section.
* * * * *
0
9. Section 80.69 is amended by revising paragraph (a)(11)(viii)(C) to
read as follows:
Sec. 80.69 Requirements for downstream oxygenate blending.
(a) * * *
(11) * * *
(viii) * * *
(C) The survey plan must be sent to the attention of ``RFG Program
(Survey Plan)'' to the address in Sec. 80.10(a);
* * * * *
Subpart E--Anti-Dumping
0
10. Section 80.93 is amended by revising paragraph (d)(4) to read as
follows:
Sec. 80.93 Individual baseline submission and approval.
* * * * *
(d) * * *
(4) For U.S. Postal delivery, the petition shall be sent to the
attention of ``RFG Program (Baseline Petition)'' to the address in
Sec. 80.10(a).
* * * * *
Subpart G--Detergent Gasoline
0
11. Section 80.174 is amended by revising paragraphs (b) and (c) to
read as follows:
[[Page 7073]]
Sec. 80.174 Addresses.
* * * * *
(b) Other detergent registration and certification data, and
certain other information which may be specified in this subpart, shall
be sent to the attention of ``Detergent Additive Certification'' to the
address in Sec. 80.10(a).
(c) Notifications to EPA regarding program exemptions, detergent
dilution and commingling, and certain other information which may be
specified in this subpart, shall be sent to the attention of
``Detergent Enforcement Program'' to the address in Sec. 80.10(a).
Subpart H--Gasoline Sulfur
0
12. Section 80.235 is amended by revising paragraph (b) to read as
follows:
Sec. 80.235 How does a refiner obtain approval as a small refiner?
* * * * *
(b) Applications for small refiner status must be sent to the
attention of ``Gasoline Sulfur Program (Small Refiner)'' to the address
in Sec. 80.10(a).
* * * * *
0
13. Section 80.290 is amended by revising paragraph (b) to read as
follows:
Sec. 80.290 How does a refiner apply for a sulfur baseline?
* * * * *
(b) The sulfur baseline request must be sent to the attention of
``Gasoline Sulfur Program (Sulfur Baseline)'' to the address in Sec.
80.10(a).
* * * * *
Subpart I--Motor Vehicle Diesel Fuel; Nonroad, Locomotive, and
Marine Diesel Fuel; and ECA Marine Fuel
0
14. Section 80.533 is amended by revising paragraph (b) as follows:
Sec. 80.533 How does a refiner or importer apply for a motor vehicle
or non-highway baseline for the generation of NRLM credits or the use
of the NRLM small refiner compliance options?
* * * * *
(b) The baseline must be sent to the attention of ``Nonroad Rule
Diesel Fuel Baseline'' to the address in Sec. 80.10(a).
* * * * *
0
15. Section 80.574 is amended by revising paragraph (b) as follows:
Sec. 80.574 What labeling requirements apply to retailers and
wholesale purchaser-consumers of ECA marine fuel beginning June 1,
2014?
* * * * *
(b) Alternative labels to those specified in paragraph (a) of this
section may be used as approved by EPA. Send requests to the attention
of ``ECA Marine Fuel Alternative Label Request'' to the address in
Sec. 80.10(a).
0
16. Section 80.585 is amended:
0
a. In paragraph (d)(1), by removing ``paragraph (a) or (b)'' and adding
``paragraph (b)'' in its place;
0
b. In the first sentence of paragraph (d)(2), by removing ``paragraph
(a) or (b)'' and adding ``paragraph (b)'' in its place; and
0
c. By revising paragraph (d)(4).
The revision reads as follows:
Sec. 80.585 What is the process for approval of a test method for
determining the sulfur content of diesel or ECA marine fuel?
* * * * *
(d) * * *
(4) The approval of any test method under paragraph (b) of this
section shall be valid from the date of approval from the
Administrator.
* * * * *
0
17. Section 80.595 is amended by revising paragraph (b) to read as
follows:
Sec. 80.595 How does a small or GPA refiner apply for a motor vehicle
diesel fuel volume baseline for the purpose of extending their gasoline
sulfur standards?
* * * * *
(b) The volume baseline must be sent via certified mail with return
receipt or express mail with return receipt to the attention of
``Diesel Baseline'' to the address in Sec. 80.10(a).
* * * * *
0
18. Section 80.607 is amended by revising paragraph (a) to read as
follows:
Sec. 80.607 What are the requirements for obtaining an exemption for
diesel fuel used for research, development or testing purposes?
(a) Written request for a research and development exemption. Any
person may receive an exemption from the provisions of this subpart for
diesel fuel or ECA marine fuel used for research, development, or
testing purposes by submitting the information listed in paragraph (c)
of this section to the attention of ``Diesel Program (Diesel Exemption
Request)'' to the address in Sec. 80.10(a).
* * * * *
0
Subpart J--Gasoline Toxics
0
19. Section 80.855 is amended by revising paragraph (c)(2) to read as
follows:
Sec. 80.855 What is the compliance baseline for refineries or
importers with insufficient data?
* * * * *
(c) * * *
(2) Application process. Applications must be submitted to the
attention of ``Anti-Dumping Compliance Period'' to the address in Sec.
80.10(a).
* * * * *
Subpart L--Gasoline Benzene
0
20. Section 80.1240 is amended in paragraph (a)(1)(i) in the equation
by revising the definition ``OC'' to read as follows:
Sec. 80.1240 How is a refinery's or importer's compliance with the
gasoline benzene requirements of this subpart determined?
(a) * * *
(1)(i) * * *
OC = Benzene credits used by the refinery or importer to show
compliance (gallons benzene).
* * * * *
0
21. Section 80.1285 is amended by revising paragraph (b) to read as
follows:
Sec. 80.1285 How does a refiner apply for a benzene baseline?
* * * * *
(b) For U.S. Postal delivery, the benzene baseline application
shall be sent to the attention of ``MSAT2 Benzene'' to the address in
Sec. 80.10(a).
* * * * *
0
22. Section 80.1340 is amended by revising paragraph (b) to read as
follows:
Sec. 80.1340 How does a refiner obtain approval as a small refiner?
* * * * *
(b) Applications for small refiner status must be sent to the
attention of ``MSAT2 Benzene'' to the address in Sec. 80.10(a).
* * * * *
Subpart M--Renewable Fuel Standard
0
23. Section 80.1401 is amended by:
0
a. Adding in alphabetical order definitions for ``Certified non-
transportation 15 ppm distillate fuel,'' ``Co-processed cellulosic
diesel,'' and ``Covered location'';
0
b. Revising the definition of ``Exporter of renewable fuel'' and
``Foreign ethanol producer'';
0
c. Adding in alphabetical order a definition for ``Foreign renewable
fuel producer'';
0
d. Revising paragraph (2) in the definition of ``Heating oil'';
0
e. Adding in alphabetical order definitions for ``Non-renewable
feedstock'' and ``Non-RIN-generating foreign producer'';
0
f. Revising paragraph (2) in the definition of ``Renewable fuel''; and
0
g. Adding in alphabetical order a definition for ``RIN-generating
foreign producer''. The additions and revisions read as follows:
[[Page 7074]]
Sec. 80.1401 Definitions
* * * * *
Certified non-transportation 15 ppm distillate fuel or certified
NTDF means distillate fuel that meets all of the following:
(1) It has been certified as complying with the 15 ppm sulfur
standard, cetane/aromatics standard, and all applicable sampling,
testing, and recordkeeping requirements of subpart I of this part.
(2) It has been designated as 15 ppm heating oil, 15 ppm ECA marine
fuel, or other non-transportation fuel (e.g., jet fuel, kerosene,
heating oil, or No. 4 fuel) on its product transfer document and has
not been designated as MVNRLM diesel fuel.
(3) The PTD for the distillate fuel meets the requirements in Sec.
80.1453(e).
* * * * *
Co-processed cellulosic diesel is any renewable fuel that meets the
definition of cellulosic biofuel, as defined in this section 80.1401,
and meets all of the requirements of paragraph (1) of this definition:
(1)(i) Is a transportation fuel, transportation fuel additive,
heating oil, or jet fuel.
(ii) Meets the definition of either biodiesel or non-ester
renewable diesel.
(iii) Is registered as a motor vehicle fuel or fuel additive under
40 CFR part 79, if the fuel or fuel additive is intended for use in a
motor vehicle.
(2) Co-processed cellulosic diesel includes heating oil and jet
fuel made from cellulosic feedstocks and cellulosic biofuel produced as
a result of co-processing cellulosic feedstocks with petroleum.
* * * * *
Covered location means the contiguous 48 states, Hawaii, and any
state or territory that has received an approval from the Administrator
to opt-in to the RFS program under Sec. 80.1443.
* * * * *
Exporter of renewable fuel means all buyers, sellers, and owners of
the renewable fuel in any transaction that results in renewable fuel
being transferred from a covered location to a destination outside of
the covered locations.
* * * * *
Foreign ethanol producer means a foreign renewable fuel producer
who produces ethanol for use in transportation fuel, heating oil, or
jet fuel but who does not add ethanol denaturant to their product as
described in paragraph (2) of the definition of ``renewable fuel'' in
this section.
Foreign renewable fuel producer means a person from a foreign
country or from an area outside the covered locations who produces
renewable fuel (including neat (undenatured) ethanol for use in
transportation fuel, heating oil, or jet fuel).
* * * * *
Heating oil * * *
(2) A fuel oil that is used to heat or cool interior spaces of
homes or buildings to control ambient climate for human comfort. The
fuel oil must be liquid at 60 degrees Fahrenheit and 1 atmosphere of
pressure, and contain no more than 2.5% mass solids.
* * * * *
Non-renewable feedstock means a feedstock that does not meet the
definition of renewable biomass.
Non-RIN-generating foreign producer means a foreign renewable fuel
producer that has been registered by EPA to produce renewable fuel for
which RINs have not been generated.
* * * * *
Renewable fuel * * *
(2) Ethanol covered by this definition shall be denatured using an
ethanol denaturant as required in 27 CFR parts 19 through 21. Any
volume of ethanol denaturant added to the undenatured ethanol by a
producer or importer in excess of 2 volume percent shall not be
included in the volume of ethanol for purposes of determining
compliance with the requirements under this subpart.
* * * * *
RIN-generating foreign producer means a foreign renewable fuel
producer that has been registered by EPA to generate RINs for renewable
fuel it produces.
* * * * *
0
24. Section 80.1405 is amended by adding paragraph (a)(11) and revising
the definitions of GEi and DEi in the equation in
paragraph (c) to read as follows:
Sec. 80.1405 What are the Renewable Fuel Standards?
(a) * * *
(11) Renewable Fuel Standards for 2020. (i) The value of the
cellulosic biofuel standard for 2020 shall be 0.34 percent.
(ii) The value of the biomass-based diesel standard for 2020 shall
be 2.10 percent.
(iii) The value of the advanced biofuel standard for 2020 shall be
2.93 percent.
(iv) The value of the renewable fuel standard for 2020 shall be
11.56 percent.
* * * * *
(c) * * *
GEi = The total amount of gasoline projected to be
exempt in year i, in gallons, per Sec. Sec. 80.1441 and 80.1442.
DEi = The total amount of diesel fuel projected to be
exempt in year i, in gallons, per Sec. Sec. 80.1441 and 80.1442.
* * * * *
0
25. Section 80.1407 is amended by adding paragraphs (f)(9) through (11)
to read as follows:
Sec. 80.1407. How are the Renewable Volume Obligations calculated?
* * * * *
(f) * * *
(9) Distillate fuel with a sulfur content greater than 15 ppm that
is clearly designated for a use other than transportation fuel, such as
heating oil or ECA marine fuel.
(10) Distillate fuel that meets a 15 ppm sulfur standard, is
designated for non-transportation use, and that remains completely
segregated from MVNRLM diesel fuel from the point of production through
to the point of use for a non-transportation purpose, such as heating
oil or ECA marine fuel.
(11) Certified NTDF, if the refiner or importer has a reasonable
expectation that the fuel will be used for non-transportation purposes.
To establish a reasonable expectation that the fuel will be used for
non-transportation purposes, a refiner or importer must, at a minimum,
be able to demonstrate that they supply areas that use heating oil, ECA
marine fuel, or 15 ppm distillate fuel for non-transportation purposes
in quantities that are consistent with past practices or changed
circumstances. EPA may consider any other relevant information,
including the price of the fuel, in assessing whether a refiner or
importer has a reasonable expectation that the fuel will be used for
non-transportation purposes.
0
26. Section 80.1408 is added to read as follows:
Sec. 80.1408. What are the requirements for parties that own and
redesignate certified NTDF as MVNRLM diesel fuel?
(a) Beginning January 1, 2021, a party that owns certified NTDF,
and only a party that owns certified NTDF, may redesignate NTDF as
MVNRLM diesel fuel if they meet all of the following requirements:
(1) Register as a refiner and register each facility where
redesignation occurs as a refinery under Sec. 80.76. NTDF may only be
redesignated as MVNRLM diesel fuel at a facility registered as a
refinery.
(2) At each facility, calculate a balance of MVNRLM diesel fuel
during each annual compliance period according to the following
equation:
MVNRLMBAL = MVNRLMO + MVNRLMINVCHG-
MVNRLMI
Where:
[[Page 7075]]
MVNRLMBAL = the balance for MVNRLM diesel fuel for the
compliance period.
MVNRLMI = the total volume of all batches of fuel
designated as MVNRLM diesel fuel owned when the fuel was received at
the facility and acquired at the facility during the compliance
period. Any MVNRLM diesel fuel produced (apart from redesignation of
NTDF to MVNRLM diesel fuel) or imported into the facility must also
be included in this volume.
MVNRLMO = the total volume of all batches of fuel
designated as MVNRLM diesel fuel owned and sold or transferred to
other parties at the facility during the compliance period.
MVNRLMINVCHG = the volume of MVNRLM diesel fuel owned at
the end of the compliance period minus the volume of MVNRLM diesel
fuel owned at the beginning of the compliance period, including
accounting for any corrections in inventory due to volume swell or
shrinkage, difference in measurement calibration between receiving
and delivering meters, and similar matters, where corrections that
increase inventory are defined as positive.
(i) If MVNRLMBAL is greater than 0, an RVO is incurred
by the redesignating party for the volume of diesel fuel equal to
MVNRLM. The redesignating party must also comply with all of the
following:
(A) The reporting requirements of Sec. 80.1451(a)(1)(xix).
(B) The recordkeeping requirements of Sec. 80.1454(t).
(C) The attest engagement requirements of Sec. Sec. 80.1464 and
80.1475, as applicable.
(ii) If MVNRLMBAL is less than or equal to 0, no RVO is
incurred by the redesignating party for any redesignated certified
NTDF. These parties must comply with all of the following:
(A) The reporting requirements of Sec. 80.1451(i).
(B) The recordkeeping requirements of Sec. 80.1454(t).
(b) Parties that incur an RVO under paragraph (a)(2)(i) of this
section must comply with all applicable requirements for obligated
parties under this subpart.
(c) The provisions of this section do not apply to gasoline or
diesel fuel that is designated for export.
0
27. Section 80.1415 is amended by revising paragraph (c)(4) to read as
follows:
Sec. 80.1415 How are equivalence values assigned to renewable fuel?
* * * * *
(c) * * *
(4) Applications for equivalence values must be sent to the
attention of ``RFS2 Program (Equivalence Value Application)'' to the
address in Sec. 80.10(a).
* * * * *
0
28. Section 80.1426 is amended:
0
a. By revising the section heading and paragraphs (a)(1)(iii), (a)(2),
and (c)(4) and (5); and
0
b. In paragraph (f)(1), in Table 1 to Sec. 80.1426, by revising the
entries F, H, I, and M.
The revisions read as follows:
Sec. 80.1426 How are RINs generated and assigned to batches of
renewable fuel?
(a) * * *
(1) * * *
(iii) The fuel was produced in compliance with the registration
requirements of Sec. 80.1450, the reporting requirements of Sec.
80.1451, the recordkeeping requirements of Sec. 80.1454, all
conditions set forth in an approval document for a pathway petition
submitted under Sec. 80.1416, and all other applicable regulations of
this subpart M.
* * * * *
(2) To generate RINs for imported renewable fuel, including any
renewable fuel contained in imported transportation fuel, heating oil,
or jet fuel, importers must obtain information from a non-RIN-
generating foreign renewable fuel producer that is registered pursuant
to Sec. 80.1450 sufficient to make the appropriate determination
regarding the applicable D code and compliance with the renewable
biomass definition for each imported batch for which RINs are
generated.
* * * * *
(c) * * *
(4) Importers shall not generate RINs for renewable fuel imported
from a non-RIN-generating foreign renewable fuel producer unless the
foreign renewable fuel producer is registered with EPA as required in
Sec. 80.1450.
(5) Importers shall not generate RINs for renewable fuel that has
already been assigned RINs by a RIN-generating foreign renewable fuel
producer.
* * * * *
(f) * * *
(1) * * *
Table 1 to Sec. 80.1426--Applicable D Codes for Each Fuel Pathway for Use in Generating RINs
----------------------------------------------------------------------------------------------------------------
Production process
Fuel type Feedstock requirements D-code
----------------------------------------------------------------------------------------------------------------
* * * * * * *
F............... Biodiesel, renewable Soy bean oil; Oil from One of the following: 4
diesel, jet fuel and annual covercrops; Oil Transesterification with
heating oil. from algae grown or without esterification
photosynthetically; pre-treatment, or
Biogenic waste oils/fats/ Hydrotreating; excludes
greases; Camelina sativa processes that co-process
oil; Distillers corn oil; renewable biomass and
Distillers sorghum oil; petroleum.
Commingled distillers corn
oil and sorghum oil.
* * * * * * *
H............... Biodiesel, renewable Soy bean oil; Oil from One of the following: 5
diesel, jet fuel and annual covercrops; Oil Transesterification with
heating oil. from algae grown or without esterification
photosynthetically; pre-treatment, or
Biogenic waste oils/fats/ Hydrotreating; includes
greases; Camelina sativa only processes that co-
oil; Distillers corn oil; process renewable biomass
Distillers sorghum oil; and petroleum.
Commingled distillers corn
oil and sorghum oil.
I............... Naphtha, LPG........... Camelina sativa oil; Hydrotreating.............. 5
Distillers sorghum oil;
Distillers corn oil;
Commingled distillers corn
oil and distillers sorghum
oil.
[[Page 7076]]
* * * * * * *
M............... Renewable Gasoline and Crop residue, slash, pre- Catalytic Pyrolysis and 3
Renewable Gasoline commercial thinnings, tree Upgrading, Gasification
Blendstock; Co- residue, and separated and Upgrading, Thermo-
Processed Cellulosic yard waste; biogenic Catalytic
Diesel, Jet Fuel, and components of separated Hydrodeoxygenation and
Heating Oil. MSW; cellulosic components Upgrading, Direct
of separated food waste; Biological Conversion,
and cellulosic components Biological Conversion and
of annual cover crops. Upgrading utilizing
natural gas, biogas, and/
or biomass as the only
process energy sources
providing that process
used converts cellulosic
biomass to fuel; any
process utilizing biogas
and/or biomass as the only
process energy sources
which converts cellulosic
biomass to fuel.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
* * * * *
0
29. Section 80.1427 is amended by revising the definition of
``RVOi'' in paragraph (b)(2) and by revising paragraph
(c)(2) to read as follows:
Sec. 80.1427 How are RINs used to demonstrate compliance?
* * * * *
(b) * * *
(2) * * *
RVOi = The Renewable Volume Obligation for the obligated
party or exporter of renewable fuel for calendar year i, in gallons.
* * * * *
(c) * * *
(2) In fulfillment of its ERVOs, each exporter of renewable fuel is
subject to the provisions of paragraphs (a)(2), (3), (6), and (8) of
this section.
* * * * *
0
30. Section 80.1429 is amended by revising paragraph (b)(3) to read as
follows:
Sec. 80.1429 Requirements for separating RINs from volumes of
renewable fuel.
* * * * *
(b) * * *
(3) Any exporter of renewable fuel must separate any RINs that have
been assigned to the exported renewable fuel volume. An exporter of
renewable fuel may separate up to 2.5 RINs per gallon of exported
renewable fuel.
* * * * *
0
31. Section 80.1430 is amended by paragraph (a), the definition of
``k'' in paragraph (b)(1), and paragraphs (c), (d)(1), and (e)
introductory text and adding paragraph (h) to read as follows:
Sec. 80.1430 Requirements for exporters of renewable fuels.
(a) Any exporter of renewable fuel, whether in its neat form or
blended shall acquire sufficient RINs to comply with all applicable
Renewable Volume Obligations under paragraphs (b) through (e) of this
section representing the exported renewable fuel. No provision of this
section applies to renewable fuel purchased directly from the renewable
fuel producer and for which the exporter of renewable fuel can
demonstrate that no RINs were generated through the recordkeeping
requirements of Sec. 80.1454(a)(6).
(b) * * *
(1) * * *
k = A discrete volume of renewable fuel that the exporter of
renewable fuel knows or has reason to know is cellulosic biofuel that
is exported in a single shipment.
* * * * *
(c) If the exporter of renewable fuel knows or has reason to know
that a volume of exported renewable fuel is cellulosic diesel, the
exporter of renewable fuel must treat the exported volume as either
cellulosic biofuel or biomass-based diesel when determining his
Renewable Volume Obligations pursuant to paragraph (b) of this section.
(d) * * *
(1) If the equivalence value for a volume of exported renewable
fuel can be determined pursuant to Sec. 80.1415 based on its
composition, then the appropriate equivalence value shall be used in
the calculation of the exporter of renewable fuel's Renewable Volume
Obligations under paragraph (b) of this section.
* * * * *
(e) For renewable fuels that are in the form of a blend at the time
of export, the exporter of renewable fuel shall determine the volume of
exported renewable fuel based on one of the following:
* * * * *
(h) Each person meeting the definition of exporter of renewable
fuel for a particular export transaction is jointly and severally
liable for completion of the requirements of this section and all
associated RIN retirement demonstration, registration, reporting, and
attest engagement obligations under this subpart. However, these
requirements for exporters of renewable fuel must be met only once for
any export transaction.
0
32. Section 80.1431 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 80.1431 Treatment of invalid RINs.
* * * * *
(b) * * *
(2) Invalid RINs cannot be used to achieve compliance with the
Renewable Volume Obligations of an obligated party or exporter of
renewable fuel, regardless of the party's good faith belief that the
RINs were valid at the time they were acquired.
* * * * *
0
33. Section 80.1434 is added to read as follows:
Sec. 80.1434 RIN retirement.
(a) A RIN must be retired in any of the following cases:
(1) Demonstrate annual compliance. Except as specified in paragraph
(b) of this section or Sec. 80.1456, each party that is an obligated
party under Sec. 80.1406 and is obligated to meet the RVO under Sec.
80.1407 must retire a sufficient number of RINs to demonstrate
compliance with an applicable RVO.
(2) Exported renewable fuel. Any exporter of renewable fuel that
incurs an ERVO as described in Sec. 80.1430(a) shall retire RINs
pursuant to Sec. Sec. 80.1430(b) through (g) and 80.1427(c).
(3) Volume error correction. A RIN must be retired when it was
based on incorrect volumes or volumes that have not been standardized
to 60 [deg]F as described in Sec. 80.1426(f)(8).
(4) Import volume correction. Where the port of entry volume is the
lesser of the two volumes in Sec. 80.1466(e)(1)(i), the importer shall
calculate the
[[Page 7077]]
difference between the number of RINs originally assigned by the
foreign producer and the number of RINs calculated under Sec. 80.1426
for the volume of renewable fuel as measured at the port of entry, and
retire that amount of RINs in accordance with Sec. 80.1466(k)(4).
(5) Spillage or disposal of renewable fuels. Except as provided in
Sec. 80.1432(c), in the event that a reported spillage or disposal of
any volume of renewable fuel, the owner of the renewable fuel must
notify any holder or holders of the attached RINs and retire a number
of gallon-RINs corresponding to the volume of spilled or disposed of
renewable fuel multiplied by its equivalence value in accordance with
Sec. 80.1432(b).
(6) Contaminated or spoiled fuel. In the event that contamination
or spoliation of any volume of renewable fuel is reported, the owner of
the renewable fuel must notify any holder or holders of the attached
RINs and retire a number of gallon-RINs corresponding to the volume of
contaminated or spoiled renewable fuel multiplied by its equivalence
value.
(i) If the equivalence value for the contaminated or spoiled volume
may be determined pursuant to Sec. 80.1415 based on its composition,
then the appropriate equivalence value shall be used.
(ii) If the equivalence value for a contaminated or spoiled volume
of renewable fuel cannot be determined, the equivalence value shall be
1.0.
(iii) If the owner of a volume of renewable fuel that is
contaminated or spoiled and reported establishes that no RINs were
generated to represent the volume, then no gallon-RINs shall be
retired.
(7) Delayed RIN generation. In the event that a party generated a
delayed RIN as described in Sec. 80.1426(g)(1) through (4), parties
must retire RINs as described in accordance with Sec. 80.1426(g)(5)
and (6).
(8) Invalid RIN. In the case that a RIN is invalid as described in
Sec. 80.1431(a), the RIN will be considered invalid and must be
retired as described in Sec. 80.1431(b).
(9) Potentially invalid RINs. In the case that a RIN is identified
as a PIR under Sec. 80.1474(b)(1), the PIRs or replacement RINs must
be retired as described in Sec. 80.1474(b)(2) through (5).
(10) Replacement. As required by Sec. 80.1431(b) or Sec. 80.1474,
any party that must replace an invalid RIN or PIR that was used for
compliance must retire valid RINs to replace the invalid RINs
originally used for any RVO.
(11) Other. Any other instance identified by EPA.
(b) In the case that retirement of a RIN is necessary, the
following provisions apply:
(1) Any party affected by such retirement must keep copies and
adjust its records, reports, and compliance calculations in which the
retired RIN was used.
(2) The retired RIN must be reported in the applicable reports
under Sec. 80.1451.
(3) The retired RIN must be reported in the EPA Moderated
Transaction System pursuant to Sec. 80.1452(c).
(4) Where the importer of renewable fuel is required to retire RINs
under paragraph (a)(5) of this section, the importer must report the
retired RINs in the applicable reports under Sec. Sec. 80.1451,
80.1466(k), and 80.1466(m).
0
34. Section 80.1440 is amended by revising the section heading and
paragraph (a) and adding paragraph (f) to read as follows:
Sec. 80.1440 What are the provisions for blenders who handle and
blend less than 250,000 gallons of renewable fuel per year or who
handle renewable fuel blended for fuels under a national security
exemption?
(a)(1) Renewable fuel blenders who handle and blend less than
250,000 gallons of renewable fuel per year, and who do not have one or
more reported or unreported Renewable Volume Obligations, are permitted
to delegate their RIN-related responsibilities to the party directly
upstream of them who supplied the renewable fuel for blending.
(2) Renewable fuel blenders who handle and blend renewable fuel for
parties that have a national security exemption under paragraph (f) of
this section, or a national security exemption under any other subpart
of 40 CFR part 80 (e.g., Sec. Sec. 80.606, 80.1655), and who do not
have one or more reported or unreported Renewable Volume Obligations,
are permitted to delegate their RIN-related responsibilities to the
party directly upstream of them who supplied the renewable fuel for
blending.
* * * * *
(f) The requirements described in paragraph (b) of this section may
be delegated directly upstream for renewable fuel (neat or blended)
that is produced, imported, sold, offered for sale, supplied, offered
for supply, stored, dispensed, or transported for use in any of the
following:
(1) Tactical military vehicles, engines, or equipment having an EPA
national security exemption from emission standards under 40 CFR
85.1708, 89.908, 92.908, 94.908, 1042.635, or 1068.225.
(2) Tactical military vehicles, engines, or equipment that are not
subject to a national security exemption from vehicle or engine
emissions standards as described in paragraph (f)(1) of this section
but, for national security purposes (for purposes of readiness for
deployment overseas), need to be fueled on the same transportation
fuel, heating oil, or jet fuel as the vehicles, engines, or equipment
for which EPA has granted such a national security exemption.
0
35. Section 80.1441 is amended by revising paragraph (h) to read as
follows:
Sec. 80.1441 Small refinery exemption.
* * * * *
(h) Verification letters under paragraph (b) of this section,
petitions for small refinery hardship extensions under paragraph (e) of
this section, and small refinery exemption waiver notices under
paragraph (f) of this section shall be sent to the attention of ``RFS
Program'' to the address in Sec. 80.10(a).
0
36. Section 80.1442 is amended by revising paragraph (i) to read as
follows:
Sec. 80.1442 What are the provisions for small refiners under the RFS
program?
* * * * *
(i) Small refiner status verification letters, small refiner
exemption waivers, or applications for extensions of the small refiner
temporary exemption under this section must be sent to the attention of
``RFS Program'' to the address in Sec. 80.10(a).
0
37. Section 80.1443 is amended by revising paragraph (d)(2) to read as
follows:
Sec. 80.1443 What are the opt-in provisions for noncontiguous states
and territories?
* * * * *
(d) * * *
(2) A petition submitted under this section should be sent to the
attention of ``RFS Program'' to the address in Sec. 80.10(a).
* * * * *
0
38. Section 80.1449 is amended by revising paragraph (d) to read as
follows:
Sec. 80.1449 What are the Production Outlook Report requirements?
* * * * *
(d) Production outlook reports shall be sent to the attention of
``RFS Program (Production Output Reports)'' to the address in Sec.
80.10(a).
* * * * *
0
39. Section 80.1450 is amended by revising paragraphs (b) introductory
text, (b)(1)(vii)(A)(1), (b)(1)(vii)(B), (b)(1)(viii)(A), (b)(1)(ix)(A)
introductory
[[Page 7078]]
text, (b)(1)(xi)(A) and (B), the first sentence of paragraph (d)(1),
and paragraphs (g)(9) and (h) to read as follows:
Sec. 80.1450 What are the registration requirements under the RFS
program?
* * * * *
(b) Producers. Any RIN-generating foreign producer, any non-RIN-
generating foreign producer, or any domestic renewable fuel producer
that generates RINs must provide EPA the information specified under
Sec. 80.76 if such information has not already been provided under the
provisions of this part, and must receive EPA-issued company and
facility identification numbers prior to the generation of any RINs for
their fuel or for fuel made with their ethanol. Unless otherwise
specifically indicated, all the following registration information must
be submitted and accepted by EPA by July 1, 2010, or 60 days prior to
the generation of RINs, whichever date comes later, subject to this
subpart:
(1) * * *
(vii) * * *
(A) * * *
(1) The location of any establishment from which the waste stream
consisting solely of separated yard waste is collected.
* * * * *
(B) For a producer of renewable fuel or a foreign producer of
ethanol made from separated food waste per Sec. 80.1426(f)(5)(i)(B) or
from biogenic waste oils/fats/greases:
(1) A plan documenting the type(s) of separated food waste or
biogenic waste oils/fats/greases, the type(s) of establishment from
which the waste is collected, how the waste will be collected, a
description of ongoing verification measures that demonstrate such
waste consists only of food waste (and an incidental amount of other
components such as paper and plastics) or biogenic waste oils/fats/
greases that is kept separate from other waste materials, and if
applicable, how the cellulosic and non-cellulosic portions of the waste
will be quantified.
(2) [Reserved]
* * * * *
(viii) * * *
(A) The location of the municipal waste establishment(s) from which
the separated municipal solid waste is collected or from which material
is collected that will be processed to produce separated municipal
solid waste.
* * * * *
(ix) * * *
(A) For a producer of ethanol from grain sorghum or a foreign
ethanol producer making product from grain sorghum and seeking to have
it sold as renewable fuel after addition of ethanol denaturant, provide
a plan that has been submitted and accepted by U.S. EPA that includes
the following information:
* * * * *
(xi) * * *
(A) An affidavit from the producer of the fuel oil meeting
paragraph (2) of the definition of ``heating oil'' in Sec. 80.1401
stating that the fuel oil for which RINs have been generated will be
sold for the purposes of heating or cooling interior spaces of homes or
buildings to control ambient climate for human comfort, and no other
purpose.
(B) Affidavits from the final end user or users of the fuel oil
stating that the fuel oil meeting paragraph (2) of the definition of
``heating oil'' in Sec. 80.1401 is being used or will be used for
purposes of heating or cooling interior spaces of homes or buildings to
control ambient climate for human comfort, and no other purpose, and
acknowledging that any other use of the fuel oil would violate EPA
regulations and subject the user to civil and/or criminal penalties
under the Clean Air Act.
* * * * *
(d) * * *
(1) Any producer of renewable fuel or any foreign ethanol producer
that makes changes to their facility that will allow them to produce
renewable fuel that is not reflected in the producer's registration
information on file with EPA must update their registration information
and submit a copy of an updated independent third-party engineering
review on file with EPA at least 60 days prior to producing the new
type of renewable fuel. * * *
* * * * *
(g) * * *
(9) Registration updates. (i) Any independent third-party auditor
who makes changes to its quality assurance plan(s) that will allow it
to audit new renewable fuel production facilities, as defined in Sec.
80.1401, that is not reflected in the independent third-party auditor's
registration information on file with EPA must update its registration
information and submit a copy of an updated QAP on file with EPA at
least 60 days prior to auditing new renewable fuel production
facilities.
(ii) Any independent third-party auditor who makes any changes
other than those specified in paragraphs (g)(9)(i), (iii), and (iv) of
this section that will affect the third-party auditor's registration
information must update its registration information 7 days prior to
the change.
(iii) Independent third-party auditors must update their QAPs at
least 60 days prior to verifying RINs generated by a renewable fuel
facility for a pathway not covered in the independent third-party
auditor's QAPs.
(iv) Independent third-party auditors must update their QAPs at
least 60 days prior to verifying RINs generated by any renewable fuel
facility not identified in the independent third-party auditor's
existing registration.
* * * * *
(h) Deactivation of registration. (1) EPA may deactivate the
registration of any party required to register under this section Sec.
80.1450, using the process in paragraph (h)(2) of this section, if any
of the following criteria are met:
(i) The party has reported no activity in EMTS for twenty-four
consecutive months.
(ii) The party has failed to comply with the registration
requirements of this section.
(iii) The party has failed to submit any required notification or
report within 30 days of the required submission date under Sec.
80.1451.
(iv) The attest engagement required under Sec. 80.1464 has not
been received within 30 days of the required submission date.
(v) The party fails to pay a penalty or to perform any requirements
under the terms of a court order, administrative order, consent decree,
or administrative settlement between the party and EPA.
(vi) The party submits false or incomplete information.
(vii) The party denies EPA access or prevents EPA from completing
authorized activities under sections 114 or 208 of the Clean Air Act
despite presenting a warrant or court order. This includes a failure to
provide reasonable assistance.
(viii) The party fails to keep or provide the records required by
this subpart.
(ix) The party otherwise circumvents the intent of the Clean Air
Act or of this subpart.
(2) Except as provided in paragraph (h)(3) of this section, EPA
will use the following process whenever it decides to deactivate the
registration of a party:
(i) EPA will provide written notification to the responsible
corporate officer identifying the reasons or deficiencies for which EPA
intends to deactivate the party's registration. The party will have
fourteen calendar days from the date of the notification to correct the
deficiencies identified or explain why there is no need for corrective
action.
(ii) If the basis for EPA's notice of intent to deactivate
registration is the
[[Page 7079]]
absence of EMTS activity under paragraph (h)(1)(i) of this section, a
stated intent to engage in activity reported through EMTS will be
sufficient to avoid deactivation of registration.
(iii) If the party does not correct identified deficiencies under
paragraphs (h)(1)(ii) through (ix) of this section, or does not provide
an adequate explanation regarding why such correction is not necessary
within the time allotted for response, EPA may deactivate the party's
registration without further notice to the party.
(3) In instances of willfulness or those in which public health,
interest, or safety requires otherwise, EPA may deactivate the
registration of the party without any notice to the party. EPA will
provide written notification to the responsible corporate officer
identifying the reasons EPA deactivated the registration of the party.
(4) Impact of registration deactivation:
(i) A party whose registration is deactivated shall still be liable
for violation of any requirements of this subpart.
(ii) A party whose registration is deactivated will not be listed
on any public list of actively registered parties that is maintained by
EPA.
(iii) A party whose registration is deactivated will not have
access to any of the electronic reporting systems associated with the
renewable fuel standard program, including the EPA Moderated
Transaction System (EMTS).
(iv) A party whose registration is deactivated must submit any
corrections of deficiencies to EPA on forms, and following policies,
established by EPA.
(v) If a party whose registration has been deactivated wishes to
re-register, they may seek to do so by submitting a new registration
pursuant to the requirements in paragraphs (a) through (c), (e), and
(g) of this section, as applicable.
* * * * *
0
40. Section 80.1451 is amended by:
0
a. Revising paragraphs (a)(1)(i) and (v);
0
b. Adding paragraph (a)(1)(xix);
0
c. Revising paragraphs (a)(4), (b) introductory text, (b)(1)(ii)(D) and
(I), (g)(1)(ii)(D) and (I);
0
d. Redesignating paragraphs (i) and (j) as paragraphs (j) and (k); and
0
e. Adding new paragraph (i). The revisions and additions read as
follows:
Sec. 80.1451 What are the reporting requirements under the RFS
program?
(a) * * *
(1) * * *
(i) The obligated party's or exporter of renewable fuel's name.
* * * * *
(v)(A) For the 2010 through 2019 compliance periods, the production
volume and import volume of all of the products listed in Sec.
80.1407(c) and (e) for the compliance period.
(B) For the 2020 compliance period, separately, the production
volume and import volume of all of the gasoline products listed in
Sec. 80.1407(c), the production volume and import volume of all of the
MVNRLM diesel fuel products listed in Sec. 80.1407(e), and the
combined volume of all gasoline products and MVNRLM diesel fuel listed
in Sec. 80.1407(c) and (e) for the compliance period.
(C) Beginning with the 2021 compliance period, separately, the
production volume and import volume for the compliance period of all of
the following:
(1) All of the gasoline products listed in Sec. 80.1407(c).
(2) All of the MVNRLM diesel fuel products listed in Sec.
80.1407(e).
(3) The combined production volume of all gasoline products and
MVNRLM diesel fuel.
(4) Distillate fuel that is not transportation fuel.
(5) Distillate fuel that is certified NTDF.
* * * * *
(xix) For parties that redesignate certified NTDF as MVNRLM diesel
fuel under Sec. 80.1408 at any time during the compliance period, the
volumes MVNRLMBAL, MVNRLMO,
MVNRLMINVCHG, and MVNRLMI as calculated in Sec.
80.1408(a)(2).
* * * * *
(4) Reports required under this paragraph (a) must be signed and
certified as meeting all the applicable requirements of this subpart by
the owner or a responsible corporate officer of the obligated party or
exporter of renewable fuel.
(b) Renewable fuel producers (domestic and foreign) and importers.
Any domestic producer or importer of renewable fuel who generates RINs,
or any RIN-generating foreign producer must submit to EPA reports
according to the schedule, and containing all of the following
information:
(1) * * *
(ii) * * *
(D) The importer EPA facility registration number and foreign
renewable fuel producer company registration number, if applicable.
* * * * *
(I) The volume of ethanol denaturant and applicable equivalence
value of each batch.
* * * * *
(g) * * *
(1) * * *
(ii) * * *
(D) The importer EPA facility registration number and foreign
renewable fuel producer company registration number, if applicable.
* * * * *
(I) The volume of ethanol denaturant and applicable equivalence
value of each verified batch.
* * * * *
(i) Parties that redesignate certified NTDF as MVNRLM diesel fuel
under Sec. 80.1408 at any time during the compliance period, but do
not incur an RVO under Sec. 80.1408(a)(2)(i), must submit a report to
EPA stating that they redesignated certified NTDF to MVNRLM diesel fuel
during the compliance period, but that their net redesignated volume
was less than or equal to zero, and they therefore did not incur an RVO
for the compliance period.
* * * * *
0
41. Section 80.1452 is amended by revising paragraph (b)(11) and the
last sentence in paragraph (c) introductory text to read as follows:
Sec. 80.1452 What are the requirements related to the EPA Moderated
Transaction System (EMTS)?
* * * * *
(b) * * *
(11) The volume of ethanol denaturant and applicable equivalence
value of each batch.
* * * * *
(c) * * * The reportable event for a RIN separation or retirement
occurs on the date of separation or retirement as described in Sec.
80.1429 or Sec. 80.1434.
* * * * *
0
42. Section 80.1453 is amended by revising paragraphs (b) and (d) and
adding paragraph (e) to read as follows:
Sec. 80.1453 What are the product transfer document (PTD)
requirements for the RFS program?
* * * * *
(b) Except for transfers to truck carriers, retailers, or wholesale
purchaser-consumers, product codes may be used to convey the
information required under paragraphs (a)(1) through (11) and (e) of
this section if such codes are clearly understood by each transferee.
* * * * *
(d) For fuel oil meeting paragraph (2) of the definition of
``heating oil'' in Sec. 80.1401, the PTD of the fuel oil shall state:
``This volume of renewable fuel oil is designated and intended to be
used to heat or cool interior spaces of homes or buildings to control
ambient
[[Page 7080]]
climate for human comfort. Do NOT use for process heat or cooling or
any other purpose, as these uses are prohibited pursuant to 40 CFR
80.1460(g).''.
(e) Beginning January 1, 2021, on each occasion when any party
transfers custody or ownership of certified NTDF, except when such fuel
is dispensed into motor vehicles or nonroad vehicles, engines, or
equipment, the transferor must provide to the transferee documents that
include all the following information, as applicable:
(1) The transferor of certified NTDF must list all applicable
required information as specified at Sec. 80.590 and, if the
distillate fuel contains renewable fuel, all applicable required
information in paragraphs (a), (b), and (d) of this section.
(2) The transferor must include the following statement on the PTD:
``15 ppm sulfur (maximum) certified NTDF--This fuel is designated for
non-transportation use.''
0
43. Section 80.1454 is amended by:
0
a. Revising paragraphs (a) introductory text, (a)(1), (d)(4),
(h)(6)(iii), (j) introductory text, (j)(1), and (j)(2) introductory
text;
0
b. Removing vacant paragraph (k) designation;
0
c. Revising paragraphs (n) and (q);
0
d. Redesignating paragraph (t) as paragraph (w); and
0
e. Adding new paragraph (t).
The revisions and addition reads as follows:
Sec. 80.1454 What are the recordkeeping requirements under the RFS
program?
(a) Requirements for obligated parties and exporters of renewable
fuel. Beginning July 1, 2010, any obligated party (as described at
Sec. 80.1406) or exporter of renewable fuel (as described at Sec.
80.1430) must keep all of the following records:
(1) Product transfer documents consistent with Sec. 80.1453 and
associated with the obligated party's or exporter of renewable fuel's
activity, if any, as transferor or transferee of renewable fuel or
separated RINs.
* * * * *
(d) * * *
(4) Domestic producers of renewable fuel made from any other type
of renewable biomass must have documents from their feedstock supplier
certifying that the feedstock qualifies as renewable biomass as defined
in Sec. 80.1401, describing the feedstock. Separated yard and food
waste, biogenic oils/fats/greases, and separated municipal solid waste
are also subject to the requirements in paragraph (j) of this section.
* * * * *
(h) * * *
(6) * * *
(iii) The survey plan must be sent to the attention of ``RFS
Program'' to the address in Sec. 80.10(a).
* * * * *
(j) A renewable fuel producer that produces fuel from separated
yard waste (as described in Sec. 80.1426(f)(5)(i)(A)), separated food
waste (as described in Sec. 80.1426(f)(5)(i)(B)), separated municipal
solid waste (as described in Sec. 80.1426(f)(5)(i)(C)), or biogenic
waste oils/fats/greases must keep all the following additional records:
(1) For separated yard waste, separated food waste, and biogenic
waste oils/fats/greases:
(i) Documents demonstrating the amounts, by weight, purchased of
separated yard waste, separated food waste, or biogenic waste oils/
fats/greases for use as a feedstock in producing renewable fuel.
(ii) Documents demonstrating the location of any establishment(s)
from which the waste stream consisting solely of separated yard waste,
separated food waste, or biogenic waste oils/fats/greases is collected.
(iii) Such other records as may be requested by the Administrator.
(2) For separated municipal solid waste:
* * * * *
(n) The records required under paragraphs (a) through (d), (f)
through (l), and (t) of this section and under Sec. 80.1453 shall be
kept for five years from the date they were created, except that
records related to transactions involving RINs shall be kept for five
years from the date of the RIN transaction.
* * * * *
(q) The records required in paragraphs (b)(3) and (c)(1) of this
section must be transferred with any renewable fuel sent to the
importer of that renewable fuel by any non-RIN-generating foreign
producer.
* * * * *
(t) Requirements for parties that redesignate certified NTDF as
MVNRLM diesel fuel. Parties that redesignate certified NTDF as MVNRLM
diesel fuel under Sec. 80.1408 must keep all of the following
additional records:
(1) Records related to all transactions in which certified NTDF is
redesignated as MVNRLM diesel fuel.
(2) Records related to all transactions in which MVNRLM diesel fuel
is redesignated to a non-transportation use.
(3) Records related to the volume of MVNRLM diesel fuel received.
(4) Records related to the volume of MVNRLM diesel fuel delivered.
(5) Records related to the volume of certified NTDF received.
(6) Records related to the volume of certified NTDF delivered.
* * * * *
0
44. Section 80.1460 is amended by adding paragraph (b)(7), revising
paragraph (g), and adding paragraph (j) to read as follows:
Sec. 80.1460 What acts are prohibited under the RFS program?
* * * * *
(b) * * *
(7) Generate a RIN for fuel that fails to meet all the conditions
set forth in an approval document for a pathway petition submitted
under Sec. 80.1416.
* * * * *
(g) Failing to use a renewable fuel oil for its intended use. No
person shall use fuel oil that meets paragraph (2) of the definition of
``heating oil'' in Sec. 80.1401 and for which RINs have been generated
in an application other than to heat or cool interior spaces of homes
or buildings to control ambient climate for human comfort.
* * * * *
(j) Redesignation violations. No person may exceed the balance
requirements at Sec. 80.1408(a)(2)(i) without incurring an RVO.
0
45. Section 80.1461 is amended by revising paragraphs (a)(1) and (2) to
read as follows:
Sec. 80.1461. Who is liable for violations under the RFS program?
(a) * * *
(1) Any person who violates a prohibition under Sec. 80.1460(a)
through (d) or Sec. 80.1460(g) through (j) is liable for the violation
of that prohibition.
(2) Any person who causes another person to violate a prohibition
under Sec. 80.1460(a) through (d) or Sec. 80.1460(g) through (j) is
liable for a violation of Sec. 80.1460(e).
* * * * *
0
46. Section 80.1463 is amended by revising paragraph (d) to read as
follows:
Sec. 80.1463 What penalties apply under the RFS program?
* * * * *
(d) Any person liable under Sec. 80.1461(a) for a violation of
Sec. 80.1460(b)(1) through (4), (6), or (7) is subject to a separate
day of violation for each day that an invalid RIN remains available for
an obligated party or exporter of renewable fuel to demonstrate
compliance with the RFS program.
0
47. Section 80.1464 is amended by revising paragraphs (a) introductory
text, (a)(1)(i)(A), (a)(1)(iii), (a)(1)(iv)
[[Page 7081]]
introductory text, (a)(1)(iv)(A) and (D), and (a)(1)(v), adding
paragraph (a)(1)(vii), and revising the first sentence of paragraph
(b)(1)(ii) to read as follows:
Sec. 80.1464 What are the attest engagement requirements under the
RFS program?
* * * * *
(a) Obligated parties and exporters of renewable fuel. The
following attest procedures shall be completed for any obligated party
(as described at Sec. 80.1406(a)) or exporter of renewable fuel (as
described at Sec. 80.1430):
(1) * * *
(i) * * *
(A) The obligated party's volume of all products listed in Sec.
80.1407(c) and (e), or the exporter of renewable fuel's volume of each
category of exported renewable fuel identified in Sec. 80.1430(b)(1)
through (b)(4).
* * * * *
(iii) For obligated parties, compare the volumes of products listed
in Sec. 80.1407(c), (e), and (f) reported to EPA in the report
required under Sec. 80.1451(a)(1) with the volumes, excluding any
renewable fuel volumes, contained in the inventory reconciliation
analysis under Sec. 80.133 and the volume of non-renewable diesel
produced or imported. Verify that the volumes reported to EPA agree
with the volumes in the inventory reconciliation analysis and the
volumes of non-renewable diesel produced or imported, and report as a
finding any exception.
(iv) For exporters of renewable fuel, perform all of the following:
(A) Obtain the database, spreadsheet, or other documentation that
the exporter of renewable fuel maintains for all exported renewable
fuel.
* * * * *
(D) Select sample batches in accordance with the guidelines in
Sec. 80.127 from each separate category of renewable fuel exported and
identified in Sec. 80.1451(a); obtain invoices, bills of lading and
other documentation for the representative samples; state whether any
of these documents refer to the exported fuel as advanced biofuel or
cellulosic biofuel; and report as a finding whether or not the exporter
of renewable fuel calculated an advanced biofuel or cellulosic biofuel
RVO for these fuels pursuant to Sec. 80.1430(b)(1) or (3).
(v) Compute and report as a finding the RVOs for the obligated
party or exporter of renewable fuel, and any deficit RVOs carried over
from the previous year or carried into the subsequent year, and verify
that the values agree with the values reported to EPA.
* * * * *
(vii) For obligated parties that redesignate certified NTDF as
MVNRLM diesel fuel under Sec. 80.1408, perform the additional attest
engagement procedures described at Sec. 80.1475 and report any
findings in the report described in paragraph (d) of this section.
Parties that do not incur an RVO under Sec. 80.1408(a)(2)(i) and do
not otherwise need to complete an attest engagement under this
paragraph (a) do not need to arrange for the additional attest
engagement procedures under Sec. 80.1475 to be performed.
* * * * *
(b) * * *
(1) * * *
(ii) Obtain production data for each renewable fuel batch by type
of renewable fuel that was produced or imported during the year being
reviewed; compute the RIN numbers, production dates, types, volumes of
ethanol denaturant and applicable equivalence values, and production
volumes for each batch; report the total RINs generated during the year
being reviewed; and state whether this information agrees with the
party's reports to EPA. * * *
* * * * *
0
48. Section 80.1466 is amended by:
0
a. Revising the section heading, paragraphs (a) and (b), the paragraph
(c) subject heading, paragraphs (c)(1), (d)(1)(iii) and (v),
(d)(1)(vi)(B), (d)(3)(ii), (e)(2)(ii), (f) introductory text, (f)(1)
introductory text, (f)(1)(ii)(C), (f)(1)(v)(A) and (C), (f)(1)(vii),
(f)(2), (f)(4) through (8), (g), and (h) introductory text;
0
b. In the equation in paragraph (h)(1) revising the definition ``G'';
0
c. Revising paragraphs (h)(3)(iii), (h)(4), (i), (j)(2) through (4),
(k)(1), (k)(2)(ii), (k)(4)(ii), the paragraph (l) subject heading,
paragraphs (l)(1) introductory text, (l)(2)(i), (l)(3), (m)(3)(ii),
(m)(6)(i), (n) introductory text, (n)(1), (3), and (4), (o)
introductory text, and (o)(2); and
0
d. Adding paragraph (p).
The revisions and addition read as follows:
Sec. 80.1466 What are the additional requirements under this subpart
for foreign renewable fuel producers and importers of renewable fuels?
(a) Applicability. This section only applies to foreign renewable
fuel producers that are located outside the United States, the
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa,
and the Commonwealth of the Northern Mariana Islands (collectively
referred to in this section as ``the United States'').
(b) General requirements. A registered foreign renewable fuel
producer under this section must meet all requirements that apply to
renewable fuel producers under this subpart.
(c) Designation, RIN-generating foreign producer certification, and
product transfer documents. (1) Any registered foreign renewable fuel
producer must designate each batch of such renewable fuel as ``RFS-
FRRF'' at the time the renewable fuel is produced.
* * * * *
(d) * * *
(1) * * *
(iii) Obtain the EPA-assigned registration number of the foreign
renewable fuel producer.
* * * * *
(v) Determine the date and time the vessel departs the port serving
the RIN-generating foreign producer.
(vi) * * *
(B) That the RFS-FRRF remained segregated from Non-RFS-FRRF and
other RFS-FRRF produced by a different foreign producer.
* * * * *
(3) * * *
(ii) Be independent under the criteria specified in Sec.
80.65(f)(2)(iii); and
* * * * *
(e) * * *
(2) * * *
(ii) Where the port of entry volume is the lesser of the two
volumes in paragraph (e)(1)(i) of this section, the importer shall
calculate the difference between the number of RINs originally assigned
by the RIN-generating foreign producer and the number of RINs
calculated under Sec. 80.1426 for the volume of renewable fuel as
measured at the port of entry, and acquire and retire that amount of
RINs in accordance with paragraph (k)(3) of this section.
(f) Foreign producer commitments. Any foreign renewable fuel
producer shall commit to and comply with the following provisions as a
condition to being registered as a foreign renewable fuel producer
under this subpart:
(1) Any EPA inspector or auditor must be given full, complete, and
immediate access to conduct inspections and audits of the foreign
renewable fuel producer facility.
* * * * *
(ii) * * *
(C) Renewable fuel is stored or transported between the foreign
renewable fuel producer and the United States, including storage tanks,
vessels and pipelines.
* * * * *
(v) * * *
(A) The volume of renewable fuel.
* * * * *
[[Page 7082]]
(C) Transfers of title or custody to renewable fuel.
* * * * *
(vii) Any employee of the foreign renewable fuel producer must be
made available for interview by the EPA inspector or auditor, on
request, within a reasonable time period.
* * * * *
(2) An agent for service of process located in the District of
Columbia shall be named, and service on this agent constitutes service
on the foreign renewable fuel producer or any employee of the foreign
renewable fuel producer for any action by EPA or otherwise by the
United States related to the requirements of this subpart.
* * * * *
(4) United States substantive and procedural laws shall apply to
any civil or criminal enforcement action against the foreign renewable
fuel producer or any employee of the foreign renewable fuel producer
related to the provisions of this section.
(5) Applying to be an approved foreign renewable fuel producer
under this section, or producing or exporting renewable fuel under such
approval, and all other actions to comply with the requirements of this
subpart relating to such approval constitute actions or activities
covered by and within the meaning of the provisions of 28 U.S.C.
1605(a)(2), but solely with respect to actions instituted against the
foreign renewable fuel producer, its agents and employees in any court
or other tribunal in the United States for conduct that violates the
requirements applicable to the foreign renewable fuel producer under
this subpart, including conduct that violates the False Statements
Accountability Act of 1996 (18 U.S.C. 1001) and section 113(c)(2) of
the Clean Air Act (42 U.S.C. 7413).
(6) The foreign renewable fuel producer, or its agents or
employees, will not seek to detain or to impose civil or criminal
remedies against EPA inspectors or auditors for actions performed
within the scope of EPA employment or contract related to the
provisions of this section.
(7) The commitment required by this paragraph shall be signed by
the owner or president of the foreign renewable fuel producer company.
(8) In any case where renewable fuel produced at a foreign
renewable fuel production facility is stored or transported by another
company between the production facility and the vessel that transports
the renewable fuel to the United States, the foreign renewable fuel
producer shall obtain from each such other company a commitment that
meets the requirements specified in paragraphs (f)(1) through (7) of
this section, and these commitments shall be included in the foreign
renewable fuel producer's application to be an approved foreign
renewable fuel producer under this subpart.
(g) Sovereign immunity. By submitting an application to be an
approved foreign renewable fuel producer under this subpart, or by
producing and exporting renewable fuel to the United States under such
approval, the foreign renewable fuel producer, and its agents and
employees, without exception, become subject to the full operation of
the administrative and judicial enforcement powers and provisions of
the United States without limitation based on sovereign immunity, with
respect to actions instituted against the foreign renewable fuel
producer, its agents and employees in any court or other tribunal in
the United States for conduct that violates the requirements applicable
to the foreign renewable fuel producer under this subpart, including
conduct that violates the False Statements Accountability Act of 1996
(18 U.S.C. 1001) and section 113(c)(2) of the Clean Air Act (42 U.S.C.
7413).
(h) Bond posting. Any RIN-generating foreign producer shall meet
the following requirements as a condition to approval as a RIN-
generating foreign producer under this subpart:
(1) * * *
G = the greater of: the largest volume of renewable fuel produced
by the RIN-generating foreign producer and exported to the United
States, in gallons, during a single calendar year among the five
preceding calendar years, or the largest volume of renewable fuel that
the Rin-generating foreign producers expects to export to the United
States during any calendar year identified in the Production Outlook
Report required by Sec. 80.1449. If the volume of renewable fuel
exported to the United States increases above the largest volume
identified in the Production Outlook Report during any calendar year,
the RIN-generating foreign producer shall increase the bond to cover
the shortfall within 90 days.
* * * * *
(3) * * *
(iii) Include a commitment that the bond will remain in effect for
at least five years following the end of latest annual reporting period
that the RIN-generating foreign producer produces renewable fuel
pursuant to the requirements of this subpart.
(4) On any occasion a RIN-generating foreign producer bond is used
to satisfy any judgment, the RIN-generating foreign producer shall
increase the bond to cover the amount used within 90 days of the date
the bond is used.
(i) English language reports. Any document submitted to EPA by a
foreign renewable fuel producer shall be in English, or shall include
an English language translation.
(j) * * *
(2) No foreign renewable fuel producer or other person may cause
another person to commit an action prohibited in paragraph (j)(1) of
this section, or that otherwise violates the requirements of this
section.
(3) No foreign renewable fuel producer or importer may generate
RINs for the same volume of renewable fuel.
(4) A foreign renewable fuel producer is prohibited from generating
RINs in excess of the number for which the bond requirements of this
section have been satisfied.
(k) * * *
(1) Renewable fuel shall be classified as RFS-FRRF according to the
designation by the RIN-generating foreign producer if this designation
is supported by product transfer documents prepared by the foreign
producer as required in paragraph (c) of this section.
(2) * * *
(ii) Use the RIN-generating foreign producer's RFS-FRRF
certification to determine the name and EPA-assigned registration
number of the RIN-generating foreign producer that produced the RFS-
FRRF.
* * * * *
(4) * * *
(ii) The RIN-generating foreign producer, containing the
information determined under paragraph (k)(2)(i) of this section, and
including identification of the port at which the product was
offloaded, and any RINs retired under paragraph (e)(2) of this section.
* * * * *
(l) Truck imports of RFS-FRRF produced by a RIN-generating foreign
producer. (1) Any RIN-generating foreign producer whose RFS-FRRF is
transported into the United States by truck may petition EPA to use
alternative procedures to meet all the following requirements:
* * * * *
(2) * * *
(i) Contracts with any facilities that receive and/or transport
RFS-FRRF that prohibit the commingling of RFS-FRRF with Non-RFS-FRRF or
RFS-FRRF from other foreign renewable fuel producers.
* * * * *
(3) The petition described in this section must be submitted to EPA
along
[[Page 7083]]
with the application for approval as a RIN-generating foreign producer
under this subpart.
(m) * * *
(3) * * *
(ii) Obtain the documents used by the independent third party to
determine transportation and storage of the RFS-FRRF from the RIN-
generating foreign producer's facility to the load port, under
paragraph (d) of this section. Obtain tank activity records for any
storage tank where the RFS-FRRF is stored, and activity records for any
mode of transportation used to transport the RFS-FRRF prior to being
loaded onto the vessel. Use these records to determine whether the RFS-
FRRF was produced at the RIN-generating foreign producer's facility
that is the subject of the attest engagement, and whether the RFS-FRRF
was mixed with any Non-RFS-FRRF or any RFS-FRRF produced at a different
facility.
* * * * *
(6) * * *
(i) Be independent of the RIN-generating foreign producer;
* * * * *
(n) Withdrawal or suspension of foreign renewable fuel producer
approval. EPA may withdraw or suspend a foreign renewable fuel
producer's approval where any of the following occur:
(1) A foreign renewable fuel producer fails to meet any requirement
of this section.
* * * * *
(3) A foreign renewable fuel producer asserts a claim of, or a
right to claim, sovereign immunity in an action to enforce the
requirements in this subpart.
(4) A foreign renewable fuel producer fails to pay a civil or
criminal penalty that is not satisfied using the foreign renewable fuel
producer bond specified in paragraph (h) of this section.
(o) Additional requirements for applications, reports, and
certificates. Any application for approval as a foreign renewable fuel
producer, alternative procedures under paragraph (l) of this section,
any report, certification, or other submission required under this
section shall be:
* * * * *
(2) Signed by the president or owner of the foreign renewable fuel
producer company, or by that person's immediate designee, and shall
contain the following declarations:
(i) ``I hereby certify:
(A) That I have actual authority to sign on behalf of and to bind
[NAME OF FOREIGN RENEWABLE FUEL PRODUCER] with regard to all statements
contained herein;
(B) That I am aware that the information contained herein is being
Certified, or submitted to the United States Environmental Protection
Agency, under the requirements of 40 CFR part 80, subpart M, and that
the information is material for determining compliance under these
regulations; and
(C) That I have read and understand the information being Certified
or submitted, and this information is true, complete and correct to the
best of my knowledge and belief after I have taken reasonable and
appropriate steps to verify the accuracy thereof.''
(ii) ``I affirm that I have read and understand the provisions of
40 CFR part 80, subpart M, including 40 CFR 80.1465 apply to [NAME OF
FOREIGN RENEWABLE FUEL PRODUCER]. Pursuant to Clean Air Act section
113(c) and 18 U.S.C. 1001, the penalty for furnishing false, incomplete
or misleading information in this certification or submission is a fine
of up to $10,000 U.S., and/or imprisonment for up to five years.''.
(p) Requirements for non-RIN-generating foreign producer. Any non-
RIN-generating foreign producer must comply with the requirements of
this section beginning on the effective date of the final rule or prior
to EPA acceptance, whichever is later.
0
49. Section 80.1469 is amended by revising paragraphs (c)(1)(ii) and
(f)(1) introductory text to read as follows:
Sec. 80.1469 Requirements for Quality Assurance Plans.
* * * * *
(c) * * *
(1) * * *
(ii) If applicable, plans under Sec. 80.1426(f)(5)(ii) are
accepted and up to date.
* * * * *
(f) * * *
(1) A new QAP shall be submitted to EPA according to paragraph (e)
of this section and the third-party auditor shall update their
registration according to Sec. 80.1450(g)(9) whenever any of the
following changes occur at a production facility audited by a third-
party independent auditor and the auditor does not possess an
appropriate pathway-specific QAP that encompasses the changes:
* * * * *
0
50. Section 80.1472 is amended by revising paragraphs (b)(3)(i)
introductory text, (b)(3)(ii)(B), and (b)(3)(iii) to read as follows:
Sec. 80.1472 Requirements for quality assurance audits.
* * * * *
(b) * * *
(3) * * *
(i) The independent third-party auditor shall conduct an on-site
visit at the renewable fuel production facility or foreign ethanol
production facility:
* * * * *
(ii) * * *
(B) 380 days after the previous on-site visit if a previously
approved (by EPA) remote monitoring system is in place at the renewable
fuel production facility or foreign ethanol production facility, as
applicable. The 380-day period shall start the day after the previous
on-site visit ends.
(iii) An on-site visit shall include verification of all QAP
elements that require inspection or evaluation of the physical
attributes of the renewable fuel production facility or foreign ethanol
production facility.
* * * * *
0
51. Section 80.1475 is added as follows:
Sec. 80.1475 What are the additional attest engagement requirements
for parties that redesignate certified NTDF as MVNRLM diesel fuel?
(a) General requirements. (1) In addition to the attest engagement
requirements under Sec. 80.1464, all obligated parties required to
arrange for additional attest engagement procedures under Sec.
80.1464(a)(1)(vii) must have an annual attest engagement conducted by
an auditor using the minimum attest procedures specified in this
section.
(2) All applicable requirements and procedures outlined in
Sec. Sec. 80.125 through 80.127 and Sec. 80.130 apply to the auditors
and attest engagement procedures specified in this section.
(3) Obligated parties must include any additional information
required under this section in the attest engagement report under Sec.
80.1464(d).
(4) Report as a finding if the party failed to either incur or
satisfy an RVO if required.
(b) EPA reports. Auditors must perform the following:
(1) Obtain and read a copy of the obligated party's reports filed
with EPA as required by Sec. 80.1451(a)(1)(xix) for the reporting
period.
(2) In the case of an obligated party's report to EPA that
represents aggregate calculations for more than one facility, obtain
the facility-specific volume and property information that was used by
the refiner to prepare the aggregate report. Foot and crossfoot the
facility-specific totals and agree to the values in the aggregate
report. The procedures in paragraphs (b) and (c) of this section are
then performed separately for each facility.
[[Page 7084]]
(3) Obtain a written representation from a company representative
that the report copies are complete and accurate copies of the reports
filed with EPA.
(4) Identify, and report as a finding, the name of the commercial
computer program used by the refiner or importer to track the data
required by the regulations in this part, if any.
(c) Inventory reconciliation analysis. Auditors must perform the
following:
(1) Obtain an inventory reconciliation analysis for the facility
for the reporting period for each of the following and perform the
procedures at paragraphs (c)(2) through (4) of this section separately
for each of the following products:
(i) The volume of certified NTDF that was redesignated as MVNRLM
diesel fuel.
(ii) The volume of MVNRLM diesel fuel that was redesignated to a
non-transportation use.
(iii) The volume of MVNRLM diesel fuel owned when the fuel was
received at the facility and acquired at the facility during the
compliance period.
(iv) The volume of MVNRLM diesel fuel owned and sold or transferred
to other parties at the facility during the compliance period.
(v) The volume of certified NTDF received.
(vi) The volume of certified NTDF delivered.
(2) Foot and crossfoot the volume totals reflected in the analysis.
(3) Agree the beginning and ending inventory amounts in the
analysis to the facility's inventory records.
(4) If the obligated party delivered more MVNRLM diesel fuel than
received, agree the annual balance with the reports obtained at Sec.
80.1475(b)(1) and verify whether the obligated party incurred and
satisfied its RVO under Sec. 80.1408(a)(2)(i).
(5) Report as a finding each of the volume totals along with any
discrepancies.
(d) Listing of tenders. Auditors must perform the following:
(1) For each of the volumes listed in paragraphs (b)(1)(iii)
through (b)(1)(vi) of this section, obtain a separate listing of all
tenders from the refiner or importer for the reporting period. Each
listing should provide for each tender the volume shipped and other
information as needed to distinguish tenders.
(2) Foot to the volume totals per the listings.
(3) Agree the volume totals on the listing to the tender volume
total in the inventory reconciliation analysis obtained in paragraph
(b) of this section.
(4) For each of the listings select a representative sample of the
tenders in accordance with the guidelines in Sec. 80.127, and for each
tender selected perform the following:
(i) Obtain product transfer documents associated with the tender
and agree the volume on the tender listing to the volume on the product
transfer documents.
(ii) Note whether the product transfer documents include the
information required by Sec. 80.590 and, for tenders involving the
transfer of certified NTDF, the information required by Sec.
80.1453(e).
(5) Report as a finding any discrepancies.
Subpart N--Additional Requirements for Gasoline-Ethanol Blends
0
52. Section 80.1501 is amended by revising the section heading and
paragraphs (b)(3)(i) and (b)(5)(i) and removing and reserving paragraph
(b)(5)(ii). The revisions read as follows:
Sec. 80.1501 Labeling requirements that apply to retailers and
wholesale purchaser-consumers of gasoline that contains greater than 10
volume percent ethanol and not more than 15 volume percent ethanol.
* * * * *
(b) * * *
(3) * * *
(i) The word ``ATTENTION'' shall be capitalized in 20-point, black,
Helvetica Neue LT 77 Bold Condensed font, and shall be placed in the
top 1.25 inches of the label as further described in paragraph
(b)(4)(iii) of this section.
* * * * *
(5) * * *
(i) A request for approval of an alternative label shall be sent to
the attention of ``E15 Alternative Label Request'' to the address in
Sec. 80.10(a).
* * * * *
Subpart O--Gasoline Sulfur
Sec. 80.1600 [Amended]
0
53. Section 80.1600 is amended by removing the definition for ``Ethanol
denaturant''.
0
54. Section 80.1603 is amended by:
0
a. Revising paragraph (d)(1);
0
b. Redesignating paragraph (d)(2) as paragraph (d)(3) and adding a new
paragraph (d)(2); and
0
c. In the equation in paragraph (f)(1) revising the definition of
``OC''. The revisions and addition read as follows:
Sec. 80.1603 Gasoline sulfur standards for refiners and importers.
* * * * *
(d) * * *
(1) The refiner or importer shall calculate the sulfur content of
the batch by volume weighting the sulfur content of the gasoline or BOB
and the sulfur content of the added oxygenate pursuant to one of the
methods listed in paragraphs (d)(1)(i) and (ii) of this section. A
refiner or importer must choose to use only one method during each
annual compliance period.
(i) Testing the sulfur content of a sample of the oxygenate
pursuant to Sec. 80.46 or Sec. 80.47, as applicable. The refiner or
importer must demonstrate through records relating to sampling,
testing, and blending that the test result was derived from a
representative sample of the oxygenate that was blended with the batch
of gasoline or BOB.
(ii) If the oxygenate is denatured fuel ethanol, and the sulfur
content has not been tested under paragraph (d)(1)(i) of this section,
then the sulfur content must be assumed to be 5.00 ppm.
(2) For denatured fuel ethanol, the refiner or importer may assume
that the denatured fuel ethanol was blended with gasoline or BOB at a
concentration of 10 volume percent, unless the refiner or importer can
demonstrate that a different amount of denatured fuel ethanol was
actually blended with a batch of gasoline or BOB.
(i) The refiner or importer of conventional gasoline or CBOB must
comply with the requirements of Sec. 80.101(d)(4)(ii).
(ii) The refiner or importer of reformulated gasoline or RBOB must
comply with the requirements of Sec. 80.69(a).
(iii) Any gasoline or BOB must meet the per-gallon sulfur standard
of paragraph (a)(2) of this section prior to calculating any dilution
from the oxygenate added downstream.
(iv) The reported volume of the batch is the combined volume of the
reformulated gasoline, RBOB, conventional gasoline, or CBOB and the
downstream added oxygenate.
* * * * *
(f) * * *
(1) * * *
OC = Sulfur credits used by the refinery or importer to show
compliance, in ppm-gallons.
* * * * *
0
55. Section 80.1609 is amended by revising the last sentence of
paragraph (a) to read as follows:
Sec. 80.1609 Oxygenate blender requirements.
(a) * * * Such oxygenate blenders are subject to the requirements
of paragraph (b) of this section, the requirements and prohibitions
applicable to downstream parties, the requirements of
[[Page 7085]]
Sec. 80.1603(d)(3), and the prohibition specified in Sec. 80.1660(e).
* * * * *
0
56. Section 80.1616 is amended by revising paragraph (c)(3) to read as
follows:
Sec. 80.1616 Credit use and transfer.
* * * * *
(c) * * *
(3) CRT2 credits generated under Sec. 80.1615(d) from
January 1, 2017, through December 31, 2019, may only be traded to and
ultimately used from January 1, 2017, through December 31, 2019, by
small refiners and small volume refineries approved under Sec.
80.1622.
0
57. Section 80.1622 is amended by revising paragraph (g) to read as
follows:
Sec. 80.1622 Approval for small refiner and small volume refinery
status.
* * * * *
(g) Small refiner and small volume refinery status applications,
and any other correspondence required by this section, Sec. 80.1620,
or Sec. 80.1621 shall be sent to the attention of ``Tier 3 Program
(Small Refiner/Small Volume Refinery Application)'' to the address in
Sec. 80.10(a).
0
58. Section 80.1625 is amended by revising paragraph (c)(2) to read as
follows:
Sec. 80.1625 Hardship provisions.
* * * * *
(c) * * *
(2) Hardship applications under this section must be sent to the
attention of ``Tier 3 Program (Hardship Application)'' to the address
in Sec. 80.10(a).
0
59. Section 80.1650 is amended by revising paragraphs (b)(3),
(e)(1)(iii)(A), and (g)(1)(iii)(A) to read as follows:
Sec. 80.1650 Registration.
* * * * *
(b) * * *
(3) Any oxygenate blender required to register shall do so by
November 1, 2016, or at least 90 days in advance of the first date that
such person will blend oxygenate into gasoline, RBOB, or CBOB where the
resulting gasoline is subject to the gasoline sulfur standards under
this subpart O.
* * * * *
(e) * * *
(1) * * *
(iii) * * *
(A) Whether records are kept on-site or off-site of the facility.
* * * * *
(g) * * *
(1) * * *
(iii) * * *
(A) Whether records are kept on-site or off-site of the facility.
* * * * *
0
60. Section 80.1652 is amended by revising paragraph (a)(7)
introductory text and adding paragraphs (a)(7)(v) and (vi) to read as
follows:
Sec. 80.1652 Reporting requirements for gasoline refiners, gasoline
importers, oxygenate producers, and oxygenate importers.
* * * * *
(a) * * *
(7) For each batch of BOB or gasoline produced or imported during
the averaging period, all the following:
* * * * *
(v) The type and amount of oxygenate, along with identification of
the method used to determine the type and amount of oxygenate content
of the batch, as determined under Sec. 80.1603(d).
(vi) The sulfur content of the oxygenate, reported to two decimal
places, along with identification of the method used to determine the
sulfur content of the oxygenate, as determined under Sec. 80.1603(d).
* * * * *
0
61. Section 80.1656 is amended by revising paragraph (h) to read as
follows:
Sec. 80.1656 Exemptions for gasoline used for research, development,
or testing purposes.
* * * * *
(h) Submission. Requests for research and development exemptions
shall be sent to the attention of ``Tier 3 Program (R&D Exemption
Request)'' to the address in Sec. 80.10(a).
[FR Doc. 2020-00431 Filed 2-5-20; 8:45 am]
BILLING CODE 6560-50-P