Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program, 23900-24014 [E7-7140]
Agencies
[Federal Register Volume 72, Number 83 (Tuesday, May 1, 2007)] [Rules and Regulations] [Pages 23900-24014] From the Federal Register Online via the Government Printing Office [www.gpo.gov] [FR Doc No: E7-7140] [[Page 23899]] ----------------------------------------------------------------------- Part II Environmental Protection Agency ----------------------------------------------------------------------- 40 CFR Part 80 Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program; Final Rule Federal Register / Vol. 72, No. 83 / Tuesday, May 1, 2007 / Rules and Regulations [[Page 23900]] ----------------------------------------------------------------------- ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 80 [EPA-HQ-OAR-2005-0161; FRL-8299-9] RIN 2060-AN76 Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: Under the Clean Air Act, as amended by Section 1501 of the Energy Policy Act of 2005, the Environmental Protection Agency is required to promulgate regulations implementing a renewable fuel program. The statute specifies the total volume of renewable fuel that the regulations must ensure is used in gasoline sold in the U.S. each year, with the total volume increasing over time. In this context, this program is expected to reduce dependence on foreign sources of petroleum, increase domestic sources of energy, and help transition to alternatives to petroleum in the transportation sector. The increased use of renewable fuels such as ethanol and biodiesel is also expected to have the added effect of providing an expanded market for agricultural products such as corn and soybeans. Based on our analysis, we believe that the expanded use of renewable fuels will provide reductions in carbon dioxide emissions that have been implicated in climate change. Also, there will be some reductions in air toxics emissions such as benzene from the transportation sector, while some other emissions such as oxides of nitrogen are expected to increase. This action finalizes regulations designed to ensure that refiners, blenders, and importers of gasoline will use enough renewable fuel each year so that the total volume requirements of the Energy Policy Act are met. Our rule describes the standard that will apply to these parties and the renewable fuels that qualify for compliance. The regulations also establish a trading program that will be an integral aspect of the overall program, allowing renewable fuels to be used where they are most economical while providing a flexible means for obligated parties to comply with the standard. DATES: This final rule is effective on September 1, 2007. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of September 1, 2007. ADDRESSES: EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2005-0161. All documents in the docket are listed in the www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through www.regulations.gov or in hard copy at the EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744 and the telephone number for the EPA Docket Center is (202) 566-1742. FOR FURTHER INFORMATION CONTACT: Julia MacAllister, U.S. Environmental Protection Agency, National Vehicle and Fuel Emissions Laboratory, 2000 Traverwood, Ann Arbor MI, 48105; telephone number (734) 214-4131; fax number (734) 214-4816; e-mail address macallister.julia@epa.gov. SUPPLEMENTARY INFORMATION: I. General Information Entities potentially affected by this action include those involved with the production, distribution and sale of gasoline motor fuel or renewable fuels such as ethanol and biodiesel. Regulated categories and entities could include: ------------------------------------------------------------------------ Examples of Category NAICS \1\ SIC \2\ potentially codes codes regulated entities ------------------------------------------------------------------------ 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.................... 454319 5989 Other fuel dealers. ------------------------------------------------------------------------ \1\ North American Industry Classification System (NAICS). \2\ Standard Industrial Classification (SIC) system code. This table is not intended to be exhaustive, but provides a guide for readers regarding entities likely to be regulated by this 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 decide whether your organization might be affected by this action, you should carefully examine today's notice and the existing regulations in 40 CFR part 80. If you have any questions regarding the applicability of this action to a particular entity, consult the persons listed in the preceding FOR FURTHER INFORMATION CONTACT section. Table of Contents I. Introduction A. The Role of Renewable Fuels in the Transportation Sector B. Requirements in the Energy Policy Act C. Development of the RFS Program II. Overview of the Program A. Impacts of Increased Reliance on Renewable Fuels 1. Renewable Fuel Volume Scenarios Analyzed 2. Emissions 3. Economic Impacts 4. Greenhouse Gases and Fossil Fuel Consumption 5. Post 2012 RFS Standards B. Program Structure 1. What Is the RFS Program Standard? 2. Who Must Meet the Standard? 3. What Qualifies as a Renewable Fuel? 4. Equivalence Values of Different Renewables Fuels 5. How Will Compliance Be Determined? 6. How Will the Trading Program Work? 7. How Will the Program Be Enforced? C. Voluntary Green Labeling Program III. Complying With the Renewable Fuel Standard A. What Is the Standard That Must Be Met? 1. How Is the Percentage Standard Calculated? 2. What Are the Applicable Standards? 3. Compliance in 2007 [[Page 23901]] 4. Renewable Volume Obligations B. What Counts as a Renewable Fuel in the RFS Program? 1. What Is a Renewable Fuel That Can Be Used for Compliance? a. Ethanol Made From a Cellulosic Feedstock b. Ethanol Made From any Feedstock in Facilities Using Waste Material To Displace 90 Percent of Normal Fossil Fuel Use c. Ethanol That Is Made From the Non-Cellulosic Portions of Animal, Other Waste, and Municipal Waste d. Foreign Producers of Cellulosic and Waste-Derived Ethanol 2. What Is Biodiesel? a. Biodiesel (Mono-Alkyl Esters) b. Non-Ester Renewable Diesel 3. Does Renewable Fuel Include Motor Fuel That Is Made From Coprocessing a Renewable Feedstock With Fossil Fuels? a. Definition of ``Renewable Crudes'' and ``Renewable Crude- Based Fuels'' b. How Are Renewable Crude-Based Fuel Volumes Measured? 4. What Are ``Equivalence Values'' for Renewable Fuel? a. Authority Under the Act To Establish Equivalence Values b. Energy Content and Renewable Content as the Basis for Equivalence Values c. Lifecycle Analyses as the Basis for Equivalence Values C. What Gasoline Is Used To Calculate the Renewable Fuel Obligation and Who Is Required To Meet the Obligation? 1. What Gasoline Is Used To Calculate the Volume of Renewable Fuel Required To Meet a Party's Obligation? 2. Who Is Required To Meet the Renewable Fuels Obligation? 3. What Exemptions Are Available Under the RFS Program? a. Small Refinery and Small Refiner Exemption b. General Hardship Exemption c. Temporary Hardship Exemption Based on Unforeseen Circumstances 4. What Are the Opt-in and State Waiver Provisions Under the RFS Program? a. Opt-in Provisions for Noncontiguous States and Territories b. State Waiver Provisions D. How Do Obligated Parties Comply With the Standard? 1. Why Use Renewable Identification Numbers? a. RINs Serve the Purpose of a Credit Trading Program b. Alternative Approach To Tracking Batches 2. Generating RINs and Assigning Them to Batches a. Form of Renewable Identification Numbers b. Generating RINs c. Cases in Which RINS Are Not Generated 3. Calculating and Reporting Compliance a. Using RINs To Meet the Standard b. Valid Life of RINs c. Cap on RIN Use To Address Rollover d. Deficit Carryovers 4. Provisions for Exporters of Renewable Fuel 5. How Will the Agency Verify Compliance? E. How Are RINs Distributed and Traded? 1. Distribution of RINs With Volumes of Renewable Fuel a. Responsibilities of Renewable Fuel Producers and Importers b. Responsibilities of Parties That Buy, Sell, or Handle Renewable Fuels c. Batch Splits and Batch Mergers 2. Separation of RINs From Volumes of Renewable Fuel 3. Distribution of Separated RINs 4. Alternative Approaches to RIN Distribution IV. Registration, Recordkeeping, and Reporting Requirements A. Introduction B. Registration 1. Who Must Register Under the RFS Program? 2. How Do I Register? 3. How Do I Know I am Properly Registered With EPA? 4. How are Small Volume Domestic Producers of Renewable Fuels Treated for Registration Purposes? C. Reporting 1. Who Must Report Under the RFS Program? 2. What Reports Are Required Under the RFS Program? 3. What Are the Specific Reporting Items for the Various Types of Parties Required To Report? 4. What are the Reporting Deadlines? 5. How May I Submit Reports to EPA? 6. What Does EPA Do With the Reports it Receives? 7. May I Claim Information in Reports as CBI and How Will EPA Protect it? 8. How are Spilled Volumes With Associated Lost RINs To Be Handled in Reports? D. Recordkeeping 1. What Types of Records Must Be Kept? 2. What Recordkeeping Requirements are Specific to Producers of Cellulosic or Waste-Derived Ethanol? E. Attest Engagements 1. What Are the Attest Engagement Requirements Under the RFS Program? 2. Who Is Subject to the Attest Engagement Requirements for the RFS Program? 3. How Are the Attest Engagement Requirements in this Final Rule Different From Those Proposed? V. What Acts Are Prohibited and Who Is Liable for Violations? VI. Current and Projected Renewable Fuel Production and Use A. Overview of U.S. Ethanol Industry and Future Production/ Consumption 1. Current Ethanol Production 2. Expected Growth in Ethanol Production 3. Current Ethanol and MTBE Consumption 4. Expected Growth in Ethanol Consumption B. Overview of Biodiesel Industry and Future Production/ Consumption 1. Characterization of U.S. Biodiesel Production/Consumption 2. Expected Growth in U.S. Biodiesel Production/Consumption C. Feasibility of the RFS Program Volume Obligations 1. Production Capacity of Ethanol and Biodiesel 2. Technology Available To Produce Cellulosic Ethanol a. Sugar Platform i. Pretreatment ii. Dilute acid hydrolysis iii. Concentrated acid hydrolysis iv. Enzymatic hydrolysis b. Syngas Platform c. Plasma Technology d. Feedstock Optimization 3. Renewable Fuel Distribution System Capability VII. Impacts on Cost of Renewable Fuels and Gasoline A. Renewable Fuel Production and Blending Costs 1. Ethanol Production Costs a. Corn Ethanol b. Cellulosic Ethanol 2. Biodiesel Production Costs 3. Diesel Fuel Costs B. Distribution Costs 1. Ethanol Distribution Costs a. Capital Costs To Upgrade Distribution System for Increased Ethanol Volume b. Ethanol Freight Costs 2. Biodiesel Distribution Costs C. Estimated Costs to Gasoline 1. Description of Cases Modeled a. Base Case (2004) b. Reference Case (2012) c. Control Cases (2012) 2. Overview of Cost Analysis Provided by the Contractor Refinery Model 3. Overall Impact on Fuel Cost a. Cost Without Ethanol Subsidies b. Gasoline Costs Including Ethanol Consumption Tax Subsidies VIII. What Are the Impacts of Increased Ethanol Use on Emissions and Air Quality? A. Effect of Renewable Fuel Use on Emissions 1. Emissions From Gasoline Fueled Motor Vehicles and Equipment a. Gasoline Fuel Quality b. Emissions From Motor Vehicles c. Nonroad Equipment 2. Diesel Fuel Quality: Biodiesel 3. Renewable Fuel Production and Distribution B. Impact on Emission Inventories 1. Primary Analysis 2. Sensitivity Analysis 3. Local and Regional VOC and NOX Emission Impacts in July C. Impact on Air Quality 1. Impact of Increased Ethanol Use on Ozone 2. Particulate Matter IX. Impacts on Fossil Fuel Consumption and Related Implications A. Impacts on Lifecycle GHG Emissions and Fossil Energy Use 1. Time Frame and Volumes Considered 2. GREET Model a. Renewable Fuel Pathways Considered b. Modifications to GREET c. Sensitivity Analysis 3. Displacement Indexes (DI) 4. Impacts of Increased Renewable Fuel Use a. Greenhouse Gases and Carbon Dioxide b. Fossil Fuel and Petroleum B. Implications of Reduced Imports of Petroleum Products [[Page 23902]] C. Energy Security Implications of Increases in Renewable Fuels 1. Effect of Oil Use on Long-Run Oil Price, U.S. Import Costs, and Economic Output 2. Short-Run Disruption Premium From Expected Costs of Sudden Supply Disruptions 3. Costs of Existing U.S. Energy Security Policies X. Agricultural Sector Economic Impacts XI. Public Participation XII. Administrative Requirements A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act 1. Overview 2. Background 4. Summary of Potentially Affected Small Entities 5. Impact of the Regulations on Small Entities 6. Small Refiner Outreach 7. Reporting, Recordkeeping, and Compliance Requirements 8. Related Federal Rules 9. Conclusions D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments G. Executive Order 13045: Protection of Children From Environmental Health and Safety Risks H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer Advancement Act J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations. K. Congressional Review Act L. Clean Air Act Section 307(d) XIII. Statutory A I. Introduction Through today's final rule, we are putting in place a compliance and enforcement program that implements the renewable fuel program, also known as the Renewable Fuel Standard (RFS) program. This program accomplishes the statutory goal of increasing the volume of renewable fuels that are required to be used in vehicles in the U.S. as required in Section 211(o) of the Clean Air Act (CAA) enacted as part of the Energy Policy Act of 2005 (the Energy Act or the Act). This final rule resulted from a collaborative effort with stakeholders, including refiners, renewable fuel producers, and distributors, who together helped to design a program that is simple, flexible, and enforceable. As a result of the favorable economics of renewable fuels in comparison to conventional gasoline and diesel, renewable fuel volumes are expected to exceed the requirements of the RFS program. We have evaluated the impacts of a range of renewable fuel volumes as high as 10 billion gallons in 2012. This represents a significant increase over the volume of renewable fuel used in 2004 which was approximately 3.5 billion gallons, and this increase is estimated to produce a number of significant effects. For instance, we estimate that the transition to renewable fuels will reduce petroleum consumption by 2.0 to 3.9 billion gallons or approximately 0.8 to 1.6 percent of the petroleum that would otherwise be used by the transportation sector. The increased use of renewable fuels is also expected to produce reductions in some regulated pollutants. Carbon monoxide emissions from gasoline powered vehicles and equipment will be reduced by 0.9 to 2.5 percent and emissions of benzene (a mobile source air toxic) will be reduced by 1.8 to 4.0 percent.\1\ At the same time, other emissions may increase. Nationwide, we estimate between a 41,000 and 83,000 ton increase in VOC + NOX emissions. However, the effects will vary significantly by region with some major metropolitan areas experiencing small emission benefits, while other areas may see an increase in VOC emissions from 4 to 5 percent and an increase in NOX emissions from 6 to 7 percent from gasoline powered vehicles and equipment. --------------------------------------------------------------------------- \1\ These reductions are relative to the Mobile Source Air Toxics (MSAT) standards in effect. Additional benzene emission reductions will occur as a result of the recently finalized MSAT2 standards (72 FR 8428, February 26, 2007). --------------------------------------------------------------------------- The use of renewable fuel will likewise reduce greenhouse gas emissions such as carbon dioxide by 8.0 to 13.1 million metric tons, about 0.4 to 0.6 percent of the anticipated greenhouse gas emissions from the transportation sector in the United States in 2012. Greenhouse gas emissions contribute to climate change, and thus, increased renewable use is an important step in addressing this issue. Finally, we estimate that increases in the use of renewable fuels will increase net farm income and the nation's energy security. Net U.S. farm income is estimated to increase by between $2.6 and $5.4 billion through transfers from users of gasoline and consumers of agricultural products used to produce ethanol. However, as feedstocks used in the production of renewable fuels expand beyond the corn and soybeans that are most common today, the renewable fuels industry is expected to continue to diversify and grow in its ability to benefit the nation's environment and economy. A. The Role of Renewable Fuels in the Transportation Sector Renewable fuels have been an important part of our nation's transportation fuel supply for many years. Following the CAA amendments of 1990, the use of renewable fuels, particularly ethanol, increased dramatically. Several key clean fuel programs required by the CAA established new market opportunities for ethanol. A very successful mobile source control strategy, the reformulated gasoline (RFG) program, was implemented in 1995. This program set stringent new controls on the emissions performance of gasoline, which were designed to significantly reduce summertime ozone precursors and year round air toxics emissions. The RFG program also required that RFG meet an oxygen content standard. Several areas of the country began blending ethanol into gasoline to help meet this new standard, such as Chicago and St. Louis. Another successful clean fuel strategy required certain areas exceeding the national ambient air quality standard for carbon monoxide to also meet an oxygen content standard during the winter time to reduce harmful carbon monoxide emissions. Many of these areas, such as Denver and Phoenix, also blended ethanol during the winter months to help meet this new standard. Today, the role and importance of renewable fuels in the transportation sector continue to expand. In the past several years as crude oil prices have soared above the lower levels of the 1990's, the relative economics of renewable fuel use have improved dramatically. In addition, since the vast majority of crude oil produced in or imported into the U.S. is consumed as gasoline or diesel fuel in the U.S., concerns about our dependence on foreign sources of crude oil have renewed interest in renewable transportation fuels. The emergence of more in-depth understanding of the impacts of human activities on climate change has also focused attention on the various ways that renewable fuels can reduce the consumption of fossil fuels. The passage of the Energy Policy Act of 2005 demonstrated a strong commitment on the part of U.S. policymakers to consider additional means of supporting renewable fuels as a supplement to petroleum-based fuels in the transportation sector. The RFS program is one such means. The RFS program was debated by the U.S. Congress over several years before finally being enacted through passage of the Energy Policy Act of 2005. The RFS program is first and foremost designed [[Page 23903]] to increase the use of renewable fuels in motor vehicle fuel consumed in the U.S. In this context, it is expected to simultaneously reduce dependence on foreign sources of petroleum, increase domestic sources of energy, and diversify our energy portfolio to help transition to alternatives to petroleum in the transportation sector. Based on our analysis, we also believe that the expanded use of renewable fuels will provide reductions in carbon dioxide emissions that contribute to climate change and in air toxics emissions such as benzene from the transportation sector, while other emissions such as hydrocarbons and oxides of nitrogen are projected to increase. The increased use of renewable fuels such as ethanol and biodiesel is also expected to have the added effect of providing an expanded market for agricultural products such as corn and soybeans. The expected increase in cellulosic ethanol production will also expand the market opportunities to a wider array of feedstocks. The requirement for use of a specified volume of renewable fuels complements other provisions of the Energy Act. In particular, the required volume of renewable fuel use will offset any possible loss in demand for renewable fuels occasioned by the Act's repeal of the oxygen content mandate in the RFG program while allowing greater flexibility in how renewable fuels are blended into the nation's fuel supply. The RFS program also creates a specific annual level for minimum renewable fuel use which increases over time, ensuring overall growth in the demand and opportunity for renewable fuels. Because renewable fuels such as ethanol and biodiesel are not new to the U.S. transportation sector, the expansion of their use is expected to follow distribution and blending practices already in place. For instance, the market already has the necessary production and distribution mechanisms in place in many areas and the ability to expand these mechanisms into new markets. Recent spikes in ethanol use resulting first from the state MTBE bans, and now the virtual elimination of MTBE from the marketplace, have tested the limits of the ethanol distribution system. However, future growth is expected to move in a more orderly fashion since the use of renewable fuels will not be geographically constrained and, given EIA volume projections, investment decisions can follow market forces rather than regulatory mandates. In addition, the increased production volumes of ethanol and the expanded penetration of ethanol in new markets may create new opportunities for blending of E85, a blend of 85 percent ethanol and 15 percent gasoline, in the long run. The increased availability of E85 will mean that more flexible fueled vehicles (FFV) can use this fuel. Of the approximately 5 million FFVs currently in use in the U.S, most are currently fueled with conventional gasoline rather than E85, in part due to the limited availability of E85. Given the ever-increasing demand for petroleum-based products in the transportation sector, the RFS program also moves the nation in the direction of replacing part of this demand with renewable energy. The RFS program provides the certainty that at least a minimum amount of renewable fuel will be used in the U.S., which in turn provides some certainty for investment in production capacity of renewable fuels. However, it should be understood that the RFS program is not the only factor currently impacting demand for ethanol and other renewable fuels. As Congress was developing the RFS program in the Energy Act, several large states were adopting and implementing bans on the use of MTBE in gasoline. As a result, refiners supplying reformulated gasoline (RFG) in those states switched to ethanol to satisfy the oxygen content mandate for their RFG, causing a large, sudden increase in demand for ethanol. Even more importantly, with the removal of the oxygen content mandate for RFG, refiners elected to remove essentially all MTBE from the gasoline supply in the U.S. during the spring of 2006. In order to accomplish this transition quickly, while still maintaining gasoline volume, octane, and gasoline air toxics performance standards, refiners elected to blend ethanol into virtually all reformulated gasoline nationwide. This caused a second dramatic increase in demand for ethanol, which in the near term was met by temporarily shifting large volumes of ethanol out of conventional gasoline and into the RFG areas. Perhaps the largest impact on renewable fuel demand, however, has been the increase in the cost of crude oil. In the last few years, both crude oil prices and crude oil price forecasts have increased dramatically. This has resulted in a large economic incentive for the use of ethanol and biodiesel. The Energy Information Administration (EIA) and others are currently projecting renewable fuel demand to exceed the minimum volumes required under the RFS program by a substantial margin. In this context, the effect of the RFS program is to provide a minimum level of demand to support ongoing investment in renewable fuel production. However, market demand for renewable fuels is expected to exceed the statutory minimums. We believe that the program we are finalizing today will operate effectively regardless of the level of renewable fuel use or market conditions in the energy sector. B. Requirements in the Energy Policy Act Section 1501 of the Energy Policy Act amended the Clean Air Act and provides the statutory basis for the RFS program in Section 211(o). It requires EPA to establish a program to ensure that the pool of gasoline sold in the contiguous 48 states contains specific volumes of renewable fuel for each calendar year starting with 2006. The required overall volumes for 2006 through 2012 are shown in Table I.B-1 below. Table I.B-1.-- Applicable Volumes of Renewable Fuel Under the RFS Program ------------------------------------------------------------------------ Billion Calendar year gallons 2006 ------------------------------------------------------------------------ 2006......................................................... 4.0 2007......................................................... 4.7 2008......................................................... 5.4 2009......................................................... 6.1 2010......................................................... 6.8 2011......................................................... 7.4 2012......................................................... 7.5 ------------------------------------------------------------------------ In order to ensure the use of the total renewable fuel volume specified for each year, the Agency must set a standard for each year representing the amount of renewable fuel that each refiner, blender, or importer must use, expressed as a percentage of gasoline sold or introduced into commerce. This yearly percentage standard is to be set at a level that will ensure that the total renewable fuel volumes shown in Table I.B-1 will be used based on gasoline volume projections provided by the Energy Information Administration (EIA). The standard for each year must be published in the Federal Register by November 30 of the previous year. Starting with 2013, EPA is required to establish the applicable national volume, based on the criteria contained in the statute, which must require at least the same overall percentage of renewable fuel use as was required in 2012. The Act defines renewable fuels primarily on the basis of the feedstock. In general, renewable fuel must be a motor vehicle fuel that is produced from plant or animal products or wastes, as opposed to fossil fuel sources. The Act [[Page 23904]] specifically identifies several types of motor vehicle fuels as renewable fuels, including cellulosic biomass ethanol, waste-derived ethanol, biogas, biodiesel, and blending components derived from renewable fuel. The standard set annually by EPA is to be a single percentage applicable to refiners, blenders, and importers, as appropriate. The percentage standard is used by obligated parties to determine a volume of renewable fuel that they are responsible for introducing into the domestic gasoline pool for the given year. The percentage standard must be adjusted such that it does not apply to multiple parties for the same volume of gasoline. The standard must also take into account the use of renewable fuel by small refineries that are exempt from the program until 2011. Under the Act, the required volumes in Table I.B-1 apply to the contiguous 48 states. However, Alaska and Hawaii can opt into the program, in which case the pool of gasoline used to calculate the standard, and the number of regulated parties, would change. In addition, other states can request a waiver of the RFS program under certain conditions, which would affect the national quantity of renewable fuel required under the program. The Act requires the Agency to promulgate a credit trading program for the RFS program whereby an obligated party may generate credits for over-complying with their annual obligation. The obligated party can then use these credits to meet their requirements in the following year or trade them for use by another obligated party. Thus the credit trading program allows obligated parties to comply in the most cost- effective manner by permitting them to generate, transfer, and use credits. The trading program also permits renewable fuels that are not blended into gasoline, such as biodiesel, to participate in the RFS program. The Agency must determine who can generate credits, under what conditions credits may be traded, how credits may be transferred from one party to another, and the appropriate value of credits for different types of renewable fuel. If a party is not able to generate or purchase sufficient credits to meet their annual obligation, they are allowed to carry over the deficit to the next annual compliance period, but must achieve full compliance in that following year. C. Development of the RFS Program Section 1501 of the Energy Act prescribed the RFS program, including the required total volumes, the timing of the obligation, the parties who are obligated to comply, the definition of renewable fuel, and the general framework for a credit trading program. Various aspects of the program require additional development by the Agency beyond the specifications in the Act. The Agency must develop regulations to ensure the successful implementation of the RFS program, based on the framework spelled out in the statute. Under the RFS program the trading provisions comprise an integral element of compliance. Many obligated parties do not have access to renewable fuels or the ability to blend them, and so must use credits to comply. The RFS trading program is also unique in that the parties liable for meeting the standard (refiners, importers, and blenders of gasoline) are not generally the parties who make the renewable fuels or blend them into gasoline. This creates the need for trading mechanisms that ensure that the means to demonstrate compliance will be readily available for use by obligated parties. The first step we took in developing the proposed program was to seek input and recommendations from the affected stakeholders. There were initially a wide range of thoughts and views on how to design the program. However, there was broad consensus that the program should satisfy a number of guiding principles, including, for example, that the compliance and trading program should provide certainty to the marketplace and minimize cost to the consumers; that the program should preserve existing business practices for the production, distribution, and use of both conventional and renewable fuels; that the program should be designed to accommodate all qualifying renewable fuels; that all renewable volumes produced are made available to obligated parties for compliance; and that the Agency should have the ability to easily verify compliance to ensure that the volume obligations are in fact met. These guiding principles and the comments we received on our Notice of Proposed Rulemaking (NPRM) helped to move us toward the program in today's final rule. We published a Notice of Proposed Rulemaking on September 22, 2006 (71 FR 55552) which described our proposed approach to compliance and the trading program, as well as preliminary analyses of the environmental and economic impacts of increased use of renewable fuels. The program finalized today largely mirrors the proposed program, with some revisions reflecting continued input from stakeholders during the formal comment period. II. Overview of the Program Today's action establishes the final requirements for the RFS program, as well as our assessment of the environmental and economic impacts of the nation's transition to greater use of renewable fuels. This section provides an overview of our program and renewable fuel impacts assessment. Sections III through V provide the details of the structure of the program, while Sections VI through X describe our assessment of the impacts on emissions of regulated pollutants and greenhouse gases, air quality, fossil fuel use, energy security, economic impacts in the agricultural sector, and cost from the expanded use of renewable fuels. A. Impacts of Increased Reliance on Renewable Fuels In a typical major rulemaking, EPA would conduct a full assessment of the economic and environmental impacts of the specific rule that it is promulgating. However, as discussed in Section I.A., the replacement of MTBE with ethanol and the extremely favorable economics for renewable fuels brought on by the rise in crude oil prices are causing renewable fuel use to far exceed the RFS requirements. Given these circumstances, it is important to assess the impacts of this larger increase in renewable use and the related changes occurring to gasoline. For this reason we have carried out an assessment of the economic and environmental impacts of the broader changes in fuel quality resulting from our nation's transition to greater utilization of renewable fuels, as opposed to an assessment that is limited to the RFS program itself. To carry out our analyses, we elected to use 2004 as the baseline from which to compare the impacts of expanded renewable use. We chose 2004 as a baseline primarily due to the fact that all the necessary refinery production data, renewable fuel production data, and fuel quality data were already in hand at the time we needed to begin the analysis. We did not use 2005 as a baseline year because 2005 may not be an appropriate year for comparison due to the extraordinary impacts of hurricanes Katrina and Rita on gasoline production and use. To assess the impacts of anticipated increases in renewable fuels, we elected to look at what they would be in 2012, the year the statutorily-mandated renewable fuel volumes will be fully phased in. By conducting the analysis in this manner, the impacts include not just the impact of expanded renewable fuel use by itself, but also the corresponding decrease in the use of MTBE, and the [[Page 23905]] potential for oxygenates to be removed from RFG due to the absence of the RFG oxygenate mandate. Since these three changes are all inextricably linked and are occurring simultaneously in the marketplace, evaluating the impacts in this manner is both necessary and appropriate. We evaluated the impacts of expanded renewable fuel use and the corresponding changes to the fuel supply on fuel costs, consumption of fossil fuels, and some of the economic impacts on the agricultural sector and energy security. We also evaluated the impacts on emissions, including greenhouse gas emissions that contribute to climate change, and the corresponding impacts on nationwide and regional air quality. Our analyses are summarized in this section. 1. Renewable Fuel Volume Scenarios Analyzed As shown in Table I.B-1, the Act stipulates that the nationwide volumes of renewable fuel required under the RFS program must be at least 4.0 billion gallons in 2006 and increase to 7.5 billion gallons in 2012. However, we expect that the volume of renewable fuel will actually exceed the required volumes by a significant margin. Based on economic modeling in 2006, EIA projected renewable fuel demand in 2012 of 9.6 billion gallons for ethanol, and approximately 300 million gallons for biodiesel using crude oil prices forecast at $48 per barrel.\2\ Therefore, in assessing the impacts of expanded use of renewable fuels, we evaluated two comparative scenarios, one representing the statutorily required minimum, and another reflecting the higher levels projected by EIA. Although the actual renewable fuel volumes produced in 2012 may differ from both the required and projected volumes, we believe that these two volume scenarios together represent a reasonable range for analysis purposes.\3\ --------------------------------------------------------------------------- \2\ $48/barrel from Annual Energy Outlook 2006, Energy Information Administration, Department of Energy. \3\ Subsequent to the analysis for this final rule, EIA has released its 2007 AEO forecasts for ethanol use, which increase the projection to 11.2 billion gallons by 2012. --------------------------------------------------------------------------- The Act also stipulates that at least 250 million gallons out of the total volume required in 2013 and beyond must meet the definition specified for cellulosic biomass ethanol. As described in Section VI, there are a number of companies already making plans to produce ethanol from cellulosic feedstocks and/or waste-derived energy sources that could potentially meet the definition of cellulosic biomass ethanol. Accordingly, we anticipate a ramp-up in production of cellulosic biomass ethanol production in the coming years, and for analysis purposes we have assumed that 250 million gallons of cellulosic biomass ethanol will be used in 2012. As discussed in Section VI, we chose 2004 to represent current baseline conditions. However, a direct comparison of the fuel quality impacts on emissions and air quality that are expected to occur once the RFS program is fully phased in required that changes in overall fuel volume, fleet characterization, and other factors be constant. Therefore, we created a 2012 reference case from the 2004 base case for use in the emissions and air quality analysis that maintained current fuel quality parameters while incorporating forecasted increases in vehicle miles traveled and changes in fleet demographics. The 2012 fuel reference case was developed by growing out the 2004 renewable fuel baseline according to EIA's forecasted energy growth rates between 2004 and 2012. For the analyses, we created two 2012 scenarios representing expanded renewable fuel production. The ``RFS Case'' represents volume levels designed to exactly meet the requirements of the RFS program, and includes the effects of higher credit values for cellulosic ethanol and biodiesel. Since higher credit values mean that one gallon of renewable fuel counts as more than one gallon for compliance purposes, less than 7.5 billion gallons of renewable fuel is needed to meet the 7.5 billion gallon statutory requirement, but credits equivalent to 7.5 billion gallons of renewable fuel would still be available for compliance purposes. The ``EIA Case'' represents volume levels based on EIA projections. A summary of the assumed renewable fuel volumes for the scenarios we evaluated is shown in Table II.A.1-1. Details of the calculations used to determine these volumes are given in Chapter 2 of the Regulatory Impact Analysis (RIA) in the docket for this rulemaking. Table II.A.1-1.--Renewable Fuel Volume Scenarios (Billion Gallons) ---------------------------------------------------------------------------------------------------------------- 2012 2004 base ----------------------------------- case Reference case RFS case EIA case ---------------------------------------------------------------------------------------------------------------- Corn-ethanol.................................................... 3.548 3.947 6.421 9.388 Cellulosic ethanol.............................................. 0 0 0.25 0.25 Biodiesel....................................................... 0.025 0.030 0.303 0.303 ----------------------------------------------- Total volume................................................ 3.573 3.977 6.974 9.941 ---------------------------------------------------------------------------------------------------------------- 2. Emissions We evaluated the impacts of increased use of ethanol and biodiesel on emissions and air quality in the U.S. relative to the reference case. We estimated that nationwide VOC emissions in 2012 from gasoline vehicles and equipment will increase by about 0.3% in the RFS Case and about 0.7% in the EIA Case. For NOX , we estimated that nationwide annual emissions in 2012 will increase about 0.9% for the RFS Case and 1.6% for the EIA Case. These increases are equivalent to an additional 18,000 to 43,000 tons of VOC per year, and an additional 23,000 to 40,000 tons of NOX per year. We also estimated the change in emissions in those areas which are projected to experience a significant change in ethanol use; i.e., where the market share of ethanol blends was projected to change by 50 percent or more. We focused on July emissions since these are most relevant to ozone formation and modeled 2015 because our ozone model is based upon a 2015 emissions inventory (though we would expect similar results in 2012). Finally, we developed separate estimates for RFG areas, low RVP areas (i.e., RVP standards less than 9.0 RVP), and conventional gasoline areas with a summer 9.0 RVP standard. For areas with a significant change in ethanol use, [[Page 23906]] compared to the reference case, VOC emissions in RFG areas increased by up to 2.3%, while NOX emissions increased by up to 1.6%. In low RVP areas, VOC emissions increased by up to 4.6%, while NOX emissions increased by up to 6.2%. In 9.0 RVP areas, VOC emissions increased by up to 4.6%, while NOX emissions increased by up to 7.3%. Unlike VOC and NOX , emissions of CO and benzene from gasoline vehicles and equipment were estimated to decrease in 2012 when the use of renewable fuels increased. Reductions in emissions of CO varied from 0.9% percent to as high as 2.5% percent for the nation as a whole, depending on the renewable fuel volume scenario. Similarly, benzene emissions from gasoline vehicles and equipment were estimated to be reduced from 1.8% to 4.0% percent. We do not have sufficient data to predict the effect of ethanol use on levels of either directly emitted particulate matter (PM) or secondarily formed PM. The increased NOX emissions are expected to lead to increases in secondary nitrate PM, but at the same time reduced aromatics resulting from ethanol blending are likely to lead to a decrease in secondary organic PM, as discussed in Section VIII.C. In addition, biodiesel use is expected to result in some reduction in direct PM emissions, though small in magnitude due to the relatively small volumes. The emission impact estimates described above are based on the best available data and models. However, it must be highlighted that most of the fuel effect estimates are based on very limited or old data which may no longer be reliable in estimating the emission impacts on vehicles in the 2012 fleet with advanced emission controls.\4\ As such, these emission estimates should be viewed as preliminary. EPA hopes to conduct significant new testing in order to better estimate the impact of fuel changes on emissions from both highway vehicles and nonroad equipment, including those fuel changes brought about by the use of renewable fuels. We hope to be able to incorporate the data from such additional testing into the analyses for other studies required by the Energy Act, and into a subsequent rule to set the RFS program standard for 2013 and later. --------------------------------------------------------------------------- \4\ Advanced emission controls include close-coupled, high- density catalysts and their associated electronic control systems for light-duty vehicles, and NOX adsorbers and PM traps for heavy-duty engines. --------------------------------------------------------------------------- We used the Ozone Response Surface Model (RSM) to estimate the impacts of the increased use of ethanol on ozone levels for both the RFS Case and the EIA Case. The ozone RSM approximates the effect of VOC and NOX emissions in a 37-state eastern area of the U.S. Using this model, we projected that the changes in VOC and NOX emissions could produce a very small increase in ambient ozone levels. On average, population-weighted ozone design value concentrations increased by about 0.05 ppb, which represents 0.06 percent of the standard. Even for areas expected to experience a significant increase in ethanol use, population-weighted ozone design value concentrations increased by only 0.15 to 0.18 ppb, about 0.2 percent of the standard. These ozone impacts do not consider the reductions in CO emissions mentioned above, or the change in the types of compounds comprising VOC emissions. Directionally, both of these factors may mitigate these ozone increases. We investigated several other issues related to emissions and air quality that could affect our estimates of the impacts of increased use of renewable fuels. These are discussed in Section VIII and in greater detail in the RIA. For instance, our current models assume that recent model year vehicles are insensitive to many fuel changes. However, a limited amount of new test data suggest that newer vehicles may be just as sensitive as older model year vehicles. Our sensitivity analysis suggests that if this is the case, VOC emissions could decrease by as much as 0.3%, instead of increasing by up to 0.7%. NOX emissions could increase by up to 4.2%, up from a 1.6% increase. We also evaluated the emissions from the production of both ethanol and biodiesel fuel and determined that they will also increase with increased use of these fuels. Nationwide, emissions related to the production and distribution of ethanol and biodiesel fuel are projected to be of the same order of magnitude as the emission impacts related to the use of these fuels in vehicles. Finally, a lack of emission data and atmospheric modeling tools prevented us from making specific projections of the impact of renewable fuels on ambient PM levels. As mentioned, however, ethanol use may affect ambient PM levels due to the increase in NOX emissions and the reduction in the aromatic content of gasoline, which should reduce aromatic VOC emissions. All of these issues will be the subject of further study and analysis in the future. 3. Economic Impacts In Section VII of this preamble, we estimate the cost of producing the extra volumes of renewable fuel anticipated through 2012. For corn ethanol, we estimate the per gallon cost of ethanol to range from $1.26 per gallon in 2012 (2004 dollars) in the RFS Case to $1.32 per gallon in the EIA Case. These costs take into account the cost of the feedstock (corn), plant equipment and operation and the value of any co-products (distiller's dried grain and solubles, for example). For biodiesel, we estimate the per gallon cost to be between $1.89 and $2.06 per gallon if produced using soy bean oil, and less if using yellow grease ($1.11 to $1.56 per gallon) or other relatively low cost or no-cost feedstocks. The price paid for ethanol, however, is reduced by the $0.51 per gallon federal tax subsidy as well as any state subsidies that might apply. Similarly the price paid for biodiesel is reduced due to the $1.00 per gallon federal tax subsidy biodiesel produced from soy bean oil and $0.50 per gallon tax subsidy for biodiesel produced from yellow grease. We also note that these costs represent the production cost of the fuel and not the market price. In recent years, the prices of ethanol and biodiesel have tended to track the prices of gasoline and diesel fuel, in some cases even exceeding those prices. These renewable fuels are then blended in gasoline and diesel fuel. While biodiesel is typically just blended with typical petroleum diesel, additional efforts are sometimes necessary and/or economically advantageous at the refiner level when adding ethanol to gasoline. For example, ethanol's high octane reduces the need for other octane enhancements by the refiner, whereas offsetting the volatility increase caused by ethanol may require removal of other highly volatile components. Section VII examines these fuel cost impacts and concludes that the net cost to society in 2012 in comparison to the reference case will range from an estimate of 0.5 cent to 1.0 cent per gallon of gasoline due to the increased use of renewable fuels and their displacement of MTBE. The resulting total nationwide costs in 2012 are $823 million per year for the RFS case and $1,739 million per year for the EIA case. This total excludes the effects of the 51 cent/gal federal excise tax credit as well as state tax subsidies. Our estimates of fuel impacts do not consider other societal benefits. For example, the displacement of petroleum-based fuel (largely imported) by renewable fuel (largely produced in the United States), should reduce our use of imported oil and fuel. We estimate that 95 percent of the lifecycle petroleum reductions resulting from the use of renewable fuel will be met [[Page 23907]] through reductions in net petroleum imports. In Section IX of this preamble we estimate the value of the decrease in imported petroleum at about $2.6 billion in 2012 for the RFS Case and $5.1 billion for the EIA Case, in comparison to our 2012 reference case. Total petroleum import expenditures in 2012 are projected to be about $698 billion. Furthermore, the above estimate on reduced petroleum import expenditures only partly assess the economic impacts. One of the effects of increased use of renewable fuel is that it diversifies the energy sources used in making transportation fuel. To the extent that diverse sources of fuel energy reduce the dependence on any one source, the risks, both financial as well as strategic, of a potential disruption in supply reflected in the price volatility of a particular energy source are reduced. As indicated in the proposal, EPA has worked with researchers at Oakridge National Laboratory to update a study they previously published and which has been used or cited in several government actions impacting oil consumption. A draft report is being made available in the docket at this time for further consideration. This analysis only looks at the impact of reduced petroleum imports on energy security. Other energy security issues could arise with the wider use of biofuels. For example, ethanol's production and costs are determined by the availability of corn as a feedstock. Corn production, in turn, is weather-dependent. Also, the use of biofuels may increase the use of natural gas. A full integrated analysis of the energy security implications of the wider use of biofuels has yet to be undertaken. While increased use of renewable fuel will reduce expenditures on imported oil, it will also increase expenditures on renewable fuels and in-turn, on the sources of those renewable fuels. The RFS program attempts to spur the increased use of renewable transportation fuels made principally from agricultural crops produced in the U.S. As a result, it is important to analyze the consequences of the transition to greater renewable fuel use in the U.S. agricultural sector. To perform this analysis, EPA selected the Forest and Agricultural Sector Optimization Model (FASOM) developed by Professor Bruce McCarl of Texas A&M University and others over the past thirty years. FASOM is a dynamic, nonlinear programming model of the agriculture and forestry sectors of the U.S. (For this analysis, we focused on the agriculture portion of the model.) Due to the greater demand for corn as a feedstock for ethanol production, corn prices are estimated to increase in 2012 by 18 cents per bushel for the RFS Case and 39 cents per bushel of corn for the EIA Case from $2.32 (in 2004 dollars) in the Reference Case. Although soybean prices are expected to rise slightly, the increased cost is likely due to higher input costs, such as land prices. We estimate a price increase of 18 cents (RFS Case) to 21 cents (EIA Case) per bushel of soybeans from a Reference Case price of $5.26 per bushel. These higher commodity prices are predicted to also result in higher U.S. farm income. Our analysis predicts that farm income will increase by $2.6 billion annually by 2012 for the RFS Case and $5.4 billion for the EIA Case, roughly a 5 to 10 percent increase. Due to higher corn prices, U.S. exports of corn are estimated to decrease by $573 million in the RFS Case and by $1.29 billion in the EIA Case in 2012. With higher commodity prices, we would expect some upward pressure on food costs as the higher cost of corn and soybeans is passed along to consumers. We estimate a relatively modest increase in annual household food costs associated with the higher price commanded by corn and soybeans. For the RFS Case, annual per capita wholesale food cost are estimated to increase by approximately $7, while the higher renewable fuel volumes anticipated by the EIA Case will result in a $12 annual increase in the per capita wholesale food cost. This equates to roughly a $2.1 to $3.6 billion increase in nationwide food costs in 2012. 4. Greenhouse Gases and Fossil Fuel Consumption There has been considerable interest in the impacts of fuel programs on greenhouse gases implicated in climate change and on fossil fuel consumption due largely to concerns about dependence on foreign sources of petroleum. Therefore, in this rulemaking we have undertaken an analysis of the greenhouse gas and fossil fuel consumption impacts of a transition to greater renewable fuel use. This is the first analysis of its kind in a high profile rule, and as such it may guide future work in this area. As a result of the transition to greater renewable fuel use, some petroleum-based gasoline and diesel will be directly replaced by renewable fuels. Therefore, consumption of petroleum-based fuels will be lower than it would be if no renewable fuels were used in transportation vehicles. However, a true measure of the impact of greater use of renewable fuels on petroleum use, and indeed on the use of all fossil fuels, accounts not only for the direct use and combustion of the finished fuel in a vehicle or engine, but also includes the petroleum use associated with production and transportation of that fuel. For instance, fossil fuels are used in producing and transporting renewable feedstocks such as plants or animal byproducts, in converting the renewable feedstocks into renewable fuel, and in transporting and blending the renewable fuels for consumption as motor vehicle fuel. Likewise, fossil fuels are used in the production and transportation of petroleum and its finished products. In order to estimate the true impacts of increases in renewable fuel use on fossil fuel use, we must take these steps into account. Such analyses are termed lifecycle analyses. There is also no consensus on the most appropriate approach for conducting such lifecycle analyses. We have chosen to base our lifecycle analysis on Argonne National Laboratory's GREET model for the reasons described in Section IX. However, there are other lifecycle models in use. The choice of model inputs and assumptions all have a bearing on the results of lifecycle analyses, and many of these assumptions remain the subject of debate among researchers. With these caveats, we compared the lifecycle impacts of renewable fuels to the petroleum-based gasoline and diesel fuels that they replace. This analysis allowed us to estimate not only the overall impacts of renewable fuel use on petroleum use, but also on emissions of greenhouse gases such as carbon dioxide from all fossil fuels. In comparison to the reference case, we estimate that the increased use of renewable fuels in the RFS and EIA cases will reduce transportation sector petroleum consumption by about 0.8 and 1.6 percent, respectively, in the transportation sector in 2012. This is equivalent to 2.0-3.9 billion gallons of petroleum in 2012. We also estimated that greenhouse gases from the transportation sector will be reduced by about 0.4 and 0.6 percent for the RFS and EIA cases, respectively, equivalent to about 8-13 million metric tons. These reductions are projected to continue to increase beyond 2012 since crude oil prices have been projected by EIA to continue to be high relative to the prices of the 1990's, and as a result there is expected to be an economic advantage to using renewable fuels beyond 2012. These greenhouse gas emission reductions are also highly dependent on the expectation that the majority of the future ethanol use will be produced [[Page 23908]] from corn. If advances in the technology for converting cellulosic feedstocks into ethanol allow cellulosic ethanol use to exceed the levels assumed in our analysis, then even greater greenhouse gas reductions may result.\5\ --------------------------------------------------------------------------- \5\ Cellulosic ethanol is estimated to provide a comparable petroleum displacement as corn derived ethanol on a per gallon basis, though the impacts on total energy and greenhouse gas emissions differ. --------------------------------------------------------------------------- 5. Post 2012 RFS Standards The Energy Policy Act of 2005, in addition to setting the standards to be adopted through 2012, requires EPA, in coordination with the Departments of Agriculture and Energy, to determine the applicable volume for the renewable fuel standard for the year 2013 and subsequent calendar years. This determination is to be based on a review of the program's implementation in 2006 through 2012 as well as review of the impact of renewable fuels on the environment, air quality, energy security, job creation, rural economic development and the expected annual rate of renewable fuel production, including production of cellulosic ethanol. In today's final rulemaking, we do not suggest any specific renewable fuel volumes for 2013 and beyond that may be appropriate under the statutory criteria. However, we would note that the President, in his State of the Union address this January, set specific goals reducing the amount of gasoline usage in the United States by 20 percent in the next 10 years. This would be accomplished by reforming and modernizing fuel economy standards for cars and setting mandatory fuels standard equivalent to requiring use of 35 billion gallons of renewable and alternative \6\ fuels in 2017. Therefore, given the necessity to address the post-2013 period under the Energy Act and the prospect of continued attention by the Administration and Congress to this issue, EPA will continue to devote attention to the issue of renewable and alternative fuel volumes in the post-2013 period. --------------------------------------------------------------------------- \6\ While the RFS program is specific to renewable fuels, the president's goal of 35 billion gallons by 2017 would include not only renewable fuels, but also other types of alternatives fuels. --------------------------------------------------------------------------- From a program structure perspective, we believe that what we are putting in place today will remain useful as part of a 2013 and later program. For example, EPA considers that the identification of renewable fuel via a Renewable Identification Number (RIN), the determination of liable parties, the averaging, banking and trading system and the recordkeeping and reporting system would all be elements of a post-2013 program. Depending on the structure of any final legislation approved by Congress and signed into law, such elements could also be incorporated into an expanded renewable and alternative fuels program. B. Program Structure The RFS program being finalized today requires refiners, importers, and blenders (other than oxygenate blenders) to show that a required volume of renewable fuel is used in gasoline. The required volume is determined by multiplying their annual gasoline production by a percentage standard specified by EPA. Compliance is demonstrated through the acquisition of unique Renewable Identification Numbers
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