Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program, 14670-14904 [2010-3851]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 75, Number 58 (Friday, March 26, 2010)]
[Rules and Regulations]
[Pages 14670-14904]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-3851]



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Part II

Book 2 of 2 Books

Pages 14669-15320





Environmental Protection Agency





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40 CFR Part 80



Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel 
Standard Program; Final Rule

Federal Register / Vol. 75, No. 58 / Friday, March 26, 2010 / Rules 
and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2005-0161; FRL-9112-3]
RIN 2060-A081


Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel 
Standard Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under the Clean Air Act Section 211(o), as amended by the 
Energy Independence and Security Act of 2007 (EISA), the Environmental 
Protection Agency is required to promulgate regulations implementing 
changes to the Renewable Fuel Standard program. The revised statutory 
requirements specify the volumes of cellulosic biofuel, biomass-based 
diesel, advanced biofuel, and total renewable fuel that must be used in 
transportation fuel. This action finalizes the regulations that 
implement the requirements of EISA, including the cellulosic, biomass-
based diesel, advanced biofuel, and renewable fuel standards that will 
apply to all gasoline and diesel produced or imported in 2010. The 
final regulations make a number of changes to the current Renewable 
Fuel Standard program while retaining many elements of the compliance 
and trading system already in place. This final rule also implements 
the revised statutory definitions and criteria, most notably the new 
greenhouse gas emission thresholds for renewable fuels and new limits 
on renewable biomass feedstocks. This rulemaking marks the first time 
that greenhouse gas emission performance is being applied in a 
regulatory context for a nationwide program. As mandated by the 
statute, our greenhouse gas emission assessments consider the full 
lifecycle emission impacts of fuel production from both direct and 
indirect emissions, including significant emissions from land use 
changes. In carrying out our lifecycle analysis we have taken steps to 
ensure that the lifecycle estimates are based on the latest and most 
up-to-date science. The lifecycle greenhouse gas assessments reflected 
in this rulemaking represent significant improvements in analysis based 
on information and data received since the proposal. However, we also 
recognize that lifecycle GHG assessment of biofuels is an evolving 
discipline and will continue to revisit our lifecycle analyses in the 
future as new information becomes available. EPA plans to ask the 
National Academy of Sciences for assistance as we move forward. Based 
on current analyses we have determined that ethanol from corn starch 
will be able to comply with the required greenhouse gas (GHG) threshold 
for renewable fuel. Similarly, biodiesel can be produced to comply with 
the 50% threshold for biomass-based diesel, sugarcane with the 50% 
threshold for advanced biofuel and multiple cellulosic-based fuels with 
their 60% threshold. Additional fuel pathways have also been determined 
to comply with their thresholds. The assessment for this rulemaking 
also indicates the increased use of renewable fuels will have important 
environmental, energy and economic impacts for our Nation.

DATES: This final rule is effective on July 1, 2010, and the percentage 
standards apply to all gasoline and diesel produced or imported in 
2010. The incorporation by reference of certain publications listed in 
the rule is approved by the Director of the Federal Register as of July 
1, 2010.

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 
https://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 https://www.regulations.gov or in hard copy at 
the Air and Radiation Docket and Information Center, EPA/DC, EPA West, 
Room 3334, 1301 Constitution Ave., NW., Washington, DC. The Public 
Reading Room 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 Air 
Docket is (202) 566-1742.

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; Fax number: 734-214-4816; E-mail 
address: macallister.julia@epa.gov, or Assessment and Standards 
Division Hotline; telephone number (734) 214-4636; E-mail address 
asdinfo@epa.gov.

SUPPLEMENTARY INFORMATION:

General Information

I. Does This Final Rule Apply to Me?

    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 
and biodiesel. Regulated categories include:

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                                           NAICS \1\
               Category                      codes       SIC \2\ codes                     Examples of potentially regulated 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..............................          454319            5989  Other fuel dealers
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\1\ North American Industry Classification System (NAICS)
\2\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
final action. This table lists the types of entities that EPA is now 
aware could potentially be regulated by this final action. Other types 
of entities not listed in the table could also be regulated. To 
determine whether your activities would be regulated by this final 
action, you should carefully examine the applicability criteria in 40 
CFR part 80. If you have any questions regarding the applicability of 
this final action to a

[[Page 14671]]

particular entity, consult the person listed in the preceding section.

Outline of This Preamble

I. Executive Summary
    A. Summary of New Provisions of the RFS Program
    1. Required Volumes of Renewable Fuel
    2. Standards for 2010 and Effective Date for New Requirements
    a. 2010 Standards
    b. Effective Date
    3. Analysis of Lifecycle Greenhouse Gas Emissions and Thresholds 
for Renewable Fuels
    a. Background and Conclusions
    b. Fuel Pathways Considered and Key Model Updates Since the 
Proposal
    c. Consideration of Fuel Pathways Not Yet Modeled
    4. Compliance with Renewable Biomass Provision
    5. EPA-Moderated Transaction System
    6. Other Changes to the RFS Program
    B. Impacts of Increasing Volume Requirements in the RFS2 Program
II. Description of the Regulatory Provisions
    A. Renewable Identification Numbers (RINs)
    B. New Eligibility Requirements for Renewable Fuels
    1. Changes in Renewable Fuel Definitions
    a. Renewable Fuel
    b. Advanced Biofuel
    c. Cellulosic Biofuel
    d. Biomass-Based Diesel
    e. Additional Renewable Fuel
    f. Cellulosic Diesel
    2. Lifecycle GHG Thresholds
    3. Renewable Fuel Exempt From 20 Percent GHG Threshold
    a. General Background of the Exemption Requirement
    b. Definition of Commenced Construction
    c. Definition of Facility Boundary
    d. Proposed Approaches and Consideration of Comments
    i. Comments on the Proposed Basic Approach
    ii. Comments on the Expiration of Grandfathered Status
    e. Final Grandfathering Provisions
    i. Increases in Volume of Renewable Fuel Produced at 
Grandfathered Facilities Due to Expansion
    ii. Replacements of Equipment
    iii. Registration, Recordkeeping and Reporting
    4. New Renewable Biomass Definition and Land Restrictions
    a. Definitions of Terms
    i. Planted Crops and Crop Residue
    ii. Planted Trees and Tree Residue
    iii. Slash and Pre-Commercial Thinnings
    iv. Biomass Obtained From Certain Areas at Risk From Wildfire
    v. Algae
    b. Implementation of Renewable Biomass Requirements
    i. Ensuring That RINs Are Generated Only For Fuels Made From 
Renewable Biomass
    ii. Whether RINs Must Be Generated For All Qualifying Renewable 
Fuel
    c. Implementation Approaches for Domestic Renewable Fuel
    i. Recordkeeping and Reporting for Feedstocks
    ii. Approaches for Foreign Producers of Renewable Fuel
    (1) RIN-Generating importers
    (2) RIN-Generating foreign producers
    iii. Aggregate Compliance Approach for Planted Crops and Crop 
Residue From Agricultural Land
    (1) Analysis of Total Agricultural Land in 2007
    (2) Aggregate Agricultural Land Trends Over Time
    (3) Aggregate Compliance Determination
    d. Treatment of Municipal Solid Waste (MSW)
    C. Expanded Registration Process for Producers and Importers
    1. Domestic Renewable Fuel Producers
    2. Foreign Renewable Fuel Producers
    3. Renewable Fuel Importers
    4. Process and Timing
    D. Generation of RINs
    1. Equivalence Values
    2. Fuel Pathways and Assignment of D Codes
    a. Producers
    b. Importers
    c. Additional Provisions for Foreign Producers
    3. Facilities With Multiple Applicable Pathways
    4. Facilities That Co-Process Renewable Biomass and Fossil Fuels
    5. Facilities That Process Municipal Solid Waste
    6. RINless Biofuel
    E. Applicable Standards
    1. Calculation of Standards
    a. How Are the Standards Calculated?
    b. Standards for 2010
    2. Treatment of Biomass-Based Diesel in 2009 and 2010
    a. Shift in 2009 Biomass-Based Diesel Compliance Demonstration 
to 2010
    b. Treatment of Deficit Carryovers, RIN Rollover, and RIN Valid 
Life For Adjusted 2010 Biomass-Based Diesel Requirement
    3. Future Standards
    F. Fuels That Are Subject to the Standards
    1. Gasoline
    2. Diesel
    3. Other Transportation Fuels
    G. Renewable Volume Obligations (RVOs)
    1. Designation of Obligated Parties
    2. Determination of RVOs Corresponding to the Four Standards
    3. RINs Eligible To Meet Each RVO
    4. Treatment of RFS1 RINs Under RFS2
    a. Use of RFS1 RINs To Meet Standards Under RFS2
    b. Deficit Carryovers From the RFS1 Program to RFS2
    H. Separation of RINs
    1. Nonroad
    2. Heating Oil and Jet Fuel
    3. Exporters
    4. Requirement to Transfer RINs With Volume
    5. Neat Renewable Fuel and Renewable Fuel Blends Designated as 
Transportation Fuel, Heating Oil, or Jet Fuel
    I. Treatment of Cellulosic Biofuel
    1. Cellulosic Biofuel Standard
    2. EPA Cellulosic Biofuel Waiver Credits for Cellulosic Biofuel
    3. Application of Cellulosic Biofuel Waiver Credits
    J. Changes to Recordkeeping and Reporting Requirements
    1. Recordkeeping
    2. Reporting
    3. Additional Requirements for Producers of Renewable Natural 
Gas, Electricity, and Propane
    4. Attest Engagements
    K. Production Outlook Reports
    L. What Acts Are Prohibited and Who Is Liable for Violations?
III. Other Program Changes
    A. The EPA Moderated Transaction System (EMTS)
    1. Need for the EPA Moderated Transaction System
    2. Implementation of the EPA Moderated Transaction System
    3. How EMTS Will Work
    4. A Sample EMTS Transaction
    B. Upward Delegation of RIN-Separating Responsibilities
    C. Small Producer Exemption
    D. 20% Rollover Cap
    E. Small Refinery and Small Refiner Flexibilities
    1. Background--RFS1
    a. Small Refinery Exemption
    b. Small Refiner Exemption
    2. Statutory Options for Extending Relief
    3. The DOE Study/DOE Study Results
    4. Ability To Grant Relief Beyond 211(o)(9)
    5. Congress-Requested Revised DOE Study
    6. What We're Finalizing
    a. Small Refinery and Small Refiner Temporary Exemptions
    b. Case-by-Case Hardship for Small Refineries and Small Refiners
    c. Program Review
    7. Other Flexibilities Considered for Small Refiners
    a. Extensions of the RFS1 Temporary Exemption for Small Refiners
    b. Phase-in
    c. RIN-Related Flexibilities
    F. Retail Dispenser Labeling for Gasoline With Greater Than 10 
Percent Ethanol
    G. Biodiesel Temperature Standardization
IV. Renewable Fuel Production and Use
    A. Overview of Renewable Fuel Volumes
    1. Reference Cases
    2. Primary Control Case
    a. Cellulosic Biofuel
    b. Biomass-Based Diesel
    c. Other Advanced Biofuel
    d. Other Renewable Fuel
    3. Additional Control Cases Considered
    B. Renewable Fuel Production
    1. Corn/Starch Ethanol
    a. Historic/Current Production
    b. Forecasted Production Under RFS2
    2. Imported Ethanol
    3. Cellulosic Biofuel
    a. Current State of the Industry
    b. Setting the 2010 Cellulosic Biofuel Standard
    c. Current Production Outlook for 2011 and Beyond
    d. Feedstock Availability
    i. Urban Waste
    ii. Agricultural and Forestry Residues
    iii. Dedicated Energy Crops

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    iv. Summary of Cellulosic Feedstocks for 2022
    4. Biodiesel & Renewable Diesel
    a. Historic and Projected Production
    i. Biodiesel
    ii. Renewable Diesel
    b. Feedstock Availability
    C. Biofuel Distribution
    1. Biofuel Shipment to Petroleum Terminals
    2. Petroleum Terminal Accommodations
    3. Potential Need for Special Blendstocks at Petroleum Terminals 
for E85
    4. Need for Additional E85 Retail Facilities
    D. Ethanol Consumption
    1. Historic/Current Ethanol Consumption
    2. Increased Ethanol Use Under RFS2
    a. Projected Gasoline Energy Demand
    b. Projected Growth in Flexible Fuel Vehicles
    c. Projected Growth in E85 Access
    d. Required Increase in E85 Refueling Rates
    e. Market Pricing of E85 Versus Gasoline
    3. Consideration of >10% Ethanol Blends
V. Lifecycle Analysis of Greenhouse Gas Emissions
    A. Introduction
    1. Open and Science-Based Approach to EPA's Analysis
    2. Addressing Uncertainty
    B. Methodology
    1. Scope of Analysis
    a. Inclusion of Indirect Land Use Change
    b. Models Used
    c. Scenarios Modeled
    2. Biofuel Modeling Framework & Methodology for Lifecycle 
Analysis Components
    a. Feedstock Production
    i. Domestic Agricultural Sector Impacts
    ii. International Agricultural Sector Impacts
    b. Land Use Change
    i. Amount of Land Area Converted and Where
    ii. Type of Land Converted
    iii. GHG Emissions Associated With Conversion
    (1) Domestic Emissions
    (2) International Emissions
    iv. Timeframe of Emission Analysis
    v. GTAP and Other Models
    c. Feedstock Transport
    d. Biofuel Processing
    e. Fuel Transportation
    f. Vehicle Tailpipe Emissions
    3. Petroleum Baseline
    C. Threshold Determination and Assignment of Pathways
    D. Total GHG Reductions
    E. Effects of GHG Emission Reductions and Changes in Global 
Temperature and Sea Level
VI. How Would the Proposal Impact Criteria and Toxic Pollutant 
Emissions and Their Associated Effects?
    A. Overview of Impacts
    B. Fuel Production & Distribution Impacts of the Proposed 
Program
    C. Vehicle and Equipment Emission Impacts of Fuel Program
    D. Air Quality Impacts
    1. Particulate Matter
    a. Current Levels
    b. Projected Levels Without RFS2 Volumes
    c. Projected Levels With RFS2 Volumes
    2. Ozone
    a. Current Levels
    b. Projected Levels Without RFS2 Volumes
    c. Projected Levels With RFS2 Volumes
    3. Air Toxics
    a. Current Levels
    b. Projected Levels
    i. Acetaldehyde
    ii. Formaldehyde
    iii. Ethanol
    iv. Benzene
    v. 1,3-Butadiene
    vi. Acrolein
    vii. Population Metrics
    4. Nitrogen and Sulfur Deposition
    a. Current Levels
    b. Projected Levels
    E. Health Effects of Criteria and Air Toxics Pollutants
    1. Particulate Matter
    a. Background
    b. Health Effects of PM
    2. Ozone
    a. Background
    b. Health Effects of Ozone
    3. NOX and SOX
    a. Background
    b. Health Effects of NOX
    c. Health Effects of SOX
    4. Carbon Monoxide
    5. Air Toxics
    a. Acetaldehyde
    b. Acrolein
    c. Benzene
    d. 1,3-Butadiene
    e. Ethanol
    f. Formaldehyde
    g. Peroxyacetyl Nitrate (PAN)
    h. Naphthalene
    i. Other Air Toxics
    F. Environmental Effects of Criteria and Air Toxic Pollutants
    1. Visibility
    2. Atmospheric Deposition
    3. Plant and Ecosystem Effects of Ozone
    4. Environmental Effects of Air Toxics
VII. Impacts on Cost of Renewable Fuels, Gasoline, and Diesel
    A. Renewable Fuel Production Costs
    1. Ethanol Production Costs
    a. Corn Ethanol
    b. Cellulosic Ethanol
    i. Feedstock Costs
    ii. Production Costs for Cellulosic Biofuels
    c. Imported Sugarcane Ethanol
    2. Biodiesel and Renewable Diesel Production Costs
    a. Biodiesel
    b. Renewable Diesel
    B. Biofuel Distribution Costs
    1. Ethanol Distribution Costs
    2. Cellulosic Distillate and Renewable Diesel Distribution Costs
    3. Biodiesel Distribution Costs
    C. Reduced U.S. Refining Demand
    D. Total Estimated Cost Impacts
    1. Refinery Modeling Methodology
    2. Overall Impact on Fuel Cost
VIII. Economic Impacts and Benefits
    A. Agricultural and Forestry Impacts
    1. Biofuel Volumes Modeled
    2. Commodity Price Changes
    3. Impacts on U.S. Farm Income
    4. Commodity Use Changes
    5. U.S. Land Use Changes
    6. Impact on U.S. Food Prices
    7. International Impacts
    B. Energy Security Impacts
    1. Implications of Reduced Petroleum Use on U.S. Imports
    2. Energy Security Implications
    a. Effect of Oil Use on Long-Run Oil Price, U.S. Import Costs, 
and Economic Output
    b. Short-Run Disruption Premium From Expected Costs of Sudden 
Supply Disruptions
    c. Costs of Existing U.S. Energy Security Policies
    3. Combining Energy Security and Other Benefits
    4. Total Energy Security Benefits
    C. Benefits of Reducing GHG Emissions
    1. Introduction
    2. Derivation of Interim Social Cost of Carbon Values
    3. Application of Interim SCC Estimates to GHG Emissions 
Reductions
    D. Criteria Pollutant Health and Environmental Impacts
    1. Overview
    2. Quantified Human Health Impacts
    3. Monetized Impacts
    4. What Are the Limitations of the Health Impacts Analysis?
    E. Summary of Costs and Benefits
IX. Impacts on Water
    A. Background
    1. Agriculture and Water Quality
    2. Ecological Impacts
    3. Impacts to the Gulf of Mexico
    B. Upper Mississippi River Basin Analysis
    1. SWAT Model
    2. AEO 2007 Reference Case
    3. Reference Cases and RFS2 Control Case
    4. Case Study
    5. Sensitivity Analysis
    C. Additional Water Issues
    1. Chesapeake Bay Watershed
    2. Ethanol Production and Distribution
    a. Production
    b. Distillers Grain With Solubles
    c. Ethanol Leaks and Spills From Fueling Stations
    3. Biodiesel Plants
    4. Water Quantity
    5. Drinking Water
X. Public Participation
XI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    1. Overview
    2. Background
    3. Summary of Potentially Affected Small Entities
    4. Reporting, Recordkeeping, and Compliance
    5. Related Federal Rules
    6. Steps Taken To Minimize the Significant Economic Impact on 
Small Entities
    a. Significant Panel Findings
    b. Outreach With Small Entities (and the Panel Process)
    c. Panel Recommendations, Proposed Provisions, and Provisions 
Being Finalized
    i. Delay in Standards
    ii. Phase-in
    iii. RIN-Related Flexibilities
    iv. Program Review

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    v. Extensions of the Temporary Exemption Based on a Study of 
Small Refinery Impacts
    vi. Extensions of the Temporary Exemption Based on 
Disproportionate Economic Hardship
    7. 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 Risks 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
XII. Statutory Provisions and Legal Authority

I. Executive Summary

    Through this final rule, the U.S. Environmental Protection Agency 
is revising the National Renewable Fuel Standard program to implement 
the requirements of the Energy Independence and Security Act of 2007 
(EISA). EISA made significant changes to both the structure and the 
magnitude of the renewable fuel program created by the Energy Policy 
Act of 2005 (EPAct). The EISA fuel program, hereafter referred to as 
RFS2, mandates the use of 36 billion gallons of renewable fuel by 
2022--a nearly five-fold increase over the highest volume specified by 
EPAct. EISA also established four separate categories of renewable 
fuels, each with a separate volume mandate and each with a specific 
lifecycle greenhouse gas emission threshold. The categories are 
renewable fuel, advanced biofuel, biomass-based diesel, and cellulosic 
biofuel. There is a notable increase in the mandate for cellulosic 
biofuels in particular. EISA increased the cellulosic biofuel mandate 
to 16 billion gallons by 2022, representing the bulk of the increase in 
the renewable fuels mandate.
    EPA's proposed rule sought comment on a multitude of issues, 
ranging from how to interpret the new definitions for renewable biomass 
to the Agency's proposed methodology for conducting the greenhouse gas 
lifecycle assessments required by EISA. The decisions presented in this 
final rule are heavily informed by the many public comments we received 
on the proposed rule. In addition, and as with the proposal, we sought 
input from a wide variety of stakeholders. The Agency has had multiple 
meetings and discussions with renewable fuel producers, technology 
companies, petroleum refiners and importers, agricultural associations, 
lifecycle experts, environmental groups, vehicle manufacturers, states, 
gasoline and petroleum marketers, pipeline owners and fuel terminal 
operators. We also have worked closely with other Federal agencies and 
in particular with the Departments of Energy and Agriculture.
    This section provides an executive summary of the final RFS2 
program requirements that EPA is implementing as a result of EISA. The 
RFS2 program will replace the RFS1 program promulgated on May 1, 2007 
(72 FR 23900).\1\ Details of the final requirements can be found in 
Sections II and III, with certain lifecycle aspects detailed in Section 
V.
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    \1\ To meet the requirements of EPAct, EPA had previously 
adopted a limited program that applied only to calendar year 2006. 
The RFS1 program refers to the general program adopted in the May 
2007 rulemaking.
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    This section also provides a summary of EPA's assessment of the 
environmental and economic impacts of the use of higher renewable fuel 
volumes. Details of these analyses can be found in Sections IV through 
IX and in the Regulatory Impact Analysis (RIA).

A. Summary of New Provisions of the RFS Program

    Today's notice establishes new regulatory requirements for the RFS 
program that will be implemented through a new subpart M to 40 CFR part 
80. EPA is maintaining several elements of the RFS1 program such as 
regulations governing the generation, transfer, and use of Renewable 
Identification Numbers (RINs). At the same time, we are making a number 
of updates to reflect the changes brought about by EISA
1. Required Volumes of Renewable Fuel
    The RFS program is intended to require a minimum volume of 
renewable fuel to be used each year in the transportation sector. In 
response to EPAct 2005, under RFS1 the required volume was 4.0 billion 
gallons in 2006, ramping up to 7.5 billion gallons by 2012. Starting in 
2013, the program also required that the total volume of renewable fuel 
contain at least 250 million gallons of fuel derived from cellulosic 
biomass.
    In response to EISA, today's action makes four primary changes to 
the volume requirements of the RFS program. First, it substantially 
increases the required volumes and extends the timeframe over which the 
volumes ramp up through at least 2022. Second, it divides the total 
renewable fuel requirement into four separate categories, each with its 
own volume requirement. Third, it requires, with certain exceptions 
applicable to existing facilities, that each of these mandated volumes 
of renewable fuels achieve certain minimum thresholds of GHG emission 
performance. Fourth, it requires that all renewable fuel be made from 
feedstocks that meet the new definition of renewable biomass including 
certain land use restrictions. The volume requirements in EISA are 
shown in Table I.A.1-1.
BILLING CODE 6560-50-P

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[GRAPHIC] [TIFF OMITTED] TR26MR10.414

BILLING CODE 6560-50-C

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    As shown in the table, the volume requirements are not exclusive, 
and generally result in nested requirements. Any renewable fuel that 
meets the requirement for cellulosic biofuel or biomass-based diesel is 
also valid for meeting the advanced biofuel requirement. Likewise, any 
renewable fuel that meets the requirement for advanced biofuel is also 
valid for meeting the total renewable fuel requirement. See Section V.C 
for further discussion of which specific types of fuel may qualify for 
the four categories shown in Table I.A.1-1.
2. Standards for 2010 and Effective Date for New Requirements
    While EISA established the renewable fuel volumes shown in Table 
I.A.1-1, it also requires that the Administrator set the standards 
based on these volumes each November for the following year based in 
part on information provided from the Energy Information Agency (EIA). 
In the case of the cellulosic biofuel standard, section 211(o)(7)(D) of 
EISA specifically requires that the standard be set based on the volume 
projected to be available during the following year. If the volume is 
lower than the level shown in Table I.A.1-1, then EISA allows the 
Administrator to also lower the advanced biofuel and total renewable 
fuel standards each year accordingly. Given the implications of these 
standards and the necessary judgment that can't be reduced to a formula 
akin to the RFS1 regulations, we believe it is appropriate to set the 
standards through a notice-and-comment rulemaking process. Thus, for 
future standards, we intend to issue an NPRM by summer and a final rule 
by November 30 of each year in order to determine the appropriate 
standards applicable in the following year. However, in the case of the 
2010 standards, we are finalizing them as part of today's action.
a. 2010 Standards
    While we proposed that the cellulosic biofuel standard would be set 
at the EISA-specified level of 100 million gallons for 2010, based on 
analysis of information available at this time, we no longer believe 
the full volume can be met. Since the proposal, we have had detailed 
discussions with over 30 companies that are in the business of 
developing cellulosic biofuels and cellulosic biofuel technology. Based 
on these discussions, we have found that many of the projects that 
served as the basis for the proposal have been put on hold, delayed, or 
scaled back. At the same time, there have been a number of additional 
projects that have developed and are moving forward. As discussed in 
Section IV.B.3, the timing for many of the projects indicates that 
while few will be able to provide commercial volumes for 2010, an 
increasing number will come on line in 2011, 2012, and 2013. The 
success of these projects is then expected to accelerate growth of the 
cellulosic biofuel industry out into the future. EIA provided us with a 
projection on October 29, 2009 of 5.04 million gallons (6.5 million 
ethanol-equivalent gallons) of cellulosic biofuel production for 2010. 
While our company-by-company assessment varies from EIA's, as described 
in Section IV.B.3., and actual cellulosic production volume during 2010 
will be a function of developments over the course of 2010, we 
nevertheless believe that 5 million gallons (6.5 million ethanol 
equivalent) represents a reasonable, yet achievable level for the 
cellulosic standard for 2010. While this is lower than the level 
specified in EISA, no change to the advanced biofuel and total 
renewable fuel standards is warranted. With the inclusion of an energy-
based Equivalence Value for biodiesel and renewable diesel, 2010 
compliance with the biomass-based diesel standard will be more than 
enough to ensure compliance with the advanced biofuel standard for 
2010.
    Today's rule also includes special provisions to account for the 
2009 biomass-based diesel volume requirements in EISA. As described in 
the NPRM, in November 2008 we used the new total renewable fuel volume 
of 11.1 billion gallons from EISA as the basis for the 2009 total 
renewable fuel standard that we issued under the RFS1 regulations.\2\ 
While this approach ensured that the total mandated renewable fuel 
volume required by EISA for 2009 was used, the RFS1 regulatory 
structure did not provide a mechanism for implementing the 0.5 billion 
gallon requirement for biomass-based diesel nor the 0.6 billion gallon 
requirement for advanced biofuel. As we proposed, and as is described 
in more detail in Section II.E.2, we are addressing this issue in 
today's rule by combining the 2010 biomass-based diesel requirement of 
0.65 billion gallons with the 2009 biomass based diesel requirement of 
0.5 billion gallons to require that obligated parties meet a combined 
2009/2010 requirement of 1.15 billion gallons by the end of the 2010 
compliance year. No similar provisions are required in order to fulfill 
the 2009 advanced biofuel volume mandate.
---------------------------------------------------------------------------

    \2\ 73 FR 70643, November 21, 2008
---------------------------------------------------------------------------

    The resulting 2010 standards are shown in Table I.A.2-1. These 
standards represent the fraction of a refiner's or importer's gasoline 
and diesel volume which must be renewable fuel. Additional discussion 
of the 2010 standards can be found in Section II.E.1.b.

                    Table I.A.2-1--Standards for 2010
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel.........................................       0.004%
Biomass-based diesel.......................................        1.10%
Advanced biofuel...........................................        0.61%
Renewable fuel.............................................        8.25%
------------------------------------------------------------------------

b. Effective Date
    Under CAA section 211(o) as modified by EISA, EPA is required to 
revise the RFS1 regulations within one year of enactment, or December 
19, 2008. Promulgation by this date would have been consistent with the 
revised volume requirements shown in Table I.A.1-1 that begin in 2009 
for certain categories of renewable fuel. As described in the NPRM, we 
were not able to promulgate final RFS2 program requirements by December 
19, 2008.
    Under today's rule, the transition from using the RFS1 regulatory 
provisions regarding registration, RIN generation, reporting, and 
recordkeeping to using comparable provisions in this RFS2 rule will 
occur on July 1, 2010. This is the start of the 1st quarter following 
completion of the statutorily required 60-day Congressional Review 
period for such a rulemaking as this. This will provide adequate lead 
time for all parties to transition to the new regulatory requirements, 
including additional time to prepare for RFS2 implementation for those 
entities who may find it helpful, especially those covered by the RFS 
program for the first time. In addition, making the transition at the 
end of the quarter will help simplify the recordkeeping and reporting 
transition to RFS2. To facilitate the volume obligations being based on 
the full year's gasoline and diesel production, and to enable the 
smooth transition from the RFS1 to RFS2 regulatory provisions, 
Renewable Identification Numbers (RINs--which are used in the program 
for both credit trading and for compliance demonstration) that were 
generated under the RFS1 regulations will continue to be valid for 
compliance with the RFS2 obligations. Further discussion of transition 
issues can be found in Sections II.A and II.G.4, respectively.
    According to EISA, the renewable fuel obligations applicable under 
RFS2 apply on a calendar basis. That is, obligated parties must 
determine their

[[Page 14676]]

renewable volume obligations (RVOs) at the end of a calendar year based 
on the volume of gasoline or diesel fuel they produce during the year, 
and they must demonstrate compliance with their RVOs in an annual 
report that is due two months after the end of the calendar year.
    For 2010, today's rule will follow this same general approach. The 
four RFS2 RVOs for each obligated party will be calculated on the basis 
of all gasoline and diesel produced or imported on and after January 1, 
2010, through December 31, 2010. Obligated parties will be required to 
demonstrate by February 28 of 2011 that they obtained sufficient RINs 
to satisfy their 2010 RVOs. We believe this is an appropriate approach 
as it is more consistent with Congress' provisions in EISA for 2010, 
and there is adequate lead time for the obligated parties to achieve 
compliance.
    The issue for EPA to resolve is how to apply the four volume 
mandates under EISA for calendar year 2010. These volume mandates are 
translated into applicable percentages that obligated parties then use 
to determine their renewable fuel volume obligations based on the 
gasoline and diesel they produce or import in 2010. There are three 
basic approaches that EPA has considered, based on comments on the 
proposal. The first is the approach adopted in this rule--the four RFS2 
applicable percentages are determined based on the four volume mandates 
covered by this rule, and the renewable volume obligation for a refiner 
or importer will be determined by applying these percentages to the 
volume of gasoline and diesel fuel they produce during calendar year 
2010. Under this approach, there is no separate applicable percentage 
under RFS1 for 2010, however RINs generated in 2009 and 2010 under RFS1 
can be used to meet the four volume obligations for 2010 under the RFS2 
regulations. Another option, which was considered and rejected by EPA, 
is much more complicated--(1) determine an RFS1 applicable percentage 
based on just the total renewable fuel volume mandate, using the same 
total volume for renewable fuel as used in the first approach, and 
require obligated parties to apply that percentage to the gasoline 
produced from January 1, 2010 until the effective date of the RFS2 
regulations, and (2) determine the four RFS2 applicable percentages as 
discussed above, but require obligated parties to apply them to only 
the gasoline and diesel in 2010 after the effective date of the RFS2 
regulations. Of greater concern than its complexity, the second 
approach fails to ensure that the total volumes for three of the volume 
mandates are met for 2010. In effect EPA would be requiring that 
obligated parties use enough cellulosic biofuel, biomass-based diesel, 
and advanced biofuel to meet approximately 75% of the total volumes 
required for these fuels under EISA. While the total volume mandate 
under EISA for renewable fuel would likely be met, the other three 
volumes mandates would only be met in part. The final option would 
involve delaying the RFS2 requirements until January 1, 2011, which 
would avoid the complexity of the second approach, but would be even 
less consistent with EISA's requirements.
    The approach adopted in this rule is clearly the most consistent 
with EISA's requirement of four different volume mandates for all of 
calendar year 2010. In addition, EPA is confident that obligated 
parties have adequate lead-time to comply with the four volume 
requirements under the approach adopted in this rule. The volume 
requirements are achieved by obtaining the appropriate number of RINs 
from producers of the renewable fuel. The obligated parties do not need 
lead time for construction or investment purposes, as they are not 
changing the way they produce gasoline or diesel, do not need to design 
to install new equipment, or take other actions that require longer 
lead time. Obtaining the appropriate amount of RINs involves 
contractual or other arrangements with renewable fuel producers or 
other holders of RINs. Obligated parties now have experience 
implementing RFS1, and the actions needed to comply under the RFS2 
regulations are a continuation of these kinds of RFS1 activities. In 
addition, an adequate supply of RINs is expected to be available for 
compliance by obligated parties. RFS1 RINs have been produced 
throughout 2009 and continue to be produced since the beginning of 
2010. There has been and will be no gap or lag in the production of 
RINS, as the RFS1 regulations continue in effect and require that 
renewable fuel producers generate RINs for the renewable fuel they 
produce. These 2009 and 2010 RFS1 RINs will be available and can be 
used towards the volume requirements of obligated parties for 2010. 
These RFS1 RINS combined with the RFS2 RINs that will be generated by 
renewable fuel producers are expected to provide an adequate supply of 
RINs to ensure compliance for all of the renewable volume mandates. For 
further discussion of the expected supply of renewable fuel, see 
section IV.
    In addition, obligated parties have received adequate notice of 
this obligation. The proposed rule called for obligated parties to meet 
the full volume mandates for all four volume mandates, and to base 
their volume obligation on the volume of gasoline and diesel produced 
starting January 1, 2010. While the RFS2 regulations are not effective 
until after January 1, 2010, the same full year approach is being taken 
for the 2010 volumes of gasoline and diesel. Obligated parties have 
been on notice based on EPA's proposal, discussions with many 
stakeholders during the rulemaking, the issuance of the final rule 
itself, and publication of this rule in the Federal Register. As 
discussed above, there is adequate time for obligated parties to meet 
their 2010 volume obligations by the spring of 2011.
    This approach does not impose any retroactive requirements. The 
obligation that is imposed under the RFS2 regulations is forward 
looking--by the spring of 2011, when compliance is determined, 
obligated parties must satisfy certain volume obligations. These future 
requirements are calculated in part based on volumes of gasoline and 
diesel produced prior to the effective date of the RFS2 regulations, 
but this does not make the RFS2 requirement retroactive in nature. The 
RFS2 regulations do not change in any way the legal obligations or 
requirements that apply prior to the effective date of the RFS2 
regulations. Instead, the RFS2 requirements impose new requirements 
that must be met in the future. There is adequate lead time to comply 
with these RFS2 requirements, and they achieve a result that is more 
consistent with Congress' goals in establishing 4 volume mandates for 
calendar year 2010, and for these reasons EPA is adopting this approach 
for calendar year 2010.
    Parties that intend to generate RINs, own and/or transfer them, or 
use them for compliance purposes after July 1, 2010 will need to 
register or re-register under the RFS2 provisions and modify their 
information technology (IT) systems to accommodate the changes we are 
finalizing today. As described more fully in Section II, these changes 
include redefining the D code within the RIN that identifies which 
standard a fuel qualifies for, adding a process for verifying that 
feedstocks meet the renewable biomass definition, and calculating 
compliance with four standards instead of one. EPA's registration 
system is available now for parties to complete the registration 
process. Further details on this process can be found elsewhere in 
today's preamble as well as at https://www.epa.gov/otaq/regs/fuels/

[[Page 14677]]

fuelsregistration.htm. Parties that produce motor vehicle, nonroad, 
locomotive, and marine (MVNRLM) diesel fuel but not gasoline will be 
newly obligated parties and may be establishing IT systems for the RFS 
program for the first time.
3. Analysis of Lifecycle Greenhouse Gas Emissions and Thresholds for 
Renewable Fuels
a. Background and Conclusions
    A significant aspect of the RFS2 program is the requirement that 
the lifecycle GHG emissions of a qualifying renewable fuel must be less 
than the lifecycle GHG emissions of the 2005 baseline average gasoline 
or diesel fuel that it replaces; four different levels of reductions 
are required for the four different renewable fuel standards. These 
lifecycle performance improvement thresholds are listed in Table I.A.3-
1. Compliance with each threshold requires a comprehensive evaluation 
of renewable fuels, as well as the baseline for gasoline and diesel, on 
the basis of their lifecycle emissions. As mandated by EISA, the 
greenhouse gas emissions assessments must evaluate the aggregate 
quantity of greenhouse gas emissions (including direct emissions and 
significant indirect emissions such as significant emissions form land 
use changes) related to the full lifecycle, including all stages of 
fuel and feedstock production, distribution and use by the ultimate 
consumer.

        Table I.A.3-1--Lifecycle GHG Thresholds Specified in EISA
                    [Percent Reduction from Baseline]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Renewable fuel \a\.........................................           20
Advanced biofuel...........................................           50
Biomass-based diesel.......................................           50
Cellulosic biofuel.........................................           60
------------------------------------------------------------------------
\a\ The 20% criterion generally applies to renewable fuel from new
  facilities that commenced construction after December 19, 2007.

    It is important to recognize that fuel from the existing capacity 
of current facilities and the capacity of all new facilities that 
commenced construction prior to December 19, 2007 (and in some cases 
prior to December 31, 2009) are exempt, or grandfathered, from the 20% 
lifecycle requirement for the Renewable Fuel category. Therefore, EPA 
has in the discussion below emphasized its analysis on those plants and 
fuels that are likely to be used for compliance with the rule and would 
be subject to the lifecycle thresholds. Based on the analyses and 
approach described in Section V of this preamble, EPA is determining 
that ethanol produced from corn starch at a new facility (or expanded 
capacity from an existing) using natural gas, biomass or biogas for 
process energy and using advanced efficient technologies that we expect 
will be most typical of new production facilities will meet the 20% GHG 
emission reduction threshold compared to the 2005 baseline gasoline. We 
are also determining that biobutanol from corn starch meets the 20% 
threshold. Similarly, EPA is making the determination that biodiesel 
and renewable diesel from soy oil or waste oils, fats and greases will 
exceed the 50% GHG threshold for biomass-based diesel compared to the 
2005 petroleum diesel baseline. In addition, we have now modeled 
biodiesel and renewable diesel produced from algal oils as complying 
with the 50% threshold for biomass-based diesel. EPA is also 
determining that ethanol from sugarcane complies with the applicable 
50% GHG reduction threshold for advanced biofuels. The modeled pathways 
(feedstock and production technology) for cellulosic ethanol and 
cellulosic diesel would also comply with the 60% GHG reduction 
threshold applicable to cellulosic biofuels. As discussed later in 
section V, there are also other fuels and fuel pathways that we are 
determining will comply with the GHG thresholds.
    Under EISA, EPA is allowed to adjust the GHG reduction thresholds 
downward by up to 10% if necessary based on lifecycle GHG assessment of 
biofuels likely to be available. Based on the results summarized above, 
we are not finalizing any adjustments to the lifecycle GHG thresholds 
for the four renewable fuel standard categories.
    EPA recognizes that as the state of scientific knowledge continues 
to evolve in this area, the lifecycle GHG assessments for a variety of 
fuel pathways are likely to be updated. Therefore, while EPA is using 
its current lifecycle assessments to inform the regulatory 
determinations for fuel pathways in this final rule, as required by the 
statute, the Agency is also committing to further reassess these 
determinations and lifecycle estimates. As part of this ongoing effort, 
we will ask for the expert advice of the National Academy of Sciences, 
as well as other experts, and incorporate their advice and any updated 
information we receive into a new assessment of the lifecycle GHG 
emissions performance of the biofuels being evaluated in this final 
rule. EPA will request that the National Academy of Sciences evaluate 
the approach taken in this rule, the underlying science of lifecycle 
assessment, and in particular indirect land use change, and make 
recommendations for subsequent lifecycle GHG assessments on this 
subject. At this time we are estimating this review by the National 
Academy of Sciences may take up to two years. As specified by EISA, if 
EPA revises the analytical methodology for determining lifecycle 
greenhouse gas emissions, any such revision will apply to renewable 
fuel from new facilities that commence construction after the effective 
date of the revision.
b. Fuel Pathways Considered and Key Model Updates Since the Proposal
    EPA is making the GHG threshold determination based on a 
methodology that includes an analysis of the full lifecycle, including 
significant emissions related to international land-use change. As 
described in more detail below and in Section V of this preamble, EPA 
has used the best available models for this purpose, and has 
incorporated many modifications to its proposed approach based on 
comments from the public and peer reviewers and developing science. EPA 
has also quantified the uncertainty associated with significant 
components of its analyses, including important factors affecting GHG 
emissions associated with international land use change. As discussed 
below, EPA has updated and refined its modeling approach since proposal 
in several important ways, and EPA is confident that its modeling of 
GHG emissions associated with international land use is comprehensive 
and provides a reasonable and scientifically robust basis for making 
the threshold determinations described above. As discussed below, EPA 
plans to continue to improve upon its analyses, and will update it in 
the future as appropriate.
    Through technical outreach, the peer review process, and the public 
comment period, EPA received and reviewed a significant amount of data, 
studies, and information on our proposed lifecycle analysis approach. 
We incorporated a number of new, updated, and peer-reviewed data 
sources in our final rulemaking analysis including better satellite 
data for tracking land use changes and improved assessments of N2O 
impacts from agriculture. The new and updated data sources are 
discussed further in this section, and in more detail in Section V.
    We also performed dozens of new modeling runs, uncertainty 
analyses, and sensitivity analyses which are leading to greater 
confidence in our results. We have updated our analyses in conjunction 
with, and based on, advice from experts from government,

[[Page 14678]]

academia, industry, and not for profit institutions.
    The new studies, data, and analysis performed for the final 
rulemaking impacted the lifecycle GHG results for biofuels in a number 
of different ways. In some cases, updates caused the modeled analysis 
of lifecycle GHG emissions from biofuels to increase, while other 
updates caused the modeled emissions to be reduced. Overall, the 
revisions since our proposed rule have led to a reduction in modeled 
lifecycle GHG emissions as compared to the values in the proposal. The 
following highlights the most significant revisions. Section V details 
all of the changes made and their relative impacts on the results.
    Corn Ethanol: The final rule analysis found less overall indirect 
land use change (less land needed), thereby improving the lifecycle GHG 
performance of corn ethanol. The main reasons for this decrease are:
     Based on new studies that show the rate of improvement in 
crop yields as a function of price, crop yields are now modeled to 
increase in response to higher crop prices. When higher crop yields are 
used in the models, less land is needed domestically and globally for 
crops as biofuels expand.
     New research available since the proposal indicates that 
the corn ethanol production co-product, distillers grains and solubles 
(DGS), is more efficient as an animal feed (meaning less corn is needed 
for animal feed) than we had assumed in the proposal. Therefore, in our 
analyses for the final rule, domestic corn exports are not impacted as 
much by increased biofuel production as they were in the proposal 
analysis.
     Improved satellite data allowed us to more finely assess 
the types of land converted when international land use changes occur, 
and this more precise assessment led to a lowering of modeled GHG 
impacts. Based on previous satellite data, the proposal assumed 
cropland expansion onto grassland would require an amount of pasture to 
be replaced through deforestation. For the final rulemaking analysis we 
incorporated improved economic modeling of demand for pasture area and 
satellite data which indicates that pasture is also likely to expand 
onto existing grasslands. This reduced the GHG emissions associated 
with an amount of land use change.
    However, we note that not all modeling updates necessarily reduced 
predicted GHG emissions from land use change. As one example, since the 
proposal a new version of the GREET model (Version 1.8C) has been 
released. EPA reviewed the new version and concluded that this was an 
improvement over the previous GREET release that was used in the 
proposal analysis (Version 1.8B). Therefore, EPA updated the GHG 
emission factors for fertilizer production used in our analysis to the 
values from the new GREET version. This had the result of slightly 
increasing the GHG emissions associated with fertilizer production and 
thus slightly increasing the GHG emission impacts of domestic 
agriculture.
    For the final rule, EPA has analyzed a variety of corn ethanol 
pathways including ethanol made from corn starch using natural gas, 
coal, and biomass as process energy sources in production facilities 
utilizing both dry mill and wet mill processes. For corn starch 
ethanol, we also considered the technology enhancements likely to occur 
in the future such as the addition of corn oil fractionation or 
extraction technology, membrane separation technology, combined heat 
and power and raw starch hydrolysis.
    Biobutanol from corn starch: In addition to ethanol from corn 
starch, for this final rule, we have also analyzed bio-butanol from 
corn starch. Since the feedstock impacts are the same as for ethanol 
from corn starch, the assessment for biobutanol reflects the differing 
impacts due to the production process and energy content of biobutanol 
compared to that of ethanol.
    Soybean Biodiesel: The new information described above for corn 
ethanol also leads to lower modeled GHG impacts associated with soybean 
biodiesel. The revised assessment predicts less overall indirect land 
use change (less land needed) and less impact from the land use changed 
that does occur (due to updates in types of converted land assumed). In 
addition, the latest IPCC guidance indicates reduced domestic soybean 
N2O emissions, and updated USDA and industry data show reductions in 
biodiesel processing energy use and a higher co-product credit, all of 
which further reduced the modeled soybean biodiesel lifecycle GHG 
emissions. This has resulted in a significant improvement in our 
assessment of the lifecycle performance of soybean biodiesel as 
compared to the estimate in the proposal.
    Biodiesel and Renewable Diesel from Algal Oil and Waste Fats and 
Greases: In addition to biodiesel from soy oil, biodiesel and renewable 
diesel from algal oil (should it reach commercial production) and 
biodiesel from waste oils, fats and greases have been modeled. These 
feedstock sources have little or no land use impact so the GHG impacts 
associate with their use in biofuel production are largely the result 
of energy required to produce the feedstock (in the case of algal oil) 
and the energy required to turn that feedstock into a biofuel.
    Sugarcane Ethanol: Sugarcane ethanol was analyzed considering a 
range of technologies and assuming alternative pathways for dehydrating 
the ethanol prior to its use as a biofuel in the U.S. For the final 
rule, our analysis also shows less overall indirect land use change 
(less land needed) associated with sugarcane ethanol production. For 
the proposal, we assumed sugarcane expansion in Brazil would result in 
cropland expansion into grassland and lost pasture being replaced 
through deforestation. Based on newly available regional specific data 
from Brazil, historic trends, and higher resolution satellite data, in 
the final rule, sugarcane expansion onto grassland is coupled with 
greater pasture intensification, such that there is less projected 
impact on forests. Furthermore, new data provided by commenters showed 
reduced sugarcane ethanol process energy, which also reduced the 
estimated lifecycle GHG impact of sugarcane ethanol production.
    Cellulosic Ethanol: We analyzed cellulosic ethanol production using 
both biochemical (enzymatic) and thermo-chemical processes with corn 
stover, switchgrass, and forestry thinnings and waste as feedstocks. 
For cellulosic diesel, we analyzed production using the Fischer-Tropsch 
process. For the final rule, we updated the cellulosic ethanol 
conversion rates based on new data provided by the National Renewable 
Energy Laboratory (NREL.) As a result of this update, the gallons per 
ton yields for switchgrass and several other feedstock sources 
increased in our analysis for the final rule, while the predicted 
yields from corn residue and several other feedstock sources decreased 
slightly from the NPRM values. In addition, we also updated our 
feedstock production yields based on new work conducted by the Pacific 
Northwest National Laboratory (PNNL). This analysis increased the tons 
per acre yields for several dedicated energy crops. These updates 
increased the amount of cellulosic ethanol projected to come from 
energy crops. While the increase in crop yields and conversion 
efficiency reduced the GHG emissions associated with cellulosic 
ethanol, there remains an increased demand for land to grow dedicated 
energy crops; this land use impact resulted in increased GHG emissions 
with the net result varying by the type of cellulosic feedstock source.

[[Page 14679]]

    We note that several of the renewable fuel pathways modeled are 
still in early stages of development or commercialization and are 
likely to continue to develop as the industry moves toward commercial 
production. Therefore, it will be necessary to reanalyze several 
pathways using updated data and information as the technologies 
develop. For example, biofuel derived from algae is undergoing wide 
ranging development. Therefore for now, our algae analyses presume 
particular processes and energy requirements which will need to be 
reviewed and updated as this fuel source moves toward commercial 
production.
    For this final rule we have incorporated a statistical analysis of 
uncertainty about critical variables in our pathway analysis. This 
uncertainty analysis is explained in detail in Section V and is 
consistent with the specific recommendations received through our peer 
review and public comments on the proposal. The uncertainty analysis 
focused on two aspects of indirect land use change--the types of land 
converted and the GHG emission associated with different types of land 
converted. In particular, our uncertainty analysis focused on such 
specific sources of information as the satellite imaging used to inform 
our assessment of land use trends and the specific changes in carbon 
storage expected from a change in land use in each geographic area of 
the world modeled. We have also performed additional sensitivity 
analyses including analysis of two yield scenarios for corn and soy 
beans to assess the impact of changes in yield assumptions.
    This uncertainty analysis provides information on both the range of 
possible outcomes for the parameters analyzed, an estimate of the 
degree of confidence that the actual result will be within a particular 
range (in our case, we estimated a 95% confidence interval) and an 
estimate of the central tendency or midpoint of the GHG performance 
estimate.
    In the proposal, we considered several options for the timeframe 
over which to measure lifecycle GHG impacts and the possibility of 
discounting those impacts. Based on peer review recommendations and 
other comments received, EPA is finalizing its assessments based on an 
analysis assuming 30 years of continued emission impacts after the 
program is fully phased in by 2022 and without discounting those 
impacts.
    EPA also notes that it received significant comment on our proposed 
baseline lifecycle greenhouse gas assessment of gasoline and diesel 
(``petroleum baseline''). While EPA has made several updates to the 
petroleum analysis in response to comments (see Section V for further 
discussion), we are finalizing the approach based on our interpretation 
of the definition in the Act as requiring that the petroleum baseline 
represent an average of the gasoline and diesel fuel (whichever is 
being replaced by the renewable fuel) sold as transportation fuel in 
2005.
    As discussed in more detail later, the modeling results developed 
for purposes of the final rule provide a rich and comprehensive base of 
information for making the threshold determinations. There are numerous 
modeling runs, reflecting updated inputs to the model, sensitivity 
analyses, and uncertainty analyses. The results for different scenarios 
include a range and a best estimate or mid-point. Given the potentially 
conservative nature of the base crop yield assumption, EPA believes the 
actual crop yield in 2022 may be above the base yield; however we are 
not in a position to characterize how much above it might be. To the 
extent actual yields are higher, the base yield modeling results would 
underestimate to some degree the actual GHG emissions reductions 
compared to the baseline.
    In making the threshold determinations for this rule, EPA weighed 
all of the evidence available to it, while placing the greatest weight 
on the best estimate value for the base yield scenario. In those cases 
where the best estimate for the base yield scenario exceeds the 
reduction threshold, EPA judges that there is a good basis to be 
confident that the threshold will be achieved and is determining that 
the bio-fuel pathway complies with the applicable threshold. To the 
extent the midpoint of the scenarios analyzed lies further above a 
threshold for a particular biofuel pathway, we have increasingly 
greater confidence that the biofuel exceeds the threshold.
    EPA recognizes that certain commenters suggest that there is a very 
high degree of uncertainty associated in particular with determining 
international indirect land use changes and their emissions impacts, 
and because of this EPA should exclude any calculation of international 
indirect land use changes in its lifecycle analysis. Commenters say EPA 
should make the threshold determinations based solely on modeling of 
other sources of lifecycle emissions. In effect, commenters argue that 
the uncertainty of the modeling associated with international indirect 
land use change means we should use our modeling results but exclude 
that part of the results associated with international land use change.
    For the reasons discussed above and in more detail in Section V, 
EPA rejects the view that the modeling relied upon in the final rule, 
which includes emissions associated with international indirect land 
use change, is too uncertain to provide a credible and reasonable 
scientific basis for determining whether the aggregate lifecycle 
emissions exceed the thresholds. In addition, as discussed elsewhere, 
the definition of lifecycle emissions includes significant indirect 
emissions associated with land use change. In deciding whether a bio-
fuel pathway meets the threshold, EPA has to consider what it knows 
about all aspects of the lifecycle emissions, and decide whether there 
is a valid basis to find that the aggregate lifecycle emissions of the 
fuel, taking into account significant indirect emissions from land use 
change meets the threshold. Based on the analyses conducted for this 
rule, EPA has determined international indirect land use impacts are 
significant and therefore must be included in threshold compliance 
assessment.
    If the international land use impacts were so uncertain that their 
impact on lifecycle GHG emissions could not be adequately determined, 
as claimed by commenters, this does not mean EPA could assume the 
international land use change emissions are zero, as commenters 
suggest. High uncertainty would not mean that emissions are small and 
can be ignored; rather it could mean that we could not tell whether 
they are large or small. If high uncertainty meant that EPA were not 
able to determine that indirect emissions from international land use