Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards, 1320-1358 [2011-33451]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]
[Rules and Regulations]
[Pages 1320-1358]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33451]



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Vol. 77

Monday,

No. 5

January 9, 2012

Part V





Environmental Protection Agency





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40 CFR Part 80





Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards; 
Final Rule

Federal Register / Vol. 77 , No. 5 / Monday, January 9, 2012 / Rules 
and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2010-0133; FRL-9614-4]
RIN 2060-AQ76


Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel 
Standards

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under the Clean Air Act Section 211(o), the Environmental 
Protection Agency is required to set the renewable fuel standards each 
November for the following year. In general the standards are designed 
to ensure that the applicable volumes of renewable fuel specified in 
the statue are used. However, the statute specifies that EPA is to 
project the volume of cellulosic biofuel production for the upcoming 
year and must base the cellulosic biofuel standard on that projected 
volume if it is less than the applicable volume set forth in the Act. 
EPA is today finalizing a projected cellulosic biofuel volume for 2012 
and annual percentage standards for cellulosic biofuel, biomass-based 
diesel, advanced biofuel, and renewable fuels that will apply to all 
gasoline and diesel produced or imported for domestic use in year 2012. 
In the NPRM we also proposed an applicable volume of 1.28 billion 
gallons for biomass-based diesel for 2013. The statute specifies that 
the minimum volume of biomass-based diesel for years 2013 and beyond 
must be at least 1.0 billion gallons. We are continuing to evaluate the 
many comments on the NPRM from stakeholders, and will issue a final 
rule setting the applicable biomass-based diesel volume for calendar 
year 2013 as expeditiously as practicable. This action also presents a 
number of changes to the RFS2 regulations that are designed to clarify 
existing provisions and to address several unique circumstances that 
have come to light since the RFS2 program became effective on July 1, 
2010. Finally, today's rule also makes a minor amendment to the 
gasoline benzene regulations regarding inclusion of transferred 
blendstocks in a refinery's early benzene credit generation 
calculations.

DATES: This final rule is effective on January 9, 2012.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-OAR-2010-0133. All documents in the docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in 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; 
Email address: macallister.julia@epa.gov, or Assessment and Standards 
Division Hotline; telephone number (734) 214-4636; Email address 
OTAQPUBLICWEB@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    Entities potentially affected by this proposed 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. Potentially regulated categories include:

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                                                NAICS \1\                     Examples of potentially regulated
                  Category                        Codes       SIC \2\ Codes                entities
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Industry...................................          324110            2911  Petroleum Refineries.
Industry...................................          325193            2869  Ethyl alcohol manufacturing.
Industry...................................          325199            2869  Other basic organic chemical
                                                                              manufacturing.
Industry...................................          424690            5169  Chemical and allied products
                                                                              merchant wholesalers.
Industry...................................          424710            5171  Petroleum bulk stations and
                                                                              terminals.
Industry...................................          424720            5172  Petroleum and petroleum products
                                                                              merchant wholesalers.
Industry...................................          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 will 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 particular entity, consult the person listed in 
the preceding section.

Outline of This Preamble

I. Executive Summary
    A. Standards for 2012
    1. Assessment of 2012 Cellulosic Biofuel Volume
    2. Advanced Biofuel and Total Renewable Fuel in 2012
    3. Percentage Standards for 2012
    4. Historical Renewable Fuel Production
    B. Regulatory Changes
    C. 2012 Price for Cellulosic Biofuel Waiver Credits
    D. Assessment of the Domestic Aggregate Compliance Approach
    E. Assessment of the Canadian Aggregate Compliance Approach
II. Projection of Cellulosic Volume and Assessment of Biomass-Based 
Diesel and Advanced Biofuel for 2012
    A. Statutory Requirements
    B. Cellulosic Biofuel Volume Assessment
    1. Existing Cellulosic Biofuel Facilities
    2. Potential New Facilities in 2012
    3. Imports of Cellulosic Biofuel
    4. Projections From the Energy Information Administration
    5. Comments on the Proposed Rule
    6. Summary of Volume Projections
    C. Advanced Biofuel and Total Renewable Fuel in 2012
    D. Biomass-Based Diesel in 2012

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III. Final Percentage Standards for 2012
    A. Background
    B. Calculation of Standards
    1. How are the standards calculated?
    2. Small Refineries and Small Refiners
    3. Final Percentage Standards
IV. Changes to RFS2 Regulations
    A. Summary of Amendments
    B. Technical Justification for Equivalence Value Application
    C. Changes to Definitions of Terms
    1. Definition of Annual Cover Crop
    2. Definition of ``Naphtha''
    D. Technical Amendments Related to RIN Generation and Separation
    1. RIN Separation Limit for Obligated Parties
    2. RIN Retirement Provision for Error Correction
    3. Production Outlook Reports Submission Deadline
    4. Attest Procedures
    E. Technical Amendments Related to Registration & Recordkeeping
    1. Construction Discontinuance & Completion Documentation
    2. Third-Party Engineering Reviews
    3. Foreign Ethanol Producers
    F. Additional Amendments and Clarifications
    1. Third-Party Engineering Review Addendum
    2. RIN Generation for Fuel Imported From a Registered Foreign 
Producer
    3. Bond Posting
    4. Prohibition Against Repeat Generation of RINs
    5. Acceptance of Separated Yard Waste and Food Waste Separation 
Plans
    6. Transferred Blendstocks in Early Benzene Credit Generation 
Calculations
V. Annual Administrative Announcements
    A. 2011 Price for Cellulosic Biofuel Waiver Credits
    B. Assessment of the Domestic Aggregate Compliance Approach
    C. Assessment of the Canadian Aggregate Compliance Approach
VI. Comments Outside the Scope of This Rulemaking
VII. Public Participation
VIII. Statutory And Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    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
IX. Statutory Authority

I. Executive Summary

    The Renewable Fuel Standard (RFS) program began in 2006 pursuant to 
the requirements in Clean Air Act (CAA) section 211(o) which were added 
through the Energy Policy Act of 2005 (EPAct). The statutory 
requirements for the RFS program were subsequently modified through the 
Energy Independence and Security Act of 2007 (EISA), resulting in the 
promulgation of revised regulatory requirements on March 26, 2010.\1\ 
The transition from the RFS1 requirements of EPAct to the RFS2 
requirements of EISA generally occurred on July 1, 2010.
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    \1\ 75 FR 14670.
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    Under RFS2, EPA is required to determine and publish the applicable 
annual percentage standards for each compliance year by November 30 of 
the previous year. As part of this effort, EPA must determine the 
projected volume of cellulosic biofuel production for the following 
year. If the projected volume of cellulosic biofuel production is less 
than the applicable volume specified in section 211(o)(2)(B)(i)(III) of 
the statute, EPA must lower the applicable volume used to set the 
annual cellulosic biofuel percentage standard to the projected volume 
of production. When we lower the applicable volume of cellulosic 
biofuel in this manner, we are also authorized to lower the applicable 
volumes of advanced biofuel and/or total renewable fuel by the same or 
a lesser amount. Since these evaluations are based on evolving 
information about emerging segments of the biofuels industry, and may 
result in the applicable volumes differing from those in the statute, 
we believe that it is appropriate to establish the applicable volumes 
through a notice-and-comment rulemaking process. Today's notice 
provides our final evaluation of the projected production of cellulosic 
biofuel for 2012, our evaluation of whether to lower the applicable 
volumes of advanced biofuel and total renewable fuel, and the final 
percentage standards for compliance year 2012. We are finalizing a 
cellulosic biofuel requirement of 10.45 mill ethanol-equivalent gallons 
for 2012, and are not reducing the advanced biofuel or total renewable 
fuel requirements below the levels specified in the statute. For future 
years, EPA will continue to evaluate whether it is appropriate to 
adjust the volume of advanced and total renewable fuel, if EPA adjusts 
the volume of cellulosic biofuel. In making such determinations, EPA 
will consider all relevant factors. The evaluations that led to these 
2012 volume requirements were based on our evaluation of individual 
producers' production plans and progress, a consideration of comments 
received in response to our notice of proposed rulemaking published on 
July 1, 2011,\2\ the estimate of projected biofuel volumes that the 
Energy Information Administration (EIA) is required to provide to EPA 
by October 31, and other information that became available.
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    \2\ 76 FR 38844.
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    Today's final rule does not include an assessment of the 
environmental impacts of the percentage standards we are setting for 
2012. All of the impacts of the RFS2 program were addressed in the RFS2 
final rule published on March 26, 2010, including impacts of the 
biofuel standards specified in the statute. Today's rulemaking simply 
sets the standards for 2012 whose impacts were already analyzed 
previously.
    Today's notice also finalizes a number of changes to the RFS2 
regulations. These changes are designed to reduce confusion among 
regulated parties and streamline implementation by clarifying certain 
terms and phrases and addressing unique circumstances that came to 
light after the RFS2 program went into effect on July 1, 2010. 
Additionally, this notice also makes a minor amendment to the gasoline 
benzene regulations regarding inclusion of transferred blendstocks in a 
refinery's early benzene credit generation calculations. Further 
discussion of all of these changes can be found in Section IV.
    Finally, in today's rulemaking we are announcing the price for 
cellulosic biofuel waiver credits that will be available for compliance 
with the 2012 cellulosic biofuel requirement, and are also announcing 
the results of our annual assessment of the aggregate compliance 
approach for U.S. crops and crop residue. These announcements are 
provided in Section V.
    EPA is required to determine the applicable volume of biomass-based 
diesel (BBD) that will be required in 2013 and beyond based on 
consideration of a variety of factors, and promulgate regulations 
establishing the volumes. The statute specifies that the volume of 
biomass-based diesel for years 2013 and beyond must be at least 1 
billion gallons. In the NPRM we proposed an applicable volume of 1.28 
bill gallons for BBD for 2013. We are continuing to evaluate the many 
comments on the NPRM from stakeholders as well as fulfilling other 
analytical requirements. In determining

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the BBD applicable volume, the statute requires an analysis of the 
impact of the BBD volume on a variety of factors such as the impact of 
BBD on energy security, transportation fuel costs, job creation, water 
quality, and other factors. EPA intends to gather additional 
information to enhance our analysis of these factors including 
consideration of costs and benefits consistent with the provisions of 
E.O. 13563, to ensure an appropriately balanced decision. For these 
reasons, we are not finalizing an applicable volume for 2013 BBD in 
today's rulemaking. We recognize that the statute calls for EPA to 
promulgate the applicable volume of BBD for 2013 no later than 14 
months before that year. We do intend to issue a final determination 
setting the applicable BBD volume for calendar year 2013 as 
expeditiously as practicable.

A. Standards for 2012

1. Assessment of 2012 Cellulosic Biofuel Volume
    To estimate the volume of cellulosic biofuel that can be made 
available in the U.S. in 2012, we researched all potential production 
sources by company and facility. This included sources that were still 
in the planning stages, those that were under construction, and those 
that are already producing some volume of cellulosic ethanol, 
cellulosic diesel, or some other type of cellulosic biofuel. Facilities 
primarily focused on research and development work with no intention of 
marketing any fuel produced were not considered for this assessment. 
From this universe of potential cellulosic biofuel sources we 
identified the subset that had a possibility of producing some volume 
of qualifying cellulosic biofuel for use as transportation fuel in 
2012.
    In today's final rule we specify the projected available volume for 
2012 that forms the basis for the percentage standard for cellulosic 
biofuel. To arrive at this final volume, we took into consideration 
additional factors such as the current and expected state of funding, 
the status of the technology, progress towards construction and 
production goals, and other significant factors that could potentially 
impact fuel production or the ability of the produced fuel to generate 
cellulosic Renewable Identification Numbers (RINs). We also considered 
projections of cellulosic biofuel provided by the EIA. Further 
discussion of these factors can be found in Section II.B.
    In our assessment we focused on domestic sources of cellulosic 
biofuel. While imports of cellulosic biofuels are possible and could be 
eligible to generate RINs, we believe this is unlikely due to local 
demand for cellulosic biofuels in the countries in which they are 
produced as well as the cost associated with transporting these fuels 
to the U.S. Of the domestic sources, we estimated that six facilities 
can make volumes of cellulosic biofuel available for transportation use 
in the U.S. in 2012. These facilities are listed in Table I.A.1-1 along 
with our estimate of the projected 2012 volume for each.

                  Table I.A.1-1--Projected Available Cellulosic Biofuel Plant Volumes for 2012
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                                                                                                   Projected
                                                                                               available  volume
                Company                           Location                  Fuel type           (million ethanol-
                                                                                                   equivalent
                                                                                                    gallons)
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American Process Inc...................  Alpena, MI...............  Ethanol..................               0.5
Fiberight..............................  Blairstown, IA...........  Ethanol..................               2.0
INEOS Bio..............................  Vero Beach, FL...........  Ethanol..................               3.0
KiOR...................................  Columbus, MS.............  Gasoline, Diesel.........               4.8
KL Energy Corp.........................  Upton, WY................  Ethanol..................               0.1
ZeaChem................................  Boardman, OR.............  Ethanol..................               0.05
                                                                                              ------------------
    Total..............................  .........................  .........................              10.45
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    Each of the facilities listed in the Table I.A.1-1 are at different 
points in their progress towards the production of commercial volumes 
of cellulosic biofuel. KL Energy Corp. is the only facility in the 
United States currently generating cellulosic biofuel RINs. American 
Process Inc., Fiberight, and ZeaChem all anticipate completing 
construction on their production facilities in late 2011 or early 2012 
and plan to begin producing biofuel soon after their facilities are 
complete. INEOS Bio and KiOR are targeting April 2012 and mid 2012 for 
the start-up of their respective cellulosic biofuel production 
facilities. The variation in these expected start-up times, along with 
the facility production capacities, company production plans, and a 
variety of other factors have all been taken into account in projecting 
the available volume of cellulosic biofuel from each these facilities.
2. Advanced Biofuel and Total Renewable Fuel in 2012
    The statute indicates that we may reduce the applicable volume of 
advanced biofuel and total renewable fuel if we determine that the 
projected volume of cellulosic biofuel production for 2012 falls short 
of the statutory volume of 500 million gallons. As shown in Table 
I.A.1-1, we have determined that this is the case. Therefore, we also 
must evaluate the need to lower the applicable volumes for advanced 
biofuel and total renewable fuel.
    To address the need to lower the advanced biofuel standard, we 
first consider whether it appears likely that the biomass-based diesel 
volume of 1.0 billion gallons specified in the statute can be met in 
2012. As discussed in Section II.E, we believe that the 1.0 billion 
gallon standard can indeed be met. Since biodiesel has an Equivalence 
Value of 1.5, 1.0 billion physical gallons of biodiesel would provide 
1.5 billion ethanol-equivalent gallons that can be counted towards the 
advanced biofuel standard of 2.0 billion gallons. Of the remaining 0.5 
bill gallons, 10.45 mill gallons will be met with cellulosic biofuel. 
Based on our analysis as described in Section II.C, we believe that 
there will be sufficient volumes of other advanced biofuels, such as 
imported sugarcane ethanol, additional biodiesel, or renewable diesel, 
such that the applicable volume for advanced biofuel can remain at the 
statutory level of 2.0 billion gallons. In addition, as discussed in 
Section II.C, we believe there will be sufficient volumes to satisfy 
the 15.2 billion gallon applicable

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volume of total renewable fuel specified in the Act, so the 2012 total 
renewable fuel percentage standard is based on that volume.
3. Percentage Standards for 2012
    The renewable fuel standards are expressed as a volume percentage, 
and are used by each refiner, blender or importer to determine their 
renewable fuel volume obligations. The applicable percentages are set 
so that if each regulated party meets the percentages, and if EIA 
projections of gasoline and diesel use are accurate, then the amount of 
renewable fuel, cellulosic biofuel, biomass-based diesel, and advanced 
biofuel used will meet the volumes required on a nationwide basis.
    To calculate the percentage standard for cellulosic biofuel for 
2012, we have used the projected annual volume of 10.45 million 
ethanol-equivalent gallons (representing 8.65 million physical 
gallons). The applicable volumes for biomass-based diesel, advanced 
biofuel, and total renewable fuel for 2012 will be those specified in 
the statute. These volumes are shown in Table I.A.3-1.

                                      Table I.A.3-1--Final Volumes for 2012
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                                              Actual volume                Ethanol equivalent  volume \a\
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Cellulosic biofuel....................  8.65 mill gal............  10.45 mill gal.
Biomass-based diesel..................  1.0 bill gal.............  1.5 bill gal.
Advanced biofuel......................  1.3-1.5 \b\ bill gal.....  2.0 bill gal.
Renewable fuel........................  14.5-14.7 \b\ bill gal...  15.2 bill gal.
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\a\ Biodiesel and cellulosic diesel have equivalence values of 1.5 and 1.7 ethanol equivalent gallons
  respectively. As a result, ethanol-equivalent volumes are larger than actual volumes for cellulosic biofuel
  and biomass-based diesel.
\b\ Range depends on the equivalence values of advanced biofuels other than cellulosic biofuel and biomass-based
  diesel.

    Four separate standards are required under the RFS2 program, 
corresponding to the four separate volume requirements shown in Table 
I.A.3-1. The specific formulas we use to calculate the renewable fuel 
percentage standards are contained in the regulations at Sec.  80.1405 
and repeated in Section III.B.1. The percentage standards represent the 
ratio of renewable fuel volume to projected non-renewable gasoline and 
diesel volume. The projected volume of transportation gasoline and 
diesel used to calculate the standards in today's final rule was 
provided by EIA.\3\
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    \3\ Letter from Howard K. Gruenspecht, Acting Administrator, 
Energy Information Administration, to Lisa P. Jackson, 
Administrator, EPA. October 19, 2011.
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    In March 2011, DOE evaluated the impacts of the RFS program on 
small entities and concluded that some small refineries would suffer a 
disproportionate economic hardship if required to participate in the 
program.\4\ As a result, we are required to exempt these few refineries 
from being obligated parties for a minimum of two years (2011 and 
2012), and must also exempt their gasoline and diesel volumes from the 
calculation of the annual percentage standards. In addition, EPA has 
approved a number of individual small refinery petitions submitted 
pursuant to 40 CFR Sec.  80.1441(e)(2) since publication of the 
proposed rule, and has also adjusted the final 2012 percentage 
standards to reflect the exemption of these small refineries from being 
RFS obligated parties in 2012. The final standards for 2012 are shown 
in Table I.A.3-2 and include the adjustment for exempt small refineries 
(which constitute about 3.6% of the gasoline pool and 4.5% of the 
diesel pool). Detailed calculations can be found in Section III.
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    \4\ ``Small Refinery Exemption Study: An Investigation into 
Disproportionate Economic Hardship,'' U.S. Department of Energy, 
March 2011.

           Table I.A.3-2--Final Percentage Standards for 2012
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------------------------------------------------------------------------
Cellulosic biofuel...........................................     0.006%
Biomass-based diesel.........................................       0.91
Advanced biofuel.............................................       1.21
Renewable fuel...............................................       9.23
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4. Historical Renewable Fuel Production
    To provide a comparison to the 2012 volume requirements shown in 
Table I.A.3-1, we determined the actual annual production volumes for 
the four RFS categories of renewable fuel. Since data on 2011 
production is currently incomplete, we have shown the production 
volumes for the full year beginning in July 2010 and ending in June 
2011. July 2010 also marks the start of the RFS2 program when data 
collection began with the EPA-Moderated Transaction System (EMTS) on 
production of renewable fuel and generation of RINs.

                    Table I.A.4-1--Production of Renewable Fuel From July 2010-June 2011 \a\
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                                              Actual volume                Ethanol equivalent  volume \a\
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Cellulosic biofuel....................  0 mill gal...............  0 mill gal.
Biomass-based diesel..................  0.43 \b\ bill gal........  0.64 \b\ bill gal.
Advanced biofuel......................  0.47 bill gal............  0.70 bill gal.
Renewable fuel........................  14.05 bill gal...........  14.29 bill gal.
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\a\ Except for biomass-based diesel, data derived from the EPA-Moderated Transaction System (EMTS) at https://www.epa.gov/otaq/fuels/rfsdata/index.htm.
\b\ Due to ongoing investigations of biodiesel RIN generation, these values have been derived from Census Bureau
  data on fats and oils at https://www.census.gov/manufacturing/cir/historical_data/m311k/.


[[Page 1324]]

B. Regulatory Changes

    In today's action we are also finalizing a number of changes to the 
RFS2 regulations. These changes are intended to:
     Clarify certain provisions because we have learned that 
there is some confusion among some regulated parties
     Clarify the application of certain provisions to unique 
circumstances
     Provide greater specificity in the definition of certain 
terms
     Correct regulatory language that inadvertently 
misrepresented our intent
    Today's rule also makes a minor amendment to the gasoline benzene 
regulations regarding inclusion of transferred blendstocks in a 
refinery's early benzene credit generation calculations. A detailed 
discussion of these regulatory changes is provided in Section IV.

C. 2012 Price for Cellulosic Biofuel Waiver Credits

    Since we are reducing the required volume of cellulosic biofuel for 
2012 below the applicable volume specified in the statute, EPA is 
required to offer biofuel waiver credits to obligated parties that can 
be purchased in lieu of acquiring cellulosic biofuel RINs.\5\ These 
waiver credits are not allowed to be traded or banked for future use, 
are only allowed to be used to meet the 2012 cellulosic biofuel 
standard, and cannot be applied to deficits carried over from 2011. 
Moreover, unlike cellulosic biofuel RINs, waiver credits may not be 
used to meet either the advanced biofuel standard or the total 
renewable fuel standard. For the 2012 compliance period, we are making 
cellulosic biofuel waiver credits available to obligated parties for 
end-of-year compliance should they need them at a price of $0.78 per 
credit. Further discussion is provided in Section VI.A.
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    \5\ One waiver credit would apply to one gallon of an obligated 
party's cellulosic biofuel Renewable Volume Obligation (RVO).
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D. Assessment of the Domestic Aggregate Compliance Approach

    As part of the RFS2 regulations, EPA established an aggregate 
compliance approach for renewable fuel producers who use planted crops 
and crop residue from U.S. agricultural land. This compliance approach 
relieved such producers (and importers of such fuel) of the individual 
recordkeeping and reporting requirements otherwise required of 
producers and importers to verify that feedstocks used in the 
production of RIN-qualifying renewable fuel meet the definition of 
renewable biomass. EPA determined that 402 million acres of U.S. 
agricultural land was available in 2007 (the year of EISA enactment) 
for production of crops and crop residue that would meet the definition 
of renewable biomass, and determined that as long as this total number 
of acres is not exceeded, it is unlikely that new land has been devoted 
to crop production based on historical trends and economic 
considerations. We indicated that we would conduct an annual evaluation 
of total U.S. acreage that is cropland, pastureland, or conservation 
reserve program land, and that if the value exceed 402 million acres, 
producers using domestically-grown crops or crop residue to produce 
renewable fuel would be subject to individual recordkeeping and 
reporting to verify that their feedstocks meet the definition of 
renewable biomass.
    The RFS2 regulations provide that EPA will make a finding 
concerning whether the 2007 baseline amount of U.S. agricultural land 
has been exceeded in a given year and will publish this finding in the 
Federal Register by November 30 of the same year. Based on data 
provided by the USDA, we have estimated that U.S. agricultural land 
reached 392 million acres in 2011, and thus did not exceed the 2007 
baseline acreage.
    We also stated in the preamble to the final RFS2 rule that if, at 
any point, EPA finds that the total agricultural land is greater than 
397 million acres, EPA will conduct further investigations to evaluate 
validity of the domestic aggregate compliance approach. The total 
acreage estimate of 392 million acres does not exceed the trigger point 
for further investigation; therefore EPA does not plan to conduct 
further investigations into this matter. Additional discussion on this 
matter can be found in Section V.B of this preamble.

E. Assessment of the Canadian Aggregate Compliance Approach

    On September 29, 2011, EPA approved the use of an aggregate 
compliance approach to renewable biomass verification for planted crops 
and crop residue grown in Canada. On March 15, 2011, EPA issued a 
notice of receipt of and solicited public comment on a petition for EPA 
to authorize the use of an aggregate approach for compliance with the 
Renewable Fuel Standard renewable biomass requirements, submitted by 
the Government of Canada. The petition requested that EPA determine 
that an aggregate compliance approach will provide reasonable assurance 
that planted crops and crop residue from Canada meet the definition of 
renewable biomass.
    The Government of Canada utilized several types of land use data to 
demonstrate that the land included in their 124 million acre baseline 
is cropland, pastureland or land equivalent to U.S. Conservation 
Reserve Program land that was cleared or cultivated prior to December 
19, 2007, and was actively managed or fallow and nonforested on that 
date (and is therefore RFS2 qualifying land). The total agricultural 
land in Canada in 2011 is estimated at 121 million acres. This data was 
presented to EPA in a report titled: Changes to the Renewable Fuel 
Standard Program Aggregate Compliance for Canadian Crops and Crop 
Residues: Data Analysis and Justification Report 2011. This report has 
been docketed at EPA-HQ-OAR-2010-0133. The total acreage estimate of 
121 million acres does not exceed the trigger point for further 
investigation; therefore EPA does not plan to conduct further 
investigations into this matter. Additional discussion on this matter 
can be found in Section V.B of this preamble.

II. Projection of Cellulosic Volume and Assessment of Biomass-Based 
Diesel and Advanced Biofuel for 2012

    In order to project production volume of cellulosic biofuel in 2012 
for use in setting the percentage standard, we collected information on 
individual facilities that have the potential to produce qualifying 
volumes for consumption as transportation fuel, heating oil, or jet 
fuel in the U.S. in 2012. This section describes the projected 
available volume of cellulosic biofuel in 2012 as well as some of the 
uncertainties associated with those volumes. Section III describes the 
derivation of the percentage standards that will apply to obligated 
parties in 2012.
    The 2012 volume projections in today's final rule were based on 
several sources of information:
     An estimate from EIA of the volumes of transportation 
fuel, biomass-based diesel, and cellulosic biofuel that they project 
will be sold or introduced into commerce in the U.S. in 2012.
     Progress that the cellulosic biofuel industry is making in 
2011
     Our own assessment of the cellulosic biofuel industry's 
projected volumes for 2012
     Comments in response to the NPRM
    In addition to the sources of information listed above EPA had also 
intended to consider the Production Outlook Reports that are required 
under Sec.  80.1449 for all registered renewable

[[Page 1325]]

fuel producers and importers. These Production Outlook Reports were not 
as useful as EPA had hoped in helping to provide information on the 
intentions of cellulosic biofuel producers in 2012 as very few had 
registered under the RFS program and they were thus not required to 
submit a report. EPA expects that in future years as more cellulosic 
biofuel producers register under the RFS program these reports will 
become of greater value in helping to determine the appropriate 
projected available volume of cellulosic biofuel.
    In directing EPA to project cellulosic biofuel production for 
purposes of setting the annual cellulosic biofuel standard, Congress 
did not specify what degree of certainty should be reflected in the 
projections. However, in response to the NPRM, some commenters cited 
Executive Order 13563 which states that regulations must in general 
``promote predictability and reduce uncertainty.'' We agree that this 
must be a goal in the process of determining the appropriate cellulosic 
biofuel requirement for 2012. The greatest certainty is achieved when 
the level of the standard is firmly established before it becomes 
applicable, and all regulated parties can have confidence regarding 
that standard. Doing this ensures that obligated parties know what 
their obligations will be so that they can begin efforts to meet those 
obligations, and biofuel producers know what baseline demand for their 
product will be so that they can secure financing and ramp up 
production with confidence.
    In contrast to statements made by several obligated parties, 
meeting the dual goals of predictability and reducing uncertainty does 
not require EPA to specify an applicable volume for cellulosic biofuel 
that is as low as possible, or based only on demonstrated (as opposed 
to reasonably anticipated) production. Due to the availability of 
cellulosic waiver credits, obligated parties always have the means to 
comply with the cellulosic biofuel standard that we set,\6\ and at a 
cost that is predictable. There is, therefore, no uncertainty with 
regard to the level of their obligations or the means available to 
achieve it.
---------------------------------------------------------------------------

    \6\ So long as the required volume is below the volume specified 
in the statute, such that cellulosic biofuel waiver credits are 
available.
---------------------------------------------------------------------------

    Moreover, Executive Order 13563 also states that regulations must 
in general promote ``economic growth, innovation, competitiveness, and 
job creation,'' while ``taking into account benefits and costs, both 
quantitative and qualitative.'' While the cellulosic biofuel standard 
that we set should be within the range of what can be attained based on 
projected domestic production and import potential, the standard that 
we set helps drive the production of volumes that will be made 
available. This is consistent with comments submitted by the 
Biotechnology Industry Organization and the Renewable Fuels 
Association. Thus while any standard we set for cellulosic biofuel 
standard for 2012 will have some uncertainty in terms of actual 
attainment, our intention is to balance such uncertainty with the 
objective of promoting growth in the industry. Our final projected 
available volume of 8.65 million gallons of cellulosic biofuel (10.45 
million ethanol-equivalent gallons) for 2012 reflects these 
considerations.

A. Statutory Requirements

    The volumes of renewable fuel to be used under the RFS2 program 
each year (absent an adjustment or waiver by EPA) are specified in CAA 
211(o)(2). These volumes for 2012 are shown in Table II.A-1.

      Table II.A-1--Required Volumes in the Clean Air Act for 2012
                               [Bill gal]
------------------------------------------------------------------------
                                                     Ethanol equivalent
                                  Actual volume            volume
------------------------------------------------------------------------
Cellulosic biofuel..........               \a\ 0.5                   0.5
Biomass-based diesel........                   1.0                   1.5
Advanced biofuel............               \a\ 2.0                   2.0
Renewable fuel..............              \a\ 15.2                  15.2
------------------------------------------------------------------------
\a\ These values assume that the biofuels would be ethanol. If any
  portion of the biofuels used to meet these applicable volumes has a
  volumetric energy content greater than that for ethanol, these values
  will be lower.

    By November 30 of each year, the EPA is required under CAA 211(o) 
to determine and publish in the Federal Register the renewable fuel 
percentage standards for the following year. These standards are to be 
based in part on transportation fuel volumes estimated by the EIA for 
the following year. The calculation of the percentage standards is 
based on the formulas in Sec.  80.1405(c) which express the required 
volumes of renewable fuel as a volume percentage of gasoline and diesel 
sold or introduced into commerce in the 48 contiguous states plus 
Hawaii.
    The statute requires that if EPA determines that the projected 
volume of cellulosic biofuel production for the following year is less 
than the applicable volume shown in Table II.A-1, then EPA is to reduce 
the applicable volume of cellulosic biofuel to the projected volume 
available during that calendar year. In addition, if EPA reduces the 
required volume of cellulosic biofuel below the level specified in the 
statute, the Act also indicates that we may reduce the applicable 
volume of advanced biofuels and total renewable fuel by the same or a 
lesser volume.

B. Cellulosic Biofuel Volume Assessment

    In order to project cellulosic biofuel production for 2012, EPA has 
tracked the progress of over 100 biofuel production facilities. From 
this list of facilities we used publically available information, as 
well as information provided by DOE and USDA, to make a preliminary 
determination of which facilities are the most likely candidates to 
produce cellulosic biofuel and make it commercially available in 2012. 
Each of these companies was investigated further in order to determine 
the current status of their facilities and their likely cellulosic 
biofuel production volumes for the coming years. Information such as 
the funding status of these facilities, announced construction and 
production ramp up periods, and annual fuel production targets were 
taken into account. We also considered each company's history of 
meeting milestone targets and production goals where

[[Page 1326]]

applicable. Our projection of the volume of cellulosic biofuel 
production in 2012 is based on this information as well as our own 
assessment of the likelihood of these facilities successfully producing 
cellulosic biofuel in the volumes indicated. A brief description of 
each of the companies we believe can produce cellulosic biofuel and 
make it commercially available in 2012 can be found below.
1. Existing Cellulosic Biofuel Facilities
    The rule that established the required 2011 cellulosic biofuel 
volume identified five production facilities that we projected would 
produce cellulosic biofuel and make the fuel commercially available in 
2011. Each of these production facilities are now structurally 
complete, however they are in various stages of biofuel production. All 
of these facilities have either produced some volume of cellulosic 
biofuel in 2011, or are on schedule to do so later in the year. Only KL 
Energy and Range Fuels, however, have completed registration of 
cellulosic biofuel production facilities under the RFS2 program and as 
such they are currently the only facilities of the five listed here 
currently eligible to generate cellulosic biofuel RINs. For more 
background information on each of these facilities see the 2011 
standards rule.\7\
---------------------------------------------------------------------------

    \7\ 75 FR 76790, December 9, 2010.
---------------------------------------------------------------------------

    DuPont Danisco Cellulosic Ethanol (DDCE) successfully started up 
their small demonstration facility in Vonore, Tennessee in late 2010. 
This facility has a maximum production capacity of 250,000 gallons of 
ethanol per year and uses an enzymatic hydrolysis process to convert 
corn cobs into ethanol. In conversations with EPA in July 2011 DDCE 
indicated that this facility was currently producing ethanol at 
approximately half the nameplate capacity, corresponding to a volume of 
125,000 gallons per year. The focus of this facility, however, remains 
gathering information to help successfully design and operate DDCE's 
first commercial scale facility. All the cellulosic ethanol currently 
produced at this facility is used for testing purposes or given away. 
No RINs are currently generated for this ethanol and it is not 
available for purchase by obligated parties. DDCE has indicated that 
they have no plans to generate RINs or sell ethanol produced at their 
facility in Vonore in 2012. No volume of cellulosic ethanol has 
therefore been included in the projections of available cellulosic 
biofuel for 2012.
    Fiberight uses an enzymatic hydrolysis process to convert the 
biogenic portion of separated municipal solid waste (MSW) into ethanol. 
Construction on the first stage of Fiberight's Blairstown, Iowa 
facility was completed in the summer of 2010. The production capacity 
of the first stage of this project is 2 million gallons of ethanol per 
year. Fiberight had planned to begin production of cellulosic biofuel 
from this facility in late 2010 but poor economic conditions, due in 
part to low cellulosic RIN values in 2010, caused them to postpone fuel 
production. Fiberight had also planned to begin construction on an 
expansion of this facility in late 2010 that would increase the 
production potential to 6 million gallons of ethanol per year, but were 
unable to secure funding to carry out the construction as planned. They 
have since secured funding and began construction on the expansion of 
their Blairstown facility in April 2011. Fiberight anticipates that 
they will begin fuel production in early 2012 and will ramp up 
production at this facility throughout 2012. EPA projects the 
production of 2 million gallons of cellulosic ethanol from this 
facility in 2012.
    KiOR continues to produce a small volume of renewable crude from 
agricultural residue at their demonstration facility in Houston, Texas 
using a technology they call Biomass Catalytic Cracking (BCC). This 
technology uses heat and a proprietary catalyst to convert biomass to a 
renewable crude with a relatively low oxygen content. The renewable 
crude is then upgraded to produce renewable gasoline and diesel, as 
well as a small quantity of fuel oil. While KiOR plans to continue to 
operate their Houston facility in 2012 its main purpose will be to 
provide small quantities of fuel for testing purposes and to provide 
data for the optimization of KiOR's first commercial facility. In 
conversations with EPA KiOR has indicated that it is unlikely that any 
significant volume of fuel from this facility will be sold 
commercially. EPA has therefore not included any volume from KiOR's 
Houston facility in our projected available volumes for 2012.
    KL Energy has developed a process to convert cellulose and 
hemicellulose into cellulosic sugars using a thermal-mechanical 
pretreatment process followed by an enzymatic hydrolysis. It had 
initially planned to used woody biomass as their feedstock for 
cellulosic biofuel production; however its production process is 
versatile enough to allow for a wide variety of cellulosic feedstocks 
to be used. In August 2010 KL Energy announced a joint development 
agreement with Petrobras America Inc. As part of the agreement 
Petrobras has invested $11 million to modify KL Energy's facility in 
Upton, Wyoming to allow it to process bagasse and other waste products. 
If successful, Petrobras and KL Energy plan to work together to 
integrate the technology into currently existing ethanol production 
facilities in Brazil. The modifications to KL Energy's facility were 
completed earlier this year. KL Energy is currently producing small 
volumes of cellulosic ethanol and plans to continue to do so throughout 
2012. In August 2011 KL Energy successfully registered its cellulosic 
biofuel production facility under the RFS program making it eligible to 
generate RINs for biofuel produced from this facility. KL Energy has 
indicated to EPA its intent to generate RINs for the fuel it produces 
and to sell it commercially in the United States. EPA projects that 
100,000 gallons of cellulosic ethanol will be available from this 
facility in 2012.
    Range Fuels began production of methanol at their Soperton, Georgia 
facility in the third quarter of 2010. This facility uses a 
thermochemical technology to produce syngas (consisting of mostly 
hydrogen and carbon monoxide) from a woody biomass feedstock. The 
syngas is then converted into fuel with the aid of a chemical catalyst 
developed by Range. Range has developed the capability to produce both 
methanol and ethanol, depending on the catalyst used. In January 2011, 
after producing a small volume of ethanol from this facility and 
proving this capability, Range Fuels shut down the Soperton facility in 
order to work through technical difficulties they had been 
experiencing. No timeline has been given for the restart of this 
facility and fuel production from this facility in 2012 appears 
unlikely. No cellulosic fuel production from Range Fuels has been 
included in EPA's 2012 projected available volume.
2. Potential New Facilities in 2012
    In the proposed rule EPA discussed five new cellulosic biofuel 
production facilities that had plans to begin commercial production at 
some point in 2012. These facilities were at various stages in the 
construction process, and as such had various degrees of uncertainty 
associated with any projected 2012 commercial production. Three of 
these facilities, those being developed by INEOS Bio, KiOR, and 
ZeaChem, have made significant progress towards completion and are 
expected to produce and market cellulosic biofuel in 2012. Two of the 
companies mentioned in the proposed rule, Fulcrum Bioenergy and 
Terrabon,

[[Page 1327]]

are no longer on a schedule to produce cellulosic biofuel in 2012. 
Finally, EPA has become aware of a sixth company, American Process 
Inc., which is developing a cellulosic biofuel project that is likely 
to produce and market some volume of cellulosic biofuel in 2012. The 
following section provides updated information on each of the companies 
discussed in the proposed rule, as well as a summary of the project 
being developed by American Process Inc.
    Fulcrum Bioenergy is planning to build a facility capable of 
producing 10.5 million gallons of cellulosic ethanol and 16 megawatts 
of renewable electricity per year. It has developed a thermochemical 
technology to produce ethanol from separated MSW via syngas using a 
chemical catalyst. In November 2010 Fulcrum announced that it had 
received a term sheet for an $80 million loan guarantee from DOE and 
was entering into the final phase of the loan guarantee program. Prior 
to that Fulcrum had announced that it had signed long term feedstock 
supply contracts for this facility as well as engineering, procurement, 
and construction contracts. In January 2011 Fulcrum announced it had 
closed on a $75 million Series C financing that would provide the 
remaining necessary capital for the construction of its first 
commercial production facility pending the closing of its DOE loan 
guarantee. The loan guarantee, however, has yet to be finalized. As a 
result the start of the construction of this facility, originally 
planned for the second quarter of 2011, is now expected to begin in 
late 2011. EPA has not included any volume of cellulosic biofuel from 
Fulcrum Bioenergy's facility in our 2012 projected available volume 
because of this delay.
    INEOS Bio has developed a process for producing cellulosic ethanol 
by first gasifying feedstock material into a syngas and then using 
naturally occurring bacteria to ferment the syngas into ethanol. In 
January 2011 USDA announced a $75 million loan guarantee for the 
construction of INEOS Bio's first commercial facility to be built in 
Vero Beach, Florida. This was in addition to the grant of up to $50 
million INEOS Bio received from DOE in January 2010. This facility will 
be capable of producing 8 million gallons of cellulosic biofuel as well 
as 6 megawatts of renewable electricity from a variety of feedstocks 
including yard, agricultural, and wood waste, as well as separated MSW. 
On February 9, 2011 INEOS Bio broke ground on this facility. Since 
February significant progress has been made and INEOS Bio remains on 
target to complete construction on this facility in April 2012. 
Commercial production of cellulosic ethanol is expected to begin soon 
after construction is complete. Three million gallons of cellulosic 
ethanol from this facility has been included in EPA's projected 
available volume for 2012.
    After successful operation of their demonstration plant in Houston, 
Texas KiOR began construction on its first commercial scale facility in 
May 2011. This facility, located in Columbus, Mississippi, will convert 
biomass to a low oxygen biocrude using a process KiOR calls Biomass 
Catalytic Cracking (BCC). BCC uses a catalyst developed by KiOR in a 
process similar to Fluid Catalytic Cracking currently used in the 
petroleum industry. KiOR's Columbus facility will also be capable of 
upgrading this biocrude into finished gasoline and diesel as well as a 
small quantity of fuel oil. KiOR plans to finish construction on this 
facility in the first half of 2012 and begin commercial production 
early in the third quarter of 2012. KiOR has also announced plans to 
construct several more commercial scale biofuel production facilities 
in Mississippi and across the southeastern United States. It is 
unlikely any of these additional facilities will begin production of 
biofuel in 2012. EPA has included 3 million gallons of cellulosic 
biofuel (4.8 million ethanol equivalent gallons) from KiOR's Columbus 
facility in our projected available volume for 2012.
    Terrabon completed construction of a small demonstration scale 
facility for the conversion of MSW and other waste materials into 
gasoline in 2010 and are currently developing plans for their first 
commercial scale facility. Terrabon utilizes a unique production 
process that can be used to produce gasoline, diesel, or jet fuel. 
Feedstock is first fermented into carboxylic acids by a variety of 
micro organisms. These carboxylic acids are then neutralized to form 
carboxylate salts that are dewatered, dried, and thermally converted to 
ketones. Finally, the ketones are hydrogenated to form alcohols which 
can then be refined into gasoline, diesel, or jet fuel. Terrabon had 
hoped to begin producing cellulosic biofuel at their first commercial 
scale facility some time in 2012, however difficulties in securing the 
necessary funding have delayed the expected start up of their first 
commercial scale facility to 2013. EPA has not included any volume of 
cellulosic biofuel from Terrabon in our 2012 projected available 
volume.
    ZeaChem has begun construction on a small demonstration scale 
facility in Boardman, Oregon capable of producing 250,000 gallons of 
cellulosic ethanol per year. Its production process uses a combination 
of biochemical and thermochemical technologies to produce ethanol and 
other renewable chemicals from cellulosic materials. The feedstock is 
first fractionated into two separate streams containing cellulosic 
sugars and lignin. The cellulosic sugars are fermented into ethyl 
acetate using a naturally occurring acetogen, which can then be 
hydrogenated into ethanol. The hydrogen necessary for this process is 
produced by gasifying the lignin stream from the cellulosic biomass. 
ZeaChem's process is flexible and is capable of producing a wide range 
of renewable chemical and fuel molecules in addition to ethanol. 
ZeaChem received a grant of up to $25 million from DOE in January 2010 
for the construction of their demonstration facility. Since then 
ZeaChem has made significant progress on its demonstration facility and 
currently plans to begin production of cellulosic ethanol from this 
facility in early 2012. It has indicated to EPA, however, that it is 
highly unlikely to achieve full production capacity at this facility in 
its first year of production and has suggested that the production of 
50,000 gallons of cellulosic ethanol from this facility in 2012 is a 
more realistic expectation. Despite this small volume, ZeaChem does 
intend to generate RINs for the fuel that they produce and to market it 
commercially. Based on this information EPA has included 0.05 million 
gallons of cellulosic ethanol in our projected available volume for 
2012.
    American Process Inc. (API) is developing a project in Alpena, 
Michigan capable of producing up to 900,000 gallons of cellulosic 
ethanol per year from woody biomass. This facility will use a 
technology developed by API called GreenPower+TM. This 
technology extracts the hemicelluloses portion of woody biomass using 
hot water and hydrolyzes it into cellulosic sugars. These cellulosic 
sugars are then converted to ethanol or other alcohols, while the 
remaining portion of the woody biomass, containing mostly cellulose and 
lignin, is processed into wood paneling at a co-located facility. At 
larger scale facilities API anticipates burning the residual biomass in 
a boiler to produce renewable steam and electricity as well as 
cellulosic biofuel. In January 2010 API received a grant from DOE for 
up to $18 million for the construction of their demonstration facility. 
Construction of the Alpena, Michigan facility began in March 2011 and 
API anticipates beginning the production of cellulosic ethanol at this 
site early in 2012. API was not

[[Page 1328]]

discussed as a potential producer of cellulosic biofuels in 2012 in our 
proposed rule due to uncertainty about its ability to generate RINs 
with the intended feedstock and production process. EPA anticipates 
these issues will be resolved. Cellulosic biofuel produced at API's 
facility will therefore likely be eligible for cellulosic RINs. For our 
2012 projected available volume of cellulosic biofuels we have included 
500,000 gallons of cellulosic ethanol from this facility. This volume 
represents the low end of API's production target for that year due to 
the uncertainties associated with the start up of a new industrial 
facility utilizing a technology unproven at industrial scale.
    Another potential source of cellulosic biofuel in 2012 is the 
application of a technology being developed by EdeniQ. EdeniQ is 
developing a suite of enzymes capable of breaking down cellulose into 
simple sugars that can then be fermented into ethanol. Rather than 
build its own production facilities EdeniQ plans to license its enzymes 
to existing corn ethanol facilities. Such licensing would be 
accompanied by the Cellunator, an advanced milling device EdeniQ has 
developed to reduce the particle size of corn kernels to enable greater 
conversion of starch to ethanol as well as the conversion of cellulose 
to simple sugars. EdeniQ claims that its technology would allow corn 
ethanol facilities to increase ethanol production by 1-2% by converting 
the cellulosic portion of the corn kernel into ethanol. EdeniQ is also 
working to increase the effectiveness of its enzymes in order to enable 
ethanol production increases of 3-4% from the cellulose in the corn 
kernel in the future. EdeniQ plans to begin commercial trials of its 
technology in the second half of 2011. This technology has the 
potential to be implemented rapidly and produce significant amounts of 
cellulosic ethanol in 2012 as it requires relatively small capital 
additions to already existing corn ethanol facilities. While this 
technology is promising, there is currently no pathway in the RFS2 
regulations for the generation of cellulosic biofuel RINs using the 
cellulosic portion of the corn kernel as a feedstock. Moreover, EdeniQ 
has not announced any agreements with corn ethanol producers to install 
this technology to enable the production of cellulosic ethanol. For 
these reasons, EPA has not included any cellulosic ethanol production 
from EdeniQ's technology in our 2012 projections.
    In addition to the facilities mentioned above, EPA is also aware of 
three companies planning to begin the production of cellulosic biofuels 
in early 2013. Coskata, Enerkem, and Poet are planning on completing 
construction on their first commercial scale cellulosic biofuel 
facilities in late 2012 or early 2013 and producing commercial volumes 
of biofuels in 2013. While all of these facilities continue to make 
progress towards commercial production of cellulosic biofuel in 2013 it 
is highly unlikely that any of these facilities will be capable of 
producing cellulosic biofuels by the end of 2012. EPA has therefore not 
included any volume of cellulosic biofuel from these facilities in our 
projected available volume for 2012. These facilities, along with 
several other commercial cellulosic biofuel facilities planning to 
begin production in 2013, notably the first commercial scale facilities 
from Abengoa and Mascoma, indicate that the potential exists for the 
rapid expansion of production volumes in future years.
3. Imports of Cellulosic Biofuel
    While domestically produced cellulosic biofuels are the most likely 
source of cellulosic biofuel available in the United States, producers 
and/or importers of cellulosic biofuel produced in other countries may 
also generate RINs and participate in the RFS2 program. While the RFS2 
program does provide a financial incentive for companies to import 
cellulosic biofuels into the United States, the combination of local 
demand, financial incentives from other governments, and transportation 
costs for the cellulosic biofuel has resulted in no cellulosic biofuel 
being imported to the United States thus far. EPA believes this 
situation is likely to continue in the near future. Additionally, the 
majority of internationally based cellulosic biofuel facilities that 
currently exist or plan to complete construction by the end of 2012 are 
small research and development or pilot facilities not designed for the 
commercial production of fuel.
    Two notable exceptions, both located in Canada, are Enerkem and 
Iogen. Enerkem has a currently existing commercial production facility 
in Westbury, Quebec and is expecting to complete construction on a 
second facility in Edmonton, Alberta in late 2011. Iogen has a small 
demonstration facility in Ottawa and is currently exploring the 
possibility of building its first commercial facility near Prince 
Albert, Saskatchewan. The large expected production volumes and 
relatively small distance this fuel would have to be transported to 
reach the United States make these facilities the most likely 
candidates to import cellulosic biofuel into t