Renewable Fuel Standard Program: Standards for 2018 and Biomass-Based Diesel Volume for 2019; Availability of Supplemental Information and Request for Further Comment, 46174-46180 [2017-21128]
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46174
Federal Register / Vol. 82, No. 191 / Wednesday, October 4, 2017 / Proposed Rules
Additionally, as a result of
information we have received from the
public, the Board proposes to amend
part 740 to permit a fourth iteration of
the official advertising statement,
namely by stating ‘‘Insured by NCUA.’’
This change would provide FICUs with
more flexibility without diminishing the
purpose of the rule.
The current part 740 addresses
conventional forms of advertising such
as print, radio, and television. The
Board requests comment about whether
the regulation should be modified to
facilitate the trend in advertising via
new types of social media, mobile
banking, text messaging and other
digital communication platforms,
including Twitter and Instagram. The
comments should focus on specific
recommendations that balance the
regulation’s goal to inform the public
with space and other constraints
inherent in new forms of advertising.
II. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act
requires NCUA to prepare an analysis to
describe any significant economic
impact a regulation may have on a
substantial number of small entities.7
For purposes of this analysis, NCUA
considers small credit unions to be
those having under $100 million in
assets. The proposed amendments
provide regulatory relief and thus do not
impose a significant burden on small
credit unions. Accordingly, NCUA has
determined and certifies that the
proposed rule, if adopted, will not have
a significant economic impact on a
substantial number of small credit
unions within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601–
612.
Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests. In adherence to
fundamental federalism principles,
NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive
order. The proposed rule would not
have substantial direct effect on the
states, on the connection between the
national government and the states, or
on the distribution of power and
responsibilities among the various
levels of government. NCUA has
determined that this proposed rule does
not constitute a policy that has
federalism implications for purposes of
the executive order.
The Treasury and General Government
Appropriations Act of 1999—
Assessment of Federal Regulations and
Policies on Families
NCUA has determined that this
proposed rule will not affect family
well-being within the meaning of
Section 654 of the Treasury and General
Government Appropriations Act, 1999.9
List of Subjects in 12 CFR Part 740
Advertisements, Credit unions, Share
insurance, Signs and symbols.
By the National Credit Union
Administration Board on September 28,
2017.
Gerard S. Poliquin,
Secretary of the Board.
For the reasons discussed above, the
NCUA Board proposes to amend 12 CFR
part 740 as follows:
PART 740—ACCURACY OF
ADVERTISING AND NOTICE OF
INSURED STATUS
1. The authority for part 740
continues to read as follows:
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Paperwork Reduction Act
■
The Paperwork Reduction Act of 1995
(‘‘PRA’’) applies to rulemakings in
which an agency by rule creates a new
paperwork burden on regulated entities
or modifies an existing burden.8 For
purposes of the PRA, a paperwork
burden may take the form of either a
reporting or a recordkeeping
requirement, both referred to as
information collections. The proposed
rule does not constitute a ‘‘collection of
information’’ within the meaning of
section 3502(3) and would not increase
paperwork requirements under the PRA
or regulations of the Office of
Management and Budget.
Authority: 12 U.S.C. 1766, 1781, 1785, and
1789.
75
U.S.C. 603(a).
U.S.C. 3507(d); 5 CFR part 1320.
8 44
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2. Amend § 740.5 by revising
paragraphs (a), (b), (c)(7) and (c)(8) to
read as follows:
■
§ 740.5 Requirements for the official
advertising statement.
(a) Each insured credit union must
include the official advertising
statement, prescribed in paragraph (b) of
this section, in all of its advertisements,
including on its main Internet page,
except as provided in paragraph (c) of
this section.
(b) The official advertising statement
is in substance one of the following:
9 Public
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(1) This credit union is federally
insured by the National Credit Union
Administration;
(2) Federally insured by NCUA;
(3) Insured by NCUA; or
(4) A reproduction of the official sign
as described in § 740.4(b) may be used
in lieu of the other statements included
in this section. If the official sign is used
as the official advertising statement, an
insured credit union may alter the font
size to ensure its legibility as provided
in § 740.4(b)(2).
(5) The official advertising statement
must be in a size and print that is clearly
legible and may be no smaller than the
smallest font size used in other portions
of the advertisement intended to convey
information to the consumer.
(c) * * *
(7) Advertisements by radio that are
less than thirty (30) seconds in time;
(8) Advertisements by television,
other than display advertisements, that
are less than thirty (30) seconds in time;
*
*
*
*
*
[FR Doc. 2017–21316 Filed 10–3–17; 8:45 am]
BILLING CODE 7535–01–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 80
[EPA–HQ–OAR–2017–0091; FRL–9968–70–
OAR]
Renewable Fuel Standard Program:
Standards for 2018 and BiomassBased Diesel Volume for 2019;
Availability of Supplemental
Information and Request for Further
Comment
Environmental Protection
Agency (EPA).
ACTION: Availability of supplemental
information; request for further
comment.
AGENCY:
This document provides
additional data and an opportunity to
comment on that data and potential
options for reductions in the 2018
biomass-based diesel, advanced biofuel,
and total renewable fuel volumes, and/
or the 2019 biomass-based diesel
volume under the Renewable Fuel
Standard (RFS) program. In a July 21,
2017 notice of proposed rulemaking, the
EPA proposed certain reductions in the
statutory volume targets for advanced
biofuel and total renewable fuel for
2018, and requested comment on further
reductions based on various
considerations. This document presents
additional data on production, imports
and cost of renewable fuel and several
options for how we may consider such
SUMMARY:
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Federal Register / Vol. 82, No. 191 / Wednesday, October 4, 2017 / Proposed Rules
data in establishing the final volume
requirements using the waiver
authorities provided by the statute.
DATES: Comments must be received on
or before October 19, 2017.
ADDRESSES: Submit your comments,
identified by Docket ID No. EPA–HQ–
OAR–2017–0091, at https://
www.regulations.gov. Follow the online
instructions for submitting comments.
Once submitted, comments cannot be
edited or withdrawn. The EPA may
publish any comment received to its
public docket. Do not submit
electronically any information you
consider to be Confidential Business
Information (CBI) or other information
whose disclosure is restricted by statute.
Multimedia submissions (audio, video,
etc.) must be accompanied by a written
comment. The written comment is
considered the official comment and
should include discussion of all points
you wish to make. The EPA will
generally not consider comments or
1 North
Julia
MacAllister, Office of Transportation
and Air Quality, Assessment and
Standards Division, Environmental
Protection Agency, 2000 Traverwood
Drive, Ann Arbor, MI 48105; telephone
number: 734–214–4131; email address:
macallister.julia@epa.gov.
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
Outline of This Preamble
I. General Information
A. Does this action apply to me?
II. Overview
III. Costs and Supply of Advanced Biofuel
NAICS 1 codes
Category
Industry
Industry
Industry
Industry
Industry
Industry
Industry
Industry
comment contents located outside of the
primary submission (i.e., on the Web,
cloud, or other file sharing system). For
the full EPA public comment policy,
information about CBI or multimedia
submissions, and general guidance on
making effective comments, please visit
https://www.epa.gov/dockets/
commenting-epa-dockets.
........................................
........................................
........................................
........................................
........................................
........................................
........................................
........................................
SIC 2 codes
324110
325193
325199
424690
424710
424720
221210
454319
46175
IV. Possible Further Reductions of 2018
Volume Requirements
A. General Waiver Authority
1. Inadequate Domestic Supply
2. Severe Economic Harm
B. Biomass-Based Diesel Waiver Authority
V. Consideration of Possible Reductions in
the Biomass-Based Diesel Volume
Requirement for 2019
VI. Executive Order 12866: Regulatory
Planning and Review and Executive
Order 13563: Improving Regulation and
Regulatory Review
I. General Information
A. Would this rule, if finalized, apply to
me?
Entities potentially affected by the
July 21, 2017 proposed rule 1 (the July
proposal), should it become final, are
those involved with the production,
distribution, and sale of transportation
fuels, including gasoline and diesel fuel
or renewable fuels such as ethanol,
biodiesel, renewable diesel, and biogas.
Potentially regulated categories include:
Examples of potentially regulated entities
2911
3869
2869
5169
5171
5172
4925
5989
Petroleum Refineries.
Ethyl alcohol manufacturing.
Other basic organic chemical manufacturing.
Chemical and allied products merchant wholesalers.
Petroleum bulk stations and terminals.
Petroleum and petroleum products merchant wholesalers.
Manufactured gas production and distribution.
Other fuel dealers.
American Industry Classification System (NAICS).
Industrial Classification (SIC) system code.
2 Standard
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This table is not intended to be
exhaustive, but rather provides a guide
for readers regarding entities likely to
engage in activities that may be affected
by this action. Other types of entities
not listed in the table could also be
affected. To determine whether your
entity would be affected by this rule, if
finalized, you should carefully examine
the applicability criteria in 40 CFR part
80. If you have any questions regarding
the applicability of the July proposal to
a particular entity, consult the person
listed in the FOR FURTHER INFORMATION
CONTACT section.
II. Overview
On July 21, 2017, EPA proposed
reductions in the statutory volume
targets for advanced biofuel and total
renewable fuel using the cellulosic
waiver authority in Clean Air Act (CAA)
section 211(o)(7)(D).2 We proposed
1 82
FR 34206.
FR 34206.
3 Advanced biodiesel and renewable diesel with
a D code of 4.
4 We note the possibility that in light of our
consideration of comments received on this
2 82
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using the maximum reduction permitted
under that authority (considering the
proposed cellulosic volume
requirement) to reduce the 2018 volume
targets for advanced biofuel and total
renewable fuel to 4.24 and 19.24 billion
gallons, respectively, in part by placing
a greater emphasis on cost
considerations than we have in the past.
We requested comment on possible
additional reductions in advanced
biofuel (with corresponding reductions
in total renewable fuel) using the
general waiver authority in CAA section
211(o)(7)(A) or other authorities.
Similarly, we requested comment on
whether EPA should, in the final rule,
reduce the 2019 volume requirement for
biomass-based diesel (BBD) 3 to a level
below the proposed level of 2.1 billion
gallons.4
We did not specifically request
comment in the proposed rule on a
possible reduction of the 2018 volume
requirement for BBD, which was set at
2.1 billion gallons in 2016.5 We did,
however, request comment on the use of
the general waiver authority or other
authorities to reduce the advanced
biofuel requirement for 2018, and BBD
is not only nested within advanced
biofuel but is also the predominant
source of advanced biofuel. Therefore,
considerations leading to a reduction of
the advanced biofuel volume may also
be relevant in reducing the 2018 BBD
volume requirement. In this document
we are providing additional information
on renewable fuel costs and supply as
well as possible options for the exercise
of our waiver authorities based on these
and other considerations.
We note that the statute also provides
EPA the authority to waive a portion of
the BBD standard if there is a significant
renewable feedstock disruption or other
document and the NPRM that the final rule could
implement volume requirements that deviate
further from the volume targets in the statute than
the proposed levels. We believe the statutory
provisions embody multiple Congressional
objectives, including both increasing renewable
fuels and limiting in certain circumstances the
additional cost or economic impact associated with
such increases. We invite comment on how to
balance these objectives in exercising our waiver
authorities.
5 81 FR 89746, December 12, 2016.
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Federal Register / Vol. 82, No. 191 / Wednesday, October 4, 2017 / Proposed Rules
market circumstance that would make
the price of biomass-based diesel fuel
increase significantly, and to make
related reductions in the advanced
biofuel and total renewable fuel volume
requirements.6 In light of recent
developments, described below, we seek
comment on whether it would be
appropriate to use this waiver authority
in the final rule.
III. Cost and Supply of Advanced
Biofuel
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As EPA indicated in the July
proposal, the cost of advanced biofuels
is high on a per gallon basis compared
to the petroleum fuels they replace. The
expiration of the biodiesel tax credit in
the U.S. at the end of 2016 has already
impacted the effective price of biodiesel
BILLING CODE 6560–50–C
The level of imports and exports can
also affect the price of renewable fuel
used in the U.S., and both imports and
6 Under
CAA section 211(o)(7)(E)(ii).
January 1, 2017 the price of biodiesel and
the estimated effective price of biodiesel to blenders
7 After
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to blenders, as well as the price of
biodiesel blends to consumers. While it
does not appear that the expiration of
the tax credit has had a direct impact on
the price of unblended biodiesel (B100)
in 2017, we expect that the expiration
of the tax credit has had a significant
impact on the effective price of
biodiesel sold to blenders. This is
because the biodiesel tax credit that
expired at the end of 2016 was received
by biodiesel blenders, rather than
biodiesel producers. The price of
biodiesel and EPA’s estimated effective
price of biodiesel to blenders (net the
$1/gallon tax credit when applicable)
from January 2016 through August 2017
are shown in Figure III–1 below.7 We
also expect the price of biodiesel used
in the U.S. could increase further
following a recent preliminary
determination by the Department of
Commerce that it would be appropriate
to place countervailing duties of 41% to
68% on imports of biodiesel from
Argentina and Indonesia.8 Cash deposits
against preliminary duties are currently
being collected, potentially impacting
prices prior to a final determination.
Such duties could also affect import
volumes as pointed out in a recent letter
from the American Fuel and
Petrochemical Manufacturers (AFPM).9
A final decision from the Department of
Commerce and the International Trade
Commission, which could include final
countervailing duty orders, is scheduled
for December 29, 2017.
export volumes have varied
considerably over the last several years.
Based on data collected on RIN
generation and retirement from the EPA-
Moderated Transaction System (EMTS),
we have determined gross domestic
production and import and export
volumes for advanced biofuels and
are identical, as the tax credit expired at the end
of 2016.
8 ‘‘Commerce Preliminary Finds Countervailable
Subsidization of Imports of Biodiesel from
Argentina and Indonesia,’’ available in EPA docket
number EPA–HQ–OAR–2017–0091.
9 ‘‘AFPM letter on biodiesel supply in 2017,’’
available in docket EPA–HQ–OAR–2017–0091.
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biomass-based diesel for the years 2013
through 2016.10 Further details can be
46177
found in a memorandum to the
docket.11
TABLE III–1—SUPPLY OF ADVANCED BIOFUEL
[million RINs]
2013
Gross domestic production ..............................................................................
Imports .............................................................................................................
Exports .............................................................................................................
2014
2,278
911
128
2015
2,308
479
134
2,327
710
143
2016
3,023
1,177
202
TABLE III–2—SUPPLY OF BIOMASS-BASED DIESEL
[million RINs]
2013
Gross domestic production ..............................................................................
Imports .............................................................................................................
Exports .............................................................................................................
2,162
476
125
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Commenters raised concerns that
along with affecting prices of renewable
fuels in the U.S., imports may also have
an impact on the energy independence
and security status of the U.S.12
Increasing the energy independence and
security of the U.S. is one of the stated
goals in the Energy Security and
Independence Act of 2007, and the RFS
program’s standards affect the volumes
of both domestic production and
imports. EPA requests comment on
whether it is appropriate to consider
possible impacts of these volumes on
U.S. energy independence and security
in setting the applicable standards
under the RFS program, insofar as they
impact those factors that we are
permitted to consider and evaluate
under the available waiver authorities,
and/or the standard-setting authority for
BBD.
EPA remains concerned about the
high cost of advanced biofuels. As a
result, and in light of the pending action
on countervailing duties on imported
biodiesel from Argentina and Indonesia
which we believe could, if finalized,
further increase the cost and/or decrease
the supply of advanced biofuel in the
U.S., we believe it is appropriate to
request further comment on appropriate
ways to determine the applicable
volume requirements for 2018, and the
BBD volume requirement for 2019.
IV. Possible Further Reductions of 2018
Volume Requirements
10 The use of RIN data necessarily excludes
renewable fuel import or export volumes for which
no RINs were generated. RINs may not be generated,
for instance, if ethanol has not been denatured or
if a producer is exporting the renewable fuel.
However, for advanced biofuels, RINless volumes
(which would not be reflected in Tables III–1 or III–
2) are expected to be an extremely small portion of
all volumes.
11 ‘‘Imports and exports of renewable fuel in 2013
through 2016,’’ memorandum from David Korotney
to docket EPA–HQ–OAR–2017–0091.
12 See e.g., comments from AFPM/API, EPA–HQ–
OAR–2017–0091–3645.
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A. General Waiver Authority
Section 211(o)(7)(A) of the CAA
provides that EPA, in consultation with
the Secretary of Agriculture and the
Secretary of Energy, may waive the
applicable volumes specified in the Act
in whole or in part based on a petition
by one or more States, by any person
subject to the requirements of the Act,
or by the EPA Administrator on his own
motion. Such a waiver must be based on
a determination by the Administrator,
after public notice and opportunity for
comment that: (1) Implementation of the
requirement would severely harm the
economy or the environment of a State,
a region or the United States, or (2) there
is an inadequate domestic supply. We
sought comment on the possible use of
the general waiver authority in the
proposal, and here are once again
seeking comment in light of the data
provided in Section III of this document
and a possible revised interpretation of
the inadequate domestic supply waiver
authority, as discussed below. We also
solicit further comment on our use of
the general waiver authority under a
determination of either inadequate
domestic supply or severe economic
harm to reduce volumes of renewable
fuel.
1. Inadequate Domestic Supply
In the annual rule establishing the
2014–2016 renewable fuel standards, we
determined that there would be an
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2014
2015
2,196
415
134
2,155
596
143
2016
2,791
1,121
202
‘‘inadequate domestic supply’’ of
renewable fuel to consumers in 2016,
and so exercised the general waiver
authority to reduce volumes to levels we
believed could be supplied.13 The
United States Court of Appeals for the
District of Columbia Circuit recently
ruled in a lawsuit challenging that rule
that EPA improperly focused on supply
of renewable fuel to consumers, and that
the statue instead requires a ‘‘supplyside’’ assessment of the volumes of
renewable fuel that can be supplied to
refiners, importers and blenders.
Americans for Clean Energy (‘‘ACE’’) v.
EPA, 864 F.3d 691 (2017). Other
components of EPA’s interpretation of
‘‘inadequate domestic supply’’ were
either upheld by the court in ACE (e.g.,
EPA’s interpretation that carryover RINs
are not part of the ‘‘supply’’ for
purposes of this waiver authority) or
were not challenged (e.g., EPA’s
consideration of biofuel imports as part
of the domestic supply). In response to
the proposed 2018 standards, we
received comments suggesting that EPA
should interpret the undefined term
‘‘domestic’’ in ‘‘inadequate domestic
supply’’ to account for only volumes of
renewable fuel that are produced
domestically.14 As we understand this
suggestion, in determining the adequacy
of supply, EPA would consider only
whether there was an adequate supply
of domestically produced volumes to
satisfy the statutory volume targets. If
there were not, EPA would be
authorized to reduce the statutory
13 See
80 FR 77420 (December 14, 2015).
e.g., comments from American Fuels and
Petrochemical Manufacturers/American Petroleum
Institute (AFPM/API) (Docket Item No. EPA–HQ–
OAR–2017–0091–3645) and Valero (Docket Item
No. EPA–HQ–OAR–2017–0091–3677).
14 See,
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applicable volumes. Having made the
threshold finding that there was an
inadequate domestic supply, EPA could
consider the availability of imports as
one factor among others in determining
whether to exercise its discretion to use
the waiver authority.
Some commenters suggested that this
interpretation would rely on common
dictionary definitions of ‘‘domestic,’’ as
meaning ‘‘of, or relating to, or
originating within a country and
especially one’s own country,’’ 15 or
‘‘[o]f or pertaining to one’s own country
or nation; not foreign, internal, inland,
‘home.’’’ 16 Commenters suggested that
this interpretation could lead to volume
requirements providing greater stability
and certainty for obligated parties; they
noted the increasing uncertainty in
international trade markets for biofuels,
including the potential for disruptions
in supply and duties being placed on
these biofuels. These commenters
suggested that by basing the volume
requirements on the projected domestic
supply of biofuels, EPA could set
volume requirements that would better
ensure the availability of renewable fuel
for compliance.17
We note that this interpretation of the
statutory phrase ‘‘inadequate domestic
supply,’’ would not in any way limit the
use of qualifying imported biofuel by
obligated parties to ultimately comply
with the annual percentage standards.
Imported and domestically produced
biofuels would still have the same
opportunities to compete in the U.S.
market as they do now. The
interpretation would only affect the way
in which EPA calculates the volumes
used to set the percentage standards
with which obligated parties must
comply, by allowing EPA to consider
the supply of domestically produced
biofuels in deciding whether to use the
general waiver authority. Once the
standards were established, however,
qualifying imported renewable fuel
could still be used to comply with the
established standards, exactly as it is
currently.
We request comment on whether this
interpretation would comply with the
Court’s direction in ACE that we only
consider ‘‘supply-side factors’’ in
determining whether there is an
15 AFPM/API comments (citing Merriam-Webster
Dictionary).
16 Id. (citing Oxford English Dictionary).
17 See, e.g., Comments from Valero (Docket Item
No. EPA–HQ–OAR–2017–0091–3677). EPA notes
that we also received comments from the biodiesel
industry that reducing volumes based on imports
could actually harm domestic producers, see, e.g.,
comments from the National Renderers Association
(Docket Item No. EPA–HQ–OAR–2017–0091–3959),
National Biodiesel Board (Docket Item No. EPA–
HQ–OAR–2017–0091–3880).
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inadequate domestic supply. Although
the Court in ACE explained that EPA
‘‘may’’ or is ‘‘authorized’’ to consider
renewable fuel imports as part of a
supply-side assessment under this
waiver authority,18 we note that these
statements were made in the context of
comparing supply-side considerations
to demand-side considerations, and
finding EPA’s demand-side
consideration to be impermissible.
Thus, the court’s statements may
indicate the scope of permissible, but
not required, interpretations, and not
foreclose further consideration by EPA
of the scope of appropriate supply-side
considerations in light of the statute and
the court’s decision.19
We believe there are a number of
reasons why this interpretation of the
phrase ‘‘inadequate domestic supply’’
may be appropriate. First, as noted by
commenters, this interpretation may be
consistent with a straightforward
reading of the term ‘‘domestic supply’’
as referring to volumes of domesticallyproduced renewable fuels. Second, as
also noted by commenters, basing EPA’s
use of the general waiver authority on
domestic supply only may better meet
the energy independence and security
purposes of EISA. Third, as EPA has
noted in past rulemakings,20 it is
extremely difficult to project volumes
that can be made available in the U.S.
through imports, and we believe that in
light of this substantial uncertainty, that
EPA could reasonably interpret the
statute as allowing it the discretion to
waive statutory applicable volumes on
the basis of a more certain assessment
of the likely supply of domesticallyproduced fuels.
We invite comment on this possible
interpretation of the term ‘‘inadequate
domestic supply,’’ and the possibility of
applying this interpretation to reduce
the final 2018 advanced biofuel volume
requirement beyond the level proposed.
In Section III of this document we
provide data on the domestic
production of advanced biofuels for
2013 through 2016. We solicit comment
on data and methodologies we should
use for estimating the 2018 supply of
domestically-produced BBD and other
advanced biofuels if we adopt this
interpretation. We also invite comment
on the potential impact on imports and
18 See
e.g., ACE, 864 F.3d at 709.
EPA’s interpretation of the term
‘‘domestic’’ in the phrase ‘‘inadequate domestic
supply’’ and the relevance of imports to EPA’s
assessment was not challenged in the litigation or
necessary for the court’s decision, so we believe
that the court’s statements in this regard are dicta.
20 See, e.g., Renewable Fuel Standard Program:
Standards for 2017 and Biomass-Based Diesel
Volume for 2018, 81 FR 89746, 89764–65
(December 12, 2016).
19 Moreover,
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the domestic production of advanced
biofuel if EPA were to further reduce the
proposed applicable volume of
advanced biofuel on the basis of an
interpretation of the term ‘‘inadequate
domestic supply’’ as discussed in this
section. We also request comment on
whether and how EPA should consider
the potential level of imports in
determining whether to use its
discretionary general waiver authority
to reduce the required volume
requirements should this interpretation
be adopted.
Considering the nested nature of the
standards, we also seek comment on the
appropriateness of (and possible basis
for) providing a reduction in the total
renewable fuel applicable volume
requirement commensurate with any
reduction in the advanced biofuel
volume requirement that may be
finalized based on a reinterpretation of
the inadequate domestic supply waiver
authority as discussed in this section.
We note that absent a commensurate
reduction, the implied volume for
conventional biofuels (i.e., the
difference between advanced and total
volumes), would exceed the 15 billion
gallon implied cap that can be discerned
from the statutory tables. We note that
both the cellulosic waiver authority in
CAA section 211(o)(7)(D) and the BBD
waiver authority in section 211(o)(7)(E)
stipulate that when nested cellulosic or
BBD volumes, respectively, are waived
under these authorities, that reductions
in the advanced and total renewable
fuel volume requirements are
authorized. Similarly, due to the nested
nature of the standards, advanced
biofuel can be used to meet the total
renewable fuel requirement. This
program structure, established in EISA,
suggests that, in general, a reduction in
a nested renewable fuel type can justify
a corresponding reduction in the other
renewable fuel standard or standards
that the fuel can also be used to meet.
We seek comment on the extent to
which EPA should interpret the
inadequate domestic supply waiver
authority in CAA section 211(o)(7)(A) as
also authorizing EPA to make a
commensurate reduction in total
renewable fuel volumes when waiving
advanced biofuel volumes on the basis
of inadequate domestic supply.
2. Severe Economic Harm
Section 211(o)(7)(A)(1) of the CAA
provides that EPA may waive the
applicable volume based on a
determination that implementation of
the requirement would severely harm
the economy or environment of a State,
a region, or the United States. We
received comments from several
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stakeholders suggesting that EPA should
reduce volumes on the basis of severe
economic harm.21 We note that EPA has
previously expressed an interpretation
of the severe economic harm waiver in
denying petitions to exercise the
waiver.22 We solicit comment on the
appropriateness of this interpretation, as
well as rationales and data to support
approaches for identifying volumes that
would be associated with severe
economic harm, or other means of
implementing this waiver authority
consistent with the statutory provision.
In particular, we seek input on whether
there is information indicating that
severe economic harm is occurring
under current standards or would occur
for any volume requirement that could
be established in the current
rulemaking 23 and, if so, whether and
how volumes should be adjusted to
address such harm.
sradovich on DSK3GMQ082PROD with PROPOSALS
B. Biomass-Based Diesel Waiver
Authority
CAA section 211(o)(7)(E)(ii) provides
that if EPA determines that there is a
significant renewable feedstock
disruption or other market circumstance
that would make the price of BBD
increase significantly, EPA shall, in
consultation with the Secretary of
Energy, and the Secretary of
Agriculture, issue an order to reduce, for
up to a 60-day period, the annual
volume requirement for BBD by an
appropriate quantity that does not
exceed 15 percent. The statute also
stipulates that EPA is authorized to
reduce applicable volumes of advanced
biofuel and total renewable fuel by the
same or a lesser volume than the
reduction in BBD. Also, the statute
provides that EPA may provide
additional 60-day waivers, with an
appropriate additional reduction in the
annual requirement of up to 15%, if
EPA determines that the feedstock
disruptions or circumstances warranting
the initial waiver are continuing.
We note that the renewable fuels
standards apply on an annual basis and
compliance is determined three months
after the end of the year. Waiving the
standard for 60 days without adjusting
the annual standard would provide no
relief. We thus solicit comment on
21 See, e.g., comments from American Fuels and
Petrochemical Manufacturers/American Petroleum
Institute (AFPM/API) (Docket Item No. EPA–HQ–
OAR–2017–0091–3645) and Valero (Docket Item
No. EPA–HQ–OAR–2017–0091–3677).
22 See e.g., 73 FR 47168 (August 13, 2008) (Notice
of Decision Regarding the State of Texas Request for
a Waiver of a Portion of the Renewable Fuel
Standard); 77 FR 70752 (November 27, 2012)
(Notice of Decision Regarding Requests for a Waiver
of the Renewable Fuel Standard).
23 82 FR 34206 (July 21, 2017).
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whether it would be appropriate to
implement the provision by waiving the
annual standard (in circumstances
where use of the provision is
authorized) by a volume that does not
exceed 15%. Alternatively, it may be
possible to implement the provision by
allowing each refiner or importer to
subtract from its compliance obligation
calculations an amount of gasoline and
diesel produced or imported during a
specific 60-day period, subject to a 15%
limitation on the reduction in their
annual RVO. We note that the statute
also allows for an extension of any
initial waiver for additional 60-day
periods if the feedstock disruption or
other market circumstance persists. We
invite comment on how to interpret and
implement the BBD waiver provision
consistent with the text and goals of the
Act.
As described in Section III of this
action, the price of biodiesel,
particularly advanced biodiesel, has
been impacted by the expiration of the
federal tax credit at the end of 2016 and
may be expected to be impacted further
by the imposition of new duties on
imports of biodiesel from Argentina and
Indonesia.24 We seek comment on the
likely result of these and any other
factors on biodiesel prices, and the
extent to which any expected price
increases should be considered
‘‘significant’’ for purposes of the waiver
authority in CAA section
211(o)(7)(E)(ii). We also seek comment
on whether the relevant biodiesel prices
are those paid by refiners, importers and
blenders,25 and if so whether it is
appropriate to consider the increase in
the ‘‘effective price’’ of biomass-based
diesel (net of any tax credit) to blenders
for these purposes. We note that the
2018 BBD volume requirement was
established by rule in 2016 at 2.1 billion
gallons.26 Therefore, if EPA were to
make the appropriate findings under the
statute, CAA section 211(o)(7)(E)(ii)
would authorize an initial waiver of up
to 315 million gallons (15% as specified
in the statute) of the 2018 applicable
volume requirement of 2.1 billion gallon
(resulting in an applicable volume as
low as 1.79 billion gallons), with
additional incremental reductions
possible in 60 day intervals if the
circumstances warranted.27
24 Both advanced and conventional biodiesel are
imported from these two countries.
25 This approach would arguably be consistent
with the focus of the ACE Court on the ability of
these parties to blend the statutorily required
volumes of renewable fuel.
26 81 FR 89746, December 12, 2016.
27 2.10 billion gallon BBD volume requirement ×
15% = 315 mill gal.
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46179
This statutory provision also indicates
that EPA may reduce the applicable
volume of renewable fuel and advanced
biofuels requirement by the same or a
lesser volume as the reduction in the
BBD volume requirement. Were we to
exercise this BBD waiver authority, we
believe it would be appropriate to lower
the advanced biofuel and total
renewable fuel volumes by the same
amount, since the predominant form of
advanced biofuel is BBD and a
reduction in the BBD volume
requirement may have little or no
impact on BBD prices if there is no
commensurate reduction in advanced
biofuel and total renewable fuel
volumes. If the BBD volume
requirement were to be reduced by 315
million gallons, an equivalent reduction
in advanced biofuel and total renewable
fuel would be 473 million ethanol
equivalent RINs.28 This would bring the
2018 advanced biofuel volume
requirement down from the proposed
level of 4.24 billion gallons to 3.77
billion gallons and the 2018 total
renewable fuel volume requirement
from the proposed level of 19.24 billion
gallons to 18.77 billion gallons.29
We request comment on the possible
use of the waiver authority provided in
CAA section 211(o)(7)(E)(ii) to reduce
the 2018 volume requirement for BBD
by as much as 315 million gallons, and
to concurrently reduce the advanced
biofuel and total renewable fuel volume
requirements by as much as 473 million
gallons. In particular, we seek data on
recent BBD price increases and
expectations for additional price
increases, and we seek comment on the
extent to which these price increases
should be considered ‘significant’’ for
purposes of the CAA section
211(o)(7)(E)(ii) waiver authority and the
extent of a waiver (up to 15%) that
would be necessary to address or avoid
a significant price increase.
V. Consideration of Possible Reductions
in the Biomass-Based Diesel Volume
Requirement for 2019
The statute establishes applicable
volume targets for BBD only through
2012. For years after those for which
28 In the context of calculating the applicable
percentage standards from the volume
requirements, one gallon of BBD is equivalent to 1.5
gallons of ethanol. The advanced biofuel and total
renewable fuel applicable volumes are expressed as
ethanol-equivalent volumes, whereas the BBD
applicable volume requirement is expressed in
terms of biodiesel equivalence.
29 The statute does not specifically require notice
and opportunity for comment prior to EPA issuance
of a waiver under CAA section 211(o)(7)(E)(ii); that
EPA is providing an opportunity for comment
regarding EPA’s possible first use of this authority
at this time should not be viewed as suggesting that
EPA would always do so in the future.
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volumes are specified in the statute,
EPA is required under CAA section
211(o)(2)(B)(ii) to determine the
applicable volume of BBD, in
coordination with the Secretary of
Energy and the Secretary of Agriculture,
based on a review of implementation of
the program during calendar years for
which the statute specifies the volumes
and an analysis of the following factors:
1. The impact of the production and
use of renewable fuels on the
environment, including on air quality,
climate change, conversion of wetlands,
ecosystems, wildlife habitat, water
quality, and water supply;
2. The impact of renewable fuels on
the energy security of the United States;
3. The expected annual rate of future
commercial production of renewable
fuels, including advanced biofuels in
each category (cellulosic biofuel and
BBD);
4. The impact of renewable fuels on
the infrastructure of the United States,
including deliverability of materials,
goods, and products other than
renewable fuel, and the sufficiency of
infrastructure to deliver and use
renewable fuel;
5. The impact of the use of renewable
fuels on the cost to consumers of
transportation fuel and on the cost to
transport goods; and
6. The impact of the use of renewable
fuels on other factors, including job
creation, the price and supply of
agricultural commodities, rural
economic development, and food prices.
The statute also specifies that the
volume requirement for BBD cannot be
less than the applicable volume
specified in the statute for calendar year
2012, which is 1.0 billion gallons. The
statute does not, however, establish any
other numeric criteria, or specify how
EPA should weigh the importance of the
often competing factors, and the
overarching goals of the statute when
EPA sets the applicable volumes of BBD
in years after those for which the statute
specifies such volumes. In the period
2013–2022, the statute specifies
increasing applicable volumes of
cellulosic biofuel, advanced biofuel, and
total renewable fuel, but does not do so
for BBD, instead specifying only a 1.0
billion gallon minimum and factors that
EPA must evaluate in determining the
volume requirement that EPA is to set.
We received comments on our July
proposal requesting that EPA reduce the
proposed applicable volume of BBD for
2019 due to the large volume of
imported biodiesel and renewable diesel
in recent years (See Table 2 for import
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volumes of BBD),30 which could affect
our analysis of several of the factors
listed above. Additionally, on August
28, 2017, the Department of Commerce
published a preliminary determination
that countervailing subsidies are being
provided to producers and/or exporters
of biodiesel from Argentina and
Indonesia, and began requiring cash
deposits equal to the subsidy rates.31
These subsidies ranged from 50%–64%
for biodiesel from Argentina and 41%–
68% for biodiesel from Indonesia.32 If
finalized, the determination would have
a direct impact on the cost of biodiesel
imported from these countries, and
could ultimately lead to increased cost
to consumers of transportation fuel and
the cost to transport goods, and/or could
lead to reduced imports from these
countries and potentially more limited
supplies in the United States.
In our proposed assessment of the
statutory factors listed above, we noted
that the proposed BBD standard for
2019, if finalized, would not likely
impact the advanced biodiesel and
renewable diesel supply to the U.S.
market. Instead, the higher advanced
biofuel volume requirement would be
the determinant, and the market would
supply more advanced biodiesel and
renewable diesel than the BBD standard
would require. We further noted in the
July proposal our expectation that the
historic trend in establishing the
advanced volume requirements (i.e.,
annual increases) would continue into
2019, and the current production levels
and costs for different types of advanced
biofuel led us to believe that the same
volume of BBD would likely be
produced and imported to satisfy the
anticipated 2019 advanced biofuel
standard regardless of the applicable
volume of BBD we ultimately required
for purposes of the 2019 BBD standard.
Any differences in the production and
import of BBD were expected to be
marginal and uncertain as BBD
competes with other advanced biofuels
in meeting the 2019 advanced biofuel
volume. We proposed a level that we
reasoned would provide a level of
guaranteed support to the BBD industry,
while also ensuring an opportunity
under the advanced standard for the
further development and marketing of
non-BBD advanced biofuels that might
have superior environmental
characteristics or cost implications. As
noted above, we are now also soliciting
comment on options for reducing the
30 See
e.g., comments from AFPM/API, EPA–HQ–
OAR–2017–0091–3645.
31 See 82 FR 40746 and 82 FR 40748 (July 21,
2017).
32 Ibid.
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2018 advanced biofuel volume
requirement. If we determine that it is
appropriate to use one of the waiver
authorities discussed above to reduce
the required volume of advanced biofuel
in 2018, it is possible that similar
considerations would lead us to provide
reductions of the 2019 advanced biofuel
volume requirement for similar reasons.
A lower required volume of advanced
biofuel in 2019 could result in the
proposed required volume of BBD for
2019 (2.1 billion gallons or 3.15 billion
ethanol-equivalent RINs) driving
demand for advanced biodiesel and
renewable diesel, and could provide
insufficient room under the advanced
standard for non-BBD advanced biofuels
to compete for market share within the
advanced biofuel category and an
inappropriate level of guaranteed
support to the BBD industry.
In addition to these considerations,
we seek comment on the extent to
which the successful BBD industry
requires the proposed level of
guaranteed support, or if the advanced
standard together with a significantly
lower BBD standard would be sufficient
for that purpose while advancing the
goals of energy independence and
security by providing additional
encouragement for the growth of other
types of advanced biofuels.
We request comment on how EPA
should take into consideration the costs
of biodiesel and the factors that
influence those costs, together with
other relevant factors discussed above or
which commenters may wish to bring to
our attention, in setting the appropriate
required volume of BBD for 2019. We
also request comment on what the
volume requirement should be, noting
that it could be equal to or greater than
the statutory minimum of 1.0 billion
gallons.
VI. Executive Order 12866: Regulatory
Planning and Review and Executive
Order 13563: Improving Regulation and
Regulatory Review
This rulemaking is a significant
regulatory action that was submitted to
the Office of Management and Budget
(OMB) for review, as it raises novel legal
or policy issues arising out of legal
mandates, the President’s priorities, or
the principles set forth in the Executive
Order. Any changes made in response to
OMB recommendations have been
documented in the docket.
Dated: September 26, 2017.
E. Scott Pruitt,
Administrator.
[FR Doc. 2017–21128 Filed 10–3–17; 8:45 am]
BILLING CODE 6560–50–P
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]]>Agencies
[Federal Register Volume 82, Number 191 (Wednesday, October 4, 2017)]
[Proposed Rules]
[Pages 46174-46180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21128]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[EPA-HQ-OAR-2017-0091; FRL-9968-70-OAR]
Renewable Fuel Standard Program: Standards for 2018 and Biomass-
Based Diesel Volume for 2019; Availability of Supplemental Information
and Request for Further Comment
AGENCY: Environmental Protection Agency (EPA).
ACTION: Availability of supplemental information; request for further
comment.
-----------------------------------------------------------------------
SUMMARY: This document provides additional data and an opportunity to
comment on that data and potential options for reductions in the 2018
biomass-based diesel, advanced biofuel, and total renewable fuel
volumes, and/or the 2019 biomass-based diesel volume under the
Renewable Fuel Standard (RFS) program. In a July 21, 2017 notice of
proposed rulemaking, the EPA proposed certain reductions in the
statutory volume targets for advanced biofuel and total renewable fuel
for 2018, and requested comment on further reductions based on various
considerations. This document presents additional data on production,
imports and cost of renewable fuel and several options for how we may
consider such
[[Page 46175]]
data in establishing the final volume requirements using the waiver
authorities provided by the statute.
DATES: Comments must be received on or before October 19, 2017.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2017-0091, at https://www.regulations.gov. Follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or withdrawn. The EPA may publish any comment received to its
public docket. Do not submit electronically any information you
consider to be Confidential Business Information (CBI) or other
information whose disclosure is restricted by statute. Multimedia
submissions (audio, video, etc.) must be accompanied by a written
comment. The written comment is considered the official comment and
should include discussion of all points you wish to make. The EPA will
generally not consider comments or comment contents located outside of
the primary submission (i.e., on the Web, cloud, or other file sharing
system). For the full EPA public comment policy, information about CBI
or multimedia submissions, and general guidance on making effective
comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.
FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: 734-214-4131; email address:
macallister.julia@epa.gov.
SUPPLEMENTARY INFORMATION:
Outline of This Preamble
I. General Information
A. Does this action apply to me?
II. Overview
III. Costs and Supply of Advanced Biofuel
IV. Possible Further Reductions of 2018 Volume Requirements
A. General Waiver Authority
1. Inadequate Domestic Supply
2. Severe Economic Harm
B. Biomass-Based Diesel Waiver Authority
V. Consideration of Possible Reductions in the Biomass-Based Diesel
Volume Requirement for 2019
VI. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
I. General Information
A. Would this rule, if finalized, apply to me?
Entities potentially affected by the July 21, 2017 proposed rule
\1\ (the July proposal), should it become final, are those involved
with the production, distribution, and sale of transportation fuels,
including gasoline and diesel fuel or renewable fuels such as ethanol,
biodiesel, renewable diesel, and biogas. Potentially regulated
categories include:
---------------------------------------------------------------------------
\1\ 82 FR 34206.
----------------------------------------------------------------------------------------------------------------
Examples of potentially
Category NAICS \1\ codes SIC \2\ codes regulated entities
----------------------------------------------------------------------------------------------------------------
Industry................................ 324110 2911 Petroleum Refineries.
Industry................................ 325193 3869 Ethyl alcohol manufacturing.
Industry................................ 325199 2869 Other basic organic chemical
manufacturing.
Industry................................ 424690 5169 Chemical and allied products
merchant wholesalers.
Industry................................ 424710 5171 Petroleum bulk stations and
terminals.
Industry................................ 424720 5172 Petroleum and petroleum products
merchant wholesalers.
Industry................................ 221210 4925 Manufactured gas production and
distribution.
Industry................................ 454319 5989 Other fuel dealers.
----------------------------------------------------------------------------------------------------------------
\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 engage in activities
that may be affected by this action. Other types of entities not listed
in the table could also be affected. To determine whether your entity
would be affected by this rule, if finalized, you should carefully
examine the applicability criteria in 40 CFR part 80. If you have any
questions regarding the applicability of the July proposal to a
particular entity, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.
II. Overview
On July 21, 2017, EPA proposed reductions in the statutory volume
targets for advanced biofuel and total renewable fuel using the
cellulosic waiver authority in Clean Air Act (CAA) section
211(o)(7)(D).\2\ We proposed using the maximum reduction permitted
under that authority (considering the proposed cellulosic volume
requirement) to reduce the 2018 volume targets for advanced biofuel and
total renewable fuel to 4.24 and 19.24 billion gallons, respectively,
in part by placing a greater emphasis on cost considerations than we
have in the past. We requested comment on possible additional
reductions in advanced biofuel (with corresponding reductions in total
renewable fuel) using the general waiver authority in CAA section
211(o)(7)(A) or other authorities. Similarly, we requested comment on
whether EPA should, in the final rule, reduce the 2019 volume
requirement for biomass-based diesel (BBD) \3\ to a level below the
proposed level of 2.1 billion gallons.\4\
---------------------------------------------------------------------------
\2\ 82 FR 34206.
\3\ Advanced biodiesel and renewable diesel with a D code of 4.
\4\ We note the possibility that in light of our consideration
of comments received on this document and the NPRM that the final
rule could implement volume requirements that deviate further from
the volume targets in the statute than the proposed levels. We
believe the statutory provisions embody multiple Congressional
objectives, including both increasing renewable fuels and limiting
in certain circumstances the additional cost or economic impact
associated with such increases. We invite comment on how to balance
these objectives in exercising our waiver authorities.
---------------------------------------------------------------------------
We did not specifically request comment in the proposed rule on a
possible reduction of the 2018 volume requirement for BBD, which was
set at 2.1 billion gallons in 2016.\5\ We did, however, request comment
on the use of the general waiver authority or other authorities to
reduce the advanced biofuel requirement for 2018, and BBD is not only
nested within advanced biofuel but is also the predominant source of
advanced biofuel. Therefore, considerations leading to a reduction of
the advanced biofuel volume may also be relevant in reducing the 2018
BBD volume requirement. In this document we are providing additional
information on renewable fuel costs and supply as well as possible
options for the exercise of our waiver authorities based on these and
other considerations.
---------------------------------------------------------------------------
\5\ 81 FR 89746, December 12, 2016.
---------------------------------------------------------------------------
We note that the statute also provides EPA the authority to waive a
portion of the BBD standard if there is a significant renewable
feedstock disruption or other
[[Page 46176]]
market circumstance that would make the price of biomass-based diesel
fuel increase significantly, and to make related reductions in the
advanced biofuel and total renewable fuel volume requirements.\6\ In
light of recent developments, described below, we seek comment on
whether it would be appropriate to use this waiver authority in the
final rule.
---------------------------------------------------------------------------
\6\ Under CAA section 211(o)(7)(E)(ii).
---------------------------------------------------------------------------
III. Cost and Supply of Advanced Biofuel
As EPA indicated in the July proposal, the cost of advanced
biofuels is high on a per gallon basis compared to the petroleum fuels
they replace. The expiration of the biodiesel tax credit in the U.S. at
the end of 2016 has already impacted the effective price of biodiesel
to blenders, as well as the price of biodiesel blends to consumers.
While it does not appear that the expiration of the tax credit has had
a direct impact on the price of unblended biodiesel (B100) in 2017, we
expect that the expiration of the tax credit has had a significant
impact on the effective price of biodiesel sold to blenders. This is
because the biodiesel tax credit that expired at the end of 2016 was
received by biodiesel blenders, rather than biodiesel producers. The
price of biodiesel and EPA's estimated effective price of biodiesel to
blenders (net the $1/gallon tax credit when applicable) from January
2016 through August 2017 are shown in Figure III-1 below.\7\ We also
expect the price of biodiesel used in the U.S. could increase further
following a recent preliminary determination by the Department of
Commerce that it would be appropriate to place countervailing duties of
41% to 68% on imports of biodiesel from Argentina and Indonesia.\8\
Cash deposits against preliminary duties are currently being collected,
potentially impacting prices prior to a final determination. Such
duties could also affect import volumes as pointed out in a recent
letter from the American Fuel and Petrochemical Manufacturers
(AFPM).\9\ A final decision from the Department of Commerce and the
International Trade Commission, which could include final
countervailing duty orders, is scheduled for December 29, 2017.
---------------------------------------------------------------------------
\7\ After January 1, 2017 the price of biodiesel and the
estimated effective price of biodiesel to blenders are identical, as
the tax credit expired at the end of 2016.
\8\ ``Commerce Preliminary Finds Countervailable Subsidization
of Imports of Biodiesel from Argentina and Indonesia,'' available in
EPA docket number EPA-HQ-OAR-2017-0091.
\9\ ``AFPM letter on biodiesel supply in 2017,'' available in
docket EPA-HQ-OAR-2017-0091.
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BILLING CODE 6560-50-C
The level of imports and exports can also affect the price of
renewable fuel used in the U.S., and both imports and export volumes
have varied considerably over the last several years. Based on data
collected on RIN generation and retirement from the EPA-Moderated
Transaction System (EMTS), we have determined gross domestic production
and import and export volumes for advanced biofuels and
[[Page 46177]]
biomass-based diesel for the years 2013 through 2016.\10\ Further
details can be found in a memorandum to the docket.\11\
---------------------------------------------------------------------------
\10\ The use of RIN data necessarily excludes renewable fuel
import or export volumes for which no RINs were generated. RINs may
not be generated, for instance, if ethanol has not been denatured or
if a producer is exporting the renewable fuel. However, for advanced
biofuels, RINless volumes (which would not be reflected in Tables
III-1 or III-2) are expected to be an extremely small portion of all
volumes.
\11\ ``Imports and exports of renewable fuel in 2013 through
2016,'' memorandum from David Korotney to docket EPA-HQ-OAR-2017-
0091.
Table III-1--Supply of Advanced Biofuel
[million RINs]
----------------------------------------------------------------------------------------------------------------
2013 2014 2015 2016
----------------------------------------------------------------------------------------------------------------
Gross domestic production....................... 2,278 2,308 2,327 3,023
Imports......................................... 911 479 710 1,177
Exports......................................... 128 134 143 202
----------------------------------------------------------------------------------------------------------------
Table III-2--Supply of Biomass-Based Diesel
[million RINs]
----------------------------------------------------------------------------------------------------------------
2013 2014 2015 2016
----------------------------------------------------------------------------------------------------------------
Gross domestic production....................... 2,162 2,196 2,155 2,791
Imports......................................... 476 415 596 1,121
Exports......................................... 125 134 143 202
----------------------------------------------------------------------------------------------------------------
Commenters raised concerns that along with affecting prices of
renewable fuels in the U.S., imports may also have an impact on the
energy independence and security status of the U.S.\12\ Increasing the
energy independence and security of the U.S. is one of the stated goals
in the Energy Security and Independence Act of 2007, and the RFS
program's standards affect the volumes of both domestic production and
imports. EPA requests comment on whether it is appropriate to consider
possible impacts of these volumes on U.S. energy independence and
security in setting the applicable standards under the RFS program,
insofar as they impact those factors that we are permitted to consider
and evaluate under the available waiver authorities, and/or the
standard-setting authority for BBD.
---------------------------------------------------------------------------
\12\ See e.g., comments from AFPM/API, EPA-HQ-OAR-2017-0091-
3645.
---------------------------------------------------------------------------
EPA remains concerned about the high cost of advanced biofuels. As
a result, and in light of the pending action on countervailing duties
on imported biodiesel from Argentina and Indonesia which we believe
could, if finalized, further increase the cost and/or decrease the
supply of advanced biofuel in the U.S., we believe it is appropriate to
request further comment on appropriate ways to determine the applicable
volume requirements for 2018, and the BBD volume requirement for 2019.
IV. Possible Further Reductions of 2018 Volume Requirements
A. General Waiver Authority
Section 211(o)(7)(A) of the CAA provides that EPA, in consultation
with the Secretary of Agriculture and the Secretary of Energy, may
waive the applicable volumes specified in the Act in whole or in part
based on a petition by one or more States, by any person subject to the
requirements of the Act, or by the EPA Administrator on his own motion.
Such a waiver must be based on a determination by the Administrator,
after public notice and opportunity for comment that: (1)
Implementation of the requirement would severely harm the economy or
the environment of a State, a region or the United States, or (2) there
is an inadequate domestic supply. We sought comment on the possible use
of the general waiver authority in the proposal, and here are once
again seeking comment in light of the data provided in Section III of
this document and a possible revised interpretation of the inadequate
domestic supply waiver authority, as discussed below. We also solicit
further comment on our use of the general waiver authority under a
determination of either inadequate domestic supply or severe economic
harm to reduce volumes of renewable fuel.
1. Inadequate Domestic Supply
In the annual rule establishing the 2014-2016 renewable fuel
standards, we determined that there would be an ``inadequate domestic
supply'' of renewable fuel to consumers in 2016, and so exercised the
general waiver authority to reduce volumes to levels we believed could
be supplied.\13\ The United States Court of Appeals for the District of
Columbia Circuit recently ruled in a lawsuit challenging that rule that
EPA improperly focused on supply of renewable fuel to consumers, and
that the statue instead requires a ``supply-side'' assessment of the
volumes of renewable fuel that can be supplied to refiners, importers
and blenders. Americans for Clean Energy (``ACE'') v. EPA, 864 F.3d 691
(2017). Other components of EPA's interpretation of ``inadequate
domestic supply'' were either upheld by the court in ACE (e.g., EPA's
interpretation that carryover RINs are not part of the ``supply'' for
purposes of this waiver authority) or were not challenged (e.g., EPA's
consideration of biofuel imports as part of the domestic supply). In
response to the proposed 2018 standards, we received comments
suggesting that EPA should interpret the undefined term ``domestic'' in
``inadequate domestic supply'' to account for only volumes of renewable
fuel that are produced domestically.\14\ As we understand this
suggestion, in determining the adequacy of supply, EPA would consider
only whether there was an adequate supply of domestically produced
volumes to satisfy the statutory volume targets. If there were not, EPA
would be authorized to reduce the statutory
[[Page 46178]]
applicable volumes. Having made the threshold finding that there was an
inadequate domestic supply, EPA could consider the availability of
imports as one factor among others in determining whether to exercise
its discretion to use the waiver authority.
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\13\ See 80 FR 77420 (December 14, 2015).
\14\ See, e.g., comments from American Fuels and Petrochemical
Manufacturers/American Petroleum Institute (AFPM/API) (Docket Item
No. EPA-HQ-OAR-2017-0091-3645) and Valero (Docket Item No. EPA-HQ-
OAR-2017-0091-3677).
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Some commenters suggested that this interpretation would rely on
common dictionary definitions of ``domestic,'' as meaning ``of, or
relating to, or originating within a country and especially one's own
country,'' \15\ or ``[o]f or pertaining to one's own country or nation;
not foreign, internal, inland, `home.''' \16\ Commenters suggested that
this interpretation could lead to volume requirements providing greater
stability and certainty for obligated parties; they noted the
increasing uncertainty in international trade markets for biofuels,
including the potential for disruptions in supply and duties being
placed on these biofuels. These commenters suggested that by basing the
volume requirements on the projected domestic supply of biofuels, EPA
could set volume requirements that would better ensure the availability
of renewable fuel for compliance.\17\
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\15\ AFPM/API comments (citing Merriam-Webster Dictionary).
\16\ Id. (citing Oxford English Dictionary).
\17\ See, e.g., Comments from Valero (Docket Item No. EPA-HQ-
OAR-2017-0091-3677). EPA notes that we also received comments from
the biodiesel industry that reducing volumes based on imports could
actually harm domestic producers, see, e.g., comments from the
National Renderers Association (Docket Item No. EPA-HQ-OAR-2017-
0091-3959), National Biodiesel Board (Docket Item No. EPA-HQ-OAR-
2017-0091-3880).
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We note that this interpretation of the statutory phrase
``inadequate domestic supply,'' would not in any way limit the use of
qualifying imported biofuel by obligated parties to ultimately comply
with the annual percentage standards. Imported and domestically
produced biofuels would still have the same opportunities to compete in
the U.S. market as they do now. The interpretation would only affect
the way in which EPA calculates the volumes used to set the percentage
standards with which obligated parties must comply, by allowing EPA to
consider the supply of domestically produced biofuels in deciding
whether to use the general waiver authority. Once the standards were
established, however, qualifying imported renewable fuel could still be
used to comply with the established standards, exactly as it is
currently.
We request comment on whether this interpretation would comply with
the Court's direction in ACE that we only consider ``supply-side
factors'' in determining whether there is an inadequate domestic
supply. Although the Court in ACE explained that EPA ``may'' or is
``authorized'' to consider renewable fuel imports as part of a supply-
side assessment under this waiver authority,\18\ we note that these
statements were made in the context of comparing supply-side
considerations to demand-side considerations, and finding EPA's demand-
side consideration to be impermissible. Thus, the court's statements
may indicate the scope of permissible, but not required,
interpretations, and not foreclose further consideration by EPA of the
scope of appropriate supply-side considerations in light of the statute
and the court's decision.\19\
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\18\ See e.g., ACE, 864 F.3d at 709.
\19\ Moreover, EPA's interpretation of the term ``domestic'' in
the phrase ``inadequate domestic supply'' and the relevance of
imports to EPA's assessment was not challenged in the litigation or
necessary for the court's decision, so we believe that the court's
statements in this regard are dicta.
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We believe there are a number of reasons why this interpretation of
the phrase ``inadequate domestic supply'' may be appropriate. First, as
noted by commenters, this interpretation may be consistent with a
straightforward reading of the term ``domestic supply'' as referring to
volumes of domestically-produced renewable fuels. Second, as also noted
by commenters, basing EPA's use of the general waiver authority on
domestic supply only may better meet the energy independence and
security purposes of EISA. Third, as EPA has noted in past
rulemakings,\20\ it is extremely difficult to project volumes that can
be made available in the U.S. through imports, and we believe that in
light of this substantial uncertainty, that EPA could reasonably
interpret the statute as allowing it the discretion to waive statutory
applicable volumes on the basis of a more certain assessment of the
likely supply of domestically-produced fuels.
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\20\ See, e.g., Renewable Fuel Standard Program: Standards for
2017 and Biomass-Based Diesel Volume for 2018, 81 FR 89746, 89764-65
(December 12, 2016).
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We invite comment on this possible interpretation of the term
``inadequate domestic supply,'' and the possibility of applying this
interpretation to reduce the final 2018 advanced biofuel volume
requirement beyond the level proposed. In Section III of this document
we provide data on the domestic production of advanced biofuels for
2013 through 2016. We solicit comment on data and methodologies we
should use for estimating the 2018 supply of domestically-produced BBD
and other advanced biofuels if we adopt this interpretation. We also
invite comment on the potential impact on imports and the domestic
production of advanced biofuel if EPA were to further reduce the
proposed applicable volume of advanced biofuel on the basis of an
interpretation of the term ``inadequate domestic supply'' as discussed
in this section. We also request comment on whether and how EPA should
consider the potential level of imports in determining whether to use
its discretionary general waiver authority to reduce the required
volume requirements should this interpretation be adopted.
Considering the nested nature of the standards, we also seek
comment on the appropriateness of (and possible basis for) providing a
reduction in the total renewable fuel applicable volume requirement
commensurate with any reduction in the advanced biofuel volume
requirement that may be finalized based on a reinterpretation of the
inadequate domestic supply waiver authority as discussed in this
section. We note that absent a commensurate reduction, the implied
volume for conventional biofuels (i.e., the difference between advanced
and total volumes), would exceed the 15 billion gallon implied cap that
can be discerned from the statutory tables. We note that both the
cellulosic waiver authority in CAA section 211(o)(7)(D) and the BBD
waiver authority in section 211(o)(7)(E) stipulate that when nested
cellulosic or BBD volumes, respectively, are waived under these
authorities, that reductions in the advanced and total renewable fuel
volume requirements are authorized. Similarly, due to the nested nature
of the standards, advanced biofuel can be used to meet the total
renewable fuel requirement. This program structure, established in
EISA, suggests that, in general, a reduction in a nested renewable fuel
type can justify a corresponding reduction in the other renewable fuel
standard or standards that the fuel can also be used to meet. We seek
comment on the extent to which EPA should interpret the inadequate
domestic supply waiver authority in CAA section 211(o)(7)(A) as also
authorizing EPA to make a commensurate reduction in total renewable
fuel volumes when waiving advanced biofuel volumes on the basis of
inadequate domestic supply.
2. Severe Economic Harm
Section 211(o)(7)(A)(1) of the CAA provides that EPA may waive the
applicable volume based on a determination that implementation of the
requirement would severely harm the economy or environment of a State,
a region, or the United States. We received comments from several
[[Page 46179]]
stakeholders suggesting that EPA should reduce volumes on the basis of
severe economic harm.\21\ We note that EPA has previously expressed an
interpretation of the severe economic harm waiver in denying petitions
to exercise the waiver.\22\ We solicit comment on the appropriateness
of this interpretation, as well as rationales and data to support
approaches for identifying volumes that would be associated with severe
economic harm, or other means of implementing this waiver authority
consistent with the statutory provision. In particular, we seek input
on whether there is information indicating that severe economic harm is
occurring under current standards or would occur for any volume
requirement that could be established in the current rulemaking \23\
and, if so, whether and how volumes should be adjusted to address such
harm.
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\21\ See, e.g., comments from American Fuels and Petrochemical
Manufacturers/American Petroleum Institute (AFPM/API) (Docket Item
No. EPA-HQ-OAR-2017-0091-3645) and Valero (Docket Item No. EPA-HQ-
OAR-2017-0091-3677).
\22\ See e.g., 73 FR 47168 (August 13, 2008) (Notice of Decision
Regarding the State of Texas Request for a Waiver of a Portion of
the Renewable Fuel Standard); 77 FR 70752 (November 27, 2012)
(Notice of Decision Regarding Requests for a Waiver of the Renewable
Fuel Standard).
\23\ 82 FR 34206 (July 21, 2017).
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B. Biomass-Based Diesel Waiver Authority
CAA section 211(o)(7)(E)(ii) provides that if EPA determines that
there is a significant renewable feedstock disruption or other market
circumstance that would make the price of BBD increase significantly,
EPA shall, in consultation with the Secretary of Energy, and the
Secretary of Agriculture, issue an order to reduce, for up to a 60-day
period, the annual volume requirement for BBD by an appropriate
quantity that does not exceed 15 percent. The statute also stipulates
that EPA is authorized to reduce applicable volumes of advanced biofuel
and total renewable fuel by the same or a lesser volume than the
reduction in BBD. Also, the statute provides that EPA may provide
additional 60-day waivers, with an appropriate additional reduction in
the annual requirement of up to 15%, if EPA determines that the
feedstock disruptions or circumstances warranting the initial waiver
are continuing.
We note that the renewable fuels standards apply on an annual basis
and compliance is determined three months after the end of the year.
Waiving the standard for 60 days without adjusting the annual standard
would provide no relief. We thus solicit comment on whether it would be
appropriate to implement the provision by waiving the annual standard
(in circumstances where use of the provision is authorized) by a volume
that does not exceed 15%. Alternatively, it may be possible to
implement the provision by allowing each refiner or importer to
subtract from its compliance obligation calculations an amount of
gasoline and diesel produced or imported during a specific 60-day
period, subject to a 15% limitation on the reduction in their annual
RVO. We note that the statute also allows for an extension of any
initial waiver for additional 60-day periods if the feedstock
disruption or other market circumstance persists. We invite comment on
how to interpret and implement the BBD waiver provision consistent with
the text and goals of the Act.
As described in Section III of this action, the price of biodiesel,
particularly advanced biodiesel, has been impacted by the expiration of
the federal tax credit at the end of 2016 and may be expected to be
impacted further by the imposition of new duties on imports of
biodiesel from Argentina and Indonesia.\24\ We seek comment on the
likely result of these and any other factors on biodiesel prices, and
the extent to which any expected price increases should be considered
``significant'' for purposes of the waiver authority in CAA section
211(o)(7)(E)(ii). We also seek comment on whether the relevant
biodiesel prices are those paid by refiners, importers and
blenders,\25\ and if so whether it is appropriate to consider the
increase in the ``effective price'' of biomass-based diesel (net of any
tax credit) to blenders for these purposes. We note that the 2018 BBD
volume requirement was established by rule in 2016 at 2.1 billion
gallons.\26\ Therefore, if EPA were to make the appropriate findings
under the statute, CAA section 211(o)(7)(E)(ii) would authorize an
initial waiver of up to 315 million gallons (15% as specified in the
statute) of the 2018 applicable volume requirement of 2.1 billion
gallon (resulting in an applicable volume as low as 1.79 billion
gallons), with additional incremental reductions possible in 60 day
intervals if the circumstances warranted.\27\
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\24\ Both advanced and conventional biodiesel are imported from
these two countries.
\25\ This approach would arguably be consistent with the focus
of the ACE Court on the ability of these parties to blend the
statutorily required volumes of renewable fuel.
\26\ 81 FR 89746, December 12, 2016.
\27\ 2.10 billion gallon BBD volume requirement x 15% = 315 mill
gal.
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This statutory provision also indicates that EPA may reduce the
applicable volume of renewable fuel and advanced biofuels requirement
by the same or a lesser volume as the reduction in the BBD volume
requirement. Were we to exercise this BBD waiver authority, we believe
it would be appropriate to lower the advanced biofuel and total
renewable fuel volumes by the same amount, since the predominant form
of advanced biofuel is BBD and a reduction in the BBD volume
requirement may have little or no impact on BBD prices if there is no
commensurate reduction in advanced biofuel and total renewable fuel
volumes. If the BBD volume requirement were to be reduced by 315
million gallons, an equivalent reduction in advanced biofuel and total
renewable fuel would be 473 million ethanol equivalent RINs.\28\ This
would bring the 2018 advanced biofuel volume requirement down from the
proposed level of 4.24 billion gallons to 3.77 billion gallons and the
2018 total renewable fuel volume requirement from the proposed level of
19.24 billion gallons to 18.77 billion gallons.\29\
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\28\ In the context of calculating the applicable percentage
standards from the volume requirements, one gallon of BBD is
equivalent to 1.5 gallons of ethanol. The advanced biofuel and total
renewable fuel applicable volumes are expressed as ethanol-
equivalent volumes, whereas the BBD applicable volume requirement is
expressed in terms of biodiesel equivalence.
\29\ The statute does not specifically require notice and
opportunity for comment prior to EPA issuance of a waiver under CAA
section 211(o)(7)(E)(ii); that EPA is providing an opportunity for
comment regarding EPA's possible first use of this authority at this
time should not be viewed as suggesting that EPA would always do so
in the future.
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We request comment on the possible use of the waiver authority
provided in CAA section 211(o)(7)(E)(ii) to reduce the 2018 volume
requirement for BBD by as much as 315 million gallons, and to
concurrently reduce the advanced biofuel and total renewable fuel
volume requirements by as much as 473 million gallons. In particular,
we seek data on recent BBD price increases and expectations for
additional price increases, and we seek comment on the extent to which
these price increases should be considered `significant'' for purposes
of the CAA section 211(o)(7)(E)(ii) waiver authority and the extent of
a waiver (up to 15%) that would be necessary to address or avoid a
significant price increase.
V. Consideration of Possible Reductions in the Biomass-Based Diesel
Volume Requirement for 2019
The statute establishes applicable volume targets for BBD only
through 2012. For years after those for which
[[Page 46180]]
volumes are specified in the statute, EPA is required under CAA section
211(o)(2)(B)(ii) to determine the applicable volume of BBD, in
coordination with the Secretary of Energy and the Secretary of
Agriculture, based on a review of implementation of the program during
calendar years for which the statute specifies the volumes and an
analysis of the following factors:
1. The impact of the production and use of renewable fuels on the
environment, including on air quality, climate change, conversion of
wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
2. The impact of renewable fuels on the energy security of the
United States;
3. The expected annual rate of future commercial production of
renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and BBD);
4. The impact of renewable fuels on the infrastructure of the
United States, including deliverability of materials, goods, and
products other than renewable fuel, and the sufficiency of
infrastructure to deliver and use renewable fuel;
5. The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
6. The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
The statute also specifies that the volume requirement for BBD
cannot be less than the applicable volume specified in the statute for
calendar year 2012, which is 1.0 billion gallons. The statute does not,
however, establish any other numeric criteria, or specify how EPA
should weigh the importance of the often competing factors, and the
overarching goals of the statute when EPA sets the applicable volumes
of BBD in years after those for which the statute specifies such
volumes. In the period 2013-2022, the statute specifies increasing
applicable volumes of cellulosic biofuel, advanced biofuel, and total
renewable fuel, but does not do so for BBD, instead specifying only a
1.0 billion gallon minimum and factors that EPA must evaluate in
determining the volume requirement that EPA is to set.
We received comments on our July proposal requesting that EPA
reduce the proposed applicable volume of BBD for 2019 due to the large
volume of imported biodiesel and renewable diesel in recent years (See
Table 2 for import volumes of BBD),\30\ which could affect our analysis
of several of the factors listed above. Additionally, on August 28,
2017, the Department of Commerce published a preliminary determination
that countervailing subsidies are being provided to producers and/or
exporters of biodiesel from Argentina and Indonesia, and began
requiring cash deposits equal to the subsidy rates.\31\ These subsidies
ranged from 50%-64% for biodiesel from Argentina and 41%-68% for
biodiesel from Indonesia.\32\ If finalized, the determination would
have a direct impact on the cost of biodiesel imported from these
countries, and could ultimately lead to increased cost to consumers of
transportation fuel and the cost to transport goods, and/or could lead
to reduced imports from these countries and potentially more limited
supplies in the United States.
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\30\ See e.g., comments from AFPM/API, EPA-HQ-OAR-2017-0091-
3645.
\31\ See 82 FR 40746 and 82 FR 40748 (July 21, 2017).
\32\ Ibid.
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In our proposed assessment of the statutory factors listed above,
we noted that the proposed BBD standard for 2019, if finalized, would
not likely impact the advanced biodiesel and renewable diesel supply to
the U.S. market. Instead, the higher advanced biofuel volume
requirement would be the determinant, and the market would supply more
advanced biodiesel and renewable diesel than the BBD standard would
require. We further noted in the July proposal our expectation that the
historic trend in establishing the advanced volume requirements (i.e.,
annual increases) would continue into 2019, and the current production
levels and costs for different types of advanced biofuel led us to
believe that the same volume of BBD would likely be produced and
imported to satisfy the anticipated 2019 advanced biofuel standard
regardless of the applicable volume of BBD we ultimately required for
purposes of the 2019 BBD standard. Any differences in the production
and import of BBD were expected to be marginal and uncertain as BBD
competes with other advanced biofuels in meeting the 2019 advanced
biofuel volume. We proposed a level that we reasoned would provide a
level of guaranteed support to the BBD industry, while also ensuring an
opportunity under the advanced standard for the further development and
marketing of non-BBD advanced biofuels that might have superior
environmental characteristics or cost implications. As noted above, we
are now also soliciting comment on options for reducing the 2018
advanced biofuel volume requirement. If we determine that it is
appropriate to use one of the waiver authorities discussed above to
reduce the required volume of advanced biofuel in 2018, it is possible
that similar considerations would lead us to provide reductions of the
2019 advanced biofuel volume requirement for similar reasons. A lower
required volume of advanced biofuel in 2019 could result in the
proposed required volume of BBD for 2019 (2.1 billion gallons or 3.15
billion ethanol-equivalent RINs) driving demand for advanced biodiesel
and renewable diesel, and could provide insufficient room under the
advanced standard for non-BBD advanced biofuels to compete for market
share within the advanced biofuel category and an inappropriate level
of guaranteed support to the BBD industry.
In addition to these considerations, we seek comment on the extent
to which the successful BBD industry requires the proposed level of
guaranteed support, or if the advanced standard together with a
significantly lower BBD standard would be sufficient for that purpose
while advancing the goals of energy independence and security by
providing additional encouragement for the growth of other types of
advanced biofuels.
We request comment on how EPA should take into consideration the
costs of biodiesel and the factors that influence those costs, together
with other relevant factors discussed above or which commenters may
wish to bring to our attention, in setting the appropriate required
volume of BBD for 2019. We also request comment on what the volume
requirement should be, noting that it could be equal to or greater than
the statutory minimum of 1.0 billion gallons.
VI. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
This rulemaking is a significant regulatory action that was
submitted to the Office of Management and Budget (OMB) for review, as
it raises novel legal or policy issues arising out of legal mandates,
the President's priorities, or the principles set forth in the
Executive Order. Any changes made in response to OMB recommendations
have been documented in the docket.
Dated: September 26, 2017.
E. Scott Pruitt,
Administrator.
[FR Doc. 2017-21128 Filed 10-3-17; 8:45 am]
BILLING CODE 6560-50-P
