Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021 and Other Changes, 7016-7085 [2020-00431]

Download as PDF 7016 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 79 and 80 [EPA–HQ–OAR–2019–0136; FRL–10003–79– OAR] RIN 2060–AU42 Renewable Fuel Standard Program: Standards for 2020 and BiomassBased Diesel Volume for 2021 and Other Changes Environmental Protection Agency (EPA). ACTION: Final rule. AGENCY: Under section 211 of the Clean Air Act, the Environmental Protection Agency (EPA) is required to set renewable fuel percentage standards every year. This action establishes the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that apply to gasoline and diesel transportation fuel produced or imported in the year 2020. Relying on SUMMARY: 1 North This final rule is effective on April 6, 2020. DATES: The EPA has established a docket for this action under Docket ID No. EPA–HQ–OAR–2019–0136. All documents in the docket are listed on ADDRESSES: NAICS 1 codes Category Industry Industry Industry Industry Industry Industry Industry Industry statutory waiver authority that is available when the projected cellulosic biofuel production volume is less than the applicable volume specified in the statute, EPA is establishing volume requirements for cellulosic biofuel, advanced biofuel, and total renewable fuel that are below the statutory volume targets. We are also establishing the applicable volume of biomass-based diesel for 2021. In addition, we are finalizing changes to the percentage standard calculations to account for volumes of gasoline and diesel we project will be exempted from the renewable volume obligations. Finally, this action finalizes several regulatory changes to the Renewable Fuel Standard (RFS) program including new pathways, flexibilities for regulated parties, and clarifications of existing regulations. ............................................ ............................................ ............................................ ............................................ ............................................ ............................................ ............................................ ............................................ SIC 2 codes 324110 325193 325199 424690 424710 424720 221210 454319 2911 2869 2869 5169 5171 5172 4925 5989 the https://www.regulations.gov website. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material is not available on the internet and will be publicly available only in hard copy form. Publicly available docket materials are available electronically through https:// www.regulations.gov. 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: Entities potentially affected by this final rule are those involved with the production, distribution, and sale of transportation fuels, including gasoline and diesel fuel or renewable fuels such as ethanol, biodiesel, renewable diesel, and biogas. Potentially affected categories include: SUPPLEMENTARY INFORMATION: Examples of potentially affected entities 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). 2 Standard This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this final action. This table lists the types of entities that EPA is now aware could potentially be affected by this action. Other types of entities not listed in the table could also be affected. To determine whether your entity would be affected by this action, you should carefully examine the applicability criteria in 40 CFR part 80. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed in the FOR FURTHER INFORMATION CONTACT section. lotter on DSKBCFDHB2PROD with RULES2 Outline of This Preamble I. Executive Summary A. Approach To Setting Volume Requirements B. Cellulosic Biofuel C. Advanced Biofuel D. Total Renewable Fuel E. 2021 Biomass-Based Diesel F. Annual Percentage Standards VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 G. Amendments to the RFS and Fuels Programs Regulations H. Response To Remand of 2016 Standards Rulemaking II. Authority and Need for Waiver of Statutory Applicable Volumes A. Statutory Authorities for Reducing Volume Targets 1. Cellulosic Waiver Authority 2. General Waiver Authority B. Severability C. Treatment of Carryover RINs 1. Carryover RIN Bank Size 2. EPA’s Decision Regarding the Treatment of Carryover RINs III. Cellulosic Biofuel Volume for 2020 A. Statutory Requirements B. Cellulosic Biofuel Industry Assessment 1. Review of EPA’s Projection of Cellulosic Biofuel in Previous Years 2. Potential Domestic Producers 3. Potential Foreign Sources of Cellulosic Biofuel 4. Summary of Volume Projections for Individual Companies C. Projection From the Energy Information Administration D. Cellulosic Biofuel Volume for 2020 1. Liquid Cellulosic Biofuel 2. CNG/LNG Derived From Biogas PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 3. Total Cellulosic Biofuel in 2020 IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020 A. Volumetric Limitation on Use of the Cellulosic Waiver Authority B. Attainable Volumes of Advanced Biofuel 1. Imported Sugarcane Ethanol 2. Other Advanced Biofuel 3. Biodiesel and Renewable Diesel a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve Advanced Biofuel Volume b. Historical Supply of Biodiesel and Renewable Diesel c. Consideration of Production Capacity and Distribution Infrastructure d. Consideration of the Availability of Advanced Feedstocks e. Biodiesel and Renewable Diesel Imports and Exports f. Attainable and Reasonably Attainable Volumes of Advanced Biodiesel and Renewable Diesel C. Volume Requirement for Advanced Biofuel D. Volume Requirement for Total Renewable Fuel V. Impacts of 2020 Volumes on Costs E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations A. Illustrative Costs Analysis of 2020 Final Volumes Compared to the 2020 Statutory Volumes Baseline B. Illustrative Cost Analysis of the 2020 Final Volumes Compared to the 2019 Final Volumes VI. Biomass-Based Diesel Volume for 2021 A. Statutory Requirements B. Review of Implementation of the Program and the 2021 Applicable Volume of Biomass-Based Diesel C. Consideration of Statutory Factors in CAA Section 211(o)(2)(B)(ii)(I)–(VI) for 2021 and Determination of the 2021 Biomass-Based Diesel Volume D. BBD Volume Requirement for 2021 VII. Percentage Standards for 2020 A. Calculation of Percentage Standards B. Small Refineries and Small Refiners 1. Changes to the Projected Volume of Gasoline and Diesel for Exempt Small Refineries 2. Projecting the Exempted Volume of Gasoline and Diesel in 2020 C. Final Standards VIII. Administrative Actions A. Assessment of the Domestic Aggregate Compliance Approach B. Assessment of the Canadian Aggregate Compliance Approach IX. Amendments to the RFS and Fuels Program Regulations A. Clarification of Diesel RVO Calculations 1. Overview 2. Downstream Re-Designation of Certified Non-Transportation 15 ppm Distillate Fuel to MVNRLM Diesel Fuel B. Pathway Petition Conditions C. Esterification Pretreatment Pathway D. Distillers Corn Oil and Distillers Sorghum Oil Pathways E. Clarification of the Definition of Renewable Fuel Exporter and Associated Provisions F. REGS Rule Provisions 1. Flexibilities for Renewable Fuel Blending for Military Use 2. Heating Oil Used for Cooling 3. Separated Food Waste Plans 4. Additional Registration Deactivation Justifications 5. New RIN Retirement Section 6. New Pathway for Co-Processing Biomass With Petroleum to Produce Co-Processed Cellulosic Diesel, Jet Fuel, and Heating Oil 7. Other Revisions to the Fuels Program a. Testing Revisions b. Oxygenate Added Downstream in Tier 3 c. Technical Corrections and Clarifications X. Public Participation XI. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Executive Order 13771: Reducing Regulations and Controlling Regulatory Costs C. Paperwork Reduction Act (PRA) D. Regulatory Flexibility Act (RFA) E. Unfunded Mandates Reform Act (UMRA) VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 F. Executive Order 13132: Federalism G. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments H. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks I. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use J. National Technology Transfer and Advancement Act (NTTAA) K. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations L. Congressional Review Act (CRA) XII. Statutory Authority I. Executive Summary The Renewable Fuel Standard (RFS) program began in 2006 pursuant to the requirements in Clean Air Act (CAA) section 211(o) that were added through the Energy Policy Act of 2005 (EPAct). The statutory requirements for the RFS program were subsequently modified through the Energy Independence and Security Act of 2007 (EISA), leading to the publication of major revisions to the regulatory requirements on March 26, 2010.1 EISA’s stated goals include moving the United States (U.S.) toward ‘‘greater energy independence and security [and] increas[ing] the production of clean renewable fuels.’’ 2 The statute includes annual volume targets and requires EPA to translate those volume targets (or alternative volume requirements established by EPA in accordance with statutory waiver authorities) into compliance obligations that obligated parties must meet every year. In this action we are establishing the applicable volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel for 2020, and biomass-based diesel (BBD) for 2021.3 We are also finalizing changes to the percentage standard calculations to account for volumes of gasoline and diesel we project will be exempted from the renewable volume obligations, and establishing the annual percentage standards (also known as ‘‘percent standards’’) for cellulosic biofuel, BBD, advanced biofuel, and total renewable fuel that would apply to gasoline and diesel produced or imported in 2020.4 1 75 FR 14670, March 26, 2010. Law 110–140, 121 Stat. 1492 (2007) (‘‘EISA’’). 3 The 2020 BBD volume requirement was established in the 2019 final rule. 83 FR 63704 (December 11, 2018). 4 For a list of the statutory provisions related to the determination of applicable volumes, see the 2 Public PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 7017 Finally, we are finalizing several regulatory changes to the RFS program to facilitate the implementation of this program going forward including new pathways, flexibilities for regulated parties, and clarifications of existing regulations. Today, nearly all gasoline used for transportation purposes contains 10 percent ethanol (E10), and on average diesel fuel contains nearly 5 percent of biodiesel and renewable diesel.5 However, the market has fallen well short of the statutory volumes for cellulosic biofuel, resulting in shortfalls in the advanced biofuel and total renewable fuel volumes. In this action, we are establishing a volume requirement for cellulosic biofuel at the level we project to be available for 2020, along with an associated applicable percentage standard. For advanced biofuel and total renewable fuel, we are finalizing volume requirements using the ‘‘cellulosic waiver authority’’ that result in advanced biofuel and total renewable fuel volume requirements that are lower than the statutory targets by the same magnitude as the reduction in the cellulosic biofuel reduction. This would effectively maintain the implied statutory volumes for non-cellulosic biofuel and conventional biofuel.6 The resulting volume requirements for 2020 are shown in Table I–1. Relative to the levels finalized for 2019, the 2020 volume requirements for cellulosic biofuel, advanced biofuel and total renewable fuel would be higher by approximately 170 million gallons. This entire increase for each category is attributable to the increased projection of cellulosic biofuel production in 2020 (see Section III for a further discussion of our cellulosic biofuel projection). We are also establishing the volume requirement for BBD for 2021 at 2.43 billion gallons. This volume is equal to the BBD volume finalized for 2020. 2018 final rule (82 FR 58486, December 12, 2017; Table I.A–2). 5 Average biodiesel and/or renewable diesel blend percentages based on EIA’s October 2019 Short Term Energy Outlook (STEO) and EPA’s Moderated Transaction System (EMTS). 6 The statutory total renewable fuel, advanced biofuel and cellulosic biofuel requirements for 2020 are 30.0, 15.0 and 10.5 billion gallons respectively. This implies a conventional renewable fuel applicable volume (the difference between the total renewable fuel and advanced biofuel volumes) of 15.0 billion gallons, and a non-cellulosic advanced biofuel applicable volume (the difference between the advanced biofuel and cellulosic biofuel volumes) of 4.5 billion gallons. E:\FR\FM\06FER2.SGM 06FER2 7018 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations TABLE I–1—FINAL VOLUME REQUIREMENTS a 2020 Statutory volumes 2019 b Cellulosic biofuel (billion gallons) ......................................... Biomass-based diesel (billion gallons) ................................ Advanced biofuel (billion gallons) ........................................ Renewable fuel (billion gallons) ........................................... 0.42 2.1 4.92 19.92 2020 Proposed volumes 10.50 ≥1.0 15.00 30.00 2020 Final volumes 0.54 0.59 c N/A c 2.43 5.04 20.04 5.09 20.09 2021 Final volumes n/a 2.43 n/a n/a a All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent. 2019 volume requirements for cellulosic biofuel, advanced biofuel, and renewable fuel were established in the 2019 final rule (83 FR 63704, December 11, 2018). The 2019 BBD volume requirement was established in the 2018 final rule (82 FR 58486, December 12, 2017). c The 2020 BBD volume requirement of 2.43 billion gallons was established in the 2019 final rule (83 FR 63704, December 11, 2018). b The A. Approach To Setting Volume Requirements For advanced biofuel and total renewable fuel, we are reducing the statutory volumes based on the ‘‘cellulosic waiver authority’’ that result in advanced biofuel and total renewable fuel volume requirements that are lower than the statutory targets by the same magnitude as the reduction in the cellulosic biofuel applicable volume. Further discussion of our cellulosic waiver authority is found in Section II. This follows the same general approach as in the 2018 and 2019 final rules, as well as the 2020 proposed rule. The volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel exceed the required volumes for these fuel types in 2019. lotter on DSKBCFDHB2PROD with RULES2 B. Cellulosic Biofuel The CAA requires EPA to annually determine the projected volume of cellulosic biofuel production for the following year. If the projected volume of cellulosic biofuel production is less than the applicable volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must lower the applicable volume used to set the annual cellulosic biofuel percentage standard to the projected volume available. In this rule we are establishing a cellulosic biofuel volume requirement of 0.59 billion ethanolequivalent gallons for 2020 based on our projection. This volume is 0.17 billion ethanol-equivalent gallons higher than the cellulosic biofuel volume finalized for 2019. Our projection in Section III considers many factors, including the estimate of cellulosic biofuel production received from the Energy Information Administration (EIA); 7 RIN generation data for past years and 2019 to date that is available to EPA through the EPA Moderated Transaction System (EMTS); the information we have received regarding individual facilities’ 7 Letter from Linda Capuano, EIA Administrator to Andrew Wheeler, EPA Administrator. October 9, 2019. Available in docket EPA–HQ–OAR–2019– 0136. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 capacities, production start dates, and biofuel production plans; a review of cellulosic biofuel production relative to EPA’s projections in previous annual rules; and EPA’s own engineering judgment. To project cellulosic biofuel production for 2020 we used the same general methodology as in the 2018 and 2019 final rules, together with updated data. C. Advanced Biofuel If we reduce the applicable volume of cellulosic biofuel below the volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the authority to reduce the applicable volumes of advanced biofuel and total renewable fuel by the same or a lesser amount. We refer to this as the ‘‘cellulosic waiver authority.’’ The conditions that caused us to reduce the 2019 volume requirement for advanced biofuel below the statutory target remain relevant in 2020. As in the 2019 final rule, we investigated the projected availability of non-cellulosic advanced biofuels in 2020. In Section IV, we describe our consideration of many factors, including: • The ability of the market to make advanced biofuels available, • The ability of the standards we set to bring about market changes in the time available, • The potential impacts associated with diverting biofuels and/or biofuel feedstocks from current uses to the production of advanced biofuel used in the U.S., • The fact that the biodiesel tax credit is currently not available for 2020, • Current tariffs on imports of biodiesel from Argentina and Indonesia and the proposal to change those tariffs, and • The cost of advanced biofuels We also considered the size of the carryover RIN bank. Based on these considerations, we have determined that the statutory volume target for advanced biofuel should be reduced by the same amount as the reduction in the statutory PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 volume target for cellulosic biofuel, consistent with our July 29, 2019, proposal (‘‘the July 29 proposal’’). Specifically, the statutory volume target for advanced biofuel should be reduced by 9.91 billion gallons. This maintains the implied statutory volume requirement for non-cellulosic advanced biofuel of 4.5 billion gallons, and results in a final advanced biofuel volume requirement for 2020 of 5.09 billion gallons, which is 0.17 billion gallons higher than the advanced biofuel volume requirement for 2019. D. Total Renewable Fuel As we have articulated in previous annual standard-setting rulemakings,8 we believe that the cellulosic waiver authority is best interpreted to require equal reductions in advanced biofuel and total renewable fuel. Consistent with previous years, we are reducing total renewable fuel by the same amount as the reduction in advanced biofuel, such that the resulting implied volume requirement for conventional renewable fuel would be 15 billion gallons, the same as the implied volume requirement in the statute. The result is that the final 2020 volume requirement is 20.09 billion gallons. E. 2021 Biomass-Based Diesel In EISA, Congress specified increasing applicable volumes of BBD through 2012. Beyond 2012, Congress stipulated that EPA, in coordination with DOE and USDA, was to establish the BBD volume based on a review of the implementation of the program during calendar years specified in the tables in CAA 211(o)(B)(i) and other statutory factors, provided that the required volume for BBD could not be less than 1.0 billion gallons. Starting in 2013, EPA has set the BBD volume requirement above the statutory minimum, most recently resulting in 2.43 billion gallons for 2020. In this rule we are maintaining the BBD volume for 2021 at 2.43 billion gallons. 8 See, E:\FR\FM\06FER2.SGM e.g., 83 FR 63704 (December 11, 2018). 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations Given current and recent market conditions, the advanced biofuel requirement is driving the production and use of biodiesel and renewable diesel volumes over and above volumes required through the separate BBD standard, and we expect this to continue. While EPA continues to believe it is appropriate to maintain the opportunity for other advanced biofuels to compete for market share, the vast majority of the advanced biofuel obligations in recent years have been satisfied with BBD. Thus, after a review of implementation of the program to date and considering the statutory factors, we are establishing, in coordination with USDA and DOE, an applicable volume of BBD for 2020 of 2.43 billion gallons. lotter on DSKBCFDHB2PROD with RULES2 F. Annual Percentage Standards The renewable fuel standards are expressed as a volume percentage and are used by each refiner and importer of fossil-based gasoline or diesel to determine their renewable fuel volume obligations. Four separate percentage standards are required under the RFS program, corresponding to the four separate renewable fuel categories shown in Table I–1. The specific formulas we use in calculating the renewable fuel percentage standards are contained in the regulations at 40 CFR 80.1405. On October 28, 2019, we proposed changes to our percentage standard formulas in 40 CFR 80.1405. (‘‘October 28 Proposal’’). These changes were intended to project the exempted volume of gasoline and diesel due to small refinery exemptions, regardless of whether we grant those exemptions prior or after the annual rule. For 2020, we proposed to project exempt volumes are based on a three-year average of the relief recommended by the Department of Energy (DOE) for 2016–2018. In this action, we are finalizing these proposed changes. These changes result in increases to the percentage standards as compared to the percentage standards in the July 29 proposal. Consistent with these changes, we are also announcing our general policy approach to small refinery exemptions going forward, including for nowpending 2019 petitions as well as for future 2019 and 2020 petitions. Although final decisions on any exemption petition must await EPA’s receipt and adjudication of those petitions, EPA intends to grant relief consistent with DOE’s recommendations where appropriate. This policy extends to DOE’s recommendations of partial (50%) relief: Where appropriate, we VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 intend to grant 50% relief where DOE recommends 50% relief. The volume of transportation gasoline and diesel used to calculate the proposed percentage standards was based on Energy Information Administration’s (EIA) October 2019 Short Term Energy Outlook (STEO), minus an estimate of fuel consumption in Alaska. The final applicable percentage standards for 2020 are shown in Table I.B.6–1. Details, including the projected gasoline and diesel volumes used, can be found in Section VII. 7019 Cellulosic Diesel, Jet Fuel, and Heating Oil (REGS Section VIII.M) • Other Revisions to the Fuels Program (REGS Section IX) The other provisions proposed in the REGS Rule remain under consideration but are not being finalized at this time. H. Response to Remand of 2016 Standards Rulemaking In 2015, EPA established the total renewable fuel standard for 2016, relying in part on the general waiver authority under a finding of inadequate domestic supply.11 Several parties challenged that action, and the U.S. Court of Appeals for the D.C. Circuit, in TABLE I.F–1—FINAL 2020 Americans for Clean Energy v. EPA, 864 PERCENTAGE STANDARDS F.3d 691 (2017) (hereafter ‘‘ACE’’), vacated EPA’s use of the general waiver Percentage authority under a finding of inadequate standards domestic supply, finding that such use Cellulosic biofuel ................... 0.34% exceeded EPA’s authority under the Biomass-based diesel .......... 2.10 Clean Air Act. Specifically, EPA had Advanced biofuel .................. 2.93 impermissibly considered demand-side Renewable fuel ..................... 11.56 factors in its assessment of inadequate domestic supply, rather than limiting G. Amendments to the RFS and Fuels that assessment to supply-side factors. Programs Regulations The court remanded the rule back to EPA for further consideration in light of In implementing the RFS program the court’s ruling. EPA has identified several areas where In the July 29 proposal, we proposed regulatory changes would assist EPA in that the applicable 2016 volume implementing the RFS program in requirement for total renewable fuel and future years. EPA requested comment on several of these regulatory changes in the associated percentage standard should not be changed. In light of the the July 29 proposal: Clarification of many comments received, we are still diesel RVO calculations, pathway actively considering this issue. We are petition conditions, a biodiesel esterification pathway, distillers corn oil therefore not taking final agency action on this issue in today’s final rule. We and distillers sorghum oil pathways, and renewable fuel exporter provisions. are instead deferring action on this issue to a separate action, which we Each of these regulatory changes is discussed in greater detail in Section IX. anticipate in early 2020. Additionally, we proposed a number II. Authority and Need for Waiver of of changes to the RFS regulations as part Statutory Applicable Volumes of the proposed Renewables The CAA provides EPA with the Enhancement and Growth Support authority to promulgate volume (REGS) Rule.9 EPA noted that it was requirements below the applicable considering finalizing several of those volume targets specified in the statute proposed changes along with the 2020 10 RVO final rule, and are now finalizing under specific circumstances. This section discusses those authorities. As the REGS Rule provisions listed below. described in the executive summary, we • Flexibilities for Renewable Fuel are setting the volume requirement for Blending for Military Use (REGS cellulosic biofuel at the level we project Section VIII.E) to be available for 2020, and an • Heating Oil Used for Cooling (REGS associated applicable percentage Section VIII.F) standard. For advanced biofuel and total • Separated Food Waste Plans (REGS renewable fuel, we are setting volume Section VIII.G) requirements and associated applicable • Additional Registration Deactivation percentage standards, based on use of Justifications (REGS Section VIII.J) the ‘‘cellulosic waiver authority’’ that • New RIN Retirement Section (REGS would result in advanced biofuel and Section VIII.L) total renewable fuel volume • New Pathway for Co-Processing requirements that are equivalent to the Biomass With Petroleum To Produce reduction in the cellulosic biofuel 9 See 81 FR 80828 (November 16, 2016). 84 FR 36765 (July 29, 2019). 10 See PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 11 See 80 FR 77420 (December 14, 2015); CAA section 211(o)(7)(A)(ii). E:\FR\FM\06FER2.SGM 06FER2 7020 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations reduction. This would effectively maintain the implied statutory volumes for non-cellulosic advanced and conventional renewable fuel. A. Statutory Authorities for Reducing Volume Targets In CAA section 211(o)(2), Congress specified increasing annual volume targets for total renewable fuel, advanced biofuel, and cellulosic biofuel for each year through 2022. However, Congress also recognized that under certain circumstances it would be appropriate for EPA to set volume requirements at a lower level than reflected in the statutory volume targets, and thus provided waiver provisions in CAA section 211(o)(7). Congress also specified increasing annual volume targets for BBD through 2012 and authorized EPA to set volume requirements for subsequent years (i.e., after 2012) in coordination with USDA and DOE, and based upon consideration of specified factors. lotter on DSKBCFDHB2PROD with RULES2 1. Cellulosic Waiver Authority Section 211(o)(7)(D)(i) of the CAA provides that if EPA determines that the projected volume of cellulosic biofuel production for a given year is less than the applicable volume specified in the statute, then EPA must reduce the applicable volume of cellulosic biofuel required to the projected volume available for that calendar year. In making this projection, EPA may not ‘‘adopt a methodology in which the risk of overestimation is set deliberately to outweigh the risk of underestimation’’ but must make a projection that ‘‘takes neutral aim at accuracy.’’ API v. EPA, 706 F.3d 474, 479, 476 (D.C. Cir. 2013). Pursuant to this provision, EPA has set the cellulosic biofuel requirement lower than the statutory volume for each year since 2010. As described in Section III.D, the projected volume of cellulosic biofuel production for 2020 is less than the 10.5 billion gallon volume target in the statute. Therefore, for 2020, we are finalizing a cellulosic biofuel volume lower than the statutory applicable volume, in accordance with this provision. CAA section 211(o)(7)(D)(i) also provides EPA with the authority to reduce the applicable volume of total renewable fuel and advanced biofuel in years when it reduces the applicable volume of cellulosic biofuel under that provision. The reduction must be less than or equal to the reduction in cellulosic biofuel. For 2020, we are reducing the applicable volumes of advanced biofuel and total renewable fuel under this authority. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 EPA has used the cellulosic waiver authority to lower the advanced biofuel and total renewable fuel volumes every year since 2014 as a result of waiving the cellulosic volumes. Further discussion of the cellulosic waiver authority, and EPA’s interpretation of it, can be found in the preamble to the 2017 final rule.12 In this action we are using the cellulosic waiver authority to reduce the statutory volume targets for advanced biofuel and total renewable fuel by equal amounts, consistent with our long-held interpretation of this provision and our approach in setting the 2014–2019 standards. This approach considers the Congressional objectives reflected in the volume tables in the statute, and the environmental objectives that generally favor the use of advanced biofuels over non-advanced biofuels.13 As described in Section IV, we are reducing the advanced biofuel volume under the cellulosic waiver authority by the amount of the reduction in cellulosic biofuel and providing an equal reduction under the cellulosic waiver authority in the applicable volume of total renewable fuel. We are taking this action both because we do not believe that the statutory volumes can be achieved, and because we believe that backfilling of the shortfall in cellulosic with advanced biofuel would not be appropriate in light of concerns about high costs of the advanced biofuels and the potential for feedstock switching. The volumes of advanced biofuel and total renewable fuel resulting from this exercise of the cellulosic waiver authority provide for an implied volume allowance for conventional renewable fuel of 15 billion gallons, and an implied volume allowance for non-cellulosic advanced biofuel of 4.5 billion gallons, equal to 12 See 81 FR 89752–89753 (December 12, 2016); see also API v. EPA, 706 F.3d 474 (D.C. Cir. 2013) (requiring that EPA’s cellulosic biofuel projections reflect a neutral aim at accuracy); Monroe Energy v. EPA, 750 F.3d 909, 915–16 (D.C. Cir. 2014) (affirming EPA’s broad discretion under the cellulosic waiver authority to reduce volumes of advanced biofuel and total renewable fuel); Americans for Clean Energy v. EPA (‘‘ACE’’), 864 F.3d 691, 730–735 (D.C. Cir. 2017) (same); Alon Refining Krotz Spring, Inc. v. EPA, 936 F.3d 628, 662–663 (D.C. Cir. 2019) (same); American Fuel & Petrochemical Manufacturers v. EPA, 937 F.3d 559, 577–78 (D.C. Cir. 2019) (same). 13 See 81 FR 89752–89753 (December 12, 2016). See also 78 FR 49809–49810 (August 15, 2013); 80 FR 77434 (December 14, 2015). Advanced biofuels are required to have lifecycle GHG emissions that are at least 50% less than the baseline defined in EISA. Non-advanced biofuels are required to have lifecycle GHG emissions that are at least 20% less than the baseline defined in EISA unless the fuel producer meets the grandfathering provisions in 40 CFR 80.1403. Beginning in 2015, all growth in the volumes established by Congress come from advanced biofuels. PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 the implied statutory volumes for 2020. As discussed in Section IV, we also believe that the resulting volume of advanced biofuel is attainable, and that the resulting volume of total renewable fuel can be made available by the market. 2. General Waiver Authority Section 211(o)(7)(A) of the CAA provides that EPA, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the applicable volumes specified in the Act in whole or in part based on a petition by one or more States, by any person subject to the requirements of the Act, or by the EPA Administrator on his own motion. Such a waiver must be based on a determination by the Administrator, after public notice and opportunity for comment that: (1) Implementation of the requirement would severely harm the economy or the environment of a State, a region, or the United States; or (2) there is an inadequate domestic supply. EPA received comments requesting that EPA should use the general waiver authority to further reduce volumes under findings of inadequate domestic supply and/or severe harm to the economy or environment, as well as comments to the contrary. Based on our review of the comments and updated data, and consistent with EPA’s rationale and decisions in setting the 2019 standards, we decline to exercise our discretion to reduce volumes under the general waiver authority. Further discussion of these issues is found in the Response To Comments (‘‘RTC’’) document.14 B. Severability The various portions of this rule are severable. Specifically, the following portions are severable from each other: The percentage standards for 2020 (described in Section VII); the 2021 BBD volume requirement (Section VI); the administrative actions (Section VIII); and the regulatory amendments (Section IX). In addition, each of the regulatory amendments is severable from the other regulatory amendments. If any of the above portions is set aside by a reviewing court, we intend the remainder of this action to remain effective. For instance, if a reviewing court sets aside one of the regulatory amendments, we intend for the 2020 percentage standards to go into effect. C. Treatment of Carryover RINs Consistent with our approach in the rules establishing the RFS standards for 14 See also ‘‘Endangered Species Act No Effect Finding for the 2020 Final Rule.’’ E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 2013 through 2019, we have also considered the availability and role of carryover RINs in setting the cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements for 2020. Neither the statute nor EPA regulations specify how or whether EPA should consider the availability of carryover RINs in exercising our statutory authorities.15 As noted in the context of the rules establishing the RFS standards for 2014 through 2019, we believe that a bank of carryover RINs is extremely important in providing obligated parties compliance flexibility in the face of substantial uncertainties in the transportation fuel marketplace, and in providing a liquid and wellfunctioning RIN market upon which success of the entire program depends.16 Carryover RINs provide flexibility in the face of a variety of unforeseeable circumstances that could limit the availability of RINs and reduce spikes in compliance costs, including weatherrelated damage to renewable fuel feedstocks and other circumstances potentially affecting the production and distribution of renewable fuel. On the other hand, carryover RINs can be used for compliance purposes, and in the context of the 2013 RFS rulemaking we noted that an abundance of carryover RINs available in that year, together with possible increases in renewable fuel production and import, justified maintaining the advanced and total renewable fuel volume requirements for that year at the levels specified in the statute.17 In general, we have authority to consider the size of the carryover RIN bank in deciding whether and to what extent to exercise any of our 15 CAA section 211(o)(5) requires that EPA establish a credit program as part of its RFS regulations, and that the credits be valid for obligated parties to show compliance for 12 months as of the date of generation. EPA implemented this requirement through the use of RINs, which can be used to demonstrate compliance for the year in which they are generated or the subsequent compliance year. Obligated parties can obtain more RINs than they need in a given compliance year, allowing them to ‘‘carry over’’ these excess RINs for use in the subsequent compliance year, although our regulations limit the use of these carryover RINs to 20 percent of the obligated party’s RVO. For the bank of carryover RINs to be preserved from one year to the next, individual carryover RINs are used for compliance before they expire and are essentially replaced with newer vintage RINs that are then held for use in the next year. For example, vintage 2018 carryover RINs must be used for compliance in 2019, or they will expire. However, vintage 2019 RINs can then be ‘‘banked’’ for use in 2020. 16 See 80 FR 77482–87 (December 14, 2015), 81 FR 89754–55 (December 12, 2016), 82 FR 58493– 95 (December 12, 2017), and 83 FR 63708–10 (December 11, 2018). 17 See 79 FR 49793–95 (August 15, 2013). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 discretionary waiver authorities.18 EPA’s approach to the consideration of carryover RINs in exercising our cellulosic waiver authority was affirmed in Monroe Energy and ACE.19 The RIN system was established in accordance with CAA section 211(o)(5), which authorizes the generation of credits by any person who refines, blends, or imports renewable fuel in excess of the requirements of the statute.20 In the RFS1 and RFS2 rulemakings, we also established a 20 percent rollover cap on the amount of an obligated party’s RVO that can be met using previous-year RINs.21 In implementing the RFS program, we have observed that an adequate carryover RIN bank serves to make the RIN market liquid wherein RINs are freely traded in an open market making them readily available and accessible to those obligated parties who need them for compliance at prices established by that open market. Just as the economy as a whole functions best when individuals and businesses prudently plan for unforeseen events by maintaining inventories and reserve money accounts, we believe that the RFS program functions best when sufficient carryover RINs are held in reserve for potential use by the RIN holders themselves, or for possible sale to others that may not have established their own carryover RIN reserves. Were there to be too few RINs in reserve, then even minor disruptions causing shortfalls in renewable fuel production or distribution, or higher than expected transportation fuel demand (requiring greater volumes of renewable fuel to comply with the percentage standards that apply to all volumes of transportation fuel, including the unexpected volumes) could lead to the need for a new waiver of the standards and higher compliance costs, undermining the market certainty so critical to the RFS program. Moreover, a significant drawdown of the carryover RIN bank leading to a scarcity of RINs 18 These discretionary waiver authorities include the discretionary portion of the cellulosic waiver authority, CAA section 211(o)(7)(D)(i) (‘‘the Administrator may also reduce the applicable volume of renewable fuel and advanced biofuels requirement’’), the general waiver authority, CAA section 211(o)(7)(A) (‘‘The Administrator . . . may waive the requirements’’), and the BBD waiver authority with regard to the extent of the reduction in the BBD volume, CAA section 211(o)(7)(E)(ii) (‘‘the Administrator . . . shall issue an order to reduce . . . the quantity of biomass-based diesel . . . by an appropriate quantity’’). 19 Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014); ACE, 864 F.3d at 713. 20 See 75 FR 14670 (March 26, 2010) and 72 FR 23900 (May 1, 2007). 21 See 75 FR 14734–35 (March 26, 2010) and 72 FR 23934–35 (May 1, 2007). PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 7021 may stop the market from functioning in an efficient manner (i.e., one in which there are a sufficient number of reasonably available RINs for obligated parties seeking to purchase them), even where the market overall could satisfy the standards. For all of these reasons, the collective carryover RIN bank provides a necessary programmatic buffer that both facilitates individual compliance, provides for smooth overall functioning of the program, and is consistent with the statutory provision allowing for the generation and use of credits.22 1. Carryover RIN Bank Size We estimate that there are currently approximately 3.48 billion total carryover RINs available, an increase of 1.29 billion RINs from the previous estimate of 2.19 billion total carryover RINs in the July 29 proposal.23 We also estimate that there are currently approximately 680 million advanced carryover RINs available (which are a subset of the 3.48 billion total carryover RINs), an increase of 290 million RINs from the previous estimate in the July 29 proposal. This increase in the carryover RIN bank is primarily the result of the millions of RINs that were unretired by small refineries that were granted hardship exemptions after the July 29 proposal.24 These volumes of carryover RINs are approximately 17 percent of the 2020 total renewable fuel volume requirement and 13 percent of the 2020 advanced biofuel volume requirement, which are less than the 20 percent maximum limit permitted by the RFS regulations to be carried over for use in complying with the 2020 standards.25 However, there remains considerable uncertainty surrounding the ultimate size of the carryover RIN bank available for compliance with the 2020 standards for several reasons, including the possibility of additional small refinery exemptions, higher or lower than expected transportation fuel demand (requiring greater or lower volumes of renewable fuel to comply with the percentage standards that apply to all 22 Here we use the term ‘‘buffer’’ as shorthand reference to all of the benefits that are provided by a sufficient bank of carryover RINs. 23 The calculations performed to estimate the number of carryover RINs currently available can be found in the memorandum, ‘‘Carryover RIN Bank Calculations for 2020 Final Rule,’’ available in the docket. 24 Information about the number of small refinery exemptions (SREs) granted and the volume of RINs not required to be retired as a result of those exemptions can be found at: https://www.epa.gov/ fuels-registration-reporting-and-compliance-help/ rfs-small-refinery-exemptions. 25 See 40 CFR 80.1427(a)(5). E:\FR\FM\06FER2.SGM 06FER2 7022 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations volumes of transportation fuel), and the impact of 2019 RFS compliance on the bank of carryover RINs. In addition, we note that there have been enforcement actions in past years that have resulted in the retirement of carryover RINs to make up for the generation and use of invalid RINs and/or the failure to retire RINs for exported renewable fuel. Future enforcement actions could have similar results and require that obligated parties and/or renewable fuel exporters settle past enforcement-related obligations in addition to complying with the annual standards, thereby potentially creating demand for RINs greater than can be accommodated through actual renewable fuel blending in 2020. In light of these uncertainties, the net result could be a bank of total carryover RINs larger or smaller than 17 percent of the 2020 total renewable fuel volume requirement, and a bank of advanced carryover RINs larger or smaller than 13 percent of the 2020 advanced biofuel volume requirement. 2. EPA’s Decision Regarding the Treatment of Carryover RINs We have evaluated the volume of carryover RINs currently available and considered whether it would justify an intentional drawdown of the carryover RIN bank in setting the 2020 volume requirements. We also carefully considered the comments received, including comments on the role of carryover RINs under our waiver authorities and the policy implications of our decision.26 For the reasons lotter on DSKBCFDHB2PROD with RULES2 26 In their comments on the 2020 NPRM, parties generally expressed two opposing points of view. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 described throughout Section II.C, we do not believe we should intentionally draw down the carryover RIN bank in setting the 2020 volumes. The current bank of carryover RINs provides an important and necessary programmatic and cost spike buffer that will both facilitate individual compliance and provide for smooth overall functioning of the program. We believe that a balanced consideration of the possible role of carryover RINs in achieving the statutory volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel, versus maintaining an adequate bank of carryover RINs for important programmatic functions, is appropriate when EPA exercises its discretion under its statutory authorities, and that the statute does not specify the extent to which EPA should require a drawdown in the bank of carryover RINs when it exercises its waiver authorities. Therefore, for the reasons noted above and consistent with the approach we took in the rules establishing the RFS standards for 2014 through 2019, we have decided to maintain our proposed Commenters representing obligated parties supported EPA’s proposed decision to not assume a drawdown in the bank of carryover RINs in determining the appropriate volume requirements, reiterating the importance of maintaining the carryover RIN bank in order to provide obligated parties with necessary compliance flexibilities, better market trading liquidity, and a cushion against future program uncertainty. Commenters representing renewable fuel producers, however, stated that not accounting for carryover RINs goes against Congressional intent of the RFS program to increase renewable fuel volumes every year and deters investment in cellulosic and advanced biofuels. A full description of comments received, and our detailed responses to them, is available in the RTC document in the docket. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 approach and are not setting the 2020 volume requirements at levels that would envision an intentional drawdown in the bank of carryover RINs. We note that we may or may not take a similar approach in future years; we will assess the situation on a caseby-case basis going forward and take into account the size of the carryover RIN bank in the future and any lessons learned from implementing past rules. III. Cellulosic Biofuel Volume for 2020 In the past several years, production of cellulosic biofuel has continued to increase. Cellulosic biofuel production reached record levels in 2018, driven largely by CNG and LNG derived from biogas.27 The projected volume of cellulosic biofuel production in 2019 is even higher that the volume produced in 2018. Production of liquid cellulosic biofuel has also increased in recent years, even as the total production of liquid cellulosic biofuels remains much smaller than the production volumes of CNG and LNG derived from biogas (see Figure III–1). This section describes our assessment of the volume of qualifying cellulosic biofuel that we project will be produced or imported into the U.S. in 2020, and some of the uncertainties associated with those volumes. 27 The majority of the cellulosic RINs generated for CNG/LNG are sourced from biogas from landfills; however, the biogas may come from a variety of sources including municipal wastewater treatment facility digesters, agricultural digesters, separated municipal solid waste (MSW) digesters, and the cellulosic components of biomass processed in other waste digesters. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 7023 Figure III-1 Cellulosic RINs Generated (2013-2019) 500 450 400 100 0---- 50 2014 lotter on DSKBCFDHB2PROD with RULES2 ■ CNG/LNG In order to project the volume of cellulosic biofuel production in 2020, we considered numerous factors, including EIA’s projection of cellulosic biofuel production in 2020, the accuracy of the methodologies used to project cellulosic biofuel production in previous years, data reported to EPA through EMTS, and information we collected through meetings with representatives of facilities that have produced or have the potential to produce qualifying volumes of cellulosic biofuel in 2020. There are two main elements to the cellulosic biofuel production projection: Liquid cellulosic biofuel and CNG/LNG derived from biogas. To project the range of potential production volumes of liquid cellulosic biofuel we used the same general methodology as the methodology used in the 2018 and 2019 final rules. We have adjusted the percentile values used to select a point estimate within a projected production range for each group of companies based on updated information (through September 2019) with the objective of improving the accuracy of the projections. To project the production of cellulosic biofuel RINs for CNG/LNG derived from biogas, we used the same general year-over-year growth rate methodology as in the 2018 and 2019 final rules, with updated RIN generation VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 2015 Derived from Biogas 2016 2017 Frm 00009 Fmt 4701 2019 (Projected) ■ Liquid Cellulosic Biofuels data through September 2019. This methodology reflects the mature status of this industry, the large number of facilities registered to generate cellulosic biofuel RINs from these fuels, and EPA’s continued attempts to refine its methodology to yield estimates that are as accurate as possible. This methodology is an improvement on the methodology that EPA used to project cellulosic biofuel production for CNG/ LNG derived from biogas in the 2017 and previous years (see Section III.B for a further discussion of the accuracy of EPA’s methodology in previous years). The methodologies used to project the production of liquid cellulosic biofuels and cellulosic CNG/LNG derived from biogas are described in more detail in Sections III.D–1 and III.D–2. The balance of this section is organized as follows. Section III.A provides a brief description of the statutory requirements. Section III.B reviews the accuracy of EPA’s projections in prior years, and also discusses the companies EPA assessed in the process of projecting qualifying cellulosic biofuel production in the U.S. Section III.C discusses EIA’s projection of cellulosic biofuel production in 2020. Section III.D discusses the methodologies used by EPA to project cellulosic biofuel production in 2020 PO 00000 2018 Sfmt 4700 and the resulting projection of 0.59 billion ethanol-equivalent gallons. A. Statutory Requirements CAA section 211(o)(2)(B)(i)(III) states the statutory volume targets for cellulosic biofuel. The volume of cellulosic biofuel specified in the statute for 2020 is 10.5 billion gallons. The statute provides that if EPA determines, based on a letter provided to the EPA by EIA, that the projected volume of cellulosic biofuel production in a given year is less than the statutory volume, then EPA shall reduce the applicable volume of cellulosic biofuel to the projected volume available during that calendar year.28 28 CAA section 211(o)(7)(D)(i). The U.S. Court of Appeals for the District of Columbia Circuit evaluated this requirement in API v. EPA, 706 F.3d 474, 479–480 (D.C. Cir. 2013), in the context of a challenge to the 2012 cellulosic biofuel standard. The Court stated that in projecting potentially available volumes of cellulosic biofuel EPA must apply an ‘‘outcome-neutral methodology’’ aimed at providing a prediction of ‘‘what will actually happen.’’ Id. at 480, 479. The Court also determined that Congress did not require ‘‘slavish adherence by EPA to the EIA estimate’’ and that EPA could ‘‘read the phrase ‘based on’ as requiring great respect but allowing deviation consistent with that respect.’’ In addition, EPA has consistently interpreted the term ‘‘projected volume of cellulosic biofuel production’’ in CAA section 211(o)(7)(D)(i) to include volumes of cellulosic biofuel likely to be made available in the U.S., including from both domestic production E:\FR\FM\06FER2.SGM Continued 06FER2 ER06FE20.000</GPH> 2013 7024 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations In addition, if EPA reduces the required volume of cellulosic biofuel below the level specified in the statute, we may reduce the applicable volumes of advanced biofuels and total renewable fuel by the same or a lesser volume,29 and we are also required to make cellulosic waiver credits available.30 Our consideration of the 2020 volume requirements for advanced biofuel and total renewable fuel is presented in Section IV. B. Cellulosic Biofuel Industry Assessment In this section, we first explain our general approach to assessing facilities or groups of facilities (which we collectively refer to as ‘‘facilities’’) that have the potential to produce cellulosic biofuel in 2020. We then review the accuracy of EPA’s projections in prior years. Next, we discuss the criteria used to determine whether to include potential domestic and foreign sources of cellulosic biofuel in our projection for 2020. Finally, we provide a summary table of all facilities that we expect to produce cellulosic biofuel in 2020. In order to project cellulosic biofuel production for 2020, we have tracked the progress of a number of potential cellulosic biofuel production facilities, located both in the U.S. and in foreign countries. We considered a number of factors, including EIA’s projection of cellulosic biofuel production in 2020, information from EMTS, the registration status of potential biofuel production facilities as cellulosic biofuel producers in the RFS program, publicly available information (including press releases and news reports), and information provided by representatives of potential cellulosic biofuel producers. As discussed in greater detail in Section III.D.1, our projection of liquid cellulosic biofuel is based on a facilityby-facility assessment of each of the likely sources of cellulosic biofuel in 2020, while our projection of CNG/LNG derived from biogas is based on an industry-wide assessment. To make a determination of which facilities are most likely to produce liquid cellulosic biofuel and generate cellulosic biofuel RINs in 2020, each potential producer of liquid cellulosic biofuel was investigated further to determine the current status of its facilities and its likely cellulosic biofuel production and RIN generation volumes for 2020. Both in our discussions with representatives of individual companies and as part of our internal evaluation process, we gathered and analyzed information including, but not limited to, the funding status of these facilities, current status of the production technologies, anticipated construction and production ramp-up periods, facility registration status, and annual fuel production and RIN generation targets. 1. Review of EPA’s Projection of Cellulosic Biofuel in Previous Years As an initial matter, it is useful to review the accuracy of EPA’s past cellulosic biofuel projections. The record of actual cellulosic biofuel production, including both cellulosic biofuel (which generate D3 RINs) and cellulosic diesel (which generate D7 RINs), and EPA’s projected production volumes from 2015–2019 are shown in Table III.B–1. These data indicate that EPA’s projection was lower than the actual number of cellulosic RINs made available in 2015,31 higher than the actual number of RINs made available in 2016 and 2017, and lower than the actual number of RINs made available in 2018. Based on our current projection of cellulosic biofuel production for 2019 based on data through September 2019, EPA’s projection of cellulosic biofuel in 2019 also appears likely to be lower than actual RIN generation in 2019. The fact that the projections made using this methodology have been somewhat inaccurate, under-estimating the actual number of RINs made available in 2015, 2018, and likely 2019, and overestimating in 2016 and 2017, reflects the inherent difficulty with projecting cellulosic biofuel production. It also emphasizes the importance of continuing to make refinements to our projection methodology in order to make our projections more accurate. TABLE III.B.1–1—PROJECTED AND ACTUAL CELLULOSIC BIOFUEL PRODUCTION (2015–2018) [Million gallons] a Projected volume b Liquid cellulosic biofuel 2015 e ....................................................... 2016 ......................................................... 2017 ......................................................... 2018 ......................................................... 2019 f ........................................................ CNG/LNG derived from biogas 2 23 13 14 20 Actual production volume c Total cellulosic biofuel d 33 207 298 274 399 Liquid cellulosic biofuel 35 230 311 288 418 0.5 4.1 11.8 10.6 15.5 CNG/LNG derived from biogas 52.8 186.2 239.5 303.2 418.2 Total cellulosic biofuel d 53.3 190.3 251.3 313.8 433.7 lotter on DSKBCFDHB2PROD with RULES2 a As noted in Section III.A. above, EPA has consistently interpreted the term ‘‘projected volume of cellulosic biofuel production’’ to include volumes of cellulosic biofuel likely to be made available in the U.S., including from both domestic production and imports. The volumes in this table therefore include both domestic production of cellulosic biofuel and imported cellulosic biofuel. b Projected volumes for 2015 and 2016 can be found in the 2014–2016 Final Rule (80 FR 77506, 77508, December 14, 2015); projected volumes for 2017 can be found in the 2017 Final Rule (81 FR 89760, December 12, 2016); projected volumes for 2018 can be found in the 2018 Final Rule (82 FR 58503, December 12, 2017); projected volumes for 2019 can be found in the 2019 Final Rule (83 FR 63704, December 11, 2018). c Actual production volumes are the total number of RINs generated minus the number of RINs retired for reasons other than compliance with the annual standards, based on EMTS data. d Total cellulosic biofuel may not be precisely equal to the sum of liquid cellulosic biofuel and CNG/LNG derived from biogas due to rounding. e Projected and actual volumes for 2015 represent only the final 3 months of 2015 (October–December) as EPA used actual RIN generation data for the first 9 months of the year. and imports (see, e.g., 80 FR 77420 (December 14, 2015) and 81 FR 89746 (December 12, 2016)). This interpretation is consistent with the statutory direction to establish the cellulosic volume at the ‘‘projected volume available.’’ We do not believe it would be reasonable to include in the projection all cellulosic biofuel produced throughout the world, regardless of likelihood of import to the U.S., since VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 volumes that are not imported would not be available to obligated parties for compliance and including them in the projection would render the resulting volume requirement and percentage standards unachievable through the use of cellulosic biofuel RINs. 29 CAA section 211(o)(7)(D)(i). PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 30 See CAA section 211(o)(7)(D)(ii); 40 CFR 80.1456. 31 EPA only projected cellulosic biofuel production for the final three months of 2015, since data on the availability of cellulosic biofuel RINs (D3+D7) for the first nine months of the year were available at the time the analyses were completed for the final rule. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 7025 f Actual production in 2019 is a projection based on actual data from January–September 2019 and a projection of likely production for October–December 2019. lotter on DSKBCFDHB2PROD with RULES2 EPA’s projections of liquid cellulosic biofuel were higher than the actual volume of liquid cellulosic biofuel produced each year from 2015 to 2018.32 Depending on liquid cellulosic biofuel production in the last 3 months or 2019, our projection for 2019 may ultimately be an over-projection or under-projection of actual production, however at this time it appears likely to result in an over-projection. As a result of the over-projections in 2015–2016 (and the anticipated over-projection in 2017), and in an effort to take into account the most recent data available and make the liquid cellulosic biofuel projections more accurate, EPA adjusted our methodology in the 2018 final rule.33 The adjustments to our methodology adopted in the 2018 final rule resulted in a projection that is close to the volume of liquid cellulosic biofuel produced in 2018 and appear likely to result in a reasonably accurate projection in 2019. In this final rule we are again applying the approach we first used in the 2018 final rule: Using percentile values based on actual production in previous years, relative to the projected volume of liquid cellulosic biofuel in these years. We have adjusted the percentile values to project liquid cellulosic biofuel production based on actual liquid cellulosic biofuel production in 2016 to 2019. We believe that the use of the methodology (described in more detail in Section III.D.1), with the adjusted percentile values, results in a projection that reflects a neutral aim at accuracy since it accounts for expected growth in the near future by using historical data that is free of any subjective bias. We next turn to the projection of CNG/LNG derived from biogas. For 2018 and 2019, EPA used an industry-wide approach, rather than an approach that projects volumes for individual companies or facilities, to project the production of CNG/LNG derived from biogas. EPA used a facility-by-facility approach to project the production of CNG/LNG derived from biogas from 2015–2017. Notably the facility-byfacility methodology resulted in significant over-estimates of CNG/LNG production in 2016 and 2017, leading EPA to develop the alternative industry 32 We note, however, that because the projected volume of liquid cellulosic biofuel in each year was very small relative to the total volume of cellulosic biofuel, these over-projections had a minimal impact on the accuracy of our projections of cellulosic biofuel for each of these years. 33 82 FR 58486 (December 12, 2017). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 wide projection methodology first used in 2018. This updated approach reflects the fact that this industry is far more mature than the liquid cellulosic biofuel industry, with a far greater number of potential producers of CNG/LNG derived from biogas. In such cases, industry-wide projection methods can be more accurate than a facility-byfacility approach, especially as macro market and economic factors become more influential on total production than the success or challenges at any single facility. The industry-wide projection methodology slightly underprojected the production of CNG/LNG derived from biogas in 2018 and appears likely to slightly under-project the production of these fuels in 2019. However, the difference between the projected and actual production volume of these fuels was smaller than in 2017. As further described in Section III.D.2, EPA is again projecting production of CNG/LNG derived from biogas using the industry-wide approach. We calculate a year-over-year rate of growth in the renewable CNG/ LNG industry and apply this year-overyear growth rate to the total number of cellulosic RINs generated and available to be used for compliance with the annual standards in 2018 to estimate the production of CNG/LNG derived from biogas in 2020.34 We have applied the growth rate to the number of available 2018 RINs generated for CNG/LNG derived from biogas as data from this year allows us to adequately account for not only RIN generation, but also for RINs retired for reasons other than compliance with the annual standards. While more recent RIN generation data is available, the retirement of RINs for reasons other than compliance with the annual standards generally lags RIN generation, sometimes by up to a year or more. The production volumes of cellulosic biofuel in previous years also highlight that the production of CNG/LNG derived from biogas has been significantly higher than the production of liquid cellulosic biofuel in previous years. This is likely the result of a combination of several factors, including the mature state of the technology used to produce CNG/LNG 34 To project the volume of CNG/LNG derived from biogas in 2020, we multiply the number of 2018 RINs generated for these fuels and available to be used for compliance with the annual standards by the calculated growth rate to project production of these fuels in 2019 and then multiply the resulting number by the growth rate again to project the production of these fuels in 2020. PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 derived from biogas relative to the technologies used to produce liquid cellulosic biofuel and the relatively low production cost of CNG/LNG derived from biogas (discussed in further detail in Section V). These factors are unlikely to change in 2020. While we project production volumes of liquid cellulosic biofuel and CNG/LNG derived from biogas separately, the actual volume of each fuel type produced may be higher or lower than projected. 2. Potential Domestic Producers There are several companies and facilities located in the U.S. that have either already begun producing cellulosic biofuel for use as transportation fuel, heating oil, or jet fuel at a commercial scale,35 or are anticipated to be in a position to do so at some time during 2020. The RFS program provides a strong financial incentive for domestic cellulosic biofuel producers to sell any fuel they produce for domestic consumption.36 To date nearly all cellulosic biofuel produced in the U.S. has been used domestically 37 and all the domestic facilities we have contacted in deriving our projections intend to produce fuel on a commercial scale for domestic consumption and plan to use approved pathways. These factors give us a high degree of confidence that cellulosic biofuel RINs will be generated for all cellulosic biofuel produced by domestic commercial scale facilities. To generate RINs, each of these facilities must be registered with EPA under the RFS program and comply with all the regulatory requirements. This includes using an approved RIN-generating pathway and verifying that their feedstocks meet the definition of renewable biomass. Most of the domestic companies and facilities considered in our assessment of potential cellulosic biofuel producers in 2019 have already successfully 35 For a further discussion of EPA’s decision to focus on commercial scale facilities, rather than R&D and pilot scale facilities, see the 2019 proposed rule (83 FR 32031, July 10, 2018). 36 According to data from EMTS, the average price for a 2019 cellulosic biofuel RINs sold in 2019 (through September 2019) was $1.30. Alternatively, obligated parties can satisfy their cellulosic biofuel obligations by purchasing an advanced (or biomassbased diesel) RIN and a cellulosic waiver credit. The average price for a 2019 advanced biofuel RINs sold in 2019 (through September 2019) was $0.43 while the price for a 2019 cellulosic waiver credit is $1.77 (EPA–420–B–18–052). 37 The only known exception was a small volume of fuel produced at a demonstration scale facility exported to be used for promotional purposes. E:\FR\FM\06FER2.SGM 06FER2 7026 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations completed facility registration, and have successfully generated RINs.38 A brief description of each of the domestic companies (or group of companies for cellulosic CNG/LNG producers and the facilities using Edeniq’s technology) that EPA believes may produce commercialscale volumes of RIN generating cellulosic biofuel by the end of 2020 can be found in a memorandum to the docket for this final rule.39 General information on each of these companies or group of companies considered in our projection of the potentially available volume of cellulosic biofuel in 2020 is summarized in Table III.B.4–1. 3. Potential Foreign Sources of Cellulosic Biofuel In addition to the potential sources of cellulosic biofuel located in the U.S., there are several foreign cellulosic biofuel companies that may produce cellulosic biofuel in 2020. These include facilities owned and operated by Beta Renewables, Enerkem, Ensyn, GranBio, and Raizen. All of these facilities use fuel production pathways that have been approved by EPA for cellulosic RIN generation provided eligible sources of renewable feedstock are used and other regulatory requirements are satisfied. These companies would therefore be eligible to register their facilities under the RFS program and generate RINs for any qualifying fuel imported into the U.S. While these facilities may be able to generate RINs for any volumes of cellulosic biofuel they import into the U.S., demand for the cellulosic biofuels they produce is expected to be high in their own local markets. EPA’s projection of cellulosic biofuel production in 2020 includes cellulosic biofuel that is projected to be imported into the U.S. in 2020, including potential imports from all the registered foreign facilities under the RFS program. We believe that due to the strong demand for cellulosic biofuel in local markets and the time necessary for potential foreign cellulosic biofuel producers to register under the RFS program and arrange for the importation of cellulosic biofuel to the U.S., cellulosic biofuel imports from foreign facilities not currently registered to generate cellulosic biofuel RINs are generally highly unlikely in 2020. For purposes of our 2020 cellulosic biofuel projection we have excluded potential volumes from foreign cellulosic biofuel production facilities that are not currently registered under the RFS program. Cellulosic biofuel produced at three foreign facilities (Ensyn’s Renfrew facility, GranBio’s Brazilian facility, and Raizen’s Brazilian facility) generated cellulosic biofuel RINs for fuel exported to the U.S. since 2017; projected volumes from each of these facilities are included in our projection of available volumes for 2020. EPA has also included projected volume from two additional foreign facilities. These two facilities (Enerkem’s Canadian facility and Ensyn’s Port-Cartier, Quebec facility) have both completed the registration process as cellulosic biofuel producers. We believe that it is appropriate to include volume from these facilities in light of their proximity to the U.S., the proven technology used by these facilities, the volumes of cellulosic biofuel exported to the U.S. by the company in previous years (in the case of Ensyn), and the company’s stated intentions to market fuel produced at these facilities to qualifying markets in the U.S. All of the facilities included in EPA’s cellulosic biofuel projection for 2020 are listed in Table III.B.4–1. 4. Summary of Volume Projections for Individual Companies General information on each of the cellulosic biofuel producers (or group of producers, for producers of CNG/LNG derived from biogas and producers of liquid cellulosic biofuel using Edeniq’s technology) that factored into our projection of cellulosic biofuel production for 2020 is shown in Table III.B.4–1. This table includes both facilities that have already generated cellulosic RINs, as well as those that have not yet generated cellulosic RINs, but are projected to do so by the end of 2020. As discussed above, we have focused on commercial-scale cellulosic biofuel production facilities. Each of these facilities (or group of facilities) is discussed further in a memorandum to the docket.40 TABLE III.B.4–1—PROJECTED PRODUCERS OF CELLULOSIC BIOFUEL FOR U.S. CONSUMPTION IN 2020 41 Company name Location Feedstock Fuel Facility capacity (million gallons per year) 42 Construction start date First production 43 CNG/LNG Producers 44. Edeniq .................... Enerkem ................. Various ................ Biogas ................. CNG/LNG ............ Various ................ Various ................ Various. Various ................ Edmonton, AL, Canada. Renfrew, ON, Canada. Port-Cartier, QC, Canada. Sa˜o Miguel dos Campos, Brazil. Galva, IA ............. Lakeview, OR ...... Corn Kernel Fiber Separated MSW .. Ethanol ................ Ethanol ................ 45 10 Various ................ .................... Various ................ 2012 .................... Wood Waste ....... Heating Oil .......... 3 .......................... 2005 .................... October 2016. September 2017.46 2014. Wood Waste ....... Heating Oil .......... 10.5 ..................... June 2016 ........... January 2018. Sugarcane bagasse. Corn Kernel Fiber Wood Waste ....... Ethanol ................ 21 ........................ Mid 2012 ............. September 2014. 4 .......................... 15 ........................ Late 2013 ............ July 2018 ............. October 2014. 1Q 2020. Piracicaba City, Brazil. Sugarcane bagasse. Ethanol ................ Diesel, Jet Fuel, Naphtha. Ethanol ................ 11 ........................ January 2014 ...... July 2015. Ensyn ..................... Ensyn ..................... GranBio .................. QCCP/Syngenta .... Red Rock Biofuels lotter on DSKBCFDHB2PROD with RULES2 Raizen .................... 38 Most of the facilities listed in Table III.B.3–1 are registered to produce cellulosic (D3 or D7) RINs with the exception of several of the producers of CNG/LNG derived from biogas and Red Rock Biofuels. EPA is unaware of any outstanding issues that would reasonably be expected to prevent these VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 facilities from registering as cellulosic biofuel producers and producing qualifying cellulosic biofuel in 2020. 39 ‘‘Cellulosic Biofuel Producer Company Descriptions (May 2019),’’ memorandum from PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 Dallas Burkholder to EPA Docket EPA–HQ–OAR– 2019–0136. 40 ‘‘Cellulosic Biofuel Producer Company Descriptions (May 2019),’’ memorandum from Dallas Burkholder to EPA Docket EPA–HQ–OAR– 2019–0136. E:\FR\FM\06FER2.SGM 06FER2 7027 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations C. Projection From the Energy Information Administration Section 211(o)(3)(A) of the CAA requires EIA to ‘‘provide to the Administrator of the Environmental Protection Agency an estimate, with respect to the following calendar year, of the volumes of transportation fuel, biomass-based diesel, and cellulosic biofuel projected to be sold or introduced into commerce in the United States.’’ EIA provided these estimates to EPA on October 9, 2019.47 With regard to domestically produced cellulosic ethanol, the EIA estimated that the available volume in 2020 would be 7 million gallons. In its letter, EIA did not identify the facilities on which their estimate of liquid cellulosic biofuel production was based. EIA did, however, indicate in the letter that it only included domestic production of cellulosic ethanol in their projections. These EIA projections, therefore, do not include cellulosic biofuel produced by foreign entities and imported into the U.S., nor estimates of cellulosic diesel, cellulosic heating oil or CNG/LNG produced from biogas, which together represent approximately 99 percent of our projected cellulosic biofuel volume for 2020. When limiting the scope of our projection to the companies assessed by EIA, we note that our volume projections are similar. EPA projects approximately 5 million gallons of cellulosic ethanol will be produced domestically in 2020. D. Cellulosic Biofuel Volume for 2020 1. Liquid Cellulosic Biofuel For our 2020 liquid cellulosic biofuel projection, we use the same general approach as we have in projecting these volumes in previous years. We begin by first categorizing potential liquid cellulosic biofuel producers in 2020 according to whether or not they have achieved consistent commercial scale production of cellulosic biofuel to date. We refer to these facilities as consistent producers and new producers, respectively. Next, we define a range of likely production volumes for 2020 for each group of companies. Finally, we use a percentile value to project from the established range a single projected production volume for each group of companies in 2020. As in the 2018 and 2019 final rules, we calculated percentile values for each group of companies based on the past performance of each group relative to our projected production ranges. This methodology is briefly described in this section and is described in detail in memoranda to the docket.48 We first separate the list of potential producers of cellulosic biofuel (listed in Table III.B.4–1) into two groups according to whether the facilities have achieved consistent commercial-scale production and cellulosic biofuel RIN generation. We next defined a range of likely production volumes for each group of potential cellulosic biofuel producers. The low end of the range for each group of producers reflects actual RIN generation data over the last 12 months for which data were available at the time our technical assessment was completed (October 2018–September 2019).49 For potential producers that have not yet generated any cellulosic RINs, the low end of the range is zero. For the high end of the range, we considered a variety of factors, including the expected start-up date and ramp-up period, facility capacity, and the number of RINs the producer expects to generate in 2020.50 The projected range for each group of companies is shown in Tables III.D.1–1 and III.D.1–2.51 TABLE III.D.1–1—2020 PRODUCTION RANGES FOR NEW PRODUCERS OF LIQUID CELLULOSIC BIOFUEL [Million ethanol-equivalent gallons] Companies included Low end of the range High end of the range a Enerkem, Ensyn (Port Cartier facility), BioEnergy, Red Rock Biofuels .................................................................. 0 30 lotter on DSKBCFDHB2PROD with RULES2 a Rounded to the nearest million gallons. 41 Despite generating cellulosic RINs in previous years Poet-DSM’s facility has not been included in Table III.B.4–1 after announcing their plans to suspend commercial production at this facility. 42 The Facility Capacity is generally equal to the nameplate capacity provided to EPA by company representatives or found in publicly available information. Capacities are listed in physical gallons (rather than ethanol-equivalent gallons). If the facility has completed registration and the total permitted capacity is lower than the nameplate capacity, then this lower volume is used as the facility capacity. 43 Where a quarter is listed for the first production date EPA has assumed production begins in the middle month of the quarter (i.e., August for the 3rd quarter) for the purposes of projecting volumes. 44 For more information on these facilities see ‘‘December 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020),’’ memorandum from Dallas Burkholder to EPA Docket EPA–HQ–OAR– 2019–0136. 45 The nameplate capacity of Enerkem’s facility is 10 million gallons per year. However, we anticipate that a portion of their feedstock will be nonbiogenic municipal solid waste (MSW). RINs cannot be generated for the portion of the fuel produced from non-biogenic feedstocks. We have taken this VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 into account in our production projection for this facility (See ‘‘May 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI’’). 46 This date reflects the first production of ethanol from this facility. The facility began production of methanol in 2015. 47 Letter from Linda Capuano, EIA Administrator to Andrew Wheeler, EPA Administrator. October 9, 2019. Available in docket EPA–HQ–OAR–2019– 0136. 48 ‘‘December 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI’’ and ‘‘Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel Production for the 2020 FRM,’’ memorandums from Dallas Burkholder to EPA Docket EPA–HQ–OAR–2019–0136. 49 Consistent with previous years, we have considered whether there is reason to believe any of the facilities considered as potential cellulosic biofuel producers for 2020 is likely to produce a smaller volume of cellulosic biofuel in 2020 than in the previous 12 months for which data are available. At this time, EPA is not aware of any information that would indicate lower production in 2020 from any facility considered than in the previous 12 months for which data are available. Despite generating cellulosic RINs in previous years Poet-DSM’s facility has not been included in our PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 projection of cellulosic biofuel production in 2020 after announcing their plans to suspend commercial production at this facility. 50 As in our 2015–2019 projections, EPA calculated a high end of the range for each facility (or group of facilities) based on the expected startup date and a six-month straight-line ramp-up period. The high end of the range for each facility (or group of facilities) is equal to the value calculated by EPA using this methodology, or the number of RINs the producer expects to generate in 2020, whichever is lower. 51 More information on the data and methods EPA used to calculate each of the ranges in these tables in contained in ‘‘December 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI’’ memorandum from Dallas Burkholder to EPA Docket EPA–HQ– OAR–2019–0136. We have not shown the projected ranges for each individual company. This is because the high end of the range for some of these companies are based on the company’s production projections, which they consider confidential business information (CBI). Additionally, the low end of the range for facilities that have achieved consistent commercial scale production is based on actual RIN generation data in the most recent 12 months, which is also claimed as CBI. E:\FR\FM\06FER2.SGM 06FER2 7028 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations TABLE III.D.1–2—2020 PRODUCTION RANGES FOR CONSISTENT PRODUCERS OF LIQUID CELLULOSIC BIOFUEL [Million ethanol-equivalent gallons] Companies included Low end of the range a High end of the range b Facilities using Edeniq’s technology (registered facilities), Ensyn (Renfrew facility), GranBio, QCCP/Syngenta, Raizen .................................................................................................................................................................. 10 36 a Rounded to the nearest million gallons. After defining likely production ranges for each group of companies, we next determined the percentile values to use in projecting a production volume for each group of companies. We calculated the percentile values using actual production data from 2016 through 2019.52 The first full year in which EPA used the current methodology for developing the range potential production volumes for each company was 2016, while 2019 is the most recent year for which we have data. For each group of companies and for each year from 2016–2019, Table III.C.1–3 shows the projected ranges for liquid cellulosic biofuel production (from the 2014–16, 2017, 2018, and 2019 final rules), actual production, and the percentile values that would have resulted in a projection equal to the actual production volume. TABLE III.D.1–3—PROJECTED AND ACTUAL LIQUID CELLULOSIC BIOFUEL PRODUCTION IN 2016–2019 [Million gallons] Low end of the range High end of the range Actual production 53 Actual percentile New Producers 54 2016 ................................................................................................................. 2017 ................................................................................................................. 2018 ................................................................................................................. 2019 ................................................................................................................. Average a .......................................................................................................... 0 0 0 0 N/A 76 33 47 10 N/A 1.06 8.79 2.87 0.00 N/A 1st 27th 6th 0th 9th 2 3.5 7 14 N/A 5 7 24 44 N/A 3.28 3.02 7.74 15.51 N/A 43rd ¥14th 4th 5th 10th Consistent Producers 55 2016 ................................................................................................................. 2017 ................................................................................................................. 2018 ................................................................................................................. 2019 ................................................................................................................. Average a .......................................................................................................... lotter on DSKBCFDHB2PROD with RULES2 a We have not averaged the low and high ends of the ranges, or actual production, as we believe it is more appropriate to average the actual percentiles from 2016–2019 rather than calculating a percentile value for 2016–2019 in aggregate. This approach gives equal weight to the accuracy of our projections for each year from 2016–2019, rather than allowing the average percentiles calculated to be dominated by years with greater projected volumes. Based upon this analysis, EPA has projected cellulosic biofuel production from new producers at the 9th percentile of the calculated range and from consistent producers at the 10th percentile.56 These percentiles are calculated by averaging the percentiles that would have produced cellulosic biofuel projections equal to the volumes produced by each group of companies in 2016–2019. Prior to 2016, EPA used different methodologies to project available volumes of cellulosic biofuel and thus believes it inappropriate to calculate percentile values based on projections from those years.57 We then used these percentile values, together with the ranges determined for each group of companies discussed above, to project a volume for each group of companies in 2020. These calculations are summarized in Table III.D.1–4. 52 To calculate the percentile value that would have resulted in a projection equal to actual production for 2019 we projected actual liquid cellulosic biofuel production for 2019 using data through September 2019 and an updated projection of liquid cellulosic biofuel production for October– December 2019. 53 Actual production is calculated by subtracting RINs retired for any reason other than compliance with the RFS standards from the total number of cellulosic RINs generated. 54 Companies characterized as new producers in the 2014–2016, 2017, 2018, and 2019 final rules were as follows: Abengoa (2016), CoolPlanet (2016), DuPont (2016, 2017), Edeniq (2016, 2017), Enerkem (2018, 2019), Ensyn Port Cartier (2018, 2019), GranBio (2016, 2017), IneosBio (2016), and Poet (2016, 2017). 55 Companies characterized as consistent producers in the 2014–2016, 2017, 2018, and 2019 final rules were as follows: Edeniq Active Facilities (2018, 2019), Ensyn Renfrew (2016–2019), GranBio (2018, 2019), Poet (2018, 2019), Quad County Corn Processors/Syngenta (2016–2019), and Raizen (2019). 56 For more detail on the calculation of the percentile values used in this final rule see ‘‘Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel Production for 2020 FRM,’’ available in EPA docket EPA–HQ–OAR– 2019–0136. 57 EPA used a similar projection methodology for 2015 as in 2016–2018, however we only projected cellulosic biofuel production volume for the final 3 months of the year, as actual production data were available for the first 9 months. We do not believe it is appropriate to consider data from a year for which 9 months of the data were known at the time the projection was made in determining the percentile values used to project volume over a full year. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 7029 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations TABLE III.D.1–4—PROJECTED VOLUME OF LIQUID CELLULOSIC BIOFUEL IN 2020 [Million ethanol-equivalent gallons] High end of the range a Low end of the range a Percentile Projected volume a Liquid Cellulosic Biofuel Producers; Producers without Consistent Commercial Scale Production ................................................................................... Liquid Cellulosic Biofuel Producers; Producers with Consistent Commercial Scale Production .......................................................................................... 0 30 9th 3 10 36 10th 13 Total .......................................................................................................... N/A N/A N/A b 15 a Volumes b Volumes rounded to the nearest million gallons. do not add due to rounding. 2. CNG/LNG Derived From Biogas For 2020, EPA is using the same industry wide projection approach as used for 2018 and 2019 based on a yearover-year growth rate to project production of CNG/LNG derived from biogas used as transportation fuel.58 EPA calculated the year-over-year growth rate in CNG/LNG derived from biogas by comparing RIN generation from October 2018 to September 2019 (the most recent 12 months for which data are available) to RIN generation in the 12 months that immediately precede this time period (October 2017 to September 2018). The growth rate calculated using this data is 37.9 percent.59 These RIN generation volumes are shown in Table III.D.2–1. TABLE III.D.2–1—GENERATION OF CELLULOSIC BIOFUEL RINS FOR CNG/LNG DERIVED FROM BIOGAS lotter on DSKBCFDHB2PROD with RULES2 [Million gallons] 60 RIN generation (October 2017–September 2018) RIN generation (October 2018–September 2019) Year-over-year increase 278,134,565 383,605,247 37.9% EPA then applied this 37.9 percent year-over-year growth rate to the total number of 2018 cellulosic RINs generated and available for compliance for CNG/LNG. This methodology results in a projection of 576.8 million gallons of CNG/LNG derived from biogas in 2020. In this rule, as in the 2018 and 2019 final rules, we are again applying the calculated year-over-year rate of growth to the volume of CNG/LNG actually supplied in 2018 (taking into account actual RIN generation as well as RINs retired for reasons other than compliance with the annual volume obligations) to provide an updated projection of the production of these fuels in 2019, and then applying the rate of growth to this updated 2019 projection to project the production of these fuels in 2020.61 We believe that projecting the production of CNG/LNG derived from biogas in this manner appropriately takes into consideration the actual recent rate of growth of this industry, and that this growth rate accounts for both the potential for future growth and the challenges associated with increasing RIN generation from these fuels in future years. This methodology may not be appropriate to use as the projected volume of CNG/LNG derived from biogas approaches the total volume of CNG/LNG that is used as transportation fuel, as RINs can be generated only for CNG/LNG used as transportation fuel. We do not believe that this is yet a constraint as our projection for 2020 is below the total volume of CNG/LNG that is currently used as transportation fuel.62 3. Total Cellulosic Biofuel in 2020 58 Historically RIN generation for CNG/LNG derived from biogas has increased each year. It is possible, however, that RIN generation for these fuels in the most recent 12 months for which data are available could be lower than the preceding 12 months. We believe our methodology accounts for this possibility. In such a case, the calculated rate of growth would be negative. 59 This growth rate is higher than the growth rates used to project CNG/LNG volumes in the 2019 final rule (29.0%, see 83 FR 63717, December 11, 2018) and the 2018 final rule (21.6%, see 82 FR 58502, December 12, 2017). 60 Further detail on the data used to calculate each of these numbers in this table, as well as the projected volume of CNG/LNG derived from biogas used as transportation fuel in 2020 can be found in ‘‘December 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020)’’ memorandum from Dallas Burkholder to EPA Docket PA–HQ–OAR– 2019–0136. 61 To calculate this value, EPA multiplied the number of 2018 RINs generated and available for compliance for CNG/LNG derived from biogas (303.2 million), by 1.379 (representing a 37.9 percent year-over-year increase) to project production of CNG/LNG in 2019, and multiplied this number (418.2 million RINs) by 1.379 again to project production of CNG/LNG in 2020. 62 EPA is aware of several estimates for the quantity of CNG/LNG that will be used as transportation fuel in 2020. As discussed in a paper prepared by Bates White for the Coalition for Renewable Gas (‘‘Renewable Natural Gas Supply and Demand for Transportation.’’ Bates White Economic Consulting, April 5, 2019) these estimates range from nearly 600 million ethanol-equivalent gallons in 2020 (February 2019 STEO) to over 1.5 billion gallons (Fuels Institute—US Share). As discussed in further detail in a memorandum to the docket (‘‘December 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020)’’ memorandum from Dallas Burkholder to EPA Docket EPA–HQ–OAR–2019–0136) we believe the higher projections are likely to be more accurate. Thus, the volume of CNG/LNG used as transportation fuel would not appear to constrain the number of RINs generated for this fuel in 2020. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 After projecting production of cellulosic biofuel from liquid cellulosic biofuel production facilities and producers of CNG/LNG derived from biogas, EPA combined these projections to project total cellulosic biofuel production for 2020. These projections are shown in Table III.D.3–1. Using the methodologies described in this section, we project that 0.59 billion ethanolequivalent gallons of qualifying cellulosic biofuel will be produced in 2020. We believe that projecting overall production in 2020 in the manner described above results in a neutral estimate (neither biased to produce a projection that is too high nor too low) of likely cellulosic biofuel production in 2020. E:\FR\FM\06FER2.SGM 06FER2 7030 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations TABLE III.D.3–1—PROJECTED VOLUME OF CELLULOSIC BIOFUEL IN 2020 Projected volume a Liquid Cellulosic Biofuel Producers; Producers without Consistent Commercial Scale Production (million gallons) ........................ Liquid Cellulosic Biofuel Producers; Producers with Consistent Commercial Scale Production (million gallons) ............................. CNG/LNG Derived from Biogas (million gallons) ................................................................................................................................ 3 13 577 Total (billion gallons) .................................................................................................................................................................... 0.59 a Rounded to the nearest million gallons. Unlike in previous years, we have rounded the final projected volume of cellulosic biofuel to the nearest 10 million gallons as proposed. This is consistent with the volumes in the tables containing the statutory volume targets for cellulosic biofuel through 2022, which also specify volumes to no more than the nearest 10 million gallons (and in many cases only to the nearest 100 million gallons). While in previous years we have rounded the required cellulosic biofuel volume to the nearest million gallon, the projected volume of cellulosic biofuel has grown such that this level of precision is unnecessary, and likely unfounded. By rounding to the nearest 10 million gallons the total projected volume of cellulosic biofuel is affected in the most extreme case by only 5 million gallons, or approximately 1 percent of the total projected volume. The uncertainty in the projected volume of cellulosic biofuel is significantly higher than any error introduced by rounding the projected volume to the nearest 10 million gallons. lotter on DSKBCFDHB2PROD with RULES2 IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020 The national volume targets for advanced biofuel and total renewable fuel to be used under the RFS program each year through 2022 are specified in CAA section 211(o)(2)(B)(i)(I) and (II). Congress set annual renewable fuel volume targets that envisioned growth at a pace that far exceeded historical growth and, for years after 2011, prioritized that growth as occurring principally in advanced biofuels (contrary to previous growth patterns where most growth was in conventional renewable fuel). Congressional intent is evident in the fact that the implied statutory volume requirement for conventional renewable fuel is 15 billion gallons for all years after 2014, while the advanced biofuel volume requirements, driven largely by growth in cellulosic biofuel, continue to grow each year through 2022 to a total of 21 billion gallons. Early growth in conventional renewable fuels was expected to provide a bridge to the new, VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 more beneficial cellulosic biofuels in the later years.63 Due to a projected shortfall in the availability of cellulosic biofuel, and consistent with our long-held interpretation that the cellulosic waiver authority is best interpreted to provide equal reductions to advanced biofuel and total renewable fuel volumes, we are reducing the statutory volume targets for both advanced biofuel and total renewable fuel for 2020 by the maximum amount permitted under the cellulosic waiver authority, 9.91 billion gallons. Section IV.A explains the volumetric limitation on our use of the cellulosic waiver authority to reduce advanced biofuel and total renewable fuel volumes. Section IV.B presents our technical analysis of the reasonably attainable and attainable volumes of advanced biofuel. Sections IV.C and IV.D further explain our decision to exercise the maximum discretion available under the cellulosic waiver authority to reduce advanced biofuel and total renewable fuel, respectively. To begin, we have evaluated the capabilities of the market and are making a finding that the 15.0 billion gallons specified in the statute for advanced biofuel cannot be reached in 2020. This is primarily due to the expected continued shortfall in cellulosic biofuel; production of this fuel type has consistently fallen short of the statutory targets by 90 percent or more, and as described in Section III, we project that it will fall far short of the statutory target of 10.5 billion gallons in 2020. For this and other reasons described in this section we are reducing the advanced biofuel statutory target by 9.91 billion gallons for 2020. In previous years when we have used the cellulosic waiver authority, we have determined the extent to which we should reduce advanced biofuel volumes by considering a number of different factors under the broad 63 See, for instance, comments from Growth Energy where they note that ‘‘ . . . producers of starch ethanol . . . are leading investors in cellulosic biofuels, which may be derived from corn.’’ Page 31 of ‘‘Comments from Growth Energy on proposed 2018 standards,’’ available in docket EPA–HQ–OAR–2019–0136. PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 discretion which that authority provides, including: • The availability of advanced biofuels (e.g., historic data on domestic supply, expiration of the biodiesel blenders’ tax credit, potential imports of biodiesel in light of the Commerce Department’s determination on tariffs on biodiesel imports from Argentina and Indonesia, potential imports of sugarcane ethanol, and anticipated changes in the production of feedstocks for advanced biodiesel and renewable diesel) • The energy security and greenhouse gas (GHG) impacts of advanced biofuels • The availability of carryover RINs • The intent of Congress as reflected in the statutory volumes tables to substantially increase the use of advanced biofuels over time • Increased costs associated with the use of advanced biofuels, and • The increasing likelihood of adverse unintended impacts associated with use of advanced biofuel volumes achieved through diversion of foreign fuels or substitution of advanced feedstocks from other uses to biofuel production. Before the 2018 standards were set, the consideration of these factors led us to conclude that it was appropriate to set the advanced biofuel standard in a manner that would allow the partial backfilling of missing cellulosic volumes with non-cellulosic advanced biofuels.64 In the 2018 and 2019 standards final rules, we concluded that partial backfilling of missing cellulosic biofuel volumes with advanced biofuel was not warranted, primarily due to a shortfall in reasonably attainable volumes of advanced biofuels, high costs, the potential for feedstock switching and/or foreign fuel diversion which could compromise GHG benefits and disrupt markets, and an interest in preserving the existing carryover RIN bank.65 66 64 For instance, see 81 FR 89750 (December 12, 2016). 65 See 82 FR 58504 (December 12, 2017). 66 See 83 FR 63719 (December 11, 2018). E:\FR\FM\06FER2.SGM 06FER2 7031 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations For 2020, we have determined that the concerns surrounding partial backfilling of missing cellulosic biofuel with advanced biofuel remain valid. As a result, we are reducing the statutory volume target for advanced biofuel by the same amount as the reduction in cellulosic biofuel. This results in the non-cellulosic component of the advanced biofuel volume requirement being equal to 4.50 billion gallons in 2020, which is the same as the implied statutory volume requirement for noncellulosic advanced biofuel for 2020. The impact of our exercise of the cellulosic waiver authority is that after waiving the statutory volume target for cellulosic biofuel down to the projected available level, and then reducing the statutory volume target for advanced biofuel by the same amount, the resulting volume requirement for advanced biofuel for 2020 is 5.09 billion gallons. This volume requirement is 170 million gallons more than the applicable volume used to derive the 2019 percentage standard. Furthermore, after applying the same reduction to the statutory volume target for total renewable fuel, the volume requirement for total renewable fuel is also 170 million gallons more than the applicable volume used to derive the 2019 percentage standard. These increases are entirely attributable to a 170 million gallon increase in the cellulosic biofuel volume requirement. The implied volumes of non-cellulosic advanced biofuel and conventional renewable fuel will remain the same as in 2019 at 4.5 and 15 billion gallons respectively. A. Volumetric Limitation on Use of the Cellulosic Waiver Authority As described in Section II.A, when making reductions in advanced biofuel and total renewable fuel under the cellulosic waiver authority, the statute limits those reductions to no more than the reduction in cellulosic biofuel. As described in Section III.C, we are establishing a 2020 applicable volume for cellulosic biofuel of 590 million gallons, representing a reduction of 9,910 million gallons from the statutory target of 10,500 million gallons. As a result, 9,910 million gallons is the maximum volume reduction for advanced biofuel and total renewable fuel that is permissible using the cellulosic waiver authority. Use of the cellulosic waiver authority to this maximum extent would result in volumes of 5.09 and 20.09 billion gallons for advanced biofuel and total renewable fuel, respectively. TABLE IV.A–1—LOWEST PERMISSIBLE VOLUMES USING ONLY THE CELLULOSIC WAIVER AUTHORITY [Million gallons] Advanced biofuel Statutory target ...................................................................................................................................................... Maximum reduction permitted under the cellulosic waiver authority .................................................................... Lowest 2020 volume requirement permitted using only the cellulosic waiver authority ....................................... We are authorized under the cellulosic waiver authority to reduce the advanced biofuel and total renewable fuel volumes ‘‘by the same or a lesser’’ amount as the reduction in the cellulosic biofuel volume.67 As discussed in Section II.A, EPA has broad discretion in using the cellulosic waiver authority in instances where its use is authorized under the statute, since Congress did not specify factors that EPA must consider in determining whether to use the authority to reduce advanced biofuel or total renewable fuel, nor what the appropriate volume reductions (within the range permitted by statute) should be. Thus, we have the authority to set the 2020 advanced biofuel volume requirement at a level that is designed to partially backfill for the shortfall in cellulosic biofuel. However, as discussed below, we do not believe this would be appropriate for 2020. lotter on DSKBCFDHB2PROD with RULES2 B. Attainable Volumes of Advanced Biofuel 68 83 section 211(o)(7)(D)(i). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 FR 63704, 63721 (December 11, 2019). consideration of ‘‘reasonably attainable’’ volumes is not intended to imply that ‘‘attainable’’ volumes are unreasonable or otherwise inappropriate. As we explain in this section, we believe that an advanced biofuel volume of 5.09 billion gallons, although not reasonably attainable, is attainable, and that establishing such volume is an appropriate exercise of our cellulosic waiver authority. 69 Our We have evaluated whether it would be appropriate to require 5.09 billion ethanol-equivalent gallons of advanced biofuel for 2020. In doing so, we have considered both attainable and 67 CAA reasonably attainable volumes of advanced biofuel to inform our exercise of the cellulosic 68 waiver authority. As we explained in the 2019 final rule, both ‘‘reasonably attainable’’ and ‘‘attainable’’ are terms of art defined by EPA.69 Volumes described as ‘‘reasonably attainable’’ are those that can be reached with minimal market disruptions, increased costs, reduced GHG benefits, and diversion of advanced biofuels or advanced biofuel feedstocks from existing uses. Volumes described as ‘‘attainable,’’ in contrast, are those we believe can be reached but would likely result in market disruption, higher costs, and/or reduced GHG benefits. Neither ‘‘reasonably attainable’’ nor ‘‘attainable’’ are meant to convey the ‘‘maximum achievable’’ level, which, as we explained in the 2017 final rule, we do not consider to be an appropriate target under the PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 15,000 9,910 5,090 Total renewable fuel 30,000 9,910 20,090 cellulosic waiver authority.70 Finally, we note that our assessments of the ‘‘reasonably attainable’’ and ‘‘attainable’’ volumes of non-cellulosic advanced biofuels are not intended to be as exacting as our projection of cellulosic biofuel production, described in Section III of this rule.71 70 81 FR 89762 (December 12, 2016). The maximum achievable volume may be relevant to our consideration of whether to exercise the general waiver authority on the basis of inadequate domestic supply. However, for 2020, we have determined that after exercising our cellulosic waiver authority to the full extent permitted, the resulting advanced biofuel volume is attainable. Therefore, further reductions using the general waiver authority on the basis of inadequate domestic supply are not necessary. 71 The statute directs EPA to lower the cellulosic biofuel volume to the projected production level where that level falls short of the statutory volume. Under API v. EPA, 706 F.3d 474, 479–80 (D.C. Cir. 2013), we must project this production level with neutral aim at accuracy, that is, make a technical determination about the market’s ability to produce cellulosic biofuels. By contrast, the discretionary portion of the cellulosic waiver authority does not explicitly require EPA to project the availability of advanced biofuels, but instead confers broad discretion on EPA. Moreover, while we have chosen to estimate reasonably attainable and attainable volumes of advanced biofuel, these volumes do not equate to projected production alone. Rather, in exercising the discretionary portion of the cellulosic waiver authority, we also consider a range of policy factors—such as costs, greenhouse gas emissions, E:\FR\FM\06FER2.SGM Continued 06FER2 7032 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations As in prior rulemakings, we begin by considering what volumes of advanced biofuels are reasonably attainable. In ACE, the Court noted that in assessing what volumes are ‘‘reasonably attainable,’’ EPA had considered the availability of feedstocks, domestic production capacity, imports, and market capacity to produce, distribute, and consume renewable fuel.72 These considerations include both demandside and supply-side factors.73 We are taking a similar approach for 2020. We are establishing the advanced biofuel volume requirement at a level that takes into consideration both the benefits and drawbacks of an increase in the implied non-cellulosic advanced biofuel volume requirement, as well as the ability of the market to make such increased volumes available. Our individual assessments of reasonably attainable volumes of each type of advanced biofuel reflect this approach. As discussed in further detail in this section, we find that 70 million gallons of imported advanced ethanol, 50 million gallons of other advanced biofuels, and 2.77 billion gallons of advanced biodiesel and renewable diesel are reasonably attainable. Together with our projected volume of 590 million gallons of cellulosic biofuel, the sum of these volumes is 5.00 billion lotter on DSKBCFDHB2PROD with RULES2 energy security, market disruptions, etc., as described throughout this section. 72 See ACE, 864 F.3d at 735–36. 73 See id. at 730–35. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 gallons.74 This is the volume of advanced biofuel that we believe is reasonably attainable. As described in Section IV.A above, 5.09 billion gallons is the lowest level that we could set under the cellulosic waiver authority. Since the volume that we have determined to be reasonably attainable—5.00 billion gallons—is less than the lowest volume we can set under the cellulosic waiver authority, we also have considered whether the market can make more than 5.00 billion gallons of advanced biofuel, notwithstanding the potential for feedstock/fuel diversions. That is, we assess whether 5.09 billion gallons is merely ‘‘attainable,’’ as opposed to ‘‘reasonably attainable.’’ In particular, we assess whether additional volumes of advanced biodiesel and renewable diesel are attainable. We conclude that 2.83 billion gallons of advanced biodiesel and renewable diesel are attainable, notwithstanding potential feedstock/fuel diversions. This quantity of advanced biodiesel and renewable diesel, together with the cellulosic biofuel, sugarcane ethanol, and other advanced biofuels described above, will enable the market to make available 5.09 billion gallons of advanced biofuels. 1. Imported Sugarcane Ethanol The predominant available source of advanced biofuel other than cellulosic biofuel and BBD has historically been 74 0.07 PO 00000 + 0.05 + 2.77 × 1.55 + 0.59 = 5.00. Frm 00018 Fmt 4701 Sfmt 4700 imported sugarcane ethanol. Imported sugarcane ethanol from Brazil is the predominant form of imported ethanol and the only significant source of imported advanced ethanol. In setting the 2019 standards, we estimated that 100 million gallons of imported sugarcane ethanol would be reasonably attainable.75 This was based on a combination of data from recent years demonstrating relatively low import volumes and older data indicating that higher volumes were possible. We also noted the high variability in ethanol import volumes in the past (including of Brazilian sugarcane ethanol), increasing gasoline consumption in Brazil, and variability in Brazilian production of sugar as reasons that it would be inappropriate to assume that sugarcane ethanol imports would reach the much higher levels suggested by some stakeholders. At the time of the 2019 standards final rule, we used available data from a portion of 2018 to estimate that import volumes of sugarcane ethanol were likely to fall significantly below the 200 million gallons we had assumed when we set the 2018 standards. Since the 2019 final rule, new data reveals a continued trend of low imports. Specifically, import data for all of 2018 is now available and indicates that imports of sugarcane ethanol reached just 54 million gallons. 75 83 E:\FR\FM\06FER2.SGM FR 63704 (December 11, 2018). 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 7033 Figure IV.B.1-1 Historical Sugarcane Ethanol Imports 700 600 500 200 100 I 0 I ■ I I Source: "US Imports of Brazilian Fuel Ethanol from EIA - Oct 2019," docket EPA-HQOAR-2019-0136. Includes imports directly from Brazil and those that are transmitted through the Caribbean Basin Initiative and Central America Free Trade Agreement Data for 2019 through August indicate that advanced ethanol imports reached 95 million gallons. While we cannot project precisely what total import volumes will be by the end of 2019, as a first approximation is may be reasonable to assume that the monthly rate of import is consistent throughout the year. If so, then total 2019 imports could be 143 million gallons. However, there is little evidence that the increase potentially exhibited in 2019 would continue into 2020 as there is no consistent upward or downward trend after 2013. Moreover, several factors create disincentives for increasing imports above the levels in recent years, including the E10 blendwall, the potential existence of a recurring tax credit for biodiesel and renewable diesel with which sugarcane ethanol competes within the advanced biofuel category, and the fact that imported sugarcane ethanol typically costs more than corn ethanol.76 As a 76 The difference between D5 and D6 RIN prices can also influence the relative attractiveness to consumers of advanced ethanol compared to conventional ethanol. However, there has been VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 result of these factors and the lower levels that have occurred in recent years, we believe it would be appropriate to reduce the expected volume of imported sugarcane ethanol below 100 million gallons. Imports of sugarcane ethanol appear to have stabilized in the 2014 to 2018 timeframe in comparison to previous years. The average for these years is 67 million gallons. Due to the difficulty in precisely projecting future import volumes as described further below, we believe that a rounded value of 70 million gallons would be more appropriate and thus we use 70 million gallons of imported sugarcane ethanol for the purposes of projecting reasonably attainable volumes of advanced biofuel for 2020. We believe the volume of fuel imported in previous years is a reasonable way to project the reasonably attainable volume of sugarcane ethanol in 2020. In the July 29 proposal, we projected that 60 million gallons of imported sugarcane ethanol would be available in 2020. Our revised estimate of 70 million gallons reflects updated data on 2018 imports as well as a more robust quantitative approach to calculating recent actual imports. We note that the future projection of imports of sugarcane ethanol is inherently imprecise and that actual imports in 2020 could be lower or higher than 70 million gallons. Factors that could affect import volumes include uncertainty in the Brazilian political climate, weather and harvests in Brazil, world ethanol demand and prices, constraints associated with the E10 blendwall in the U.S., the status of the biodiesel tax credit which affects the economic attractiveness of sugarcane ethanol’s primary competitor, world demand for and prices of sugar, and the cost of sugarcane ethanol relative to that of corn ethanol. After considering these factors, and in light of the high degree of variability in historical imports of sugarcane ethanol, we believe that 70 considerable variability in this particular RIN price difference over the last few years. PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 ER06FE20.001</GPH> lotter on DSKBCFDHB2PROD with RULES2 (CAFTA). 7034 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations million gallons is reasonably attainable for 2020.77 2. Other Advanced Biofuel In addition to cellulosic biofuel, imported sugarcane ethanol, and advanced biodiesel and renewable diesel, there are other advanced biofuels that can be counted in the determination of reasonably attainable volumes of advanced biofuel for 2020. These other advanced biofuels include non-cellulosic CNG, naphtha, heating oil, and domestically produced advanced ethanol. However, the supply of these fuels has been relatively low in the last several years. TABLE IV.B.2–1—HISTORICAL SUPPLY OF OTHER ADVANCED BIOFUELS [Million ethanol-equivalent gallons] CNG/LNG 2013 2014 2015 2016 2017 2018 ..................................................................................... ..................................................................................... ..................................................................................... ..................................................................................... ..................................................................................... ..................................................................................... Heating oil 26 20 0 0 2 0 Domestic ethanol Naphtha 0 0 1 2 2 1 3 18 24 27 32 18 Total 23 26 25 27 26 27 a 52 64 50 56 62 46 lotter on DSKBCFDHB2PROD with RULES2 a Excludes consideration of D5 renewable diesel, as this category of renewable fuel is considered as part of biodiesel and renewable diesel as discussed in Section IV.B.3. The significant decrease after 2014 in CNG/LNG from biogas as advanced biofuel with a D code of 5 is due to the re-categorization in 2014 of landfill biogas from advanced (D code 5) to cellulosic (D code 3).78 Subsequently, total supply of these other advanced biofuels has exhibited no consistent trend during 2015 to 2018. The average during those four years was 54 million gallons. However, due to the high variability, and consistent with the approach we are taking for estimating volumes of imported sugarcane ethanol, we believe that this average should be rounded to the nearest 10 million gallons. As a result, we have used 50 million gallons to represent other advanced biofuels in the context of estimating attainable volumes of advanced biofuel.79 As with sugarcane ethanol, we have not conducted an indepth assessment of the volume of other advanced biofuels that could be made available to the U.S. without diverting this fuel from other markets. We believe the volume of fuel supplied in previous years is a reasonable way to project the reasonably attainable volume of other advanced biofuels in 2020. We acknowledge that, in the July 29 proposal, we proposed using 60 million gallons of other advanced biofuel in estimating attainable volumes of advanced biofuel. This value was based on the same data shown in Table IV.B.2–1, but using a more qualitative approach wherein 60 million gallons was deemed representative of both historical volumes and those that could 77 Given the relatively small volumes of sugarcane ethanol we are projecting (approximately 1 percent of the advanced biofuel standard), even a significant deviation in its actual availability would likely have negligible impact on the market’s ability to meet the advanced biofuel volumes. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 be attained in 2020. For this final rule we have chosen to use a mathematical approach that is consistent with the approach we have taken for imported sugarcane ethanol, and which we believe represents a more robust methodology for making future projections. As the change in the projected 2020 volume of other advanced biofuel is very small, we do not believe this change in approach meaningfully affects the broader assessment of advanced biofuel volumes. Moreover, we note that this final action uses a volume of imported sugarcane ethanol that is 10 million gallons higher than that proposed, while simultaneously using a volume of other advanced that is 10 million gallons lower than that proposed. The net effect on projections of advanced biofuel for both of these changes combined is zero. We recognize that the potential exists for additional volumes of advanced biofuel from sources such as jet fuel, liquefied petroleum gas (LPG), butanol, and liquefied natural gas (as distinct from CNG), as well as non-cellulosic CNG from biogas produced in digesters. However, since they have been produced, if at all, in only de minimis and sporadic amounts in the past, we do not have a reasonable basis for projecting substantial volumes from these sources in 2020.80 3. Biodiesel and Renewable Diesel Having projected the available volume of cellulosic biofuel, and the reasonably attainable volumes of imported 78 79 FR 42128 (July 18, 2014). with sugarcane ethanol, given the relatively small volumes of other advanced biofuels we are projecting (approximately 1% of the advanced biofuel standard), even a significant deviation in its actual availability would likely have negligible 79 As PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 sugarcane ethanol and ‘‘other’’ advanced biofuels, we next assess the availability of advanced biodiesel and renewable diesel by considering a wide range of factors. First, we calculate the amount of advanced biodiesel and renewable diesel that would be needed to meet the 5.09 billion ethanolequivalent gallon advanced requirement were we to exercise our maximum discretion under the cellulosic waiver authority discussed in Section IV.A. This calculation, shown in Table IV.B.3–1, helps inform the exercise of our waiver authorities. Second, we consider the historical availability of these fuels, including the impacts of biodiesel tax policy and tariffs. Third, we consider other factors that could potentially limit the availability of these fuels including the production capacity of advanced biodiesel and renewable diesel production facilities, and the ability for the market to distribute and use these fuels. Fourth, we assess the availability of advanced feedstocks. As part of this analysis, we consider the volume of advanced biodiesel and renewable diesel that can be made available with minimal diversions of advanced feedstocks and biofuels from existing uses, i.e., the reasonably attainable volume of advanced biodiesel and renewable diesel. We calculate this volume based on our projection of growth in qualifying feedstocks and on the reasonably attainable volume calculated in the 2019 final rule. Fifth, we consider how changes to the import and export of advanced biodiesel and impact on the market’s ability to meet the advanced biofuel volumes. 80 No RIN-generating volumes of these other advanced biofuels were produced in 2018, and less than 1 million gallons total in prior years. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations renewable diesel could impact the available volume of these fuels. These analyses support three key findings. First, were EPA to exercise the cellulosic waiver authority to the maximum extent, we would require an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons, of which we estimate 4.37 billion ethanol-equivalent gallons (2.83 billion actual gallons of biodiesel and renewable diesel) would be met by advanced biodiesel and renewable diesel. Second, the reasonably attainable volume of advanced biodiesel and renewable diesel, which can be achieved with minimal diversions of advanced feedstocks and biofuels (2.77 billion gallons) is slightly lower than this volume. This finding, together with the high cost of advanced biofuels, supports our decision to exercise the cellulosic waiver authority to the maximum extent and not to permit backfilling of missing cellulosic volumes with additional advanced biofuels. Third, 2.83 billion gallons of advanced biodiesel and renewable diesel are attainable by the market. These findings, together with additional discussions in the RTC document and docket memoranda, supports our decisions to neither require the use of additional volumes of advanced biofuel to backfill for the shortfall in cellulosic biofuel nor to further waive volumes under the general waiver authority.81 a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve Advanced Biofuel Volume We begin by calculating the volume of advanced biodiesel and renewable diesel that would be needed to meet the 2020 advanced biofuel volume were EPA to exercise the cellulosic waiver authority to the maximum extent. This important benchmark informs EPA’s consideration of our waiver authorities, albeit as only one factor among many. Specifically, in past annual rules where the reasonably attainable volume of biodiesel and renewable diesel has exceeded this benchmark, as was the case in 2017 and 2018, EPA has considered whether or not to allow additional volumes of these fuels to backfill for missing cellulosic biofuel volumes. By contrast, where the reasonably attainable volume of advanced biodiesel and renewable diesel has been less than this benchmark, as was the case in 2019, this 7035 weighs in favor of exercising the cellulosic waiver authority to the maximum extent so as to minimize diversions of advanced biofuels and feedstocks and the associated harms and the need for additional volumes of high cost advanced biofuel. Relatedly, were EPA to find that volume of advanced biodiesel and renewable diesel needed to meet this benchmark is not attainable, that would weigh in favor of EPA exercising its discretion under additional waiver authorities, to the extent available, to make further reductions to the advanced biofuel volume. As shown in Table IV.B.3–1, were EPA to exercise the cellulosic waiver authority to the maximum extent, the required volume of advanced biofuel would be 5.09 billion ethanolequivalent gallons. After subtracting from this volume the available volume of cellulosic biofuel and reasonably attainable volumes of imported sugarcane ethanol and ‘‘other’’ advanced biofuels, we estimate that approximately 2.83 billion gallons of advanced biodiesel and renewable diesel would be needed to meet the 2020 advanced biofuel volume. TABLE IV.B.3–1—DETERMINATION OF VOLUME OF BIODIESEL AND RENEWABLE DIESEL NEEDED IN 2020 TO ACHIEVE 5.09 BILLION GALLONS OF ADVANCED BIOFUEL [Million ethanol-equivalent gallons except as noted] Target 2020 advanced biofuel volume requirement absent any backfilling of missing cellulosic biofuel .......................................... Cellulosic biofuel .................................................................................................................................................................................. Imported sugarcane ethanol ................................................................................................................................................................ Other advanced ................................................................................................................................................................................... Calculated advanced biodiesel and renewable diesel needed (ethanol-equivalent gallons/physical gallons) 82 ............................... We next consider the volumes of advanced biodiesel and renewable diesel supplied in previous years, as well as the impacts of biodiesel tax policy and tariffs on these volumes. A review of the volumes of advanced biodiesel and renewable diesel used in previous years is especially useful in projecting the potential availability of these fuels, since there are a number of complex and inter-related factors beyond simply total production capacity (including the availability of advanced biodiesel and renewable diesel feedstocks,83 the expiration of the biodiesel tax credit, changes to tariffs on biodiesel from Argentina and Indonesia, import and distribution infrastructure, and other market-based factors) that could affect the supply of advanced biodiesel and renewable diesel. While historic data and trends alone are insufficient to project the volumes of biodiesel and renewable diesel that could be provided in future years, historic data can serve as a useful reference in considering future volumes. Past experience suggests that a high percentage of the biodiesel and renewable diesel used in the U.S. (from both domestic production and imports) qualifies as advanced biofuel.84 In 81 We note that we have not attempted to determine the maximum achievable volume of these fuels. While the maximum achievable volume of advanced biodiesel and renewable diesel in 2020 is likely greater than 2.83 billion gallons we do not believe it would be appropriate to require a greater volume of these fuels due to the high cost and increased likelihood of adverse unintended impacts associated with these fuels. 82 To calculate the volume of advanced biodiesel and renewable diesel that would generate the 4.37 billion RINs needed to meet the advanced biofuel volume EPA divided the 4.37 billion RINs by 1.55, which is the approximate average (weighted by the volume of these fuels expected to be produced in 2020) of the equivalence values for biodiesel (generally 1.5) and renewable diesel (generally 1.7). 83 Throughout this section we refer to advanced biodiesel and renewable diesel as well as advanced biodiesel and renewable diesel feedstocks. In this context, advanced biodiesel and renewable diesel refer to any biodiesel or renewable diesel for which RINs can be generated that satisfy an obligated party’s advanced biofuel obligation (i.e., D4 or D5 RINs). While cellulosic diesel (D7) can also contribute towards an obligated party’s advanced biofuel obligation, these fuels are discussed in Section III rather than in this section. An advanced biodiesel or renewable feedstock refers to any of the biodiesel, renewable diesel, jet fuel, and heating oil feedstocks listed in Table 1 to 40 CFR 80.1426 or in petition approvals issued pursuant to section 80.1416, that can be used to produce fuel that qualifies for D4 or D5 RINs. These feedstocks include, for example, soy bean oil; oil from annual cover crops; oil from algae grown photosynthetically; biogenic waste oils/fats/greases; non-food grade corn oil; camelina sativa oil; and canola/rapeseed oil (See pathways F, G, and H of Table 1 to section 80.1426). 84 From 2011 through 2018 approximately 96 percent of all biodiesel and renewable diesel b. Historical Supply of Biodiesel and Renewable Diesel lotter on DSKBCFDHB2PROD with RULES2 5,090 590 70 50 4,380\2,826 Continued VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 7036 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations previous years, biodiesel and renewable diesel produced in the U.S. have been almost exclusively advanced biofuel.85 Volumes of imported biodiesel and renewable diesel, which include both advanced and conventional biodiesel and renewable diesel, have varied significantly from year to year, as they are impacted both by domestic and foreign policies, as well as many economic factors. Production, import, export, and total volumes of advanced biodiesel and renewable diesel are shown in Table IV.B.3–2, while volumes of conventional biodiesel and renewable diesel are shown in the following Table IV.B.3–3. TABLE IV.B.3–2 86—ADVANCED (D4 AND D5) BIODIESEL AND RENEWABLE DIESEL FROM 2011 TO 2019 [Million gallons] a 2011 2012 2013 2014 b 2015 b 2016 2017 2018 2019 c Domestic Biodiesel ...................... (Annual Change) .......................... Domestic Renewable Diesel ........ (Annual Change) .......................... Imported Biodiesel ....................... (Annual Change) .......................... Imported Renewable Diesel ......... (Annual Change) .......................... Exported Biodiesel and Renewable Diesel ................................ (Annual Change) .......................... 969 (N/A) 59 (N/A) 43 (N/A) 0 (N/A) 984 (+15) 50 (¥9) 39 (¥4) 28 (+28) 1,364 (+380) 112 (+62) 153 (+114) 145 (+117) 1,296 (¥68) 158 (+46) 130 (¥23) 130 (¥15) 1,245 (¥51) 174 (+16) 261 (+131) 120 (¥10) 1,581 (+336) 236 (+62) 562 (+301) 165 (+45) 1,530 (¥51) 251 (+15) 462 (¥100) 191 (+26) 1,843 (+313) 306 (+55) 175 (¥287) 178 (¥13) 1825 (¥18) 531 (+225) 246 (+71) 256 (+78) 32 (N/A) 68 (+36) 84 (+16) 87 (+3) 94 (+7) 129 (+35) 166 (+37) 154 (¥12) 122 (¥32) Total d .................................... (Annual Change) ................... 1,039 (N/A) 1,033 (¥6) 1,690 (+657) 1,627 (¥63) 1,706 (+79) 2,415 (+709) 2,268 (¥147) 2,348 (+80) 2,736 (+388) a All data from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year. b RFS required volumes for these years were not established until December 2015. c Data for 2019 is based on actual production and import data through September 2019, and a projection for October–December 2019. For more information on how the volumes for 2019 were determined see ‘‘Projecting Advanced Biofuel Production and Imports for 2019 (November 2019),’’ Memorandum from Dallas Burkholder to EPA Docket EPA–HQ–OAR–2019–0136. d Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports. TABLE IV.B.3–3—CONVENTIONAL (D6) BIODIESEL AND RENEWABLE DIESEL FROM 2011 TO 2019 [Million gallons] a 2011 2012 2013 2014 b 2015 b 2016 2017 2018 2019 c Domestic Biodiesel ...................... (Annual Change) .......................... Domestic Renewable Diesel ........ (Annual Change) .......................... Imported Biodiesel ....................... (Annual Change) .......................... Imported Renewable Diesel ......... (Annual Change) .......................... Exported Biodiesel and Renewable Diesel ................................ (Annual Change) .......................... 2 (N/A) 0 (N/A) 0 (N/A) 0 (N/A) 0 (¥2) 0 (+0) 0 (+0) 0 (+0) 1 (+1) 0 (+0) 31 (+31) 70 (+70) 1 (+0) 0 (+0) 52 (+21) 2 (¥68) 0 (¥1) 0 (+0) 74 (+22) 87 (+85) 0 (+0) 0 (+0) 113 (+39) 45 (¥42) 0 (+0) 0 (+0) 0 (-113) 2 (¥43) 0 (+0) 0 (+0) 0 (+0) 1 (¥1) 0 (+0) 0 (+0) 0 (+0) 0 (¥1) 0 (N/A) 0 (+0) 0 (+0) 0 (+0) 1 (+1) 1 (+0) 0 (¥1) 0 (+0) 0 (+0) Total d .................................... (Annual Change) ................... 2 (N/A) 0 (¥2) 102 (+102) 55 (¥47) 160 (+105) 157 (¥3) 2 (¥155) 1 (¥1) 0 (¥1) lotter on DSKBCFDHB2PROD with RULES2 a All data from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year. b RFS required volumes for these years were not established until December 2015. c While a significant number of D6 RINs have been generated for biodiesel and renewable diesel in 2019 in recent years nearly all of these RINs have later been retired for reasons other than compliance with the volume obligations. Since D6 RIN prices have been relatively low in 2019 and the biodiesel tax credit is currently not available we are not projecting any production or import of D6 biodiesel or renewable diesel in 2019. d Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports. supplied to the U.S. (including domestically produced and imported biodiesel and renewable diesel) qualified as advanced biodiesel and renewable diesel (14,214 million gallons of the 14,869 million gallons) according to EMTS data. This section focuses on the availability of advanced biodiesel and renewable diesel to meet the advanced biofuel volume. For a discussion of the availability of all biodiesel and renewable diesel that could be used to meet the total renewable fuel VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 volume see ‘‘Updated market impacts of biofuels in 2020,’’ memorandum from David Korotney to docket EPA–HQ–OAR–2019–0136. 85 From 2011 through 2018 over 99.9 percent of all the domestically produced biodiesel and renewable diesel supplied to the U.S. qualified as advanced biodiesel and renewable diesel (12,268 million gallons of the 12,275 million gallons) according to EMTS data. PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 86 For this final rule EPA reviewed the data available in EMTS and updated historical renewable fuel production and RIN generation data. This updated data can be found in ‘‘Historical RIN supply as of 8–12–19,’’ memorandum from David Korotney to EPA docket EPA–HQ–OAR–2019–0136. Tables in this final rule that contain historical data (such as Tables IV.B.3–2, IV.B.3–3, VI.B.1–1 and VI.B.1–2) have been updated accordingly. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 As we explained above, to meet an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons we project that the market would supply 2.83 billion gallons of advanced biodiesel and renewable diesel. This volume (2.83 billion gallons) is approximately 90 million gallons greater than the volume of these fuels projected to be supplied in 2019 based on data through September 2019. Since 2011, the yearover-year changes in the volume of advanced biodiesel and renewable diesel used in the U.S. have varied greatly, from a low of 147 million fewer gallons from 2016 to 2017 to a high of 709 million additional gallons from 2015 to 2016. These changes were likely influenced by multiple factors such as the cost of biodiesel feedstocks and petroleum diesel, the status of the biodiesel blenders tax credit, growth in marketing of biodiesel at high volume truck stops and centrally fueled fleet locations, demand for biodiesel and renewable diesel in other countries, biofuel policies in both the U.S. and foreign countries, and the volumes of renewable fuels (particularly advanced biofuels) required by the RFS. This historical information does not indicate that the maximum previously observed increase of 709 million gallons of advanced biodiesel and renewable diesel would be reasonable to expect in 2020, nor does it indicate that the low (or negative) growth rates observed in other years would recur. Rather, these data illustrate both the magnitude of the changes in advanced biodiesel and renewable diesel in previous years and the significant variability in these changes. The historic data indicates that the biodiesel tax policy in the U.S. can have a significant impact on the volume of biodiesel and renewable diesel used in the U.S. in any given year.87 While the biodiesel blenders tax credit has applied in each year from 2010 to 2017, it has only been prospectively in effect during the calendar year in 2011, 2013, and 2016, while other years it has been applied retroactively. Each of the years in which the biodiesel blenders tax credit was in effect during the calendar year (2013 and 2016) resulted in significant increases in the volume of advanced biodiesel and renewable 87 We note that the status of the tax credit does not impact our assessment of the reasonably attainable volume of advanced biodiesel and renewable diesel in 2020 as that assessment is primarily based on feedstock availability. The status of the tax credit could potentially affect the maximum achievable volume of these fuels, but our assessment demonstrates that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable whether or not the tax credit is renewed prospectively (or retrospectively) for 2020. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 diesel used in the U.S. over the previous year (656 million gallons and 742 million gallons respectively). However, following these large increases in 2013 and 2016, there was little to no growth in the use of advanced biodiesel and renewable diesel in the following years. More recent data from 2019 suggests that while the availability of the tax credit certainly incentivizes an increasing supply of biodiesel and renewable diesel, supply increases can also occur in the absence of the tax credit, likely as the result of the incentives provided by the RFS program and other economic factors. The availability of this tax credit also provides biodiesel and renewable diesel with a competitive advantage relative to other advanced biofuels that do not qualify for the tax credit.88 Another important factor highlighted by the historic data is the tariffs imposed by the U.S. on biodiesel imported from Argentina and Indonesia. In December 2017 the U.S. International Trade Commission adopted tariffs on biodiesel imported from Argentina and Indonesia.89 According to data from EIA,90 no biodiesel was imported from Argentina or Indonesia since September 2017, after a preliminary decision to impose tariffs on biodiesel imported from these countries was announced in August 2017. As a result of these tariffs, total imports of biodiesel into the U.S. were significantly lower in 2018 than they had been in 2016 and 2017. The decrease in imported biodiesel did not, however, result in a decrease in the volume of advanced biodiesel and renewable diesel supplied to the U.S. in 2018. Instead, higher domestic production of advanced biodiesel and renewable diesel, in combination with lower exported volumes of domestically produced biodiesel, resulted in an overall increase in the volume of advanced biodiesel and renewable diesel supplied in 2018. On July 9, 2019, the Department of Commerce published a preliminary determination to reduce the countervailing duty on biodiesel imported from Argentina.91 If finalized this could result in increasing volumes of biodiesel imports from Argentina in future years. 88 For a further discussion of the impact of the tax credit on the supply of biodiesel and renewable diesel, see the discussion from the proposed rule (84 FR 36783, July 29, 2019). 89 ‘‘Biodiesel from Argentina and Indonesia Injures U.S. Industry, says USITC,’’ Available online at: https://www.usitc.gov/press_room/news_ release/2017/er1205ll876.htm. 90 See ‘‘EIA Biomass-Based Diesel Import Data’’ available in docket EPA–HQ–OAR–2019–0136. 91 84 FR 32714 (July 9, 2019). PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 7037 The historical data suggests that the 2.83 billion gallons of advanced biodiesel and renewable diesel projected to be used to meet an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons is attainable. This would represent a projected increase of approximately 90 million gallons from 2019 to 2020. This increase is less than the average increase in the volume of advanced biodiesel and renewable diesel used in the U.S. from 2011 through 2019 (212 million gallons per year) and significantly less than the highest annual increase during this time (742 million gallons from 2015 to 2016). We note, however, that this assessment does not consider the sources of feedstock that would be used to meet this increase, or the potential impacts of supplying 2.83 billion gallons of advanced biodiesel and renewable diesel, which are discussed in greater detail in the following sections. c. Consideration of Production Capacity and Distribution Infrastructure After reviewing the historical volume of advanced biodiesel and renewable diesel used in the U.S., EPA next considers other factors that may impact the production, import, and use of advanced biodiesel and renewable diesel in 2020. The production capacity of registered advanced biodiesel and renewable diesel production facilities is highly unlikely to limit the production of these fuels, as the total production capacity for biodiesel and renewable diesel at registered facilities in the U.S. (4.1 billion gallons) exceeds the volume of these fuels that are projected to be needed to meet the advanced biofuel volume for 2020 after exercising the cellulosic waiver authority (2.83 billion gallons).92 Significant registered production also exists internationally. Similarly, the ability for the market to distribute and use advanced biodiesel and renewable diesel appears unlikely constrain the growth of these fuels to a volume lower than 2.83 billion gallons. The investments required to distribute and use this volume of biodiesel and renewable diesel are expected to be manageable by the marketplace given the RIN value incentive, as this volume is approximately 90 million gallons greater than the volume of biodiesel and renewable diesel produced, imported, and used in the U.S. in 2019. The magnitude of the increase projected 92 The production capacity of the sub-set of biodiesel and renewable diesel producers that generated RINs in 2018 is approximately 2.9 billion gallons. See ‘‘Biodiesel and Renewable Diesel Registered Capacity (March 2019)’’ Memorandum from Dallas Burkholder to EPA Docket EPA–HQ– OAR–2019–0136. E:\FR\FM\06FER2.SGM 06FER2 7038 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations from 2019 to 2020 (90 million gallons) is much smaller than the increases observed in previous years. These factors further support our finding that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable. lotter on DSKBCFDHB2PROD with RULES2 d. Consideration of the Availability of Advanced Feedstocks We next consider the availability of advanced feedstocks that can be used to produce advanced biodiesel and renewable diesel. This assessment has two parts. First, we assess whether there are sufficient advanced feedstocks to produce 2.83 billion gallons of advanced biodiesel and renewable diesel. We find that the quantity of feedstocks exceeds the amount needed to do so, further supporting our conclusion that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable. Second, we assess whether the growth in advanced feedstocks suffices to produce 2.83 billion gallons of advanced biodiesel and renewable diesel without diverting advanced feedstocks or biofuels from existing uses, i.e., the reasonably attainable volume. We find that the reasonably attainable volume falls slightly short at 2.77 billion gallons. We believe the most reliable source for projecting the expected increase in virgin vegetable oils in the U.S. is USDA’s World Agricultural Supply and Demand Estimates (WASDE). At the time of our assessment for this rule, the October 2019 version was the most current version of the WASDE report. The October 2019 WASDE projects that production of vegetable oil in the U.S. in the 2019/2020 market year will be sufficient to produce approximately 3.6 billion gallons of biodiesel and renewable diesel (including both advanced and conventional biofuels) if the entire volume of vegetable oil was used to produce these fuels. Additional advanced biodiesel and renewable diesel could also be produced from waste fats, oils, and greases as they have been in past years.93 Thus, the availability of domestic vegetable oils, in combination the potential to source additional feedstocks from waste fats, oils, and greases, supports our conclusion that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable. In addition, the global production of vegetable oil projected in the 2019/2020 marketing year in the October 2019 93 See ‘‘Projections of FOG biodiesel and renewable diesel 2015–2018,’’ memorandum from David Korotney to EPA Docket, EPA–HQ–OAR– 2019–0136. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 WASDE would be sufficient to produce approximately 59.3 billion gallons of biodiesel and renewable diesel (including both advanced and conventional biofuels).94 While it would not be reasonable to assume that all, or even a significant portion, of global vegetable oil production globally or domestically could be available to produce biodiesel or renewable diesel supplied to the U.S. for a number of reasons,95 the large global supply of vegetable oil further indicates that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable in 2020. We now turn to the reasonably attainable volume of advanced biodiesel and renewable diesel, which we find to be 2.77 billion gallons. This volume represents the amount of advanced biodiesel and renewable diesel that can be supplied without relying on the diversion of advanced biofuels and feedstocks from existing uses and the associated harms of such diversions. We calculate this volume by summing the reasonable attainable volume from last year’s final rule (2.61 billion gallons) with the volume that can be produced from the projected increase in advanced feedstocks from 2019 to 2020 (159 million gallons).96 We acknowledge that an increase in the required use of advanced biodiesel and renewable diesel could be realized through the production or collection of additional advanced feedstocks, a diversion of advanced feedstocks from 94 The October 2019 WASDE projects production of vegetable oils in 2019/2020 in the U.S. and the World to be 12.58 and 207.50 million metric tons respectively. To convert projected vegetable oil production to potential biodiesel and renewable diesel production we have used a conversion of 7.7 pounds of feedstock per gallon of biodiesel or renewable diesel (World Agricultural Supply and Demand Estimates. United States Department of Agriculture, Office of the Chief Economist. October 10, 2019. ISSN 1554–9089). In addition, global production of biodiesel is projected to be 44.2 billion liters (11.7 billion gallons) in 2020 according to the July 2019 OECD–FAO Agricultural Outlook. Based on the projected production of biodiesel by country we estimate that over 80% of this biodiesel (all biodiesel except that produced in Columbia, Indonesia, Malaysia, and Thailand) could qualify as advanced biofuel if the feedstocks meet the definition of renewable biomass. 95 These reasons include the demand for vegetable oil in the food, feed, and industrial markets both domestically and globally; constraints related to the production, import, distribution, and use of significantly higher volumes of biodiesel and renewable diesel; and the fact that biodiesel and renewable diesel produced from much of the vegetable oil available globally would not qualify as an advanced biofuel under the RFS program. 96 As discussed in more detail in this section, this 159 million gallons increase is projected to be comprised of 94 million gallons from increased vegetable oil production, 17 million gallons from distillers corn oil, and 48 million gallons from waste fats, oils, and greases. PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 other uses, or a diversion of advanced biodiesel and renewable diesel from existing markets in other countries. As already explained, the volume of advanced biodiesel and renewable diesel and their corresponding feedstocks projected to be produced globally exceeds the volume projected to be required in 2020 (2.83 billion gallons of advanced biodiesel and renewable diesel and the corresponding volume of advanced feedstocks) by a significant margin. However, we expect that increases in advanced biofuel and renewable fuel volumes beyond those that can be produced from the projected growth in advanced feedstock production and/or consumption (e.g., by diverting advanced feedstocks or advanced biodiesel and renewable diesel from existing markets and uses) would be increasingly likely to incur adverse unintended impacts.97 This is because of several factors, notably the potential disruption of the current biogenic fats, oils, and greases market, the associated cost impacts to other industries resulting from feedstock diversion, and the potential adverse effect on lifecycle GHG emissions and energy security associated with feedstocks for biofuel production that would have been used for other purposes and which must then be backfilled with other feedstocks.98 Similarly, increasing the supply of biodiesel and renewable diesel to the U.S. by diverting fuel that would otherwise have been used in other countries results in higher lifecycle GHG emissions than if the supply of these fuels was increased by an increased collection of waste fats and oils or increased production of feedstocks that are byproducts of other industries, especially if this diversion results in increased consumption of petroleum fuels in the countries that would have otherwise consumed the biodiesel or renewable diesel. By assessing the expected growth in the production of advanced feedstocks, we are attempting to minimize the incentives for the RFS program to increase the supply of advanced 97 The volume of advanced biodiesel and renewable diesel projected to be used to meet the advanced biofuel volume (2.83 billion gallons) is approximately 1 billion gallons greater than the volume of these fuels we projected would be used to meet the advanced biofuel volume for 2022 in the 2010 RFS final rule analyses (1.82 billion gallons). For a further discussion of this issue see Section 4.2.2.4 of the RTC. 98 For instance, see the draft GHG assessment of palm oil biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012). We believe palm or petroleum-derived products would likely be used to replace advanced biodiesel and renewable diesel diverted to the U.S. as these products are currently the lowest cost substitutes. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 biodiesel and renewable diesel through feedstock switching or diverting biodiesel and renewable diesel from foreign markets to the U.S. Advanced biodiesel and renewable diesel feedstocks include both waste oils, fats, and greases; and oils from planted crops. The projected growth in these feedstocks is expected to be modest relative to the volume of these feedstocks that is currently being used to produce biodiesel and renewable diesel. Most of the waste oils, fats, and greases that can be recovered economically are already being recovered and used in biodiesel and renewable diesel production or for other purposes. The availability of animal fats will likely increase with beef, pork, and poultry production. Most of the vegetable oil used to produce advanced biodiesel and renewable diesel that is sourced from planted crops comes from crops primarily grown for purposes other than providing feedstocks for biodiesel and renewable diesel, such as for livestock feed, with the oil that is used as feedstock for renewable fuel production a co-product.99 This is true for soybeans and corn, which are the two largest sources of feedstock from planted crops used for biodiesel production in the U.S.100 We do not believe that the increased demand for soybean oil or corn oil caused by a higher 2020 advanced biofuel standard would result in an increase in soybean or corn prices large enough to induce significant changes in agricultural activity.101 However, production of these feedstocks is likely to increase over time as crop yields, oil extraction rates, and demand for the primary products increase. Based on the October 2019 WASDE report the projected increase in vegetable oil production in the U.S. from the 2018/2019 marketing year to the 2019/2020 marketing year is 0.33 million metric tons per year.102 This 99 For example, corn oil is a co-product of corn grown primarily for animal feed or ethanol production, while soy and canola are primarily grown as livestock feed. 100 According to EIA data 7,542 million pounds of soy bean oil and 2,085 million pounds of corn oil were used to produce biodiesel in the U.S. in 2018. Other significant sources of feedstock were yellow grease (1,668 million pounds), canola oil (total volume withheld, but monthly data suggests greater than 700 million pounds), and white grease (618 million pounds).’’Monthly Biodiesel Production Report with Data for February 2019,’’ U.S. Energy Information Administration. April 2019. 101 This position is supported by several commenters, including the American Soybean Association (EPA–HQ–OAR–2019–0136–0177) and the Nebraska Soybean Association (EPA–HQ–OAR– 2019–0136–0117). 102 U.S. vegetable oil production is projected to be 12.25 million metric tons in the 2018/2019 VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 additional quantity of vegetable oils could be used to produce approximately 94 million additional gallons of advanced biodiesel or renewable diesel in 2020 relative to 2019.103 In the 2019 final rule we also noted that the WASDE projected a decrease in trade of both oilseeds and vegetable oils. The projected decrease in oilseed trade was likely due to tariffs enacted by China on soybean exports from the U.S. While the projected trade in oilseeds is expected to increase slightly from 2018/ 2019 to 2019/2020, trade in vegetable oils is projected to decrease by 0.12 million metric tons from 2018/2019 to 2019/2020. If converted to biodiesel, this volume of vegetable oils could be used to produce approximately 34 million additional gallons of advanced biodiesel or renewable diesel in 2020 relative to 2019. As in the 2019 final rule, we did not include in our projection of the reasonably attainable volumes the potential biodiesel or renewable diesel that could theoretically be produced from the oilseeds and vegetable oil projected to remain in the U.S. due to changes in trade of these products. This is because any biodiesel and renewable diesel produced from soybeans previously exported are necessarily diverted from other uses (even if the reason for this diversion is the tariffs, rather than the RFS program), and biodiesel produced from these diverted feedstocks is therefore more likely to have the adverse unintended effects as previously discussed. In addition to virgin vegetable oils, we also expect increasing volumes of distillers corn oil 104 to be available for use in 2020. The WASDE report does not project distillers corn oil production, so EPA must use an alternative source to project the growth in the production of this feedstock. For this final rule we use results from the World Agricultural Economic and Environmental Services (WAEES) model to project the growth in the production of distillers corn oil.105 In assessing the agricultural marketing year and 12.58 million metric tons in the 2019/2020 agricultural marketing year. 103 To calculate this volume, we have used a conversion of 7.7 pounds of feedstock per gallon of biodiesel or renewable diesel. This is based on the expected conversion of soybean oil (https:// extension.missouri.edu/p/G1990), which is the largest source of feedstock used to produce advanced biodiesel and renewable diesel. Conversion rates for other types of vegetable oils used to produce biodiesel and renewable diesel are similar to those for soybean oil. 104 Distillers corn oil is non-food grade corn oil produced by ethanol production facilities. 105 For the purposes of this rule, EPA relied on WAEES modeling results submitted as comments by the National Biodiesel Board on the 2020 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 7039 likely increase in the availability of distillers corn oil from 2019 to 2020, the authors of the WAEES model considered the effects of an increasing adoption rate of distillers corn oil extraction technologies at domestic ethanol production facilities, as well as increased corn oil extraction rates enabled by advances in this technology. The WAEES model projects that production of distillers corn oil will increase by approximately 130 million pounds from the 2018/2019 to the 2019/ 2020 agricultural marketing year. This quantity of feedstock could be used to produce approximately 17 million gallons of advanced biodiesel or renewable diesel. We believe it is reasonable to use these estimates from the WAEES model for these purposes based on the projected increase in the use of corn oil extraction and corn oil yield increases. While much of the increase in advanced biodiesel and renewable diesel feedstocks produced in the U.S. from 2019 to 2020 is expected to come from virgin vegetable oils and distillers corn oil, increases in the supply of other sources of advanced biodiesel and renewable diesel feedstocks, such as biogenic waste fats, oils, and greases (FOG), could also occur. In scenarios with increases to the advanced biofuel and biomass-based diesel volume requirements in 2020 and 2021 the WAEES model projects minimal increases in the volume of biodiesel produced from total other fats and oils in the 2018/2019 and 2019/2020 marketing years.106 Conversely, an assessment conducted by LMC International in 2017 and submitted in comments on our 2018 proposed rule projected that the waste oil supply in the U.S. could increase by approximately 2.4 million metric tons from 2016 to 2022.107 This estimate represents a growth rate of approximately 0.4 billion tons per year, or enough feedstock to produce approximately 115 million gallons of biodiesel and renewable diesel per year. This estimate, however, only accounts for potential sources of feedstock and proposed rule (Kruse, J., ‘‘Implications of an Alternative 2021 Biomass Based Diesel Volume Obligation for Global Agriculture and Biofuels,’’ August 26, 2019, World Agricultural Economic and Environmental Services (WAEES)). 106 The WAEES model projects a 7 million gallon increase in 2019/2020 and a 16 million gallon increase in 2020/2021. See Kruse, J., ‘‘Implications of an Alternative Biomass Based Diesel Volume Obligation for Global Agriculture and Biofuels,’’ August 26, 2019, World Agricultural Economic and Environmental Services. 107 LMC International. Global Waste Grease Supply. August 2017 (EPA–HQ–OAR–2017–0091– 3880). E:\FR\FM\06FER2.SGM 06FER2 7040 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 not for the economic viability of recovering waste oils. To project the increase in the use of biogenic FOG we used historical data to determine the increase in the use of these feedstocks to produce biodiesel and renewable diesel. From 2015–2018, advanced biodiesel and renewable diesel produced from biogenic FOG increased by an average of 48 million gallons per year.108 This annual increase is higher than the increase in the use of these feedstocks projected by the WAEES model, but lower than the potential increase projected by LMC. We have included an additional 48 million gallons of advanced biodiesel and renewable diesel from FOG in our assessment of the reasonably attainable volume for 2020, consistent with the observed annual increase in advanced biodiesel and renewable diesel produced from these feedstocks in recent years. In total, we project that increases in feedstocks produced in the U.S. are sufficient to produce approximately 159 million more gallons of advanced biodiesel and renewable diesel in 2020 relative to 2019. This number includes 94 million gallons from increased vegetable oil production, 17 million gallons from increased corn oil production, and 48 million gallons from increased waste oil collection. This increase does not include the projected 34 million gallons of biodiesel that could be produced from the projected reduction in vegetable oil trade since decreases in exported volumes of vegetable oils represent feedstocks diverted from use in other countries. Our projection also does not consider factors that could potentially affect the availability of advanced biofuel feedstocks that could be used to produce biodiesel or renewable diesel, such as changes in the volume of vegetable oils used in food markets or other non-biofuel industries. In our 2019 final rule, we determined that 2.61 billion gallons of advanced biodiesel and renewable diesel were reasonably attainable in 2019,109 therefore our projection of the reasonably attainable volume of advanced biodiesel and renewable diesel in 2020 is 2.77 billion gallons.110 108 ‘‘Projections of FOG biodiesel and renewable diesel 2015–2018,’’ memorandum from David Korotney to EPA Docket, EPA–HQ–OAR–2019– 0136. 109 83 FR 63704 (December 11, 2018). 110 We calculated the reasonably attainable volume for 2020 by adding the projected increase in advanced feedstocks (159 million gallons) to the reasonably attainable volume of these fuels we projected for 2019 (2.61 billion gallons). Another possible approach would be to add the 159-milliongallon increment in the reasonably attainable VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 e. Biodiesel and Renewable Diesel Imports and Exports EPA next considered potential changes in the imports of advanced biodiesel and renewable diesel produced in other countries. In previous years, significant volumes of foreign produced advanced biodiesel and renewable diesel have been supplied to markets in the U.S. (see Table IV.B.2–1). These significant imports were likely the result of a strong U.S. demand for advanced biodiesel and renewable diesel, supported by the RFS standards, the low carbon fuel standard (LCFS) in California, the biodiesel blenders tax credit, and the opportunity for imported biodiesel and renewable diesel to realize these incentives. We have not included the potential for increased (or decreased) volumes of imported advanced biodiesel and renewable diesel in our projection of the reasonably attainable volume for 2020. As discussed previously, any increases in the import of advanced biodiesel and renewable diesel is necessarily diverted from other markets. There is also a far higher degree of uncertainty related to the availability and production of advanced biodiesel and renewable diesel in foreign countries, as this supply can be affected by a number of unpredictable factors such as the imposition of tariffs and increased incentives for the use of these fuels in other countries (such as tax incentives or blend mandates). EPA also lacks the data necessary to determine the quantity of these fuels that would otherwise be produced and used in other countries, and thus the degree to which the RFS standards are simply diverting this fuel from use in other countries as opposed to incentivizing additional production. While we do not consider changes in imports or exports of advanced biodiesel and renewable diesel in our projection of the reasonably attainable volume, changes to the volume of these fuels that is imported and exported volume to the volume we now project to be used in 2019, 2.74 billion gallons (rather than the reasonably attainable volume we projected for 2019). This would result in a reasonably attainable volume of 2.90 billion gallons. While this approach uses more recent data on the availability of advanced biodiesel and renewable diesel in 2019, it does not account for whether or not the additional use of these fuels in 2019, beyond the reasonably attainable volume calculated in the 2019 final rule, resulted in diversions of advanced biofuels or feedstocks. In any event, even were we to adopt this approach, it would make no difference to our final decision on the volumes as (1) the difference in the calculated reasonably attainable volume is slight, (2) the high costs of advanced biodiesel and renewable diesel would justify exercising the maximum cellulosic waiver in any event, and (3) the volume we are finalizing is attainable under either approach. PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 could potentially impact the attainable volume. Imports of advanced biodiesel and renewable diesel are projected to increase by 150 million gallons from 2018 to 2019 (from approximately 350 million gallons in 2018 to approximately 500 million gallons in 2019, see Table IV.B.3–2). At the same time, data through July 2019 suggests that the U.S. will export approximately 122 million gallons of domestically produced biodiesel in 2019.111 Increased imports and/or decreased exports of these fuels in 2020 could contribute to the market supplying 2.83 billion gallons of advanced biodiesel and renewable diesel. The higher volumes of imported advanced biodiesel and renewable diesel in previous years (shown in Table IV.B.3–2) suggest that these changes are possible, especially if the tariffs on biodiesel imported from Argentina are reduced. Thus the potential for increased imports and decreased exports further supports our determination that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable. While changes to the volumes of imports/exports of advanced biodiesel and renewable could supply the approximately 60 million gallon difference between the reasonably attainable volume of these fuels (2.77 billion gallons) and the volume needed to meet an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons (2.83 billion gallons), these changes are not without impacts. Diverting this fuel to markets in the U.S. may be complicated as doing so would likely require higher prices for these fuels in the U.S. to divert the fuels from foreign markets that are presumably more profitable currently. It may also be more difficult and costly to distribute this additional volume of biodiesel and renewable diesel to domestic markets than the current foreign markets. Finally, reducing advanced biodiesel and renewable diesel exports may indirectly result in the decreased availability of imported volumes of these fuels, as other countries seek to replace volumes previously imported from the U.S. f. Attainable and Reasonably Attainable Volumes of Advanced Biodiesel and Renewable Diesel In sum, the 2.83 billion gallons of advanced biodiesel and renewable 111 Projection is based on EIA data on exports of biomass-based diesel (biodiesel) through July 2019. For more detail on this projection see ‘‘Projecting Advanced Biofuel Production and Imports for 2019 (November 2019),’’ memorandum from Dallas Burkholder to EPA docket EPA–HQ–OAR–2019– 0136. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 diesel projected to be needed to achieve an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons are attainable. We have reached this conclusion based on our analysis of the above factors, including historical supply of biodiesel and renewable diesel, the impacts of tax policy and tariffs, production capacity and distribution infrastructure, availability of advanced feedstocks, and imports and exports. By contrast, we find that only 2.77 billion gallons of advanced biodiesel and renewable diesel are reasonably attainable. This estimate is based on our analysis of growth in qualifying feedstocks, and represents the volume that can be supplied with minimal diversions of advanced biofuels and feedstocks from existing uses, and the associated harms of such diversions. These assessments support EPA’s decision to establish the advanced biofuel volume for 2020 at 5.09 billion gallons, a volume which neither requires the use of EPA’s general waiver authority nor the use of additional volumes of advanced biofuel in place of cellulosic biofuel. C. Volume Requirement for Advanced Biofuel In exercising the cellulosic waiver authority for 2017 and earlier, we determined it was appropriate to require a partial backfilling of missing cellulosic volumes with volumes of non-cellulosic advanced biofuel we determined to be reasonably attainable, notwithstanding the increase in costs associated with those decisions.112 For the 2018 and 2019 standards, in contrast, we placed a greater emphasis on costs in the context of balancing the various considerations, ultimately concluding that the applicable volume requirement should be based on the maximum reduction permitted under the cellulosic waiver authority, effectively preventing any backfilling of missing cellulosic biofuel with advanced biofuel. In setting the 2019 standards, we also found that greater volumes of advanced biofuel would be attainable but did not believe that requiring higher volumes would be appropriate as such volumes were not reasonably attainable and would lead to diversion of advanced feedstocks or biofuels and the associated harms. For 2020, we are following the same approach as in 2018 and 2019 and exercising the cellulosic waiver authority to reduce the advanced biofuel requirement by the maximum extent 112 See, e.g., Renewable Fuel Standards for 2014, 2015 and 2016, and the Biomass-Based Volume for 2017: Response to Comments (EPA–420–R–15–024, November 2015), pages 628–631, available in docket EPA–HQ–OAR–2015–0111–3671. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 permitted. This results in an advanced biofuel volume of 5.09 billion gallons. This also preserves the implied statutory volume target for noncellulosic advanced biofuel at 4.5 billion gallons, identical to that for 2019. As in the 2019 standards, we are taking this approach for two reasons, each of which is an independent and sufficient justification. First, as in 2019, the reasonably attainable volume of advanced biofuel for 2020 falls short of the volume resulting from the maximum exercise of the cellulosic authority. It is thus appropriate to exercise the cellulosic waiver authority to the maximum extent to minimize the harms associated with advanced biofuel and feedstock diversions. Second, even if greater volumes of advanced biofuel are reasonably attainable, the high cost of these fuels independently justifies reducing the advanced biofuel volume for 2020 by the maximum amount permitted under the cellulosic waiver authority. In the 2019 final rule we presented illustrative cost projections for sugarcane ethanol and soybean biodiesel in 2019, the two advanced biofuels that would be most likely to provide the marginal increase in volumes of advanced biofuel in 2019 in comparison to 2018. Sugarcane ethanol results in a cost increase compared to gasoline that ranges from $0.39–$1.04 per ethanol-equivalent gallon. Soybean biodiesel results in a cost increase compared to diesel fuel that ranges from $0.74–$1.23 per ethanol-equivalent gallon. Thus, the cost of these renewable fuels is high as compared to the petroleum fuels they displace. In conclusion, we believe that a 2020 advanced biofuel volume requirement of 5.09 billion ethanol-equivalent gallons is appropriate following our assessment of volumes that are attainable and in consideration of carryover RINs, potential feedstock/fuel diversions, and costs. Comments requesting higher or lower volumes are addressed in the separate Response to Comments document. D. Volume Requirement for Total Renewable Fuel As discussed in Section II.A.1, we believe that the cellulosic waiver provision is best interpreted as requiring that the advanced biofuel and total renewable fuel volumes be reduced by equal amounts. For the reasons we have previously articulated, we believe this interpretation is consistent with the statutory language and best effectuates the objectives of the statute, including the environmental objectives that generally favor the use of advanced PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 7041 biofuels over non-advanced biofuels and the legislative intent reflected in the statutory volume tables.113 If we were to reduce the total renewable fuel volume requirement by a lesser amount than the advanced biofuel volume requirement, we would effectively increase the opportunity for conventional biofuels to participate in the RFS program beyond the implied statutory volume of 15 billion gallons. Applying an equal reduction of 9.91 billion gallons to both the statutory target for advanced biofuel and the statutory target for total renewable fuel results in a total renewable fuel volume of 20.09 billion gallons as shown in Table IV.A–1. This volume of total renewable fuel results in an implied volume of 15 billion gallons of conventional renewable fuel, which is the same as in the 2019 final rule. We have investigated the different ways that the market could respond to a total renewable fuel volume requirement of 20.09 billion gallons in a memorandum to the docket.114 115 We note that the statute provides other authorities for EPA to reduce the required volumes beyond that permitted 113 See 81 FR 89752–89753 (December 12, 2016). See also 78 FR 49809–49810 (August 15, 2013); 80 FR 77434 (December 14, 2015). 114 ‘‘Updated market impacts of biofuels in 2020,’’ memorandum from David Korotney to docket EPA– HQ–OAR–2019–0136. In prior actions, similar analyses to those described in this memorandum indicated that the market was capable of both producing and consuming the required volume of renewable fuels, and that as a result there was no basis for finding an inadequate domestic supply of total renewable fuel. See 82 FR 34229 & n.82 (July 21, 2017). Given the D.C. Circuit’s decision in ACE, however, assessment of demand-side constraints is no longer relevant for determining inadequate domestic supply. Even so, we believe consideration of the ways that the market could make this volume available may still be generally relevant to whether and how EPA exercises its waiver authorities, such as our consideration of whether the volumes will cause severe economic harm. 115 We note that the previously cited memorandum discusses the potential for total ethanol consumption in 2020, but does not make specific projections for E0, E15 and E85. Volumes of these ethanol blends are highly dependent upon consumer demand and retail distribution infrastructure. In prior annual rules, we assessed volumes of these blends in determining whether and to what extent to exercise the inadequate domestic supply waiver prong of the general waiver authority. The D.C. Circuit’s decision ACE precludes assessment of demand-side constraints in determining inadequate domestic supply. While we could still assess such blend volumes in deciding whether and to what extent to exercise our other discretionary waiver authorities, and in evaluating the market’s ability to meet the total renewable fuel requirement, doing so is not necessary. In terms of the market’s ability to satisfy the total renewable fuel requirement, the more relevant consideration is whether the pool-wide ethanol volume, together with volumes of other biofuels, suffices. We note that EPA does not establish separate standards for E0, E15, or E85. Moreover, there has historically been a lack of reliable data on volumes of these blends, making reliance on the pool-wide ethanol volume a more technically robust approach. E:\FR\FM\06FER2.SGM 06FER2 7042 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 by the cellulosic waiver. As explained in Section II of this rule and in Section 2 of the Response to Comments document, we do not believe it is appropriate to further reduce volumes under the general waiver authority. We acknowledge that there is some uncertainty regarding whether the market will actually make available 5.09 billion ethanol-equivalent gallons of advanced biofuel or 20.09 billion ethanol-equivalent gallons of total renewable fuel in 2020. In the event that the market is not able to meet these volume requirements with biofuels produced and used in 2020, the carryover RIN bank represents a source of RINs that could help obligated parties meet them if the market fails to supply sufficient advanced biofuels. As discussed in greater detail in Section II.B.1, carryover RINs provide obligated parties compliance flexibility in the face of substantial uncertainties in the transportation fuel marketplace and provide a liquid and well-functioning RIN market upon which success of the entire program depends. We currently estimate that there are approximately 680 million advanced biofuel carryover RINs and 2.80 billion non-advanced (D6) carryover RINs available. V. Impacts of 2020 Volumes on Costs In this section, EPA presents its assessment of the illustrative costs of this final RFS annual rulemaking. It is important to note that these illustrative costs do not attempt to capture the full impacts of this final rule. We frame the analyses we have performed for this rule as ‘‘illustrative’’ so as not to give the impression of comprehensive estimates. These estimates are provided for the purpose of showing how the cost to produce a gallon of a ‘‘representative’’ renewable fuel compares to the cost of fossil fuels (e.g., petroleum-derived fuels). There are a significant number of caveats that must be considered when interpreting these illustrative cost estimates. For example, there are many different feedstocks that could be used to produce biofuels, and there is a significant amount of heterogeneity in the costs associated with these different feedstocks and fuels. Some renewable fuels may be cost competitive with the fossil fuels they replace; however, we do not have cost data on every type of feedstock and every type of fuel. Therefore, we do not attempt to capture this range of potential costs in our illustrative estimates. The renewable fuel volumes for which we provide cost estimates are described in Section III. In this section, we estimate illustrative costs for two different cases. In the first case, we VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 provide illustrative cost estimates by comparing the final 2020 RFS renewable fuel volumes to 2020 RFS statutory renewable fuel volumes. In the second case, we examine the final 2020 RFS renewable fuel volumes to the final 2019 RFS renewable fuel volumes to estimate changes in the annual costs of the final 2020 RFS annual rule in comparison to the final 2019 RFS annual rule.116 A. Illustrative Costs Analysis of 2020 Final Volumes Compared to the 2020 Statutory Volumes Baseline In this section, EPA provides illustrative cost estimates that compare the final 2020 RFS cellulosic renewable volume requirement to the 2020 RFS cellulosic statutory renewable fuel volume that would be required absent the exercise of our cellulosic waiver authority under CAA section 211(o)(7)(D)(i). As described in Section III, we are finalizing a cellulosic volume of 0.59 billion gallons for 2020, using our cellulosic waiver authority to waive the statutory cellulosic volume of 10.5 billion gallons by 9.91 billion gallons. Estimating the cost savings from renewable fuel volumes that are not projected to be produced is inherently challenging. EPA has taken the relatively straightforward methodology of multiplying the waived cellulosic volume by the wholesale per-gallon costs of cellulosic biofuel production relative to the fossil fuels they displace. While there may be growth in other cellulosic renewable fuel sources, we believe it is appropriate to use cellulosic ethanol produced from corn kernel fiber at an existing corn starch ethanol production facility as representative of cellulosic renewable fuel. As explained in Section III, we believe that production of the major alternative cellulosic biofuel—compressed natural gas/liquefied natural gas (CNG/LNG)derived from biogas—is constrained in 2020 due to a limitation in the number of vehicles capable of using this form of fuel.117 EPA uses a ‘‘bottom-up’’ engineering cost analysis to quantify the costs of producing a gallon of cellulosic ethanol derived from corn kernel fiber. There are multiple processes that could yield cellulosic ethanol from corn kernel fiber. EPA assumes a cellulosic ethanol 116 This action imposes renewable fuel standards only for 2020. However, solely for E.O. 13771 purposes in this section, we estimate the costs of the relevant volumes as though they applied in future years as well. Therefore, we use the term ‘‘annual costs’’ in this section. 117 See Section III.D.2 for a further discussion of the quantity of CNG/LNG projected to be used as transportation fuel in 2020. PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 production process that generates biofuel using distiller’s grains, a coproduct of generating corn starch ethanol that is commonly dried and sold into the feed market as distillers dried grains with solubles (DDGS), as the renewable biomass feedstock. We assume an enzymatic hydrolysis process with cellulosic enzymes to break down the cellulosic components of the distiller’s grains. This process for generating cellulosic ethanol is similar to approaches currently used by industry to generate cellulosic ethanol at a commercial scale, and we believe these cost estimates are likely representative of the range of different technology options being developed to produce ethanol from corn kernel fiber. We then compare the per-gallon costs of the cellulosic ethanol to the fossil fuel that would be replaced at the wholesale stage, since that is when the two are blended together. These cost estimates do not consider taxes, retail margins, or other costs or transfers that occur at or after the point of blending. Transfers are payments within society and are not additional costs (e.g., RIN payments are one example of a transfer payment). We do not attempt to estimate potential cost savings related to avoided infrastructure costs (e.g., the cost savings of not having to provide pumps and storage tanks associated with higher-level ethanol blends). When estimating per-gallon costs, we consider the costs of gasoline on an energy-equivalent basis as compared to ethanol, since more ethanol gallons must be consumed to travel the same distance as on gasoline due to the ethanol’s lower energy content. Table V.A–1 below presents the cellulosic fuel cost savings associated with this final rule that are estimated using this approach.118 The per-gallon cost differences for cellulosic ethanol range from $0.46–$3.30 per ethanolequivalent gallon ($/EEG).119 Given that commercial cellulosic ethanol production is still at an early stage in its deployment, these cost estimates have a significant range. Multiplying the per118 Details of the data and assumptions used can be found in a Memorandum available in the docket entitled ‘‘Cost Impacts of the Final 2020 Annual Renewable Fuel Standards’’, Memorandum from Michael Shelby, Dallas Burkholder, and Aaron Sobel available in docket EPA–HQ–OAR–2019– 0136. 119 For the purposes of the cost estimates in this section, EPA has not attempted to adjust the price of the petroleum fuels to account for the impact of the RFS program, since the changes in the renewable fuel volume are relatively modest in comparison to the quantity of fuel associated with the petroleum market. Rather, we have used the wholesale price projections for gasoline and diesel as reported in EIA’s October 2019 STEO. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations gallon cost differences by the amount of cellulosic biofuel waived in this final 7043 rule results in approximately $4.6–$33 billion in cost savings. TABLE V.A–1—ILLUSTRATIVE COSTS ANALYSIS OF 2020 FINAL CELLULOSIC VOLUMES COMPARED TO THE 2020 STATUTORY VOLUMES Cellulosic Volume Required (Million Ethanol-Equivalent Gallons) .......................................................................................... Change in Required Cellulosic Biofuel from 2020 Statutory Volume (Million Ethanol-Equivalent Gallons) ........................... Cost Difference Between Cellulosic Corn Kernel Fiber Ethanol and Gasoline Per-Gallon ($/Ethanol-Equivalent Gallons) 120 ($/EEG) 121 ............................................................................................................................................................. Annual Change in Overall Costs (Million $) 122 ....................................................................................................................... B. Illustrative Cost Analysis of the 2020 Final Volumes Compared to the 2019 Final Volumes In this section, we provide illustrative cost estimates for the final 2020 RFS volumes compared to the final 2019 RFS volumes. In comparison to the final 2019 RFS volumes, the final 2020 RFS volumes result in an overall increase of 172 million ethanol-equivalent gallons of cellulosic biofuel derived from CNG/ LNG from landfill biogas. To estimate the cost of production of CNG/LNG derived from landfill gas (LFG), EPA uses Version 3.2 of the Landfill Gas Energy Cost Model, or LFGcost-Web.123 LFGcost-Web is a software tool developed by EPA’s Landfill Methane Outreach Program (LMOP) to conduct initial economic feasibility analysis of developing LFG energy recovery projects in the United States. The default inputs and cost estimates by LFGcost-Web are based on typical project designs and for typical landfill situations. The Model attempts to include all equipment, site work, permits, operating activities, and maintenance that would normally be required for constructing and operating a typical project. 590 (9,910) $0.46–$3.30 $(4,600)–$(33,000) Table V.B–1 presents estimates of per energy-equivalent gallon costs for producing CNG/LNG derived from landfill biogas relative to natural gas at the wholesale level. These per-gallon costs are then multiplied by the increase in the final 2020 RFS cellulosic biofuel volume relative to the 2019 final RFS cellulosic biofuel volume to obtain an estimate of costs of using increased qualities of CNG/LNG from landfill biogas. An estimate of overall costs associated with the increase in the cellulosic biofuel volume is calculated as the range of $(1.1)–$17 million. TABLE V.B–1—ILLUSTRATIVE COSTS ANALYSIS OF THE 2020 FINAL CELLULOSIC VOLUME COMPARED TO THE 2019 CELLULOSIC VOLUME 124 Cellulosic Volume Change in Volume (Million Ethanol-Equivalent Gallons) ........................................................................................................ 172 CNG/LNG Derived from Biogas Costs lotter on DSKBCFDHB2PROD with RULES2 Cost Difference Between CNG/LNG Derived from Landfill Biogas and Natural Gas Per Gallon ($/Ethanol-Equivalent Gallons) ($/EEG) ....................................................................................................................................................................... Annual Increase in Overall Costs (Million $) ...................................................................................................................... The annual volume-setting process encourages consideration of the RFS program on a piecemeal (i.e., year-toyear) basis, which may not reflect the full, long-term costs and benefits of the program. For the purposes of this final rule, other than the estimates of costs of producing a ‘‘representative’’ renewable fuel compared to cost of fossil fuel, EPA did not quantitatively assess other direct and indirect costs or benefits of changes in renewable fuel volumes. These direct and indirect costs and benefits may include infrastructure costs, investment, climate change impacts, air quality impacts, and energy security benefits, which all to some degree may be affected by the annual volumes. For example, we do not have a quantified estimate of the lifecycle GHG or energy security benefits for a single year (e.g., 2020). Also, there are impacts that are difficult to quantify, such as rural economic development and employment changes from more diversified fuel sources, that are not quantified in this rulemaking. While some of these impacts were analyzed in the 2010 final rulemaking that established the current RFS program, we 120 For this table and all subsequent tables in this section, approximate costs in per-gallon cost difference estimates are rounded to the cents place. 121 Since the proposed rule, we have updated these per-gallon and total annual cost differences based on EIA’s updated projections for petroleum gasoline costs in 2020 from the October Short-Term Energy Outlook. 122 For this table and all subsequent tables in this section, approximate resulting costs (other than in per-gallon cost difference estimates) are rounded to two significant figures. 123 The current version of this model and user’s manual are downloadable from the LMOP website. https://www.epa.gov/lmop/download-lfgcost-web/. 124 For the proposed 2020 annual RFS rule, we estimated that there would be an increase of cellulosic biofuel derived from CNG/LNG from landfill biogas of 126 million gallons (ethanolequivalent) compared to the 2019 final annual RFS volumes. The total costs of the proposed 2020 cellulosic volume compared to 2019 RFS cellulosic volume range from $(3.2)–$10 million. In this final VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 $(0.01)–$0.10 $(1.1)–$17 have not analyzed these impacts for the 2020 volume requirements.125 VI. Biomass-Based Diesel Volume for 2021 In this section we discuss the BBD applicable volume for 2021. We are setting this volume in advance of those for other renewable fuel categories in light of the statutory requirement in CAA section 211(o)(2)(B)(ii) to establish the applicable volume of BBD for years after 2012 no later than 14 months before the applicable volume will apply. We are not at this time setting the BBD rule, both the projected volume increase of CNG/ LNG derived from biogas and the cost of natural gas to which this fuel is compared have been updated. 125 RFS2 Regulatory Impact Analysis (RIA). U.S. EPA 2010, Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA–420–R– 10–006. February 2010. Docket EPA–HQ–OAR– 2009–0472–11332. E:\FR\FM\06FER2.SGM 06FER2 7044 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations percentage standards that would apply to obligated parties in 2021 but intend to do so in late 2020, after receiving EIA’s estimate of gasoline and diesel consumption for 2021. At that time, we will also set the percentage standards for the other renewable fuel types for 2021. Although the BBD applicable volume sets a floor for required BBD use, because the BBD volume requirement is nested within both the advanced biofuel and the total renewable fuel volume requirements, any BBD produced can be used to satisfy both of these other applicable volume requirements, even beyond the mandated BBD volume. lotter on DSKBCFDHB2PROD with RULES2 A. Statutory Requirements The statute establishes applicable volume targets for years through 2022 for cellulosic biofuel, advanced biofuel, and total renewable fuel. For BBD, applicable volume targets are specified in the statute only through 2012. For years after those for which volumes are specified in the statute, EPA is required under CAA section 211(o)(2)(B)(ii) to determine the applicable volume of BBD, in coordination with the Secretary of Energy and the Secretary of Agriculture, based on a review of the implementation of the program during calendar years for which the statute specifies the volumes and an analysis of the following factors: 1. The impact of the production and use of renewable fuels on the environment, including on air quality, climate change, conversion of wetlands, ecosystems, wildlife habitat, water quality, and water supply; 2. The impact of renewable fuels on the energy security of the United States; 3. The expected annual rate of future commercial production of renewable fuels, including advanced biofuels in each category (cellulosic biofuel and BBD); 4. The impact of renewable fuels on the infrastructure of the United States, including deliverability of materials, goods, and products other than renewable fuel, and the sufficiency of infrastructure to deliver and use renewable fuel; VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 5. The impact of the use of renewable fuels on the cost to consumers of transportation fuel and on the cost to transport goods; and 6. The impact of the use of renewable fuels on other factors, including job creation, the price and supply of agricultural commodities, rural economic development, and food prices. The statute also specifies that the volume requirement for BBD cannot be less than the applicable volume specified in the statute for calendar year 2012, which is 1.0 billion gallons.126 The statute does not, however, establish any other numeric criteria, and provides EPA discretion over how to weigh the importance of the often competing factors and the overarching goals of the statute when the EPA sets the applicable volumes of BBD in years after those for which the statute specifies such volumes. In the period 2013–2022, the statute specifies increasing applicable volumes of cellulosic biofuel, advanced biofuel, and total renewable fuel, but provides no numeric criteria, beyond the 1.0 billion gallon minimum, on the level at which BBD volumes should be set. In establishing the BBD and cellulosic standards as nested within the advanced biofuel standard, Congress clearly intended to support development of BBD and especially cellulosic biofuels, while also providing an incentive for the growth of other non-specified types of advanced biofuels. In general, the advanced biofuel standard provides an opportunity for other advanced biofuels (advanced biofuels that do not qualify as cellulosic biofuel or BBD) to compete with cellulosic biofuel and BBD to satisfy the advanced biofuel standard after the cellulosic biofuel and BBD standards have been met. In Alon Refining Krotz Spring, Inc. v. EPA, the D.C. Circuit affirmed EPA’s approach to setting the 2017 BBD volume as ‘‘consistent with the structure and purposes of the statute.’’ 127 In today’s rule, we have applied the same 126 See CAA section 211(o)(2)(B)(v). Refining Krotz Springs, Inc. v. EPA, 936 F.3d 628, 666 (D.C. Cir 2019). 127 Alon PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 general methodology upheld in Alon with updated information. Similar to the rule reviewed in Alon, today’s rule finds that it is the advanced biofuel standard, when set in 2021, that will drive the use of BBD in 2021. Furthermore, in light of the benefits of incentivizing other advanced biofuels, we choose to preserve the existing gap for other advanced biofuels, and accordingly establish the BBD volume at the same level as for 2020: 2.43 billion gallons. B. Review of Implementation of the Program and the 2021 Applicable Volume of Biomass-Based Diesel One of the considerations in determining the BBD volume for 2021 is a review of the implementation of the program to date, as it affects BBD. This review is required by the CAA, and also provides insight into the capabilities of the industry to produce, import, export, distribute, and use BBD. It also helps us to understand what factors, beyond the BBD standard, may incentivize the availability of BBD. In reviewing the program, we assess numerous regulatory, economic, and technical factors, including the availability of BBD in past years relative to the BBD and advanced standards; the prices of BBD, advanced, and conventional RINs; the competition between BBD and other advanced biofuels in meeting the portion of the advanced standard not required to be met by BBD or cellulosic RINs; the maturation of the BBD industry over the course of the RFS program; and the effects of the BBD standard on the production and development of both BBD and other advanced biofuels. Table VI.B.1–1 shows, for 2011–2019, the number of BBD RINs generated, the number of RINs retired due to export, the number of RINs retired for reasons other than compliance with the annual BBD standards, and the consequent number of available BBD RINs; for 2011–2019, the BBD and advanced biofuel standards; and for 2020, the BBD and advanced biofuel standards. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 7045 TABLE VI.B.1–1—BIOMASS-BASED DIESEL (D4) RIN GENERATION AND ADVANCED BIOFUEL AND BIOMASS-BASED DIESEL STANDARDS IN 2011–2020 [Million RINs or gallons] 128 BBD RINs generated 2011 ......................................................... 2012 ......................................................... 2013 ......................................................... 2014 ......................................................... 2015 ......................................................... 2016 ......................................................... 2017 ......................................................... 2018 ......................................................... d 2019 ....................................................... 2020 ......................................................... Exported BBD (RINs) 1,692 1,738 2,740 2,710 2,796 4,009 3,849 3,871 4,381 N/A 48 102 125 134 145 203 257 247 183 N/A BBD RINs retired, noncompliance reasons Available BBD RINs a 102 91 101 99 45 121 115 59 0 N/A 1,542 1,545 2,514 2,477 2,606 3,685 3,477 3,565 4,198 N/A BBD standard (gallons) b 800 1,000 1,280 1,630 1,730 1,900 2,000 2,100 2,100 2,430 BBD standard (RINs) b 1,200 1,500 1,920 c 2,490 c 2,655 2,850 3,000 3,150 3,150 3,645 Advanced biofuel standard (RINs) b 1,350 2,000 2,750 2,670 2,880 3,610 4,280 4,290 4,920 5,100 a Available BBD RINs may not be exactly equal to BBD RINs Generated minus Exported RINs and BBD RINs Retired, Non-Compliance Reasons, due to rounding. b The volumes for each year are those used as the basis for calculating the percentage standards in the final rule. They have not been retroactively adjusted for subsequent events, such as differences between projected and actual gasoline and diesel use and exempted small refinery volumes. c Each gallon of biodiesel qualifies for 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5 and 1.7 RINs per gallon, but generally has an equivalence value of 1.7. While some fuels that qualify as BBD generate more than 1.5 RINs per gallon, EPA multiplies the required volume of BBD by 1.5 in calculating the percent standard per 80.1405(c). In 2014 and 2015 however, the number of RINs in the BBD Standard column is not exactly equal to 1.5 times the BBD volume standard as these standards were established based on actual RIN generation data for 2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015, rather than by multiplying the required volume of BBD by 1.5. Some of the volume used to meet the BBD standard in these years was renewable diesel, with an equivalence value higher than 1.5. d 2019 ‘‘BBD RINs generated,’’ ‘‘Exported BBD,’’ and ‘‘BBD RINs retired, Non-compliance reason’’ are projected based on data through September 2019. lotter on DSKBCFDHB2PROD with RULES2 In reviewing historical BBD RIN generation and use, we see that the number of RINs available for compliance purposes exceeded the volume required to meet the BBD standard in 2011–13 and 2016–19.129 Additional production and use of biodiesel was likely driven by a number of factors, including demand to satisfy the advanced biofuel and total renewable fuels standards, the biodiesel tax credit,130 and various other State and local incentives and mandates allowing for favorable blending economics. Moreover, additional production of BBD, beyond the volumes shown in the above table, was exported. 128 Available BBD RINs Generated, Exported BBD RINs, and BBD RINs Retired for Non-Compliance Reasons information from EMTs. 129 The number of RINs available in 2014 and 2015 was approximately equal to the number required for compliance in those years, as the standards for these years were finalized at the end of November 2015 and EPA’s intent at that time was to set the standards for 2014 and 2015 to reflect actual BBD use. See 80 FR 77490–92, 77495 (December 14, 2015). 130 The biodiesel tax credit was reauthorized in January 2013. It applied retroactively for 2012 and for the remainder of 2013. It was once again extended in December 2014 and applied retroactively to all of 2014 as well as to the remaining weeks of 2014. In December 2015 the biodiesel tax credit was authorized and applied retroactively for all of 2015 as well as through the end of 2016. In February 2018 the biodiesel tax credit was authorized and applied retroactively for all of 2017. The biodiesel tax credit is not currently in place for 2018, 2019, or 2020. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 The prices paid for advanced biofuel and BBD RINs beginning in early 2013 through September 2019 (the last month for which data is available) also support the conclusion that the advanced biofuel, and in some periods the total renewable fuel standards, provide a sufficient incentive for additional biodiesel volume beyond what is required by the BBD standard. Because the BBD standard is nested within the advanced biofuel and total renewable fuel standards, and therefore can help to satisfy three RVOs, we would expect the price of BBD RINs to exceed that of advanced and conventional renewable RINs.131 If, however, BBD RINs are being used (or are expected to be used) by obligated parties to satisfy their advanced biofuel obligations, above and beyond the BBD standard, we would expect the prices of advanced biofuel and BBD RINs to converge.132 Further, 131 This is because when an obligated party retires a BBD RIN (D4) to help satisfy their BBD obligation, the nested nature of the BBD standard means that this RIN also counts towards satisfying their advanced and total renewable fuel obligations. Advanced RINs (D5) count towards both the advanced and total renewable fuel obligations, while conventional RINs (D6) count towards only the total renewable fuel obligation. 132 We would still expect D4 RINs to be valued at a slight premium to D5 and D6 RINs in this case (and D5 RINs at a slight premium to D6 RINs) to reflect the greater flexibility of the D4 RINs to be used towards the BBD, advanced biofuel, and total renewable fuel standard. This pricing has been observed over the past several years. PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 if BBD RINs are being used (or are expected to be used) to satisfy obligated parties’ total renewable fuel obligation, above and beyond their BBD and advanced biofuel requirements, we would expect the price for all three RIN types to converge. When examining RIN price data from 2011 through September 2019, shown in Figure VI.B.2–1, we see that beginning in early 2013 and through September 2019 the advanced RIN (D5) price and BBD (D4) RIN prices were approximately equal. Similarly, from early 2013 through late 2016 the conventional renewable fuel (D6) RIN and BBD RIN prices were approximately equal. This demonstrates that the advanced biofuel standard, and in some periods the total renewable fuel standard, are capable of incentivizing increased BBD volumes beyond the BBD standard. The advanced biofuel standard has incentivized additional volumes of BBD since 2013, while the total standard had incentivized additional volumes of BBD from 2013 through 2016.133 We do note, however, 133 Although we did not issue a rule establishing the final 2013 standards until August of 2013, we believe that the market anticipated the final standards, based on EPA’s July 2011 proposal and the volume targets for advanced and total renewable fuel established in the statute. (76 FR 38844, 38843 July 1, 2011). Similarly, for 2014 and 2015, although we issued the final standards in late 2015, the proposed rule incentivized the market to use E:\FR\FM\06FER2.SGM Continued 06FER2 7046 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations that in 2011–2012 the BBD RIN price was significantly higher than both the advanced biofuel and conventional renewable fuel RIN prices. At this time, the E10 blendwall had not yet been reached, and it was likely more cost effective for most obligated parties to satisfy the portion of the advanced biofuel requirement that exceeded the BBD and cellulosic biofuel requirements with advanced ethanol. Figure VI.B.2-1 D4, D5, and D6 RIN Prices (July 2010 - September 2019) $2.00 $1.80 sum $1.40 -.ft... Q... i $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 # ro?f.P ~ '-o~~ ~ ro?~ # ro?~ -D4RINs ~ <o"<J,'c~ # # ~ # ~ b?~ ro~~ ro?~ ro'Q,~~ ro~q,~ -D5R1Ns -D6RINs RIN Price Source: EMTS Data We also examined the opportunity for advanced biofuels other than BBD and cellulosic biofuels, as shown in Table VI.B.1–2. We believe it is important to preserve this opportunity for other advanced biofuels, and we are conscious of public comments claiming that BBD volume requirements that are a significant portion of the advanced volume requirements effectively disincentivize the future development of other promising advanced biofuel pathways.134 A variety of different types of advanced biofuels, rather than a single type such as BBD, would increase energy security (e.g., by increasing the diversity of feedstock sources used to make biofuels, thereby reducing the impacts associated with a shortfall in a particular type of feedstock) and increase the likelihood of the development of lower cost advanced biofuels that meet the same GHG reduction threshold as BBD.135 TABLE VI.B.1–2—OPPORTUNITY FOR AND RIN GENERATION OF ‘‘OTHER’’ ADVANCED BIOFUELS [Million RINs] 2011 ............................................................................................................. 2012 ............................................................................................................. 2013 ............................................................................................................. 2014 c ........................................................................................................... 2015 c ........................................................................................................... 2016 ............................................................................................................. BBD volumes exceeding the proposed BBD standard to help satisfy the proposed advanced and total standards. See 80 FR 33100 (2014–16 standards proposed June 10, 2015); 78 FR 71732 (2014 standards proposed Nov. 29, 2013). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 150 500 829 147 102 530 134 See, e.g., Comments from Advanced Biofuel Association, available in EPA docket EPA–HQ– OAR–2018–0167–1277. PO 00000 Frm 00032 Fmt 4701 Available advanced (D5) RINs Sfmt 4700 223 597 548 143 147 98 Available BBD (D4) RINs in excess of the BBD equirement b 342 45 594 ¥13 ¥49 835 135 All types of advanced biofuel, including BBD, must achieve lifecycle GHG reductions of at least 50 percent. See CAA section 211(o)(1)(B)(i), (D). E:\FR\FM\06FER2.SGM 06FER2 ER06FE20.002</GPH> lotter on DSKBCFDHB2PROD with RULES2 Opportunity for ‘‘other’’ advanced biofuels a Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 7047 TABLE VI.B.1–2—OPPORTUNITY FOR AND RIN GENERATION OF ‘‘OTHER’’ ADVANCED BIOFUELS—Continued [Million RINs] Opportunity for ‘‘other’’ advanced biofuels a 2017 ............................................................................................................. 2018 ............................................................................................................. 2019 d ........................................................................................................... Available advanced (D5) RINs 969 852 1,352 144 178 310 Available BBD (D4) RINs in excess of the BBD equirement b 477 415 1,048 lotter on DSKBCFDHB2PROD with RULES2 a The opportunity for ‘‘other’’ advanced biofuel is calculated by subtracting the number of cellulosic biofuel and BBD RINs required each year from the number of advanced biofuel RINs required. This portion of the advanced standard can be satisfied by advanced (D5) RINs, BBD RINs in excess of those required by the BBD standard, or cellulosic RINs in excess of those required by the cellulosic standard. b The available BBD (D4) RINs in excess of the BBD requirement is calculated by subtracting the required BBD volume (multiplied by 1.5 to account for the equivalence value of biodiesel) required each year from the number of BBD RINs available for compliance in that year. This number does not include carryover RINs, nor do we account for factors that may impact the number of BBD RINs that must be retired for compliance, such as differences between the projected and actual volume of obligated gasoline and diesel. The required BBD volume has not been retroactively adjusted for subsequent events, such as differences between projected and actual gasoline and diesel use and exempted small refinery volumes. c The 2014 and 2015 volume requirements were established in November 2015 and were set equal to the number of RINs projected to be available for each year. d Available advanced RINs and available D4 RINs in excess of the BBD requirement are projected based on data through September 2019. In each year since 2016, there has been a significant gap for other advanced biofuels, but this gap has nonetheless been dominated by BBD. While the RFS volumes created the opportunity for up to 530 million, 969 million, 852 million, and 1,352 million gallons of ‘‘other’’ advanced for 2016, 2017, 2018, and 2019 respectively to be used to satisfy the advanced biofuel obligation, only 98 million, 144 million, 178 million, and 310 million gallons of ‘‘other’’ advanced biofuels were generated. This is significantly less than the volumes of ‘‘other’’ advanced available in 2012–2013. Despite creating space within the advanced biofuel standard for ‘‘other’’ advanced, in recent years, only a small fraction of that space has been filled with ‘‘other’’ advanced, and BBD continues to fill most of the gap between the BBD standard and the advanced standard. Thus, there does not appear to be a compelling reason to increase the ‘‘space’’ maintained for ‘‘other’’ advanced biofuel volumes. This conclusion is consistent with our approach in the 2019 final rule, when we established the 2019 advanced biofuel volume and the 2020 BBD volume. The overall volume of noncellulosic advanced biofuel increased by 500 million gallons for 2019. For the 2020 BBD volume, we determined that it was appropriate to also increase the BBD volume by the same energyequivalent amount (330 million physical gallons) as it would preserve the space already available for other advanced biofuels to compete in 2018 (850 million RINs). This space is many times the amount of other advanced biofuels used in each year starting from 2016. In this action, we are maintaining the implied non-cellulosic advanced biofuel VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 standard for 2021 that is presented in the statute, and that is equivalent to the implied non-cellulosic advanced biofuel standard for 2020. For the 2021 BBD volume, we thus find that it is appropriate to maintain the BBD volume for 2021 at 2.43 billion gallons. Even in an optimistic scenario, we do not believe that the use of other advanced biofuels will approach 850 million gallons by 2021. We recognize, however, the dynamic nature of the fuels marketplace, and the impact that the BBD blender’s tax credit can have on the relative economics of BBD versus other advanced biofuels, so going forward we intend to assess the appropriate space for other advanced biofuels in subsequent rules setting BBD volumes. At the same time, the rationale for preserving the ‘‘space’’ for ‘‘other’’ advanced biofuels remains. We note that the BBD industry in the U.S. and abroad has matured since EPA first increased the required volume of BBD beyond the statutory minimum in 2013.136 To assess the maturity of the biodiesel industry, EPA compared information on BBD RIN generation by company in 2012 and 2018 (the most recent year for which complete RIN generation by company is available). In 2012, the annual average RIN generation per company producing BBD was about 11 million RINs (about 7.3 million gallons) with approximately 50 percent of companies producing less than 1 million gallons of BBD a year.137 Since that time, the BBD industry has matured in a number of critical areas, including 136 See also generally 84 FR 36794–95 (further explaining our approach in establishing the 2013 BBD volume and our experience since that time). 137 ‘‘BBD RIN Generation by Company in 2012 and 2018,’’ available in EPA docket EPA–HQ–OAR– 2019–0136. PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 growth in the size of companies, the consolidation of the industry, and more stable funding and access to capital. By 2018, the average BBD RIN generation per company had climbed to over 36 million RINs (23.7 million gallons) annually, more than a 3-fold increase. Only 20 percent of the companies produced less than 1 million gallons of BBD in 2017.138 We recognize that the space for other advanced biofuels in 2021 will ultimately depend on the 2021 advanced biofuel volume. While EPA is not establishing the advanced biofuel volume for 2021 in this action, we anticipate that the non-cellulosic advanced biofuel volume for 2021, when established, will be greater than 3.65 billion gallons (equivalent to 2.43 billion gallons of BBD, after applying the 1.5 equivalence ratio). This expectation is consistent with our actions in previous years. Accordingly, we expect that the 2021 advanced biofuel volume, together with the 2021 BBD volume established today, will continue to preserve a considerable portion of the advanced biofuel volume that could be satisfied by either additional gallons of BBD or by other unspecified and potentially less costly types of qualifying advanced biofuels. C. Consideration of Statutory Factors in CAA Section 211(o)(2)(B)(ii)(I)–(VI) for 2021 and Determination of the 2021 Biomass-Based Diesel Volume As in past annual standard-setting rulemakings, we find that additional volumes of BBD would displace other advanced biofuel, due to the nested 138 Id. E:\FR\FM\06FER2.SGM 06FER2 7048 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations nature of the standards,139 as opposed to petroleum fuels. More specifically, for a given advanced biofuel standard, greater or lesser BBD volume requirements generally do not change the amount of advanced biofuel used to displace petroleum fuels; the total volume of advanced biofuels is unchanged regardless of the BBD volume requirement. Thus increasing the BBD volume requirement would result in the displacement of other types of advanced biofuels that could have been used to meet the advanced biofuels volume requirement. As a result, as in past assessments of the factors articulated in CAA 211(o)(2)(B)(ii)(I)–(VI), we consider BBD in comparison to other advanced biofuels, and not in comparison to petroleum diesel. Our primary assessment of the statutory factors is that because the BBD requirement is nested within the advanced biofuel volume requirement, we expect that the 2021 advanced volume requirement will determine the level of BBD use, production, and imports that occur in 2021. Therefore, we continue to believe that approximately the same overall volume of BBD would likely be supplied in 2021 regardless of the 2021 BBD volume requirement. In the longterm, however, leaving adequate room for growth of other advanced biofuels could have a beneficial impact on certain statutory factors. Notably, this incentivizes the development of other advanced biofuels with potentially superior cost, climate, environmental, and other characteristics, relative to BBD. We present a detailed analysis of the statutory factors for the BBD volume requirement in a memorandum to the docket.140 lotter on DSKBCFDHB2PROD with RULES2 D. BBD Volume Requirement for 2021 Based on the above analysis, we are setting the applicable volume of BBD at 2.43 billion gallons for 2021. We believe this volume sets the appropriate floor for BBD, and that the volume of BBD actually used in 2021 will be driven by the level of the advanced biofuel and potentially the total renewable fuel standards that the Agency will establish for 2021. In addition, despite providing 139 The BBD volume requirement is nested within the advanced biofuel requirement, and the advanced biofuel requirement is, in turn, nested within the total renewable fuel volume requirement. See CAA section 211(o)(2)(B)(i)(IV), (II). This means that any BBD produced can be used to satisfy both these other applicable volume requirements even beyond the BBD volume requirement. 140 ‘‘Memorandum to docket: Statutory Factors Assessment for the 2021 Biomass-Based Diesel (BBD) Applicable Volumes.’’ See Docket EPA–HQ– OAR–2019–0136. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 a significant degree of space for ‘‘other’’ advanced biofuels in recent years, far smaller volumes of ‘‘other’’ advanced have been utilized to meet the advanced standard. The BBD volume we are finalizing today continues to preserve the existing gap between the advanced biofuel volume and the sum of the cellulosic biofuel and BBD volumes. We believe this provides sufficient incentive to producers of ‘‘other’’ advanced biofuels, while also acknowledging that the advanced standard has been met predominantly with biomass-based diesel. Namely, this would allow other advanced biofuels to continue to compete with excess volumes of BBD for market share under the advanced biofuel standard. This would provide significant long term certainty for investments in other advanced biofuels that over time could compete with BBD to fill the advanced biofuel standard. In sum, our assessment of the statutory factors and the implementation of the program supports a volume of 2.43 billion gallons. VII. Percentage Standards for 2020 The renewable fuel standards are expressed as volume percentages and are used by each obligated party to determine their Renewable Volume Obligations (RVOs). Since there are four separate standards under the RFS program, there are likewise four separate RVOs applicable to each obligated party. Each standard applies to the sum of all non-renewable gasoline and diesel produced or imported. Sections II through IV provide our rationale and basis for the final volume requirements for 2020.141 The volumes used to determine the final percentage standards are shown in Table VII–1. three decimal places for cellulosic biofuel in both the volume requirement and percentage standards to more precisely capture the smaller volume projections and the unique methodology that in some cases results in estimates of only a few million gallons for a group of cellulosic biofuel producers (see Section III for a further discussion of the methodology for projecting cellulosic biofuel production and our decision to round the projected volume of cellulosic biofuel to the nearest 10 million gallons). However, the volume requirements for cellulosic biofuel have increased over time. We have therefore determined that volume requirements and percentage standards for cellulosic biofuel will now use two decimal places. In this section, we also discuss our regulatory change to the percent standard formulas to account for a projection of the aggregate volume for SREs that we expect to grant for the 2020 compliance year. This section also provides our rationale for that projection of exempt gasoline and diesel volume. Additionally, we also provide our approach for evaluating SREs going forward, including for the currently pending 2019 petitions and for 2020 petitions we receive in the future. A. Calculation of Percentage Standards The formulas used to calculate the percentage standards applicable to producers and importers of gasoline and diesel are provided in 40 CFR 80.1405. The formulas rely on estimates of the volumes of gasoline and diesel fuel, for both highway and nonroad uses, which are projected to be used in the year in which the standards will apply. The projected gasoline and diesel volumes are provided by EIA and include projections of ethanol and biomassbased diesel used in transportation TABLE VII–1—VOLUMES FOR USE IN fuel.142 Since the percentage standards DETERMINING THE FINAL 2020 AP- apply only to the non-renewable PLICABLE PERCENTAGE STANDARDS gasoline and diesel produced or imported, the volumes of renewable fuel [Billion gallons] are subtracted out of the EIA projections Cellulosic biofuel ....................... 0.59 of gasoline and diesel. Transportation fuels other than Biomass-based diesel .............. 2.43 Advanced biofuel ...................... 5.09 gasoline or diesel, such as natural gas, Renewable fuel ......................... 20.09 propane, and electricity from fossil fuels, are not currently subject to the For the purposes of converting these standards, and volumes of such fuels are volumes into percentage standards, we not used in calculating the annual generally use two decimal places to be percentage standards. Since under the consistent with the volume targets as regulations the standards apply only to given in the statute, and similarly two producers and importers of gasoline and decimal places in the percentage diesel, these are the transportation fuels standards. In past years we have used 141 The 2020 volume requirement for BBD was established in the 2019 standards final rule (83 FR 63704, December 11, 2018) PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 142 Letter from Linda Capuano, EIA Administrator to Andrew Wheeler, EPA Administrator. October 9, 2019. Available in docket EPA–HQ–OAR–2019– 0136. E:\FR\FM\06FER2.SGM 06FER2 7049 used to set the percentage standards, as well as to determine the annual volume obligations of an individual gasoline or diesel producer or importer under 40 CFR 80.1407. As specified in the RFS2 final rule,143 the percentage standards are based on energy-equivalent gallons of renewable fuel, with the cellulosic biofuel, advanced biofuel, and total renewable fuel standards based on ethanol equivalence and the BBD standard based on biodiesel equivalence. However, all RIN generation is based on ethanol-equivalence. For example, the RFS regulations provide that production or import of a gallon of qualifying biodiesel will lead to the generation of 1.5 RINs. The formula specified in the regulations for calculation of the BBD percentage standard is based on biodiesel-equivalence, and thus assumes that all BBD used to satisfy the BBD standard is biodiesel and requires that the applicable volume requirement be multiplied by 1.5 in order to calculate a percentage standard that is on the same basis (i.e., ethanol-equivalent) as the other three standards. However, BBD often contains some renewable diesel, and a gallon of renewable diesel typically generates 1.7 RINs.144 In addition, there is often some renewable diesel in the conventional renewable fuel pool. As a result, the actual number of RINs generated by biodiesel and renewable diesel is used in the context of our assessment of the applicable volume requirements and associated percentage standards for advanced biofuel and total renewable fuel, and likewise in obligated parties’ determination of compliance with any of the applicable standards. While there is a difference in the treatment of biodiesel and renewable diesel in the context of determining the percentage standard for BBD versus determining the percentage standard for advanced biofuel and total renewable fuel, it is not a significant one given our approach to determining the BBD volume requirement. Our intent in setting the BBD applicable volume is to provide a level of guaranteed volume for BBD, but as described in Section VII.B of the 2019 standards final rule, we do not expect the BBD standard to be binding in 2020.145 That is, we expect that actual supply of BBD, as well as supply of conventional biodiesel and renewable diesel, will be driven by the advanced biofuel and total renewable fuel standards and will exceed the BBD standard. exemptions already granted at the time of the final annual rule.148 In the October 28 proposal, we proposed to modify the regulations at 40 CFR 80.1405(c) to account for a projection of the total exempted volume of gasoline and diesel produced at small refineries, including for those exemptions granted after the final annual rule.149 We are finalizing the change as proposed. The result is that our calculation of the applicable percentage standards for 2020 takes into account a projection of the total exempted volume of gasoline and diesel produced by small refineries in 2020. B. Small Refineries and Small Refiners In CAA section 211(o)(9), enacted as part of the EPAct, and amended by EISA, Congress provided a temporary exemption to small refineries 146 through December 31, 2010. Congress provided that small refineries could receive a temporary extension of the exemption beyond 2010 based either on the results of a required DOE study, or for the reason of ‘‘disproportionate economic hardship’’ in response to small refinery petitions submitted ‘‘at any time.’’ CAA section 211(o)(9)(B)(i). Pursuant to this petition process, EPA often granted SREs for a given compliance year after the applicable percentage standards for that compliance year had been established. Under our prior approach to calculating the percentage standards, we did not account for these exemptions in establishing the percentage standards.147 We only accounted for The formulas used to calculate the percentage standards applicable to producers and importers of gasoline and diesel are provided in 40 CFR 80.1405(c). The formula for the percentage standard calculation for total renewable fuel, including the definitions of the terms prior to this action, is shown below. The formulas for the other three percentage standards follow the same format, with the numerator of the fraction replaced with the annual volume of cellulosic biofuel, biomass-based diesel, and advanced biofuel, respectively. In this action we are only modifying the definitions of the terms GEi and DEi, which previously referred to the amount of gasoline and diesel projected to be produced by exempt small refineries, to now refer to the amount of gasoline and diesel projected to be exempt. All other terms remain in the same and were not reexamined in this rulemaking. Where: StdRF,i = The renewable fuel standard for year i, in percent. RFVRF,i = Annual volume of renewable fuel required by 42 U.S.C. 7545(o)(2)(B) for year i, in gallons. Gi = Amount of gasoline projected to be used in the 48 contiguous states and Hawaii, in year i, in gallons. Di = Amount of diesel projected to be used in the 48 contiguous states and Hawaii, in year i, in gallons. RGi = Amount of renewable fuel blended into gasoline that is projected to be consumed in the 48 contiguous states and Hawaii, in year i, in gallons. RDi = Amount of renewable fuel blended into diesel that is projected to be consumed in the 48 contiguous states and Hawaii, in year i, in gallons. GSi = Amount of gasoline projected to be used in Alaska or a U.S. territory, in year i, if the state or territory has opted-in or opts-in, in gallons. RGSi = Amount of renewable fuel blended into gasoline that is projected to be consumed in Alaska or a U.S. territory, 143 See 75 FR 14670 (March 26, 2010). 40 CFR 80.1415(b)(4), renewable diesel with a lower heating value of at least 123,500 Btu/ gallon is assigned an equivalence value of 1.7. A minority of renewable diesel has a lower heating value below 123,500 BTU/gallon and is therefore assigned an equivalence value of 1.5 or 1.6 based on applications submitted under 40 CFR 80.1415(c)(2). 144 Under VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 145 83 FR 63704 (December 11, 2018). small refiner that meets the requirements of 40 CFR 80.1442 may also be eligible for an exemption. 147 We adopted this interpretation of our regulations in the 2011 final rule. 75 FR 76804. We reaffirmed it in annual rulemakings since then, including most recently in the 2019 final rule. 83 146 A PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 1. Changes to the Projected Volume of Gasoline and Diesel for Exempt Small Refineries FR 63740; see also, e.g., 77 FR 1320, 1340; 78 FR 49794, 49825–49826; 80 FR 77420, 77511. We also proposed to follow this interpretation in the July 29 proposal for this final rule. 84 FR 36797 (July 29, 2019). 148 See, e.g., 80 FR 77420, 77511 (December 14, 2015). 149 84 FR 57677. E:\FR\FM\06FER2.SGM 06FER2 ER06FE20.003</GPH> lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 7050 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations in year i, if the state or territory opts-in, in gallons. DSi = Amount of diesel projected to be used in Alaska or a U.S. territory, in year i, if the state or territory has opted-in or optsin, in gallons. RDSi = Amount of renewable fuel blended into diesel that is projected to be consumed in Alaska or a U.S. territory, in year i, if the state or territory opts-in, in gallons. GEi = The amount of gasoline projected to be produced by exempt small refineries and small refiners, in year i, in gallons in any year they are exempt per §§ 80.1441 and 80.1442. DEi = The amount of diesel fuel projected to be produced by exempt small refineries and small refiners in year i, in gallons, in any year they are exempt per §§ 80.1441 and 80.1442. lotter on DSKBCFDHB2PROD with RULES2 Historically, EPA has interpreted the terms GEi and DEi to refer to the amount of gasoline and diesel projected to be produced by small refineries that have already been granted exemptions from their RFS obligations prior to our issuing the final rule for the relevant compliance year.150 As a result of this interpretation, any SREs granted after we issued the annual rule containing the percentage standards for that year effectively reduced the required volume of renewable fuel for that year. For example, in August 2019 we granted 31 SREs for the 2018 compliance year after the percentage standards for 2018 had been established.151 These SREs reduced the obligated volume of gasoline and diesel for 2018 by 13.42 billion gallons, effectively reducing the required volume of total renewable fuel for 2018 by 1.43 billion RINs. In comments on the July 29 proposal, many commenters requested that EPA adopt a different interpretation of the terms for the amount of gasoline and diesel projected to be produced by exempt small refineries in the existing percentage standard formula.152 Many commenters requested that these terms refer to a projection of the exempted volume of gasoline and diesel produced by small refineries, regardless of whether EPA had already adjudicated such exemption petitions by the time of the final rule. These commenters argued that this interpretation of the regulations is reasonable and better implements the statutory requirement that EPA must ‘‘ensure’’ the renewable fuel volumes are met. Some commenters suggested that adjusting the percentage standards 150 See, e.g., 84 FR 36797 (July 29, 2019). percentage standards for 2018 were established in December 2017 (82 FR 58486, December 12, 2017). 152 See, e.g., comments from the Renewable Fuels Association (Docket Item No. EPA–HQ–OAR–2019– 0136–0281). 151 The VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 formula is more important now than in earlier years of the program as we have recently granted exemptions for more significant volumes of gasoline and diesel, potentially resulting in more significant volumes that are not being met at the time of compliance.153 A petition for administrative reconsideration raised similar issues, asking EPA to reconsider our approach for accounting for exempted volumes through the formula at 40 CFR 80.1405(c).154 In the October 28 proposal, EPA undertook a process to revisit this issue, albeit under our inherent authority to revise or amend a rulemaking, rather than as an exercise of our reconsideration authority under CAA section 307(d)(7)(B).155 In the October 28 proposal we proposed to change the definitions of the two relevant terms in the percentage standard formula at 40 CFR 80.1405(c), GEi and DEi. We proposed that these terms represent a projection of the exempted volume of gasoline and diesel, regardless of whether we had adjudicated exemptions for that year by the time of the final rule establishing the percentage standards. We are finalizing these changes, and in turn, also completing the process of revisiting this issue that we undertook as described above in response to the above-noted administrative petition. The term ‘‘GEi’’, representing the volume of exempt gasoline, is now defined as ‘‘the total amount of gasoline projected to be exempt in year i, in gallons, per §§ 80.1441 and 80.1442.’’ Similarly, the term ‘‘DEi’’, representing the volume of exempt diesel, is now defined as ‘‘the total amount of diesel projected to be exempt in year i, in gallons, per §§ 80.1441 and 80.1442.’’ We begin by explaining our legal authority to adopt the new definitions, as well as our rationale for the change in our policy. While the statute does not specifically require EPA to redistribute exempted volumes in this manner, we believe that this is a reasonable interpretation of our authority under Chevron v. NRDC.156 Indeed, making this projection harmonizes various statutory provisions. The statute authorizes small refineries to petition 153 See, e.g., comments from Growth Energy (Docket Item No. EPA–HQ–OAR–2019–0136–0312). 154 ‘‘Petition for Reconsideration of 40 CFR 80.1405(c), EPA Docket No. EPA–HQ–OAR–2005– 0161, promulgated in 75 FR 14670 (Mar. 26, 2010); Petition for Reconsideration of Periodic Reviews for the Renewable Fuel Standard Program, 82 FR 58364 (Dec. 12, 2017)’’ (June 4, 2018). 155 See 84 FR 57680 & n.13 (explaining in greater detail the basis for EPA’s reconsideration of this issue). 156 Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–44 (1984). PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 for and EPA to grant an exemption based on disproportionate economic hardship ‘‘at any time,’’ 157 while also directing EPA to promulgate standards by November 30 of the prior year to ‘‘ensure[]’’ that the renewable fuel volumes are met.158 In other words, small refineries may seek and EPA may grant hardship exemptions at any time, including after the percentage standards are established. Meanwhile, EPA may account for a projection of these exemptions in the annual rule to ‘‘ensure’’ the renewable fuel volumes.159 In more concrete terms, should EPA grant SREs without accounting for them in the percentage formula, those exemptions would effectively reduce the volumes of renewable fuel required by the RFS program, potentially impacting renewable fuel use in the U.S.160 By contrast, under our new approach, the percentage standard for each category of renewable fuel would increase to account for a projection of the exempted volume. These higher percentage standards would have the effect of ensuring that the required volumes of renewable fuel are met when small refineries are granted exemptions from their 2020 obligations after the issuance of the final rule, provided EPA’s projection of the exempted volume is accurate. This new approach entails a change in policy.161 We previously did not account for exemptions granted after the annual rule, and at times we even suggested that doing so was improper.162 We believe our changed approach is appropriate and largely avoids the problems we previously identified. First, we had previously stated that ‘‘the Act is best interpreted to require issuance of a single annual standard in November that is applicable in the following calendar year, thereby providing advance notice and certainty to obligated parties regarding their 157 CAA section 211(o)(9)(B)(i). section 211(o)(3)(B)(i); see also CAA section 211(o)(2)(A)(i), (2)(A)(iii)(I), CAA section 301(a). This projection, moreover, is hardly unique in the RFS program as Congress required numerous projections in the implementation of the program. See, e.g., CAA section 211(o)(7)(D) (projection of the volume of cellulosic biofuel production); (o)(3)(A) (projection of the volumes of transportation fuel, biomass-based diesel, and cellulosic biofuel). 159 See CAA section 211(o)(2)(A)(i), (2)(A)(iii)(I), (3)(B)(i); see also CAA section 301(a). 160 We note that there are other factors, besides the RFS program, that affect renewable fuel use. See, e.g., ‘‘Endangered Species Act No Effect Finding for the 2020 Final Rule,’’ available in the docket for this action. 161 FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). 162 See 78 FR 49825–49826; 77 FR 1340; EPA’s Br., Doc No. 1757157, D.C. Cir. No. 17–1258, AFPM v. EPA (Oct. 25, 2018) (‘‘EPA Br. in AFPM’’). 158 CAA E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations regulatory requirements. Periodic revisions to the standards to reflect waivers issued to small refineries or refiners would be inconsistent with the statutory text, and would introduce an undesirable level of uncertainty for obligated parties.’’ 163 Today’s changes are consistent with these views. By projecting exempted volumes in advance of issuing annual standards, we can issue a single set of standards for each year without the need for periodic revisions and the associated uncertainty for obligated parties. Second, we also had previously noted that ‘‘Congress allowed for some imprecision to exist in the actual volumes of renewable fuel that are consumed as a result of the percentage standards that we set each November. . . .’’ 164 Relatedly, we had noted the inherent difficulties of projecting exempted small refinery volumes.165 We still agree that Congress allowed for some imprecision to exist in the actual required volumes of renewable fuel, and that projecting future exempted volumes involves some uncertainty. But several recent developments persuade us to reach a different conclusion in accounting for a projection of exempted small refinery volumes. For one, we are projecting the aggregate exempted volume in 2020. We thus need not wrestle with the difficulties of predicting precisely which refineries will apply or the economic circumstances of specific refineries in 2020. We only need to estimate the total exempted volume. Moreover, we have the benefit of additional experience administering the RFS program and knowledge of the relatively high levels of exempted volumes in recent years, where exempted volumes associated with SREs granted after the annual percentage standards were established have constituted a significant portion of the total volume of obligated fuel, resulting in fewer RINs being used to comply with the RFS standards. Finally, in recent annual rulemakings, EPA has not articulated its prospective policy to adjudicating SRE petitions for those compliance years. For instance, in the 2018 final rule, we did not state our policy to adjudicating 2018 SRE petitions. Instead we articulated that policy in a separate memorandum issued after the annual rule.166 Since 163 77 FR 1340. FR 1340 (January 9, 2012). 165 EPA Br. in AFPM 72–77. 166 ‘‘Decision on 2018 Small Refinery Exemption Petitions,’’ Memorandum from Anne Idsal, Acting Assistant Administrator, Office of Air and Radiation 164 77 VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 EPA’s policy to adjudicating SRE petitions affects the exempted volume, not having established this policy at the time of the annual rule made it very challenging to project the exempted volume. In today’s rule, by contrast, we are articulating our prospective policy to adjudicating SRE petitions (beginning with the 2019 SRE petitions and including the 2020 SRE petitions) concurrently with issuing this final rule. Doing so augments our ability to reasonably project the exempted volume for 2020. We explain this policy further below. 2. Projecting the Exempted Volume of Gasoline and Diesel in 2020 As already noted, we acknowledge the inherent uncertainty in projecting the exempted volume. More concretely, an imprecise projection has consequences on the actual required volume of renewable fuel. If we over-project the volume of gasoline and diesel produced by exempt small refineries in 2020, the actual required volumes of renewable fuel will be higher than the volumes used in calculating the percentage standards. By contrast, if we underproject the volume of exempted gasoline and diesel, the actual required volumes of renewable fuel will be lower than the volumes used in calculating the percentage standards. If we project the volume correctly, we will ensure that, as far as exempted small refinery volumes are concerned, the actual required volume is equal to the volume established in this final rule.167 In selecting the methodology for projecting the exempted volume, we thus aim to make a neutral projection of exemptions based on the information now before us. As proposed, we are finalizing a projection methodology based on a 2016–18 annual average of exempted volumes had EPA strictly followed DOE recommendations in those years, including by granting 50 percent relief where DOE recommended 50 percent relief. We explain why we do so below, beginning with our decision to base the projection on DOE recommendations and then our decision to use a 2016–18 annual average. Finally, we state the projected exempt volumes of gasoline and diesel based on this approach and the corresponding number of RINs. First, we choose to base the projection of exempted volumes on DOE’s recommendations for two reasons, one to Sarah Dunham, Director, Office of Transportation and Air Quality. August 9, 2019. 167 The actual required volume is subject to other uncertainties besides small refinery exemptions, such as unexpected changes in gasoline and diesel use. PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 7051 prospective and one retrospective. Prospectively, this is our general approach to adjudicating SRE petitions going forward, beginning with 2019 SRE petitions and including 2020 SRE petitions. Our approach to evaluating SREs going forward is to follow DOE’s recommendations, including granting partial (i.e., 50 percent) exemptions, where appropriate. The statute authorizes EPA to evaluate petitions for SREs considering DOE’s study, recommendation, and other economic factors. While final decisions on 2020 SREs must await EPA’s receipt and adjudication of those petitions, we generally have the statutory authority to issue a final decision consistent with DOE’s recommendation.168 This reading of the statute is consistent with congressional guidance to DOE 169 and EPA.170 We acknowledge that on August 9, 2019, we took final agency action on 36 then-pending small refinery petitions for the 2018 compliance year (‘‘August 9 Memorandum Decision’’),171 and stated that the ‘‘best interpretation’’ of the statute was that EPA should either grant or deny petitions in full, and ‘‘not 168 Other factors, such as judicial resolution of pending decisions or subsequent Congressional direction, could potentially affect EPA’s SRE policy going forward. 169 See Consolidated Appropriations Act, 2016, Public Law 114–113 (2015), Explanatory Statement to Senate amendment to H.R. 2029 Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2016, Division D— Energy and Water Development and Related Agencies Appropriations Act, 2016, available at https://docs.house.gov/meetings/RU/RU00/ 20151216/104298/HMTG-114-RU00-20151216SD005.pdf. Congress in this Statement directed DOE, under certain circumstances, ‘‘to recommend to the EPA Administrator a 50 percent waiver of RFS requirements for the [small refinery] petitioner.’’ Id. at 35. Consistent with that guidance and since 2014, DOE has recommended 50 percent exemptions as it deemed appropriate. 170 S. Rep. 114–281. Congress in this Report provided that ‘‘[w]hen making decisions about small refinery exemptions under the RFS program, the Agency is directed to follow DOE’s recommendations.’’ See also Consolidated Appropriations Act, 2019, Public Law No. 116–6 (2019), H. Rep. 116–9 at 741, continuing the directive contained in Senate Report 114–281. See also Sen. Rep. 116–123, Department of the Interior, Environment, and Related Agencies Appropriations Bill, 2020, Report Accompanying Sen. 2580, at 87– 88 (Sept. 26, 2019) (again ‘‘continu[ing] the directive contained in Senate Report 114–281 related to small refinery relief’’), available at https://www.congress.gov/116/crpt/srpt123/CRPT116srpt123.pdf. This guidance, read together with that discussed in the previous footnote, supports the interpretation that DOE has authority to recommend partial exemptions for particular small refineries, and that EPA has discretion to follow that recommendation and grant a partial exemption. 171 ‘‘Decision on 2018 Small Refinery Exemption Petitions,’’ Memorandum from Anne Idsal, Acting Assistant Administrator, Office of Air and Radiation to Sarah Dunham, Director, Office of Transportation and Air Quality. August 9, 2019 (‘‘August 9 Memorandum Decision’’). E:\FR\FM\06FER2.SGM 06FER2 7052 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations grant partial relief.’’ Specifically, we observed that the statute provided for exemptions as an ‘‘extension of the exemption under subparagraph (A)’’, where subparagraph (A) stated that the RFS program requirements ‘‘shall not apply to small refineries under calendar year 2011.’’ 172 We had implemented the ‘‘subparagraph (A)’’ pre-2011 exemption as a full exemption for all qualifying small refineries. Consistent with this interpretation, we concluded that ‘‘when Congress authorized the Administrator to provide an ‘extension’ of that exemption for the reason of [disproportionate economic hardship], Congress intended that extension to be a full, and not partial, exemption.’’ 173 We believe, however, that this is not the only reasonable way to adjudicate exemption petitions. Had Congress spoken directly to the issue of the amount of relief EPA could provide to small refineries, EPA would be bound by that directive. However, the statute is silent with respect to EPA’s authority to issue partial exemptions. Nothing in the statute directly addresses this issue. No statutory language exists characterizing the scope of an exemption; there are no terms employed such as ‘‘partial’’ or ‘‘full,’’ or ‘‘50%’’ or ‘‘100%.’’ Moreover, nothing in the statute obligates EPA to provide full relief where we find that only partial relief is warranted. We think there is another reasonable reading of this provision of the statute: EPA may issue partial exemptions. Notably, EPA may determine that only partial relief is warranted based on a particular small refinery’s circumstances. In that case, it is reasonable for the level of relief that EPA grants to reflect that determination. For purposes of making the projection of the aggregate exempted volume of gasoline and diesel in 2020, and going forward, we are adopting this interpretation of the statute,174 and thereby depart from the interpretation taken in the August 9 Memorandum Decision, under which EPA ‘‘shall either grant or deny petitions for small refinery hardship in full, and not grant partial relief.’’ 175 We adopt this new approach for several reasons, consistent with FCC v. Fox Television Stations, Inc.176 As already noted, this new policy would allow EPA to ensure that the level of relief that it grants appropriately reflects the particular small refinery’s disproportionate economic hardship. This allows EPA to more precisely calibrate its RFS policy, and to strike an appropriate balance between furthering the production and use of renewable fuels while granting relief to small refineries that meet the statutory criteria. This balance, moreover, is also appropriate in light of the above-cited recent Congressional direction.177 Even independent of our prospective SRE policy, we believe this approach is a reasonable estimate of the aggregate exempted volume based on a retrospective review of EPA’s past SRE policies. In prior years, EPA has taken different approaches in evaluating small refinery petitions. As noted above, in the August 9 Memorandum Decision, we granted full exemptions to petitioners where DOE either recommended full or 50 percent relief. That is, in cases where DOE found a small refinery experienced either disproportionate impacts or viability impairment, EPA found the small refinery experienced disproportionate economic hardship and granted a full exemption. By contrast, in earlier years of the program, we denied petitions and provided no exemption in certain cases where DOE recommended a 50 percent exemption, finding that disproportionate economic hardship existed only where the small refinery experienced both disproportionate impacts and viability impairment.178 Our approach to projection, then, takes a middle ground between these prior approaches, and is a reasonable estimate of the aggregate exempted volume in 2020. We now turn to our decision to use the 2016–18 annual average under this methodology. As we have not yet received SRE petitions for 2020, we must estimate the aggregate amount of DOE recommended relief for that year. To do so, it is instructive to look back at what the exempted volumes of gasoline and diesel in previous years would have been had EPA followed DOE’s recommendations, including granting partial exemptions. These volumes, along with the Renewable Volume Obligation (RVO) that would have been exempted, are shown in Table VII.B–1. TABLE VII.B–1—ESTIMATED EXEMPTED VOLUME OF GASOLINE AND DIESEL AND ESTIMATED RVO EXEMPTED BY COMPLIANCE YEAR FOLLOWING DOE’S RECOMMENDATIONS Estimated exempted volume of gasoline (million gallons) Compliance year 2016 ......................................................................................................... 2017 ......................................................................................................... 2018 ......................................................................................................... lotter on DSKBCFDHB2PROD with RULES2 As demonstrated in Table VII.B–1, the volume of gasoline and diesel that would have been exempted if EPA had followed DOE’s recommendations has varied significantly in previous years.179 This is because there are many factors that affect the number of SREs that are granted in a given year and the aggregate exempted volume. We believe that it is 172 CAA section 211(o)(9)(B), (o)(9)(A). 9 Memorandum Decision at 2. 174 See Chevron, 467 U.S. at 842–44. 175 August 9 Memorandum Decision at 2. 176 See generally FCC, 556 U.S. at 515. 177 See supra notes 20 and 21. 173 August VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 Estimated exempted volume of diesel (million gallons) 2,450 5,650 4,620 1,930 3,870 3,270 Estimated RVO exempted (million RINs) 440 1020 840 appropriate to use an average volume of the gasoline and diesel that would have been exempted over a three-year period as our projection of gasoline and diesel that will be exempted in 2020, rather than the volume of gasoline and diesel that would have been exempted in any single year. This approach averages out the effects of unique events or market circumstances that occurred in individual past years that may or may not occur in 2020. Given that the last year for which we have data on small refinery exemptions is 2018,180 we take the average exempted volume from 2016–18. The average volume of these fuels that would have been exempted in 2016–18 178 See, e.g., Hermes Consol., LLC v. EPA, 787 F.3d 568, 575 (D.C. Cir. 2015). 179 Information about the number of SREs granted and the volume of RINs not required to be retired as a result of those exemptions can be found at: https://www.epa.gov/fuels-registration-reporting- and-compliance-help/rfs-small-refineryexemptions. 180 To date, we have adjudicated all 2018 small refinery exemption petitions submitted to us. EPA has not yet adjudicated any small refinery exemptions for the 2019 or 2020 compliance years. PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations if EPA had followed DOE’s recommendations is 4,240 and 3,020 million gallons, for gasoline and diesel fuel, respectively. We use these values for GEi and DEi, respectively, in calculating the percentage standards for each of the renewable fuel types. We also note that these exempted volumes would have resulted in an average reduction to the RVO of approximately 770 million RINs. C. Final Standards The formulas in 40 CFR 80.1405 for the calculation of the percentage standards require the specification of a total of 14 variables covering factors such as the renewable fuel volume requirements, projected gasoline and 7053 diesel demand for all states and territories where the RFS program applies, renewable fuels projected by EIA to be included in the gasoline and diesel demand, and projected gasoline and diesel volumes from exempt small refineries. The values of all the variables used for this final rule are shown in Table VII.C–1 for the applicable 2020 standards.181 TABLE VII.C–1—VALUES FOR TERMS IN CALCULATION OF THE FINAL 2020 STANDARDS 182 (billion gallons) Value for 2020 standards Term Description RFVCB .................... RFVBBD ................... RFVAB ..................... RFVRF ..................... G ............................. D ............................. RG .......................... RD .......................... GS .......................... RGS ........................ DS .......................... RDS ........................ GE .......................... DE .......................... Required volume of cellulosic biofuel ......................................................................................................... Required volume of biomass-based diesel a .............................................................................................. Required volume of advanced biofuel ........................................................................................................ Required volume of renewable fuel ............................................................................................................ Projected volume of gasoline ..................................................................................................................... Projected volume of diesel ......................................................................................................................... Projected volume of renewables in gasoline .............................................................................................. Projected volume of renewables in diesel .................................................................................................. Projected volume of gasoline for opt-in areas ........................................................................................... Projected volume of renewables in gasoline for opt-in areas .................................................................... Projected volume of diesel for opt-in areas ............................................................................................... Projected volume of renewables in diesel for opt-in areas ........................................................................ Projected volume of gasoline for exempt small refineries ......................................................................... Projected volume of diesel for exempt small refineries ............................................................................. 0.59 2.43 5.09 20.09 142.68 55.30 14.42 2.48 0 0 0 0 4.24 3.02 a The BBD volume used in the formula represents physical gallons. The formula contains a 1.5 multiplier to convert this physical volume to ethanol-equivalent volume. Projected volumes of gasoline and diesel, and the renewable fuels contained within them, were provided by EIA in a letter to EPA that is required under the statute, and represent consumption values from the October 2019 version of EIA’s Short-Term Energy Outlook.183 An estimate of fuel consumed in Alaska, derived from the June 28, 2019 release of EIA’s State Energy Data System (SEDS) and based on the 2017 volumes contained therein, was subtracted from the nationwide volumes. Using the volumes shown in Table VII.C–1, we have calculated the final percentage standards for 2020 as shown in Table VII.C–2. TABLE VII.C–2—FINAL PERCENTAGE STANDARDS FOR 2020—Continued Renewable fuel ......................... a Based 11.56% on the ethanol-equivalent volume of BBD. VIII. Administrative Actions A. Assessment of the Domestic Aggregate Compliance Approach lotter on DSKBCFDHB2PROD with RULES2 The RFS regulations specify an ‘‘aggregate compliance’’ approach for demonstrating that planted crops and crop residue from the U.S. complies with the ‘‘renewable biomass’’ requirements that address lands from which qualifying feedstocks may be harvested.184 In the 2010 RFS2 rulemaking, EPA established a baseline TABLE VII.C–2—FINAL PERCENTAGE number of acres for U.S. agricultural land in 2007 (the year of EISA STANDARDS FOR 2020 enactment) and determined that as long as this baseline number of acres was not Cellulosic biofuel ....................... 0.34% a 2.10% exceeded, it was unlikely that new land Biomass-based diesel .............. Advanced biofuel ...................... 2.93 outside of the 2007 baseline would be 181 To determine the 49-state values for gasoline and diesel, the amount of these fuels used in Alaska is subtracted from the totals provided by EIA because petroleum based fuels used in Alaska do not incur RFS obligations. The Alaska fractions are determined from the June 28, 2019 EIA State Energy Data System (SEDS), Energy Consumption Estimates. 182 See ‘‘Calculation of final % standards for 2020’’ in docket EPA–HQ–OAR–2019–0136. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 183 ‘‘EIA letter to EPA with 2020 volume projections 10–9–2019,’’ available in docket EPA– HQ–OAR–2019–0136. 184 40 CFR 80.1454(g). EPA has applied this ‘‘aggregate compliance’’ approach for the United States in annual RFS rulemakings since establishing it in the 2010 RFS2 rule. See 75 FR 14701–04. In this annual rulemaking, we have not reexamined or reopened this policy, including the regulations at 80.1454(g) and 80.1457. Similarly, as further PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 devoted to crop production based on historical trends and economic considerations. The regulations specify, therefore, that renewable fuel producers using planted crops or crop residue from the U.S. as feedstock in renewable fuel production need not undertake individual recordkeeping and reporting related to documenting that their feedstocks come from qualifying lands, unless EPA determines through one of its annual evaluations that the 2007 baseline acreage of 402 million acres agricultural land has been exceeded. In the 2010 RFS2 rulemaking, EPA committed to make an annual finding concerning whether the 2007 baseline amount of U.S. agricultural land has been exceeded in a given year. If the baseline is found to have been exceeded, then producers using U.S. planted crops and crop residue as feedstocks for renewable fuel production would be required to comply with individual recordkeeping and reporting requirements to verify explained below, we have applied this approach for Canada since our approval of Canada’s petition to use aggregate compliance in 2011. In this rulemaking, we have also not reexamined or reopened our decision on that petition. Any comments on these issues are beyond the scope of this rulemaking. E:\FR\FM\06FER2.SGM 06FER2 7054 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations that their feedstocks are renewable biomass. Based on data provided by the USDA Farm Service Agency (FSA) and Natural Resources Conservation Service (NRCS), we have estimated that U.S. agricultural land reached approximately 379.8 million acres in 2019 and thus did not exceed the 2007 baseline acreage of 402 million acres. The USDA data used to make this derivation can be found in the docket to this rule.185 B. Assessment of the Canadian Aggregate Compliance Approach The RFS regulations specify a petition process through which EPA may approve the use of an aggregate compliance approach for planted crops and crop residue from foreign countries.186 On September 29, 2011, EPA approved such a petition from the Government of Canada.187 The total agricultural land in Canada in 2019 is estimated at 118.1 million acres. This total agricultural land area includes 95.9 million acres of cropland and summer fallow, 12.4 million acres of pastureland and 9.8 million acres of agricultural land under conservation practices. This acreage estimate is based on the same methodology used to set the 2007 baseline acreage for Canadian agricultural land in EPA’s response to Canada’s petition. The data used to make this calculation can be found in the docket to this rule. This acreage does not exceed the 2007 baseline acreage of 122.1 million acres. lotter on DSKBCFDHB2PROD with RULES2 IX. Amendments to the RFS and Fuels Program Regulations In implementing the RFS program, we have identified several changes to the program that will assist with implementation in future years. These regulatory changes include both revisions we proposed in the July 29 proposal—clarification of diesel RVO calculations, pathway petition conditions, a biodiesel esterification pretreatment pathway, distillers corn oil and distillers sorghum oil pathways, and renewable fuel exporter 185 USDA also provided EPA with 2019 data from the discontinued Grassland Reserve Program (GRP) and Wetlands Reserve Program (WRP). Given this data, EPA estimated the total U.S. agricultural land both including and omitting the GRP and WRP acreage. In 2019, combined land under GRP and WRP totaled 2,974,573 acres. Subtracting the GRP, WRP, and Agriculture Conservation Easement Program acreage yields an estimate of 376,853,632 acres or approximately 376.9 million total acres of U.S. agricultural land in 2019. Omitting the GRP and WRP data yields approximately 379.8 million acres of U.S. agricultural land in 2019. 186 40 CFR 80.1457. 187 See ‘‘EPA Decision on Canadian Aggregate Compliance Approach Petition’’ available in docket EPA–HQ–OAR–2019–0136. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 provisions—and certain provisions of the 2016 REGS rule proposal that we are finalizing here.188 These regulatory changes are described in this section. Comments on these regulatory revisions from both the 2016 REGS and 2020 RVO proposals, as well as EPA’s responses, are contained in the response to comments (RTC) document in the docket for this action.189 A. Clarification of Diesel RVO Calculations 1. Overview We are finalizing certain provisions regarding clarification of diesel RVO calculations. Specifically, we are finalizing the ‘‘primary approach’’ proposed in the July 29 proposal, with some modifications based on comments received. We are not finalizing either of the two alternative approaches presented in the July 29 proposal, after consideration of negative comments on these two approaches. Historically, home heating oil (HO) and diesel fuel were virtually indistinguishable because both contained the same distillation range of hydrocarbons and high level of sulfur. EPA’s diesel fuel sulfur regulations resulted in a distinction in the marketplace beginning in the 1990s and concluding in 2010 with the phase-in of the ultra-low sulfur diesel regulations for diesel fuel used in motor vehicles and motor vehicle engines (MV diesel fuel). Similarly, beginning in 2004, EPA promulgated requirements for diesel fuel used in nonroad, locomotive, and marine vehicles and engines (NRLM diesel fuel) that concluded phasing in at the end of 2014. Thus, all diesel fuel for use in motor vehicles and motor vehicle engines, and nonroad, locomotive, and marine vehicles and engines, is currently required to meet a 15 ppm sulfur per-gallon standard, under regulations set out in 40 CFR part 80, subpart I 190 (For purposes of subpart I, 188 See 81 FR 80828 (November 16, 2016). comments submitted on the REGS proposal can be found in Docket No. EPA–HQ– OAR–2016–0041. Specific comments relevant to the provisions that were under consideration for finalization in this action have also been added to the docket for this action (Docket Item No. EPA– HQ–OAR–2019–0136–0002). We are only responding to comments from the REGS proposal on the provisions that are being finalized in this action. Comments on the remaining provisions in the REGS proposal, as well as those on provisions listed in the July 29 proposal but that are not being finalized here, remain under consideration. We are not responding to them in this action. 190 Subpart I includes an exception to this requirement that allows diesel fuel used in locomotive or marine engines to meet a 500 ppm sulfur standard if the fuel is produced from transmix processors and distributed under an approved compliance plan. 189 All PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 such diesel fuel is also now collectively known as MVNRLM diesel fuel). We did not set standards for HO under subpart I, with the result that it remained high in sulfur content and cost less to produce than MVNRLM diesel fuel. As such, subpart I also requires all parties in the distribution system to ensure that diesel fuel containing 15 ppm sulfur or less (referred to as 15 ppm diesel fuel, ultra-low sulfur diesel fuel, or ULSD) remains segregated from higher sulfur fuels and to take measures to prevent sulfur contamination of ULSD.191 The RFS regulations, which place an RVO on the production and importation of diesel transportation fuel, but not on the production or importation of HO, were promulgated in 2010 and, similar to subpart I regulations, made the same presumption that HO and MVNRLM diesel fuel would be segregated. The RFS regulations did not anticipate that these fuels would become indistinguishable, have the same value in the marketplace (apart from their RFS compliance cost), and be commingled in the fuel distribution system. For example, 40 CFR 80.1407 set forth requirements for obligated parties to include all products meeting the definition of MVNRLM diesel fuel, collectively called ‘‘diesel fuel,’’ at 40 CFR 80.2(qqq) that are produced or imported during a compliance period in the volume used to calculate their RVOs unless the diesel fuel is not transportation fuel.192 Under definitions of MV and NRLM diesel fuel, these products include diesel fuel that is ‘‘made available’’ for use in motor vehicles and motor vehicle engines, and nonroad, locomotive, or marine vehicles and engines.193 When the RFS regulations were promulgated in 2010, the lower production cost of HO relative to diesel fuel provided economic incentive for refiners, pipelines, and terminals to produce and distribute HO separately from diesel fuel. After we promulgated the RFS regulations, however, many states began implementing programs designed to reduce the sulfur content of HO to 15 ppm or less (15 ppm HO). Currently, the majority of HO is required to meet a 15 ppm sulfur standard under numerous state and city programs in the Northeast and MidAtlantic,194 making HO once again indistinguishable from ULSD and of the same economic value as MVNRLM 191 See, e.g., 40 CFR 80.610(g). 40 CFR 80.1407(e) and (f). 193 See 40 CFR 80.2(y) and (nnn). 194 Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, the District of Columbia, and the city of Philadelphia. 192 See E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 diesel fuel.195 Further, in 2015, additional regulations became effective that required marine diesel fuel used in Emissions Control Areas (ECA marine fuel) to contain 1,000 ppm sulfur or less.196 In response, many companies have opted to produce and distribute ECA marine fuel containing 15 ppm sulfur or less (15 ppm ECA marine fuel) fungibly with 15 ppm diesel fuel, rather than invest in infrastructure to distribute and segregate higher-sulfur ECA marine fuel. Since HO, ECA marine fuel, and other non-transportation fuels that meet a 15 ppm sulfur standard are essentially identical in the marketplace, we believe that some parties in the fuel distribution system are distributing them together—i.e., commingling MVNRLM diesel fuel with 15 ppm HO and 15 ppm ECA marine fuel. The regulations in 40 CFR part 80, subpart I, do not prohibit parties from commingling MVNRLM diesel fuel with other 15 ppm distillate fuel (i.e., distillate fuel that contains 15 ppm sulfur or less) that is designated for nontransportation purposes. However, commingled fuel must meet all of the applicable requirements in subpart I because the resulting fuel is ‘‘made available’’ for use in motor vehicles, or nonroad, locomotive, or marine vehicles and engines.197 This means that any refiner or importer that produces or imports 15 ppm distillate fuel that is designated for non-transportation purposes and is commingled with MVNRLM diesel fuel must also certify the fuel as meeting the sampling, testing, reporting, and recordkeeping requirements in subpart I.198 Although this approach does not create compliance issues relating to subpart I requirements, at proposal we explained that we were concerned that some obligated parties (e.g., refiners and importers) under the RFS program may be calculating RVOs without accounting for all of their 15 ppm distillate fuel that is ultimately sold for use as MVNRLM diesel fuel. Specifically, obligated 195 See the New England Fuel Institute’s (NEFI) ‘‘State Sulfur & Bioheat Requirements for No. 2 Heating Oil in the Northeast & Mid-Atlantic States,’’ available in the docket for this action. 196 See 40 CFR 80.610(e)(6). ECA marine fuel is not transportation fuel under the RFS regulations. Therefore, refiners and importers do not incur an RVO for ECA marine fuel that they produce or import. 197 See 40 CFR 80.2(y) and (nnn). 198 We have received requests from a number of regulated parties asking the agency to amend the fuels regulations to allow parties to more easily mix and fungibly ship HO, ECA marine fuel, and MVNRLM fuel that meet the 15 ppm sulfur standard. In a separate action, we intend to propose additional amendments that would significantly streamline these regulations (see RIN 2060–AT31 in EPA’s Regulatory Agenda). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 parties may be excluding 15 ppm HO or 15 ppm ECA marine fuel from their RVO calculations, and downstream parties may be re-designating this fuel as MVNRLM diesel fuel and not incurring an RVO.199 We also explained that with the convergence of the MVNRLM diesel fuel, HO, and ECA marine fuel sulfur standards, some stakeholders had expressed confusion to EPA on accounting for 15 ppm distillate fuel that leaves the obligated party’s gate designated as HO, ECA marine fuel, or other non-transportation fuels, but is subsequently re-designated as either MVNRLM diesel fuel or ultimately used as MVNRLM diesel fuel by a downstream entity. Specifically, some obligated parties had asked whether they are required to add re-designated MVNRLM diesel fuel back to their RVO calculations while some downstream entities had asked whether they are required to incur an RVO for MVNRLM diesel fuel they re-designate from nontransportation fuel to transportation fuel. We further explained in the July 29 proposal that we intended for any diesel fuel not used as transportation fuel, such as HO or ECA marine fuel, to be excluded from RVO calculations in keeping with statutory requirements.200 We also intended for all diesel fuel ultimately used as transportation fuel to incur an RVO, even 15 ppm distillate fuel that is initially designated as nontransportation fuel and subsequently redesignated as transportation fuel by downstream parties.201 Thus, existing regulations allow downstream parties who are registered as refiners and who comply with all sampling, testing, recordkeeping, and other refiner requirements to ‘‘produce’’ MVNRLM diesel fuel from HO, ECA marine fuel, and other non-transportation fuels. These refiners incur RVOs for all MVNRLM diesel fuel that they ‘‘produce’’ from the non-transportation fuel. However, we believe that stakeholder confusion over who should account for re-designated fuel in their RVO may be causing the omission of some re-designated MVNRLM diesel fuel from RVO calculations altogether. Therefore, we are revising the RFS regulations to more clearly specify how volumes of re-designated MVNRLM diesel fuel are accounted for in obligated parties’ RVO calculations in 199 A similar situation exists with respect to #1 diesel fuel, which is used/blended in the winter due to cold temperature constraints and its oftenidentical counterparts of kerosene and jet fuel. 200 See 40 CFR 80.1407(f)(8). 201 With the other exceptions listed in 40 CFR 80.1407(f). PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 7055 order to ensure that the RFS mandates continue to be met. Consistent with our proposal, we are clarifying the requirement for refiners and importers to include distillate fuel in their RVO compliance calculations and providing exceptions for the following three additional categories of fuel: • Distillate fuel, such as HO or ECA marine fuel, with a sulfur content greater than 15 ppm that is clearly designated for a use other than transportation fuel. • Distillate fuel that meets the 15 ppm sulfur standard, that is designated for non-transportation use, and that remains completely segregated from MVNRLM diesel fuel from the point of production through to the point of use for a non-transportation purpose. • Distillate fuel that meets the 15 ppm diesel sulfur standard, that is ultimately used for non-transportation purposes, and that does not remain completely segregated from MVNRLM diesel fuel. As also explained in the July 29 proposal, since the first two categories of distillate fuel above are completely segregated from MVNRLM diesel fuel, we do not believe that they would be used as transportation fuel and are therefore not finalizing any additional requirements for these fuels to be excluded from a refiner or importer’s RVO compliance calculations. However, consistent with the July 29 proposal, and as described below, because the third category of distillate fuel is not completely segregated and is indistinguishable from MVNRLM diesel fuel, we are finalizing additional requirements for this type of distillate fuel to be excluded from a refiner or importer’s RVO compliance calculations. 2. Downstream Re-Designation of Certified Non-Transportation 15 ppm Distillate Fuel to MVNRLM Diesel Fuel Consistent with the July 29 proposal, and in order to allow refiners and importers to exclude distillate fuel that that meets the 15 ppm diesel sulfur standard, is ultimately used for nontransportation purposes, and does not remain completely segregated from MVNRLM diesel fuel from their RVO calculations, we are establishing a new category of distillate fuel: Certified nontransportation 15 ppm distillate fuel (‘‘certified NTDF’’). We are defining certified NTDF as distillate fuel that meets all of the following requirements: • Fuel that is certified as complying with the 15 ppm sulfur standard, cetane/aromatics standard, and all applicable sampling, testing, and E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 7056 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations recordkeeping requirements of 40 CFR part 80, subpart I. • Fuel that is designated on the product transfer document as 15 ppm HO, 15 ppm ECA marine fuel, or other non-transportation fuel (e.g., jet fuel, kerosene, No. 4 fuel, or distillate fuel for export only) with a notation that the fuel is ‘‘15 ppm sulfur (maximum) certified NTDF—This fuel is designated for non-transportation use.’’ with no designation as MVNRLM diesel fuel. Some commenters noted that our proposed PTD language stating, ‘‘This fuel meets all MVNRLM diesel fuel standards’’ could potentially cause confusion as to whether the fuel qualified as MVNRLM diesel fuel or not. We are therefore finalizing PTD language similar to that suggested by commenters, which avoids any reference to MVNRLM diesel fuel. In order to prevent refiners and importers from circumventing the requirement to incur an RVO for all transportation fuel by simply designating transportation fuel as nontransportation fuel, we had proposed that refiners or importers must have a reasonable expectation that their NTDF will be used as HO, ECA marine fuel, or another non-transportation purpose in order to exclude it from their RVO calculations. We proposed that refiners or importers would need to meet the following three criteria to demonstrate they have a reasonable expectation that NTDF will not be used as transportation fuel: • The refiner or importer supplies areas that use HO, ECA marine fuel, or 15 ppm distillate fuel for nontransportation purposes in the quantities being supplied by the refiner or importer. • The refiner or importer has entered into a contractual arrangement that prohibits the buyer from selling the fuel as MVNRLM diesel fuel. • The volume of fuel designated as HO, ECA marine fuel, or other nontransportation purposes is consistent with the refiner’s or importer’s past practices or reflect changed market conditions. We also noted that EPA may consider any other relevant information in assessing whether a refiner or importer has a reasonable expectation that the fuel was used for non-transportation purposes. We received comments indicating that it would be complex and disruptive to require refiners and importers to enter into contractual arrangements that prohibit the buyers from selling NTDF as MVNRLM diesel fuel. We agree with these comments and have eliminated this criterion. In light of these comments VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 and in order to simplify the proposed regulations, we have also consolidated the first and third criterion into one sentence that states ‘‘[t]o establish a reasonable expectation that the fuel will be used for non-transportation purposes, a refiner or importer must, at a minimum, be able to demonstrate that they supply areas that use heating oil, ECA marine fuel, or 15 ppm distillate fuel for non-transportation purposes in quantities that are consistent with past practices or changed circumstances.’’ With these changes, we are finalizing the requirement that refiners or importers may only exclude NTDF from their compliance calculations if they have a reasonable expectation that the fuel will be used for non-transportation purposes. Some commenters also noted that there is normally a noticeable price difference between fuel sold for transportation fuel and nontransportation fuel, and that this price difference is a relevant consideration for determining if the fuel was intended to be sold as transportation fuel or nontransportation fuel. We agree with this comment and the final rule explicitly identifies price as relevant information that EPA may consider in evaluating whether a refiner or importer had a reasonable expectation that the fuel will be sold for non-transportation purposes. As previously noted, our intent is to ensure that all fuel ultimately used as MVNRLM diesel fuel incurs an RVO. In order to achieve this goal, we are also finalizing requirements that will allow parties in the fuel distribution system (e.g., downstream of the original refinery or import facility) to sell certified NTDF as MVNRLM diesel fuel without incurring an RVO if the total volume of MVNRLM diesel fuel delivered during each compliance period does not exceed the amount of MVNRLM diesel fuel received during that compliance period. Any party who re-designates certified NTDF as MVNRLM diesel fuel is a refiner for purposes of the RFS program and is therefore required to register as a refiner. They will also be required to calculate whether the volume of MVNRLM diesel fuel that they deliver exceeds the volume of MVNRLM diesel fuel that they receive, during an annual compliance period. If a downstream party delivers a volume of MVNRLM diesel fuel that exceeds the volume of MVNRLM diesel fuel they received during a compliance period, they are required to treat the difference as diesel fuel that they ‘‘produced’’ and incur an RVO on this volume. This will enable proper accounting for the aggregate volume of non-transportation fuel that is PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 re-designated as MVNRLM diesel fuel under the RFS program. This one-sided test allows MVNRLM diesel fuel to be sold as HO or ECA marine fuel but prevents the erosion of the renewable fuel mandate. These parties will also be subject to recordkeeping requirements to ensure the enforceability of this program. We received several comments recommending modifications and clarifications to the proposed volume balance provisions, and are finalizing the following changes in response to these comments: • We are adding an equation to the regulations that provides specific guidance on how to calculate the volume balance. This is in response to a comment suggesting that EPA should include a balance equation for diesel fuel, similar to the heating oil balance in 40 CFR 80.599(c)(3) and (4). The new balance equation accounts for changes in diesel inventory, in addition to diesel volumes in and out. • We are clarifying that the volume balance requirement applies to each facility that is registered as a diesel refinery. This is in response to comments suggesting that EPA clarify whether the volume balances were applicable on a facility basis or an aggregated basis. Our intent was that the balances apply on a facility basis and have clarified this in the final regulations. One commenter also recommended that the new provisions for redesignation of certified NTDF to MVNRLM diesel fuel should apply to the owner of the certified NTDF at the time of redesignation and not the custody holder of the certified NTDF, or the original refiner of the NTDF. We agree with this recommendation and have included final rule requirements that reflect this recommendation. Since the owner of certified NTDF would be responsible for making any decisions regarding redesignation of NTDF to MVNRLM diesel fuel, we intend for the owner of the certified NTDF to meet the regulatory requirements associated with redesignation, such as registration, reporting, and incurring an RVO. We are also finalizing corresponding reporting requirements, including requiring refiners and importers to report the volume of MVNRLM diesel fuel they produce or import, the volume of distillate fuel they produce or import that is not transportation fuel, and the volume of distillate fuel they produce or import that is certified NTDF. We are also requiring some downstream parties who redesignate NTDF as MVNRLM diesel fuel to submit reports to EPA identifying the volume of MVNRLM E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations diesel fuel received, the volume of MVNRLM diesel fuel delivered, the volume of fuel re-designated from certified NTDF to MVNRLM diesel fuel, and the volume of MVNRLM diesel fuel redesignated to non-transportation use. Further, for purposes of evaluating compliance, we are also: • Requiring parties who re-designate certified NTDF to MVNRLM diesel fuel to keep all records relating to these transactions. • Prohibiting a party from exceeding its balance requirements without incurring an RVO. • Ensuring that the attest auditors review relevant information to ensure compliance with applicable RFS program requirements. Some commenters stated that it was not necessary to require that volume balance reports and attest engagements be submitted by all parties who redesignate certified NTDF to MVNRLM diesel fuel, and that EPA should only require reports from those parties who redesignated a net positive volume of certified NTDF to MVNRLM diesel fuel (i.e., incurred an RVO). We agree with these comments and are finalizing provisions to require parties that only incur an RVO through redesignation of certified NTDF to MVNRLM diesel fuel to submit volume balance reports and meet the required attest engagements. Obligated parties that would otherwise have an attest engagement performed (e.g., because they produced gasoline or diesel fuel, exported renewable fuels, etc.) would now have the attest auditor perform the additional attest engagement procedures for the obligated party. We believe that the types of reports and records attest auditors review for obligated parties annual attest engagements would already include much of the information we are requiring and would therefore represent a minimal increase in burden for these obligated parties. Parties that redesignate certified NTDF to MVNRLM diesel fuel during a compliance period but did not incur an RVO (because they redesignated an equivalent or greater volume of MVNRLM diesel fuel to nontransportation fuel during the compliance period) are required to submit a short report stating that they redesignated certified NTDF to MVNRLM diesel fuel, but did not incur an RVO. We are also not finalizing the proposed requirement for quarterly reports, since compliance will be on an annual basis and can be demonstrated through annual reports. Lastly, implementation of these new provisions will be delayed until January 1, 2021, to allow time for updates to product codes and tracking software VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 used by distillate distributors. Some commenters suggested that this would be helpful for them to avoid implementing the new regulations in the middle of a compliance period, and we agree with these commenters. B. Pathway Petition Conditions We are clarifying our authority to enforce conditions created by requirements included in an approval document for a facility-specific pathway petition submitted under 40 CFR 80.1416. Since December 2010, we have approved over 100 facility-specific pathway petitions. To qualify for the generation of RINs under an approved pathway petition, the fuel produced under that pathway must also meet the conditions and applicable regulatory provisions specified in EPA’s petition approval document and the other definitional and regulatory requirements for renewable fuel specified in the CAA and EPA implementing regulations, including for RIN generation, registration, reporting, and recordkeeping. Common conditions include, but are not limited to, compliance monitoring plans detailing how parties will accurately and reliably measure and record the energy and material inputs and outputs required to ensure fuels are produced consistent with the specifications evaluated in the lifecycle analysis, process flow diagrams showing the energy used for feedstock, fuel, and co-product operations, and certifications signed by responsible corporate officers (RCOs). We have authority to bring an enforcement action of these conditions under 40 CFR 80.1460(a), which prohibits producing or importing a renewable fuel without complying with the RIN generation and assignment requirements. The RFS regulations provide that RINs may only be generated if the fuel qualifies for a D code pursuant to 40 CFR 80.1426(f) or an approved petition submitted under 40 CFR 80.1416.202 If any of the conditions required by an approval document for a pathway petition are not met, then the fuel does not qualify for a D code per the terms of the approval, and RINs may not be generated. These conditions are also enforceable under 40 CFR 80.1460(b)(2), which prohibits creating a RIN that is invalid; a RIN is invalid if it was improperly generated.203 As stated above, a RIN is improperly generated if the fuel representing the RIN does not qualify for a D code, which is the case if a fuel producer does not follow all of the 202 See 203 See PO 00000 40 CFR 80.1426(a)(1)(i). 40 CFR 80.1431(a)(ix). Frm 00043 Fmt 4701 Sfmt 4700 7057 required conditions in the pathway petition approval document. We are adding a provision at 40 CFR 80.1426(a)(1)(iii) to clarify that renewable fuel that qualifies for a D code pursuant to an approved petition submitted under 40 CFR 80.1416 must be produced in compliance with all conditions set forth in the petition approval document (in addition to the applicable statutory requirements and requirements of subpart M). We are also adding a prohibited act at 40 CFR 80.1460(b)(7) for generating a RIN for fuel that fails to meet all the conditions set forth in a petition approval document for a pathway petition submitted under 40 CFR 80.1416 in order to provide more clarity regarding our ability to bring enforcement actions for failure to meet such conditions. C. Esterification Pretreatment Pathway We are revising rows F and H of Table 1 to 40 CFR 80.1426 by changing the existing approved production process ‘‘Trans-Esterification’’ to be ‘‘Transesterification with or without esterification pretreatment.’’ We are finalizing these revisions to rows F and H without modifying the feedstocks listed in those rows, as these changes do not make any additional feedstocks eligible beyond those already listed in rows F and H. Table 1 to 40 CFR 80.1426 includes pathways for the production of biodiesel using specified feedstocks and the production process transesterification.204 Transesterification is the most commonly used method to produce biodiesel and involves reacting triglycerides with methanol, typically under the presence of a base catalyst.205 While the main component of oils, fats, and grease feedstocks are typically triglycerides, other components, such as free fatty acids (FFAs), can also exist. Removal or conversion of the FFAs is important where the traditional basecatalyzed transesterification production process is used; if they are not removed or converted prior to this process, FFAs will react with base catalysts to produce soaps that inhibit the transesterification reaction. One of the most widely used methods for treating biodiesel feedstocks with a higher FFA content is acid catalysis. Acid catalysis typically uses a strong 204 While we expect these pathways to be used predominately for biodiesel, they may also be used for heating oil and jet fuel. Renewable diesel is excluded because it is by definition ‘‘not a monoalkyl ester’’ (40 CFR 80.1401) and that is what transesterification produces. 205 Commonly used base catalysts include sodium hydroxide (NaOH), potassium hydroxide (KOH) and sodium methoxide (NaOCH3). E:\FR\FM\06FER2.SGM 06FER2 7058 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 acid, such as sulfuric acid, to catalyze the esterification of the FFAs prior to the transesterification of the triglycerides as a pre-treatment step. Acid esterification can be applied to feedstocks with FFA contents above 5 percent to produce biodiesel. Because the transesterification of triglycerides is slow under acid catalysis, a technique commonly used to overcome the reaction rate issue is to first convert the FFAs through an acid esterification (also known as an acid ‘‘pretreatment’’ step), and then follow-up with the traditional base-catalyzed transesterification of triglycerides. Under the RFS2 final rule, biodiesel from biogenic waste oils/fats/greases qualifies for D-codes 4 or 5 using a transesterification process. This conclusion was based on the analysis of yellow grease as a feedstock, where there was an acid pretreatment of the FFAs contained in the feedstock. In fact, one of the material inputs assumed in the modeling for the final RFS2 rule yellow grease pathway was sulfuric acid, which is the catalyst commonly used for acid esterification.206 As we had not stipulated transesterification with esterification pretreatment as a qualified production process in rows F and H to Table 1 to 40 CFR 80.1426, we are revising these entries to include ‘‘transesterification with or without esterification pre-treatment’’ as a production process requirement so that RINs may be generated for biodiesel produced by the esterification pretreatment, as well as for the biodiesel produced through transesterification.207 In the July 29 proposal, we also proposed to add a standalone esterification pathway to rows F and H to Table 1 to 40 CFR 80.1426, which would allow parties who have processing units that can take feedstocks listed in rows F and H of Table 1 to 40 CFR 80.1426 that have high-FFA content and separate the FFAs and triglycerides for chemical processing in 206 Section 2.4.7.3.3 of the Regulatory Impact Analysis for the March 2010 final rule describes the material inputs evaluated for biodiesel production. For conversion of yellow grease to biodiesel, sulfuric acid accounted for 4.7 percent of the material inputs on a mass basis (0.02 kg per gallon of biodiesel). 207 In 2012, we issued a direct final rule and a parallel proposed rule (see 77 FR 700 and 77 FR 462, respectively; January 5, 2012) that would have determined that, among other regulatory changes, biodiesel produced from esterification met the GHG reduction requirements. Because we received adverse comment, we withdrew the direct final rule in its entirety (see 77 FR 13009, March 5, 2012). In the 2013 final rule based on the parallel proposal (78 FR 14190, March 5, 2013), we decided not to finalize a determination at that time on biodiesel produced from esterification and noted that we would instead make a final determination at a later time. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 separate standalone esterification and transesterification units to generate RINs for the biodiesel produced. However, we are not at this time finalizing the proposed standalone esterification pathway. It remains under consideration and may be finalized in a future action. D. Distillers Corn Oil and Distillers Sorghum Oil Pathways We are adding distillers corn oil and commingled distillers corn oil and sorghum oil as feedstocks to row I of Table 1 to 40 CFR 80.1426. While the lifecycle GHG emissions associated with using a very similar feedstock— distillers sorghum oil—as part of this pathway were evaluated in the grain sorghum oil pathway final rule (‘‘sorghum oil rule’’),208 these two feedstocks were not added to row I as part of that rulemaking. This section discusses the addition of distillers corn oil and commingled distillers corn oil and sorghum oil as feedstocks to row I and presents the lifecycle GHG emissions associated with these pathways. We also explain why the most likely effect of adding these pathways will be to reduce the number of petitions submitted pursuant to 40 CFR 80.1416. The March 2010 RFS2 rule included pathways for biodiesel and renewable diesel produced from non-food grade corn oil. The March 2013 Pathways I rule added pathways for heating oil and jet fuel from non-food grade corn oil in rows F and H of Table 1 to 40 CFR 80.1426, and added pathways for naphtha and LPG from Camelina sativa oil in row I.209 The sorghum oil rule amended the RFS regulations to add a new definition of distillers sorghum oil and to replace existing references to non-food grade corn oil with the newly defined term ‘‘distillers corn oil.’’ That rule also added a number of pathways to rows F and H of Table 1 to 40 CFR 80.1426 for biodiesel, renewable diesel, jet fuel, and heating oil produced from distillers sorghum oil and commingled distillers sorghum and corn oil. Pathways for naphtha and LPG produced from distillers sorghum oil via a hydrotreating process were also added to row I of Table 1 to 40 CFR 80.1426. Commingled distillers corn oil and sorghum oil was added as a feedstock to rows F and H of Table 1 to 40 CFR 80.1426 because distillers sorghum oil is often co-produced with distillers corn oil at ethanol plants using a combination of grain sorghum and corn as feedstocks for ethanol production. Due to the recovery process of the oils 208 See 209 See PO 00000 83 FR 37735 (August 2, 2018). 78 FR 14190 (March 5, 2013). Frm 00044 Fmt 4701 Sfmt 4700 from the distillers grains and solubles (DGS), where the ethanol plant is using a feedstock that combines grain sorghum and corn, it is not possible to physically separate the distillers sorghum and corn oils into two streams, nor is it possible to account for the volume of sorghum oil or corn oil in this mixture. For these and other reasons,210 after concluding that distillers sorghum oil satisfies the 50 percent GHG reduction threshold required for the advanced biofuel and biomass-based diesel, we added both distillers sorghum oil and ‘‘commingled distillers corn oil and sorghum oil’’ to rows F and H of Table 1 to 40 CFR 80.1426 in the sorghum oil rule. However, unlike rows F and H, row I did not include a pathway using ‘‘non-food grade corn oil’’ prior to that final rule, nor did we propose to add ‘‘distillers corn oil’’ to that row in the December 2017 sorghum oil proposed rule.211 Thus, in the absence of an assessment of lifecycle emissions showing that distillers corn oil also meets the GHG reduction threshold required for the pathways therein, in the sorghum oil rule we decided ‘‘it would be premature for EPA to add either distillers corn oil or commingled distillers corn and sorghum oil as feedstocks in row I.’’ 212 Currently, in order to generate D-code 5 RINs for naphtha and/or LPG produced from distillers corn oil and/or commingled distillers corn and sorghum oil, a fuel producer would first need to petition EPA pursuant to 40 CFR 80.1416, have EPA review and approve their requested pathway, and then submit and have EPA accept the registration for the new pathway. Adding these feedstocks to row I eliminates the need for these petitions. Table IX.D–1 shows the lifecycle GHG emissions associated with renewable diesel, jet fuel, naphtha, and LPG produced from distillers sorghum oil. These results are based on the analysis completed for the sorghum oil rule.213 The lifecycle GHG emissions associated with the statutory baseline fuels, 2005 average diesel and gasoline, are shown for comparison. Based on the distillers sorghum oil results, as explained below we have concluded that naphtha and LPG produced from distillers corn oil and commingled distillers corn and sorghum oil also satisfy the 50 percent lifecycle GHG reduction requirement at CAA section 211(o)(1)(B), relative to the 210 For the other reasons discussed in the sorghum oil rule preamble, see 83 FR 37737–39 (August 2, 2018). 211 See 82 FR 61205 (December 27, 2017). 212 See 83 FR 37738 (August 2, 2018). 213 See Table III.4 of the sorghum oil rule preamble (83 FR 37743, August 2, 2018). E:\FR\FM\06FER2.SGM 06FER2 7059 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations statutory petroleum baseline, to be eligible for advanced biofuel RINs. TABLE IX.D-1—LIFECYCLE GHG EMISSIONS ASSOCIATED WITH BIOFUELS PRODUCED FROM DISTILLERS SORGHUM OIL [kgCO2-eq/mmBtu] Renewable diesel, jet fuel Fuel lotter on DSKBCFDHB2PROD with RULES2 Production Process .............................................................. Naphtha 2005 Diesel baseline LPG Hydrotreating Refining Livestock Sector Impacts ..................................................... Feedstock Production .......................................................... Feedstock Transport ............................................................ Feedstock Pretreatment ....................................................... Fuel Production .................................................................... Fuel Distribution ................................................................... Fuel Use ............................................................................... 19.4 6.2 0.3 0.0 8.0 0.8 0.7 19.4 6.2 0.3 0.0 8.0 0.8 1.7 19.4 6.2 0.3 0.0 8.0 0.8 1.5 Total .............................................................................. Percent Reduction ............................................................... 35.4 64% 36.4 63% 36.2 63% Although the lifecycle GHG analysis for the sorghum oil rule focused on distillers sorghum oil, we believe it is also applicable to distillers corn oil and commingled distillers corn oil and sorghum oil for purposes of determining whether these satisfy the 50 percent GHG reduction requirement. For the sorghum oil rule, we estimated the livestock sector impacts associated with distillers sorghum oil based on a set of assumptions about the type of feed that would need to backfill for the reduction in mass of de-oiled DGS as compared to full-oil DGS. For that analysis we calculated a substitution rate for how much corn would be needed to backfill in livestock feed for every pound of grain sorghum oil diverted to biofuel production, by livestock type. The amounts of corn needed to replace each pound of extracted sorghum oil were largely based on studies that evaluated the nutritional values of regular and reduced-oil distillers grains produced as a co-product of corn starch ethanol.214 Given that the underlying data for our distillers sorghum oil assessment was largely based on studies conducted on corn ethanol co-products, we believe it is appropriate to apply the same results to similar pathways using distillers corn oil feedstock. Based on the similarities between the two products and how they are produced (i.e., co-produced at ethanol plants), we are also assuming that the lifecycle GHG emission for distillers corn oil and distillers sorghum oil are the same for the other lifecycle 214 See Table III.2 (Full-Oil and Reduced-Oil Sorghum Distillers Grains with Solubles Displacement Ratios) of the sorghum oil rule (83 FR 37741, August 2, 2018) and accompanying footnote number 36, which lists the sources for the data in that table. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 stages evaluated (e.g., feedstock production, fuel production). One difference between distillers corn oil and sorghum oil is the rate of oil recovered per pound of corn versus grain sorghum processed. The distillers sorghum oil petition submitted by the National Sorghum Producers reported that 0.67 pounds of distillers sorghum oil are recovered per bushel of grain sorghum processed to ethanol, whereas 0.84 pounds of distillers corn oil is extracted per bushel of corn.215 Adjusting for this difference results in slightly lower livestock sector GHG emissions associated with naphtha and LPG produced from distillers corn oil.216 Based on this adjustment the results in Table IX.D–1 change from a 63 percent GHG reduction for naphtha and LPG produced from distillers sorghum oil to a 64 percent reduction for naphtha and LPG production from distillers corn oil. We have therefore concluded that these pathways satisfy the 50 percent GHG reduction requirement to qualify as advanced biofuel under the RFS program and are adding ‘‘distillers corn oil’’ and ‘‘commingled distillers corn oil 215 See Table 4 of ‘‘Grain Sorghum Oil Pathway Petition,’’ Docket Item No. EPA–HQ–OAR–2017– 0655–0005. 216 The source of the difference is the amount of corn needed to replace one pound of full-oil versus reduced-oiled DDGS in beef cattle diets. In our analysis for the sorghum oil rule, we assumed, based on the best available data provided by NSP, USDA, and commenters, that reduced-oil DDGS are replaced at a lower rate (1.173 lbs corn per lbs DDGS) than full-oil DDGS (1.196 lbs corn per lbs DDGS). Increasing the rate of oil extraction produces less de-oiled DDGS and requires corn replacement at the lower rate of 1.173. Thus, all else equal, higher rates of oil extraction result in lower GHG emissions per pound of oil extracted. It is possible this effect would disappear if we had higher resolution data on corn displacement ratios for DDGS with different oil contents, but such data are currently not available. PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 2005 Gasoline baseline 18.0 19.2 79.0 79.0 97.0 98.2 and sorghum oil’’ as feedstocks in row I to Table 1 to 40 CFR 80.1426. E. Clarification of the Definition of Renewable Fuel Exporter and Associated Provisions We are finalizing our proposed clarification of the definition of ‘‘exporter of renewable fuel.’’ These changes are meant to ensure appropriate flexibility for market participants to meet export obligations and to ensure RINs are properly retired, as well to as to clarify exporter obligations for parties who transfer renewable fuel between the 48 states or Hawaii and an approved opt-in area (i.e., Alaska or the U.S. territories were any of them to opt-in). The RFS regulations require an exporter of renewable fuel to acquire sufficient RINs to comply with all applicable RVOs incurred from the volumes of the renewable fuel exported.217 We previously defined ‘‘exporter of renewable fuel’’ in 40 CFR 80.1401 as: ‘‘(1) A person that transfers any renewable fuel from a location within the contiguous 48 states or Hawaii to a location outside the contiguous 48 states and Hawaii; and (2) A person that transfers any renewable fuel from a location in the contiguous 48 states or Hawaii to Alaska or a United 217 In this rulemaking, we did not reexamine our well-settled policy of exporter RVOs, which generally require exporters to retire RINs for biofuels they export. We established this policy when we promulgated the regulations implementing the RFS1 and RFS2 programs in 2007 and 2010. See 72 FR 23936 (May 1, 2007); 75 FR 14724 (March 26, 2010). We did not reexamine this issue in this rulemaking, and comments on it are beyond the scope of the rulemaking. We are not making any substantive changes to the relevant provisions, particularly those at 40 CFR 80.1430(a) or (b). Consistent with our long-standing policy, exporters of renewable fuel must continue to acquire sufficient RINs to comply with all applicable RVOs. E:\FR\FM\06FER2.SGM 06FER2 7060 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 States territory, unless that state or territory has received an approval from the Administrator to opt in to the renewable fuel program pursuant to § 80.1443.’’ 218 We are revising these regulations for two key reasons. First, during implementation of the RFS program, we have observed contract structuring practices that may have eroded compliance assurance. Notably, we have observed instances of export transactions in which parties have sold renewable fuel for export to entities purporting to accept RIN retirement obligations that were then not fulfilled by the buyer. These instances demonstrate that the RFS program could benefit from regulatory changes designed to ensure that exporter obligations are fulfilled. Therefore, we are revising the definition to resolve any potential ambiguity and clarify which parties may and may not be liable for exporter obligations in order to ensure exporter obligations are fulfilled. Second, the previous definition could have been construed to include parties who transfer renewable fuel from the contiguous 48 states and Hawaii, to an area (either Alaska or a U.S. territory) that has received an approval to opt-in to the RFS program. We did not intend to impose a RIN retirement obligation on these parties. We are therefore clarifying how exporter obligations apply to renewable fuel transferred between the 48 states and Hawaii, and opt-in areas. To achieve these goals when we developed the proposal, we initially considered whether to amend the RFS program regulations consistent with the Foreign Trade Regulations (FTR) and other federal export-related regulations, such as United States Principal Party in Interest (USPPI) and Foreign Principal Party in Interest (FPPI).219 While there were some commenters that suggested adopting those terms, we chose not to do so for the following reasons. The FTR and other export-related obligations in other federal programs use a traditional definition of ‘‘export’’ where exported goods leave the U.S. The RFS program addresses obligations incurred through the transfer of renewable fuel from areas covered by the program to both domestic and foreign areas not covered by the program. For instance, the 218 75 FR 14865 (March 26, 2010). e.g., 15 CFR 772.1 (defining exporter as ‘‘[t]he person in the United States who has the authority of a principal party in interest to determine and control the sending of items out of the United States’’). We also considered and rejected other alternatives, which we discuss further in the RTC document in the docket for this action. 219 See, VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 transport of goods from Oregon to Alaska would not qualify as export under most federal export regulations, but the transport of biofuel from Oregon, a covered area, to Alaska, a non-covered area (unless Alaska chooses to opt in), would qualify as export under the RFS program. In addition, if we merely adopted the FTR approach to allow allocation of exporter obligations among parties to an export transaction, we have concerns that a party that is insolvent or lacking assets in the U.S. could undertake those obligations, and enforcement efforts could become overly resource intensive where the fuel has left the country. For these reasons, we do not believe it would be appropriate to amend the RFS program regulations to define an exporter as the USPPI or the FPPI. In reviewing the FTR, we also considered the concept of routed export transactions and the associated flexibility for parties to an export transaction to structure that transaction to place some responsibilities with an FPPI.220 We believe that this framework is reflective of market custom, practice, and capability to contractually allocate liabilities and indemnities among parties to a commercial transaction. We prefer regulations that accommodate these flexibilities, while also balancing the need to protect RFS program integrity. Specifically, we want to allow parties to an export transaction to allocate RFS program exporter obligations as they see fit among themselves, but we also want to protect against contract structuring that may erode compliance assurance. Therefore, we are revising the definition of ‘‘exporter of renewable fuel’’ to mean ‘‘all buyers, sellers, and owners of the renewable fuel in any transaction that results in renewable fuel being transferred from a covered location to a destination outside of the covered locations.’’ In conjunction with this revision, we are creating a definition of ‘‘covered location’’ as ‘‘the contiguous 48 states, Hawaii, and any state or territory that has received an approval from the Administrator to optin to the RFS program under § 80.1443.’’ As described above, this revised definition permits contract flexibilities frequently employed in export transactions with respect to export obligations under other regulatory programs, such as the FTR. All buyers, sellers, and owners of the renewable fuel in a transaction that results in 220 Routed export transaction is the term used to describe an export transaction in which an FPPI directs the movement of goods out of the U.S. and authorizes a U.S. agent to file certain information required by the FTR. PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 renewable fuel being transferred from a covered location to a destination outside of any covered location may contractually allocate RFS program obligations, indemnities, and pricing as they see fit in light of the regulatory requirements. At the same time, the revised definition provides enhanced compliance assurance so as to maintain a level playing field among would-be exporters and ensures RIN retirement so as to maintain the integrity of that market in accordance with the regulatory requirements. Ultimately, the revised definition contributes to satisfying Congress’s mandate that EPA promulgate regulations that ‘‘ensure’’ the nationally-applicable renewable fuel volumes are met.221 We note, moreover, that the existing RFS regulations provide that ‘‘[n]o person shall cause another person to commit an act in violation of any prohibited act under this section.’’ 222 We believe that this prohibition coupled with the revised definitions will deter parties from engaging in sham transactions to evade RIN retirement obligations by transferring ownership of renewable fuels to undercapitalized entities that do not meet their RIN retirement obligations. This includes the specific earlier-described practices we have already observed. The revised definition also clarifies how exporter obligations apply to transfers to and from the contiguous 48 states and Hawaii, and opt-in areas (i.e., Alaska and U.S. territories were they to opt-in). Notably, it avoids imposing exporter obligations on biofuels transferred from the 48 states and Hawaii to an opt-in area. Under the revised definition, multiple parties may meet the definition of an exporter of renewable fuel for the same volume of renewable fuel. In addition, although the definition uses the term ‘‘transaction,’’ in many cases there may be more than one discrete exchange or interaction that results in a volume of renewable fuel being exported. We intend the regulatory term ‘‘transaction’’ to cover all those exchanges and interactions in which the buyers, sellers, and owners know or have reason to know will result in renewable fuel being transferred from a covered location to a destination outside of any covered location.223 For instance, a person holding title to renewable fuel in the U.S. may sell renewable fuel to another person (either inside or outside of the 221 CAA section 211(o)(2)(A)(i); see also CAA section 301(a). 222 See 40 CFR 80.1460(c). 223 To clarify this point, we have revised the regulatory text from the proposed ‘‘a transaction’’ to ‘‘any transaction’’ in this final rulemaking. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 covered areas) and cause the renewable fuel to leave the covered areas. Further, that buyer and seller may have a third party hold title to the renewable fuel during transit out of the covered areas. In this case, the buyer and the seller, both of whom are also owners of the renewable fuel, and the third-party holding company, as another owner of the renewable fuel in the transaction, would be jointly-and-severally liable for complying with the exporter provisions.224 However, our revised regulations create broad flexibility for parties to assign responsibilities as they see fit among themselves in structuring an export transaction. These parties may contractually allocate RIN retirement, and associated registration, reporting, and attest engagement obligations, to any one of the parties that meets the definition of an exporter of renewable fuel. The party undertaking these requirements would then register as an exporter of renewable fuel as set forth in 40 CFR 80.1450(a). This approach is also consistent with our approach to the term ‘‘refiner,’’ under which multiple parties could be considered the refiner of a batch of fuel. In such instances, we have stated that each party meeting the definition of refiner will be held jointlyand-severally liable for refiner requirements, and we are adopting a consistent approach for exporters of renewable fuel.225 However, our revised regulations create broad flexibility for parties to assign responsibilities as they see fit among themselves in structuring an export transaction. These parties may contractually allocate RIN retirement, and associated registration, reporting, and attest engagement obligations, to any one of the parties that meets the definition of an exporter of renewable fuel. The party undertaking these requirements would then register as an exporter of renewable fuel as set forth in 40 CFR 80.1450(a). This approach is also consistent with our approach to the term ‘‘refiner,’’ under which multiple parties could be considered the refiner of a batch of fuel. In such instances, we have stated that each party meeting the 224 This example is meant to be a stylized illustration of how our regulations could apply. It is not meant to exhaustively detail the entities that could meet the definition of exporter of renewable fuel in this type of transaction. To the extent that other parties meet the definition of exporter of renewable fuel, they would also be subject to the exporter provisions. 225 See ‘‘Consolidated List of Reformulated Gasoline and Anti-Dumping Questions and Answers: July 1, 1994 through November 10, 1997,’’ EPA420–R–03–009, at 256 (July 2003) (discussing a scenario in which two parties would be considered refiners and would be independently responsible for all refinery requirements, which would only need to be met once). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 definition of refiner will be held jointlyand-severally liable for refiner requirements, and we are adopting a consistent approach for exporters of renewable fuel.226 EPA does not consider a person to be an exporter of renewable fuel if that person does not know and does not have reason to know that the renewable fuel will be exported. For instance, a renewable fuel producer who produces a batch of fuel, generates RINs, and sells the renewable fuel with attached RINs into the fungible fuel distribution system would not be considered an exporter of renewable fuel under the revised definition unless they know or have reason to know that the batch of fuel would be exported. More specifically, the mere fact that a producer introduces renewable fuels into the stream of commerce, coupled with the fact that a significant portion of domestically produced biofuel is exported, does not make the producer an exporter of renewable fuel. We are also finalizing minor, nonsubstantive changes throughout the RFS regulations to more consistently use the term ‘‘exporter of renewable fuel’’ rather than the term ‘‘exporter.’’ These clarifying edits reflect that the ‘‘exporter of renewable fuel’’ may be different than the ‘‘exporter’’ under other state and federal regulatory programs. F. REGS Rule Provisions We are finalizing a number of changes to the RFS and fuels programs that were previously proposed in the REGS rule,227 and that we listed in the preamble to July 29 proposal as candidates for finalization in this action.228 In reaching our final decisions on these provisions we considered relevant comments on both the 2016 REGS proposal and the July 29 proposal. As noted in the July 29 proposal, we 226 See ‘‘Consolidated List of Reformulated Gasoline and Anti-Dumping Questions and Answers: July 1, 1994 through November 10, 1997,’’ EPA420–R–03–009, at 256 (July 2003) (discussing a scenario in which two parties would be considered refiners and would be independently responsible for all refinery requirements, which would only need to be met once). 227 See 81 FR 80828 (November 16, 2016). 228 We are not taking final action at this time on several changes from the REGS proposal that were listed in the July 29 proposal (Allowing Production of Biomass-Based Diesel From Separated Food Waste (REGS Section VIII.C), RFS Facility Ownership Changes (REGS Section VIII.H), Public Access to Information (REGS Section VIII.O), and Redesignation of Renewable Fuel on a PTD for NonQualifying Uses (REGS Section VIII.R), and certain portions of Other Revisions to the Fuels Program (REGS Section IX), primarily related to test methods). These provisions, along with the other provisions in the REGS proposal that are not being finalized here, remain under consideration and may be finalized in a future action. PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 7061 believe these provisions to be relatively straightforward and would reduce the burden of RFS program implementation. Commenters were generally supportive of these provisions and we are largely finalizing them as proposed; changes to the final provisions relative to the 2016 REGS proposal are discussed in detail in the following sections. 1. Flexibilities for Renewable Fuel Blending for Military Use We are amending 40 CFR 80.1440 to provide new flexibilities for parties that blend renewable fuel to produce fuels for use as transportation fuel, heating oil, or jet fuel under a national security exemption or that sell neat renewable fuel for use in vehicles, engines, and equipment that have a national security exemption for emissions certification. Specifically, these parties will be able to delegate to an upstream party the RINrelated responsibilities (i.e., RIN separation, reporting, recordkeeping, and attest engagement requirements) associated with the renewable fuel. These parties could include the U.S. Military itself, or contractors working for the U.S. Military. The RFS program has a provision that allows blenders that handle and blend small volumes of renewable fuel per year (less than 250,000 gallons per year) to delegate RIN-related responsibilities to an upstream party. We have received a number of inquiries from parties that have wished to provide renewable fuel, either neat or blended into transportation fuel, for use by the U.S. Military as part of Department of Defense (DOD) renewable military initiatives. One obstacle to this use of renewable fuel by the DOD is that, unlike other EPA fuels programs, there were no exemptions related to national security uses in the RFS regulatory program. We believe that it is appropriate to allow DOD or its contractors to delegate RFS RIN responsibilities to upstream parties; doing so removes a potential obstacle to the use of renewable fuels by DOD and will promote use of renewable fuel by the military. Therefore, we are finalizing similar upstream delegation provisions for neat and blended renewable fuels supplied to DOD under a national security exemption as those already in place for small renewable fuel blenders. 2. Heating Oil Used for Cooling We are expanding the definition of heating oil in 40 CFR 80.1401 to include fuels that differ from those meeting the current definition only because they are used to cool, rather than heat, interior spaces of homes or buildings. The first E:\FR\FM\06FER2.SGM 06FER2 7062 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations sentence of the definition of heating oil thus now reads: ‘‘A fuel oil that is used to heat or cool interior spaces of homes or buildings to control ambient climate for human comfort.’’ We are also making minor modifications to the registration, reporting, PTD, and recordkeeping requirements for renewable heating oil to correspond with this change. We had received questions related to the use of renewable heating oil in equipment that cools interior spaces and believe that displacing the use of petroleum based fuel oil with renewable heating oil for cooling is consistent with CAA section 211(o)’s provision for home heating oil to be treated as additional renewable fuel and should be allowed. lotter on DSKBCFDHB2PROD with RULES2 3. Separated Food Waste Plans We are amending the RFS registration procedures for separated food waste plans at 40 CFR 80.1450(b)(1)(vii)(B) and the recordkeeping requirements for separated food waste at 40 CFR 80.1454(j). We are also adding requirements for renewable fuel produced from biogenic waste oils/fats/ greases at 40 CFR 80.1450(b)(1)(vii)(B) and 80.1454(d)(4) and (j). The RFS regulations promulgated in the RFS2 rulemaking required that separated food waste plans include: ‘‘(1) The location of any municipal waste facility or other facility from which the waste stream consisting solely of separated food waste is collected; and (2) A plan documenting how the waste will be collected, how the cellulosic and non-cellulosic portions of the waste will be quantified, and for ongoing verification that such waste consists only of food waste (and incidental other components such as paper and plastics) that is kept separate since generation from other waste materials.’’ 229 In addition to the initial submission of separated food waste plans during RFS registration, we also required that renewable fuel producers using separated food waste feedstock update the registration information whenever there was a change to the plan, including to the location(s) of establishments from which the separated food waste is collected, and in some cases the newly updated plan must have been reviewed by a thirdparty engineer in accordance with EPA registration procedures. We have received numerous company updates for production facilities with separated food waste plans, and some parties noted that the requirement to identify and update suppliers of feedstocks through a plan was overly burdensome. 229 See 40 CFR 80.1450(b)(1)(vii)(B). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 Recognizing that business relationships for recovery of food wastes evolve and that a renewable fuel producer may elect over time to purchase feedstocks from different or multiple parties, we are removing the requirement to provide the location of every facility from which separated food waste feedstock is collected as part of the information required for registration. Removing this registration requirement alleviates the need for numerous company registration updates as a facility’s feedstock supplier list evolves, as well as makes it easier for EPA to review renewable fuel producers’ separated food waste plans in a timely manner. However, the recordkeeping section of the regulations requires renewable fuel producers to keep documents associated with feedstock purchases and transfers that identify where the feedstocks were produced; these documents must be sufficient to verify that the feedstocks meet the definition of renewable biomass.230 Thus, renewable fuel producers will still be required to maintain records that demonstrate that they used a qualifying feedstock to produce renewable fuels for the generation of RINs pursuant to the recordkeeping requirements at 40 CFR 80.1454(d)(4) and (j). We are also adding a provision at 40 CFR 80.1454(j)(1)(ii) that will require renewable fuel producers to maintain records demonstrating the location of any establishment from which the waste stream is collected. Since many renewable fuel producers receive wastes used as feedstocks from an aggregator, we interpret the term ‘‘location’’ to mean the physical address that the aggregator obtained the wastes used as feedstocks from, not the physical or company address of the aggregator. In addition to removing the registration requirement to provide the locations of establishments from which separated food waste is collected, we are also modifying the registration regulations to require that separated food waste plans identify the type(s) of separated food waste(s) to be used and the type(s) of establishment(s) the waste will be collected from. For instance, CAA section 211(o) identifies ‘‘recycled cooking and trap grease’’ as a type of separated food waste. Examples of types of establishments could be restaurants, slaughterhouses, or specific food production plants (the kind of food production should be provided). We believe this information is necessary for EPA to determine at registration whether a renewable fuel producer can make fuel from its proposed feedstock 230 See PO 00000 40 CFR 80.1454(d)(4) and (j). Frm 00048 Fmt 4701 Sfmt 4700 under currently approved separated food waste pathways. Without this information, we would not know what the specific feedstock is (e.g., tallow, yellow grease, etc.) or whether it qualifies as a separated food waste. We are also requiring under 40 CFR 80.1450(b)(1)(vii)(B) that producers of renewable fuels made from biogenic waste oils/fats/greases that are not separated food waste submit a plan at registration with the same requirements as the plan for producers of renewable fuels made from separated food waste. We are henceforth referring to such plans as ‘‘waste oils/fats/greases feedstock plans.’’ There is significant overlap between the two categories of feedstock, with a considerable quantity of biogenic waste oils/fats/greases qualifying as renewable biomass as a result of its additional qualification as separated food waste. For these reasons, as a matter of practice we have required parties intending to use biogenic waste oils/fats/greases as a renewable fuel feedstock to submit separated food waste plans at registration. In addition to helping EPA determine if the feedstock in question meets renewable biomass requirements, we have found that the plans help us assess whether the feedstocks specified by a prospective producer qualify as biogenic waste oils/fats/greases. This assessment is made on a case-by-case basis. This amendment conforms the regulations to EPA’s current practice. A party fully describing its feedstock in a separated food waste plan will not be required to submit an additional waste oils/fats/ greases plan. Since most, if not all, producers of renewable fuel from biogenic waste oils/fats/greases have submitted a separated food waste plan at registration, we do not believe that this revision will add much, if any, burden to existing registered facilities. Those few registered producers using biogenic waste oils/fats/greases that have not previously submitted a separated food waste plan at registration or in a subsequent registration update will be required to do so as part of their next periodic registration update. In addition to adding the registration requirement for a waste oils/fats/greases feedstock plan to 40 CFR 80.1540(b)(1)(vii)(B), we are also adding the same recordkeeping requirements for biogenic oils/fats/greases as for separated food waste at 40 CFR 80.1454(d)(4) and (j), and providing further clarity that the locations from which separated food waste or biogenic oils/fats/greases was sourced is a recordkeeping requirement. E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations 4. Additional Registration Deactivation Justifications lotter on DSKBCFDHB2PROD with RULES2 We are adding additional circumstances in which EPA may deactivate the registration of any party required to register under 40 CFR 80.1450. These amendments will help parties better understand when EPA intends to restrict a party’s participation in the RFS program as well as the procedures that will be used in such circumstances. In July 2014, we finalized requirements that described circumstances under which EPA may deactivate a company registration and an administrative process to initiate deactivation that provides companies an opportunity to respond to and/or submit the required information in a timely manner.231 Since finalizing these requirements, we have identified a number of other cases in which it is appropriate to deactivate the registration of a company. In addition, we believe the provisions should be extended to cover deactivation of registrations for any party required to register with EPA under 40 CFR 80.1450 (e.g., third-party auditors).232 Specifically, we are amending 40 CFR 80.1450(h)(1) to provide that EPA may deactivate registrations of a party for the following reasons in addition to those previously listed: • The party fails to comply with the registration requirements of 40 CFR 80.1450. • The party fails to submit any required report within thirty days of the required submission date. • The party fails to pay a penalty or to perform any requirements under the terms of a court order, administrative order, consent decree, or administrative settlement agreement between the party and EPA. • The party submits false or incomplete information. • The party denies EPA access or prevents EPA from completing authorized activities under CAA section 114 despite our presenting a warrant or court order. This includes a failure to provide reasonable assistance. • The party fails to keep or provide EPA with the records required in 40 CFR part 80, subpart M. 231 Under this administrative process, the party has 14 calendar days from the date of the notification to correct the deficiencies identified or explain why there is no need for corrective action. See 40 CFR 80.1450(h)(2)(i). 232 In the REGS proposal, we proposed to use the term ‘‘company, third-party auditor, or third-party engineer’’ in the registration deactivation provisions; however, we are now using the term ‘‘party’’ to refer more generally to any person that may be required to register with EPA. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 • The party otherwise circumvents the intent of the CAA or 40 CFR part 80, subpart M. These deactivation circumstances are consistent with cases where EPA may deny or revoke a certificate of conformity under 40 CFR 1051.255(c) and 86.442–78 for engines and vehicles manufactured in or imported into the U.S. In addition, we are finalizing requirements that state that in instances of willful violation of an applicable requirement or those in which public health, interest, or safety requires otherwise, EPA may also deactivate the registration of a party without providing notice to the party prior to deactivation and will send written notification to the RCO describing the reasons for the deactivation. Parties can still submit new registrations after appropriate actions are taken by the party to remedy the deficiency. 5. New RIN Retirement Section We are creating a new section in the RFS regulations for RIN retirements. The regulations have specific sections that address when and how parties may generate and separate RINs. However, the cases where parties must retire RINs were identified in various sections throughout the regulations. The new section of the RFS regulations for RIN retirements, 40 CFR 80.1434, simply organizes these current sections into one place and will provide beneficial clarification by enumerating the specific instances in which a party must retire RINs in a new section of the regulations and by making those retirements consistent with how parties administratively retire RINs in EMTS. We are aware of some confusion for some parties causing those parties to improperly retire RINs or fail to retire RINs when they have a responsibility to do so under the regulations. Improper retirements can lead to a timeconsuming remediation process, both for EPA and responsible parties. This new section organizes these requirements into one location in the regulations to make the circumstances under which RINs must be retired simpler to locate and understand. The section also includes new regulatory language for cases requiring RIN retirement that are identified in EMTS, but may not be clear in the regulations, given their current organization (e.g., in the case of contaminated or spoiled fuel). Our intent is not to add additional burden on parties that must retire RINs under the RFS program, but rather to make the regulations consistent with how parties already retire RINs in EMTS and help reduce potential confusion PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 7063 regarding the situations in which parties must retire RINs. We are finalizing the elements of the new RIN retirement section at 40 CFR 80.1434 as proposed, with the exception of the provisions for expired RINs and redesignated renewable fuel, which we are not finalizing because we have determined they are not necessary for program implementation at this time. 6. New Pathway for Co-Processing Biomass With Petroleum To Produce Co-Processed Cellulosic Diesel, Jet Fuel, and Heating Oil We are creating a new definition of ‘‘co-processed cellulosic diesel’’ to refer to biodiesel or non-ester renewable diesel fuels that meet the definition for cellulosic biofuel but not the definition of biomass-based diesel. We are also finalizing new pathways that allow coprocessed cellulosic diesel, jet fuel, and heating oil that are derived from coprocessing biomass with petroleum to qualify as cellulosic biofuel and generate cellulosic (D-code 3) RINs, provided certain production process requirements are satisfied. Fuels that meet the cellulosic diesel definition will continue to be able to generate D7 RINs, while fuels that meet the co-processed cellulosic diesel definition but not the cellulosic diesel definition due to coprocessing with petroleum will be able to generate D3 RINs. Fuels produced through co-processing with petroleum will also be required to meet, among other requirements, the requirements of 40 CFR 80.1426(f)(4) to determine the number of RINs that can be generated. While pathways existed for renewable gasoline and gasoline blendstock (row M in Table 1 to 40 CFR 80.1426) and naphtha (row N in Table 1 to 40 CFR 80.1426) produced from cellulosic biomass that is co-processed with petroleum, there was no pathway for diesel, jet fuel, or heating oil produced in this manner. The pathway for cellulosic diesel, jet fuel, and heating oil (Pathway L in Table 1 to 40 CFR 80.1426) excludes processes that coprocess renewable biomass and petroleum. To qualify as cellulosic diesel, a fuel must meet the requirements for both cellulosic biofuel and biomass-based diesel. The definition of biomass-based diesel explicitly excludes renewable fuels that are derived from co-processing biomass with petroleum, and therefore a process that produced diesel, jet fuel, or heating oil by co-processing renewable biomass with petroleum could not qualify as biomass-based diesel or cellulosic diesel under Pathway L in Table 1 to 40 CFR 80.1426. However, cellulosic biofuels other than cellulosic diesel are not E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 7064 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations prohibited from being derived from biomass co-processed with petroleum. In the 2016 REGS proposed rule, we proposed to add a new row U to Table 1 to 40 CFR 80.1426 that would have allowed for cellulosic diesel, jet fuel and heating oil produced from any of the feedstocks listed in row L via any process that co-processes renewable biomass with petroleum and converts cellulosic biomass to fuel to qualify for cellulosic biofuel (D-code 3) RINs.233 While most commenters supported this proposed addition, several commenters disagreed. The dissenting commenters stated that EPA had not conducted a sufficient lifecycle GHG analysis to support the pathways proposed for row U. After reviewing these comments, we have decided to finalize a narrower set of pathways for co-processed cellulosic diesel. Instead of adding a new row U to Table 1 to 40 CFR 80.1426, we are instead adding ‘‘Co-Processed Cellulosic Diesel, Jet Fuel, and Heating Oil’’ as fuel types in row M. Thus, as we had proposed, we are finalizing new pathways for co-processed cellulosic diesel, jet fuel, and heating oil, but for a narrower set of feedstocks and production process requirements. Compared to the proposed row U, row M contains the same feedstocks except that it does not include any energy grasses (i.e., switchgrass, miscanthus, energy cane, Arundo donax, Pennisetum purpureum), and row M contains a more narrowly defined set of production process requirements. Note that the energy grass feedstocks are the only ones in the proposed row U that include significant indirect land use change emissions based on EPA’s lifecycle GHG analysis of switchgrass for the March 2010 RFS2 rule. Finalizing this narrower set of pathways addresses the commenters concerns about insufficient analysis because approval of these pathways is supported by the extensive analyses that we conducted for a previous rule. The pathways in row M were approved in the March 2013 Pathways I rule and may include fuels produced through the co-processing renewable biomass and petroleum.234 The analysis supporting that rulemaking found that the pathways evaluated for corn stover feedstock reduced lifecycle GHG emissions by at least 65 to 129 percent compared to the statutory petroleum baseline, and the results for corn stover were extended to the other feedstocks 233 Another part of the 2016 REGS proposal, which we are not finalizing here, would have amended the definition of ‘‘cellulosic diesel’’ so that it no longer required that such fuel meet the definition of biomass-based diesel. 234 See 78 FR 14190 (March 5, 2013). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 listed in row M. We are now extending those results to cover co-processed cellulosic diesel, jet fuel, and heating oil produced from the same feedstocks and processes listed in row M. The analysis for the March 2013 Pathways I rule did not explicitly evaluate co-processing but the upgrading processes were modeled as using the same types of equipment and processes as petroleum refining.235 Indeed, the analysis was largely based on a report that evaluated processes that co-produce gasoline and diesel products.236 The most likely processes in row M to include co-processing are the ones that have upgrading as the final step, as upgrading is a common part of petroleum refining. Our analysis for the March 2013 Pathways I rule estimated a 67 percent GHG reduction compared to conventional gasoline for renewable gasoline and renewable gasoline blendstock produced from corn stover through catalytic pyrolysis and upgrading. Producing cellulosic diesel instead of renewable gasoline through this same pathway would produce similar results satisfying the 60 percent GHG reduction threshold. When energy allocation is used for GHG accounting, which is the approach we have used for co-produced RIN generating fuels,237 coproduced gasoline and diesel products will have the same, or nearly the same GHG emissions per unit of energy. Studies looking at petroleum refining have also found that upgrading to diesel fuel is less GHG-intensive than upgrading to gasoline.238 Based on these assessments we conclude that the lifecycle GHG emissions associated with the new pathways being added to row M satisfy the statutory 60 percent GHG reduction requirement to qualify as cellulosic biofuel. In summary, the analyses conducted for the March 2013 Pathways I rule support the addition of ‘‘co-processed cellulosic diesel, jet fuel and heating oil’’ as feedstocks to row M 235 Kinchin, Christopher. Catalytic Fast Pyrolysis with Upgrading to Gasoline and Diesel Blendstocks. National Renewable Energy Laboratory (NREL). 2011. EPA–HQ–OAR–2011–0542–0007 236 Id. 237 See for example discussion of hydrotreated camelina oil in that March 2013 Pathways I rule at 78 FR 14198. 238 For example, for the 2010 RFS2 rule EPA estimated slightly lower refining emissions (9.2 gCO2e/MJ) for 2005 average U.S. gasoline than for 2005 U.S. average diesel (9.0 gCO2e/MJ). Other studies have found an even larger reduction for refining diesel as compared to gasoline. See for example: Cooney, G., et al. (2017). ‘‘Updating the U.S. Life Cycle GHG Petroleum Baseline to 2014 with Projections to 2040 Using Open-Source Engineering-Based Models.’’ Environmental Science & Technology 51(2): 977–987. While this may be different when biogenic feedstocks are used, it is reasonable to conclude that any differences would not be large enough to disqualify the fuel from satisfying the 60 percent GHG reduction threshold. PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 of Table 1 to 40 CFR 80.1426, and commenters did not provide sufficient data or information to support a different conclusion. The 2016 REGS proposal also included a revised definition for ‘‘cellulosic diesel’’ and a new term, ‘‘cellulosic biomass-based diesel.’’ 239 These proposed revisions would have, among other things, removed the requirement for ‘‘cellulosic diesel’’ to meet the definitions of both cellulosic biofuel and biomass-based diesel. The new term, ‘‘cellulosic biomass-based diesel,’’ would have effectively replaced ‘‘cellulosic diesel’’ and would have required that the renewable fuel meet both definitions. However, after considering the implementation issues associated with revising an existing definition within EPA’s IT systems (e.g., changing existing registrations), we have decided not to finalize either of the definitional changes proposed in the 2016 REGS rule. Instead, we are accomplishing the same result by leaving the definition of ‘‘cellulosic diesel’’ as-is and are adding a new term, ‘‘co-processed cellulosic diesel,’’ which is, among other things, a renewable fuel that meets the definitions of cellulosic biofuel and either biodiesel or non-ester renewable diesel.240 Importantly, coprocessed cellulosic diesel can be produced as a result of co-processing cellulosic feedstocks with petroleum and is eligible for D-code 3 RINs, but not D-code 7 RINs. It is thus ‘‘co-processed cellulosic diesel, jet fuel, and heating oil’’ that we are adding to row M of Table 1 to 40 CFR 80.14626. 7. Other Revisions to the Fuels Program a. Testing Revisions We are removing the requirement for periodic resubmitting of non-voluntary consensus standard body (non-VCSB) test methods that have not been approved by VCSBs in 40 CFR 80.585(d)(4). Currently, non-VCSB test methods are required to resubmit accuracy and precision qualification information every 5 years if the nonVCSB test method has not been approved by a VCSB organization. At this time, VCSBs, such as ASTM, have yet to qualify any non-VCSB test methods for measuring the sulfur content in diesel, gasoline, or butane. Moreover, we require minimal statistical quality control requirements on every 239 81 FR 80927 (November 16, 2016). new definition for ‘‘co-processed cellulosic diesel’’ is essentially the same as the revised definition of ‘‘cellulosic diesel’’ that we proposed in the 2016 REGS proposal; creating a new term rather than revising an existing definition allows us to avoid legacy issues within our IT system. 240 This E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations type test method approved under the diesel sulfur accuracy and precision requirements 241 to ensure proper test method instrumentation use is as intended in practice. We are, therefore, amending the regulatory requirement by eliminating the provision for non-VCSB test methods to re-submit accuracy and precision qualification information every 5 years. We are also removing the sunset date for designated primary test methods in 40 CFR 80.47. EPA fuels regulations exempted those designated primary test methods that were in use prior to October 28, 2013, from meeting the accuracy and precision qualification requirements.242 We provided this sunset exemption date in the Tier 3 final rule because we were confident that test facilities were utilizing designated primary test methods prior to this date. However, since the statistical quality control (SQC) requirements at 40 CFR 80.47 are intended to ensure proper utilization of designated primary test methods in practice, we are removing this sunset exemption date. This action exempts all designated primary test methods from the accuracy and precision requirements of 40 CFR 80.47. b. Oxygenate Added Downstream in Tier 3 After the Tier 3 final rule was published,243 we received several questions concerning the language at 40 CFR 80.1603(d) about accounting for downstream oxygenate blending in refiners’ and importers’ average annual sulfur calculations. Specifically, some refiners asked whether 40 CFR 80.1603(d) is consistent with the related reformulated gasoline (RFG) provisions for downstream oxygenate blending in 40 CFR 80.69. Currently, refiners may certify RFG after the addition of oxygenate to the reformulated blendstock for oxygenate blending (RBOB) sample at the refinery lab (creating a so-called ‘‘hand blend’’), as allowed in 40 CFR 80.69(a). The Tier 3 regulations at 40 CFR 80.1603(d) require that refiners and importers account for downstream oxygenate blending to any gasoline or blendstock for oxygenate blending (BOB) by volume weighting the sulfur content of the gasoline or BOB with the sulfur content of the added oxygenate. Under the Tier 3 regulations, refiners and importers may either rely upon test results of batches of oxygenate supplied by the producer of the oxygenate or use an assumed value of 5.00 ppm added at 10 volume percent ethanol concentration if actual sulfur results are not available. These refiners and importers suggested that the regulatory language at 40 CFR 80.1603(d) may be interpreted to continue to allow the use of handblended RBOB samples for determining oxygenate sulfur content added downstream by arguing that the language at 40 CFR 80.1603(d) only applied to conventional gasoline and conventional blendstock for oxygenate blending (CBOB). We intended for the downstream oxygenate blending regulations at 40 CFR 80.1603(d) to apply to all gasoline and BOBs, not just conventional gasoline and CBOB. In the preamble to the Tier 3 final rule, we explained that the ‘‘final rule requires that in determining their compliance with today’s sulfur standards, refiners and importers must either use the actual sulfur content of the denatured fuel ethanol (DFE) established through testing of the DFE actually blended or assume a 5 ppm sulfur content for the DFE added downstream. To prevent potential bias, a refiner or importer must choose to use only one method during each annual compliance period.’’ 244 The regulations at 40 CFR 80.101(d)(4) set forth the criteria that a refiner must meet to include downstream ethanol in their conventional gasoline compliance 7065 calculations, and 40 CFR 80.69 sets forth the criteria a refiner must meet to include downstream ethanol in their RFG or RBOB compliance calculations. If a refiner satisfies these criteria, 40 CFR 80.1603(d) sets forth the mechanism for accounting for downstream ethanol in annual compliance calculations for all gasoline and BOBs. This section of the regulations was designed to ensure that all refiners calculate their annual average sulfur levels by including the ethanol that is actually added to their gasoline or BOBs, or to use the default value of 5 ppm sulfur content. This would alleviate the need for refiners to use hand blends prepared with ethanol that has less sulfur than is actually blended with the refiner’s gasoline or BOB for their compliance calculations. Although we believe that 40 CFR 80.1603(d) clearly applies to all gasoline and BOBs, not just RFG or RBOB, we are making minor amendments to ensure that these requirements are as clear as possible to the regulated community. We are also making minor amendments to the Tier 3 sulfur reporting requirements at 40 CFR 80.1652 to better accommodate the inclusion of downstream oxygenate blending in annual average sulfur compliance demonstrations. These added requirements will help align the reported batch information with the annual average compliance report and is necessary to ensure that refiners met both the per-gallon and annual average sulfur standards. c. Technical Corrections and Clarifications We are making numerous technical corrections to EPA’s fuels programs. These amendments are being made to correct inaccuracies and oversights in the current regulations. These changes are described in Table IX.F.7–2 below. lotter on DSKBCFDHB2PROD with RULES2 TABLE IX.F.7–2—MISCELLANEOUS TECHNICAL CORRECTIONS AND CLARIFICATIONS TO TITLE 40 Part and section of Title 40 Description of revision 79.51(f)(6)(iii), 79.59(a)(1), 80.27(e)(1)(i), 80.69(a)(11)(viii)(C), 80.93(d)(4), 80.174(b), 80.174(c), 80.235(b), 80.290(b), 80.533(b), 80.574(b), 80.595(b), 80.607(a), 80.855(c)(2), 80.1285(b), 80.1340(b), 80.1415(c)(4), 80.1441(h), 80.1442(i), 80.1443(d)(2), 80.1449(d), 80.1454(h)(6)(iii), 80.1501(b)(5)(i), 80.1501(b)(5)(ii), 80.1622(g), 80.1625(c)(2), and 80.1656(h). 80.10 ......................................................................................................... 80.27(b) .................................................................................................... Redirecting the mailing addresses to the new address section in 80.10. 241 See 40 CFR 80.584. e.g., 40 CFR 80.47(j)(2). 243 See 242 See, VerDate Sep<11>2014 20:53 Feb 05, 2020 244 See Jkt 250001 PO 00000 Adding a new address section that reflects the address change. Clarifying the Performance-Based Analytical Test Method Approach (PBATMA) implementation for Reid vapor pressure (RVP) compliance assurance measurements. 79 FR 23414 (April 28, 2014). 79 FR 23544 (April 28, 2014). Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 7066 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations TABLE IX.F.7–2—MISCELLANEOUS TECHNICAL CORRECTIONS AND CLARIFICATIONS TO TITLE 40—Continued Part and section of Title 40 Description of revision 80.46 ......................................................................................................... Clarifying that the PBATMA requirements in 80.47 are now effective, removing the VCSB alternative analytical test methods from 80.46, as the VCSB analytical test methods in 80.46 must now meet the requirements in 80.47. Clarifying accuracy criterion for sulfur in gasoline by adding examples with accuracy criterion. Removing the reference to the October 28, 2013, date and making the designated primary test methods exempt from the applicable accuracy and precision requirements of 40 CFR 80.47, given that there are SQC requirements for these methods that will verify if they are being carried out properly. Clarifying accuracy criterion for sulfur in butane by adding examples with accuracy criterion. Clarifying that test facilities meet applicable precision requirements for VCSB method defined and non-VCSB absolute fuel parameters. Removing the accuracy SQC requirement for pre-treatment and assessment of results from the check standard testing after at least 15 testing occasions as described in section 8.2 of ASTM D6299. Clarifying the expanded uncertainty of the accepted reference value of consensus named fuels shall be included in the accuracy SQC qualification criterion. Clarifying participation in a commercially available Inter Laboratory Crosscheck Program (ILCP) at least three times a year meeting the ASTM D6299 requirements for ILCP check standards that meet the requirements for absolute differences between test results and the accepted reference value of the check standard based on the designated primary test method obtained through participation in the ILCP satisfies the accuracy SQC requirement as well as appropriate calculation for adherence to SQC criteria. Also clarifying the accuracy SQC criteria is 0.75 times the published reproducibility of the applicable designated primary test method for each method defined fuel parameter to be consistent with non-VCSB method defined fuel parameter accuracy SQC requirements. Clarification in Precision SQC requirements that the test facility’s long term precision standard deviation, as demonstrated by control charts, is expected to meet applicable precision criterion for the test method. Removing reference to expired provisions related to approval of test methods approved by VCSBs. Clarifying that gasoline benzene and sulfur credits must be used for compliance purposes (i.e., retired) instead of simply being obtained. Adding definition of foreign renewable fuel producer, non-renewable feedstock, non-RIN-generating foreign producer, and RIN-generating foreign producer; amended by revising the definition of foreign ethanol producer and renewable fuel. Applying the new and revised definitions in 80.1401. 80.47(b)(2)(i) and 80.47(b)(2)(ii) ............................................................... 80.47(b)(3), 80.47(c)(3), 80.47(d)(2), 80.47(e)(2), 80.47(f)(2), 80.47(g)(2), 80.47(h)(2), 80.47(i)(2), 80.47(j)(2), and 80.47(l)(4). 80.47(c)(2)(i) and 80.47(c)(2)(ii) ............................................................... 80.47(l)(2)(i) .............................................................................................. 80.47(n)(1)(i), 80.47(o)(1)(i), 80.47(p)(1)(i), and 80.47(p)(2)(i) ................ 80.47(n)(1)(ii), 80.47(o)(1)(ii), and 80.47(p)(1)(ii) ..................................... 80.47(o)(1)(i) ............................................................................................. 80.47(n)(2)(i), 80.47(o)(2)(i), and 80.47(p)(3)(i) ....................................... 80.585(d)(1) and (2) ................................................................................. 80.1240(a)(1)(i) and 80.1603(f)(1) ............................................................ 80.1401 ..................................................................................................... 80.1426(a)(2), 80.1426(c)(4)-(5), 80.1450(b), 80.1450(d)(1), 80.1451(b), 80.1451(b)(1)(ii)(D), 80.1451(g)(1)(ii)(D), 80.1454(q), 80.1466, 80.1472(b)(3)(i), 80.1472(b)(3)(ii)(B), and 80.1472(b)(3)(iii). 80.1440 ..................................................................................................... 80.1450(b)(1)(ix)(A), 80.1451(b)(1)(ii)(I), 80.1451(g)(1)(ii)(I), 80.1452(b)(11), and 80.1464(b)(1)(ii). 80.1450(g)(9) ............................................................................................ 80.1466(d)(3)(ii) ........................................................................................ 80.1469(f)(1) ............................................................................................. 80.1501(b)(3)(i) ......................................................................................... lotter on DSKBCFDHB2PROD with RULES2 80.1600 ..................................................................................................... 80.1609(a) ................................................................................................ 80.1616(c)(3) ............................................................................................ 80.1650(b)(3) ............................................................................................ 80.1650(e)(1)(iii)(A) and 80.1650(g)(1)(iii)(A) ........................................... VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 PO 00000 Frm 00052 Fmt 4701 Adding a new paragraph related to RIN responsibilities for renewable fuel used for purposes subject to national security exemptions. Clarifying the term ‘‘denaturant’’ to mean ‘‘ethanol denaturant.’’ Clarifying the third-party auditor registration updates language to make QAP updates consistent with registration updates. Revising erroneous reference for third-party independence requirements from 80.65(e)(2)(iii) to 80.65(f)(2)(iii). Clarifying to clearly link updates to quality assurance plans with updates to a third-party auditor’s registration under 80.1450(g)(9). Clarifying that the word ‘‘ATTENTION’’ should be in black font, not orange. Removing the duplicative definition of ‘‘Ethanol denaturant,’’ which is already defined in 80.2(iiii). Revising cross-reference to 80.1603(d)(3). Clarifying that Tier 2 credits generated from January 1, 2017 through December 31, 2019, must be used between January 1, 2017 and December 31, 2019. Clarifying that the oxygenate blender registration dates also apply to persons who blend oxygenate into CBOB and conventional gasoline. Clarifying that records are kept at the oxygenate production ‘‘facility’’ (instead of the oxygenate production ‘‘refinery’’). Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations X. Public Participation Many interested parties participated in the rulemaking process that culminates with this final rule. This process provided opportunity for submitting written public comments following the proposal that we published on July 29, 2019 (84 FR 36762) and the supplemental notice of proposed rulemaking published on October 28, 2019. We also held public hearings on July 31, 2019 and October 30, 2019, at which many parties provided both verbal and written testimony. All comments received, both verbal and written, are available in Docket ID No. EPA–HQ–OAR–2019– 0136 and we considered these comments in developing the final rule. Public comments and EPA responses are discussed throughout this preamble and in the accompanying RTC document, which is available in the docket for this action. XI. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review This action is a significant regulatory action that was submitted to the Office of Management and Budget (OMB) for review. Any changes made in response to OMB recommendations have been documented in the docket. EPA prepared an analysis of illustrative costs associated with the 2020 percentage standards. This analysis is presented in Section V. lotter on DSKBCFDHB2PROD with RULES2 B. Executive Order 13771: Reducing Regulations and Controlling Regulatory Costs This action is considered an Executive Order 13771 regulatory action. Details on the estimated costs of the 2020 percentage standards can be found in EPA’s analysis of the illustrative costs. This analysis is presented in Section V. C. Paperwork Reduction Act (PRA) The existing Information Collection Request (ICR) covering the RFS program is entitled ‘‘Recordkeeping and Reporting for the Renewable Fuel Standard Program,’’ EPA ICR No. 2546.01, OMB Control Number 2060– 0725; expires August 31, 2022. The existing RFS ICR covers registration, recordkeeping, and reporting requirements currently in 40 CFR part 80, subpart M. The changes affecting RVO calculations will not change the recordkeeping and reporting burdens vis-a`-vis the existing collection. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 However, certain of the amendments in this action will result in an additional burden. The information collection activities related to the amendments to the RFS regulations in this rule have been submitted for approval to the Office of Management and Budget (OMB) under the PRA. You can find a copy of the ICR in the docket for this rule, identified by EPA ICR Number 2595.02, OMB Control Number 2060– NEW, and it is briefly summarized here. The parties for whom we anticipate an increase in burden are generally described as RIN generators (specifically, those who are producers of renewable fuel) due the amendments related to pathways, and those who are generally described as obligated parties (specifically, those who are refiners and importers) due to the provisions for certified NTDF. The supporting statement clearly indicates the amendments and includes detailed tables with regulatory burden laid out by type of party, regulatory citation, description of information to be collected, estimated burden in hours and dollars, and reporting form or format. Certain amendments in this action are related to non-RFS fuels programs, but these amendments are mostly technical corrections (e.g., address corrections) and do not impose any additional recordkeeping and reporting burden. The Following Summarizes the Burden Respondents/affected entities: The respondents to this information collection are RIN generators and obligated parties under the RFS program, and fall into the following general industry categories: Petroleum refineries, ethyl alcohol manufacturers, other basic organic chemical manufacturing, chemical and allied products merchant wholesalers, petroleum bulk stations and terminals, petroleum and petroleum products merchant wholesalers, gasoline service stations, and marine service stations. Respondent’s obligation to respond: Mandatory. Estimated number of respondents: 6,042. Total number of responses: 357,512. Frequency of response: Annually and occasionally. Total estimated burden: 32,548 hours (per year). Burden is defined at 5 CFR 1320.3(b). Total estimated cost: $3,511,813 (per year). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 7067 numbers for EPA’s regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves this ICR, EPA will announce that approval in the Federal Register and publish a technical amendment to 40 CFR part 9 to display the OMB control number for the approved information collection activities contained in this final rule. D. Regulatory Flexibility Act (RFA) I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden, or otherwise has a positive economic effect on the small entities subject to the rule. With respect to the amendments to the RFS regulations and other fuels programs, this action makes relatively minor corrections and modifications to those regulations, and we do not anticipate that there will be any significant adverse economic impact on directly regulated small entities. The small entities directly regulated by the annual percentage standards associated with the RFS volumes are small refiners, which are defined at 13 CFR 121.201. With respect to the 2020 percentage standards, we have evaluated the impacts on small entities from two perspectives: As if the standards were a standalone action or if they are a part of the overall impacts of the RFS program as a whole. When evaluating the standards as if they were a standalone action separate and apart from the original rulemaking that established the RFS2 program, the standards could be viewed as increasing the cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements by 170 million gallons between 2019 and 2020. To evaluate the impacts of the volume requirements on small entities relative to 2019, we have conducted a screening analysis 245 to assess whether we should make a finding that this action will not have a significant economic impact on a substantial number of small entities. Currently available information shows that the impact on small entities from implementation of this rule will not be significant. We have reviewed and 245 ‘‘Screening Analysis for the Final Renewable Fuel Standards for 2020,’’ memorandum from Dallas Burkholder and Nick Parsons to EPA Air Docket EPA–HQ–OAR–2018–0205. E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 7068 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations assessed the available information, which shows that obligated parties, including small entities, are generally able to recover the cost of acquiring the RINs necessary for compliance with the RFS standards through higher sales prices of the petroleum products they sell than would be expected in the absence of the RFS program.246 This is true whether they acquire RINs by purchasing renewable fuels with attached RINs or purchase separated RINs. The costs of the RFS program are thus generally being passed on to consumers in the highly competitive marketplace. Even if we were to assume that the cost of acquiring RINs was not recovered by obligated parties, and we used the maximum values of the costs discussed in Section V and the gasoline and diesel fuel volume projections and wholesale prices from the October 2019 version of EIA’s Short Term Energy Outlook, along with current wholesale biofuel prices, a cost-to-sales ratio test shows that the costs to small entities of the RFS standards are far less than 1 percent of the value of their sales. While the screening analysis described above supports a certification that this rule will not have a significant economic impact on small refiners, we continue to believe that it is more appropriate to consider the standards as a part of our ongoing implementation of the overall RFS program. When considered this way, the impacts of the RFS program as a whole on small entities were addressed in the RFS2 final rule, which was the rule that implemented the entire program as required by EISA 2007.247 As such, the Small Business Regulatory Enforcement Fairness Act (SBREFA) panel process that took place prior to the 2010 rule was also for the entire RFS program and looked at impacts on small refiners through 2022. For the SBREFA process for the RFS2 final rule, we conducted outreach, factfinding, and analysis of the potential impacts of the program on small refiners, which are all described in the Final Regulatory Flexibility Analysis, located in the rulemaking docket (EPA– HQ–OAR–2005–0161). This analysis looked at impacts to all refiners, including small refiners, through the year 2022 and found that the program would not have a significant economic impact on a substantial number of small entities, and that this impact was expected to decrease over time, even as 246 For a further discussion of the ability of obligated parties to recover the cost of RINs see ‘‘Denial of Petitions for Rulemaking to Change the RFS Point of Obligation,’’ EPA–420–R–17–008, November 2017. 247 75 FR 14670 (March 26, 2010). VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 the standards increased. For gasoline and/or diesel small refiners subject to the standards, the analysis included a cost-to-sales ratio test, a ratio of the estimated annualized compliance costs to the value of sales per company. From this test, we estimated that all directly regulated small entities would have compliance costs that are less than one percent of their sales over the life of the program (75 FR 14862, March 26, 2010). We have determined that this final rule will not impose any additional requirements on small entities beyond those already analyzed, since the impacts of this rule are not greater or fundamentally different than those already considered in the analysis for the RFS2 final rule assuming full implementation of the RFS program. This rule increases the 2020 cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements by 170 million gallons relative to the 2019 volume requirements, but those volumes remain significantly below the statutory volume targets analyzed in the RFS2 final rule. Compared to the burden that would be imposed under the volumes that we assessed in the screening analysis for the RFS2 final rule (i.e., the volumes specified in the Clean Air Act), the volume requirements in this rule reduce burden on small entities. Regarding the BBD standard, we are maintaining the volume requirement for 2021 at the same level as the 2020 volume requirement we finalized in the 2019 final rule.248 While this volume is an increase over the statutory minimum value of 1 billion gallons, the BBD standard is a nested standard within the advanced biofuel category, which we are significantly reducing from the statutory volume targets. As discussed in Section VI, the BBD volume requirement is below what is anticipated to be produced and used to satisfy the advanced biofuel requirement. The net result of the standards being finalized in this action 248 Moreover, we note that the 2021 BBD volume only establishes the maximum BBD volume for that year and may be adjusted in subsequent actions. This volume does not directly regulate any entity. We intend to translate this volume, subject to any appropriate adjustments, into a percentage standard in the 2021 annual rulemaking. We also acknowledge that today’s action does impose the 2020 BBD percentage standard. As we explain in Section VI and in the preamble to the 2019 final rule, this percentage standard is not practically binding, as we expect obligated parties to rely on BBD RINs, in excess of this standard, to satisfy the 2020 advanced biofuel standard. Thus, any impact on directly regulated entities from the 2020 BBD percentage standard is subsumed into the impact of the 2020 advanced biofuel standard. As we explain in this section and the screening memo, we find that the 2020 advanced biofuel standard will not have a significant economic impact on a substantial number of small entities under the RFA. PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 is a reduction in burden as compared to implementation of the statutory volume targets assumed in the RFS2 final rule analysis. While the rule will not have a significant economic impact on a substantial number of small entities, there are compliance flexibilities in the program that can help to reduce impacts on small entities. These flexibilities include being able to comply through RIN trading rather than renewable fuel blending, 20 percent RIN rollover allowance (up to 20 percent of an obligated party’s RVO can be met using previous-year RINs), and deficit carryforward (the ability to carry over a deficit from a given year into the following year, provided that the deficit is satisfied together with the next year’s RVO). In the RFS2 final rule, we discussed other potential small entity flexibilities that had been suggested by the SBREFA panel or through comments, but we did not adopt them, in part because we had serious concerns regarding our authority to do so. Additionally, we realize that there may be cases in which a small entity may be in a difficult financial situation and the level of assistance afforded by the program flexibilities is insufficient. For such circumstances, the program provides hardship relief provisions for small entities (small refiners), as well as for small refineries.249 As required by the statute, the RFS regulations include a hardship relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small refinery to petition for an extension of its small refinery exemption at any time based on a showing that the refinery is experiencing a ‘‘disproportionate economic hardship.’’ EPA regulations provide similar relief to small refiners that are not eligible for small refinery relief (see 40 CFR 80.1442(h)). We have currently identified a total of 9 small refiners that own 11 refineries subject to the RFS program, all of which are also small refineries. We evaluate these petitions on a caseby-case basis and may approve such petitions if it finds that a disproportionate economic hardship exists. In evaluating such petitions, we consult with the U.S. Department of Energy and consider the findings of DOE’s 2011 Small Refinery Study and other economic factors. To date, EPA has adjudicated petitions for exemption from 37 small refineries for the 2018 RFS standards (10 of which are owned by a small refiner).250 We have not yet 249 See CAA section 211(o)(9)(B). about the number of SREs granted can be found at: https://www.epa.gov/fuels250 Information E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations adjudicated any small refinery exemption petitions for the 2019 or 2020 RFS standards. In sum, this final rule will not change the compliance flexibilities currently offered to small entities under the RFS program (including the small refinery hardship provisions we continue to implement) and available information shows that the impact on small entities from implementation of this rule will not be significant viewed either from the perspective of it being a standalone action or a part of the overall RFS program. We have therefore concluded that this action will not have any significant adverse economic impact on directly regulated small entities. E. Unfunded Mandates Reform Act (UMRA) This action does not contain an unfunded mandate of $100 million or more as described in UMRA, 2 U.S.C. 1531–1538, and does not significantly or uniquely affect small governments. This action implements mandates specifically and explicitly set forth in CAA section 211(o) and we believe that this action represents the least costly, most cost-effective approach to achieve the statutory requirements. F. Executive Order 13132: Federalism This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. G. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments This action does not have tribal implications as specified in Executive Order 13175. This action will be implemented at the Federal level and affects transportation fuel refiners, blenders, marketers, distributors, importers, exporters, and renewable fuel producers and importers. Tribal governments will be affected only to the extent they produce, purchase, or use regulated fuels. Thus, Executive Order 13175 does not apply to this action. lotter on DSKBCFDHB2PROD with RULES2 H. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that EPA has registration-reporting-and-compliance-help/rfssmall-refinery-exemptions. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 7069 reason to believe may disproportionately affect children, per the definition of ‘‘covered regulatory action’’ in section 2–202 of the Executive Order. This action is not subject to Executive Order 13045 because it implements specific standards established by Congress in statutes (CAA section 211(o)) and does not concern an environmental health risk or safety risk. U.S.C. 7414, 7522–24, 7542, 7545, and 7601. I. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use Environmental protection, Administrative practice and procedure, Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports, Oil imports, Petroleum, Renewable fuel. This action is not a ‘‘significant energy action’’ because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. This action establishes the required renewable fuel content of the transportation fuel supply for 2020, consistent with the CAA and waiver authorities provided therein. The RFS program and this rule are designed to achieve positive effects on the nation’s transportation fuel supply, by increasing energy independence and security and lowering lifecycle GHG emissions of transportation fuel. J. National Technology Transfer and Advancement Act (NTTAA) This rulemaking does not involve technical standards. K. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations EPA believes that this action does not have disproportionately high and adverse human health or environmental effects on minority populations, low income populations, and/or indigenous peoples, as specified in Executive Order 12898 (59 FR 7629, February 16, 1994). This regulatory action does not affect the level of protection provided to human health or the environment by applicable air quality standards. This action does not relax the control measures on sources regulated by the RFS and other fuels regulations. L. Congressional Review Act (CRA) This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). XII. Statutory Authority Statutory authority for this action comes from sections 114, 203–05, 208, 211, and 301 of the Clean Air Act, 42 PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 List of Subjects 40 CFR Part 79 Environmental protection, Fuel additives, Gasoline, Motor vehicle pollution, Penalties, Reporting and recordkeeping requirements. 40 CFR Part 80 Dated: December 19, 2019. Andrew R. Wheeler, Administrator. For the reasons set forth in the preamble, EPA amends 40 CFR parts 79 and 80 as follows: PART 79—REGISTRATION OF FUEL AND FUEL ADDITIVES 1. The authority citation for part 79 continues to read as follows: ■ Authority: 42 U.S.C. 7414, 7524, 7545 and 7601. Subpart F—Testing Requirements for Registration 2. Section 79.51 is amended by revising the last sentence of paragraph (f)(6)(iii) to read as follows: ■ § 79.51 General requirements and provisions. * * * * * (f) * * * (6) * * * (iii) * * * The registrants’ communications should be sent to the following address: Attn: Fuel/Additives Registration, U.S. Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Mail Code 6405A, Washington, DC 20460. * * * * * ■ 3. Section 79.59 is amended by revising the last sentence of paragraph (a)(1) introductory text to read as follows: § 79.59 Reporting requirements. (a) * * * (1) * * * Forms for submitting this data may be obtained from EPA at the following address: Attn: Fuel/Additives Registration, U.S. Environmental Protection Agency, 1200 Pennsylvania Ave., NW, Mail Code 6405A, Washington, DC 20460. * * * * * E:\FR\FM\06FER2.SGM 06FER2 7070 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations The revisions read as follows: PART 80—REGULATION OF FUELS AND FUEL ADDITIVES § 80.46 Measurement of reformulated gasoline and conventional gasoline fuel parameters. 4. The authority citation for part 80 continues to read as follows: ■ Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a). Subpart A—General Provisions 5. Section 80.10 is added to read as follows: ■ § 80.10 Addresses. (a) For submitting notifications, applications, petitions, or other communications with EPA, use one of the following addresses for mailing: (1) For U.S. Mail: Attn: [TITLE AS DIRECTED], U.S. Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Mail Code 6405A, Washington, DC 20460. (2) For commercial service: Attn: [TITLE AS DIRECTED], U.S. Environmental Protection Agency, William Jefferson Clinton Building North, Mail Code 6405A, Room 6520V, 1200 Pennsylvania Ave. NW, Washington, DC 20004; Phone: 1–800– 385–6164. (b) [Reserved] Subpart B—Controls and Prohibitions 6. Section 80.27 is amended by revising paragraphs (b) and (e)(1)(i) to read as follows: ■ § 80.27 Controls and prohibitions on gasoline volatility. * * * * * (b) Determination of compliance. Compliance with the standards listed in paragraph (a) of this section shall be determined by the use of the sampling methodologies specified in § 80.8 and the testing methodology specified in § 80.46(c) until December 31, 2015, and § 80.47 beginning January 1, 2016. * * * * * (e) * * * (1) * * * (i) Any person may request a testing exemption by submitting an application that includes all the information listed in paragraphs (e)(3) through (6) of this section to the attention of ‘‘Test Exemptions’’ to the address in § 80.10(a). * * * * * lotter on DSKBCFDHB2PROD with RULES2 Subpart D—Reformulated Gasoline 7. Section 80.46 is amended by: a. Revising paragraphs (a), (b), (d), (e), (f), and (g); and ■ b. Removing and reserving paragraphs (h)(1)(iv), (v), (vii), (viii), (x), (xiii), (xv), and (xvi). ■ ■ VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (a) Sulfur. Sulfur content of gasoline and butane must be determined by use of the following methods: (1)(i) Through December 31, 2015, the sulfur content of gasoline must be determined by ASTM D2622. (ii) Beginning January 1, 2016, the sulfur content of gasoline must be determined by a test method approved under § 80.47. (2)(i) Through December 31, 2015, the sulfur content of butane must be determined by ASTM D6667. (ii) Beginning January 1, 2016, the sulfur content of butane must be determined by a test method approved under § 80.47. (b) Olefins. Olefin content must be determined by use of the following methods: (1) Through December 31, 2015, olefin content must be determined using ASTM D1319. (2) Beginning January 1, 2016, olefin content must be determined by a test method approved under § 80.47. * * * * * (d) Distillation. Distillation parameters must be determined by use of the following test methods: (1) Through December 31, 2015, distillation parameters must be determined using ASTM D86. (2) Beginning January 1, 2016, distillation parameters must be determined by a test method approved under § 80.47. (Note: The precision estimates for reproducibility in ASTM D86–12 do not apply; see § 80.47(h).) (e) Benzene. Benzene content must be determined by use of the following test methods: (1) Through December 31, 2015, benzene content must be determined using ASTM D3606, except that instrument parameters shall be adjusted to ensure complete resolution of the benzene, ethanol, and methanol peaks because ethanol and methanol may cause interference with ASTM D3606 when present. (2) Beginning January 1, 2016, benzene content must be determined by a test method approved under § 80.47. (f) Aromatic content. Aromatic content must be determined by use of the following methods: (1) Through December 31, 2015, aromatic content must be determined using ASTM D5769, except the sample chilling requirements in section 8 of this standard method are optional. (2) Beginning January 1, 2016, aromatic content must be determined by a test method approved under § 80.47. PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 (g) Oxygen and oxygenate content analysis. Oxygen and oxygenate content must be determined by use of the following methods: (1) Through December 31, 2015, oxygen and oxygenate content must be determined using ASTM D5599. (2) Beginning January 1, 2016, oxygen and oxygenate content must be determined by a test method approved under § 80.47. * * * * * ■ 8. Section 80.47 is amended by revising paragraphs (b), (c)(2)(i) and (ii), (c)(3), (d)(2), (e)(2), (f)(2), (g)(2), (h)(2), (i)(2), (j)(2), (l)(2)(i), (l)(4), (n)(1), (n)(2)(i), (o)(1), (o)(2)(i), (p)(1), (p)(2)(i), and (p)(3)(i) to read as follows: § 80.47 Performance-based Analytical Test Method Approach. * * * * * (b) Precision and accuracy criteria for approval for the absolute fuel parameter of gasoline sulfur—(1) Precision. Beginning January 1, 2016, for motor vehicle gasoline, gasoline blendstock, and gasoline fuel additives subject to the gasoline sulfur standard at §§ 80.195 and 80.1603, the maximum allowable standard deviation computed from the results of a minimum of 20 tests made over 20 days (tests may be arranged into no fewer than five batches of four or fewer tests each, with only one such batch allowed per day over the minimum of 20 days) on samples using good laboratory practices taken from a single homogeneous commercially available gasoline must be less than or equal to 1.5 times the repeatability ‘‘r’’ divided by 2.77, where ‘‘r’’ equals the ASTM repeatability of ASTM D7039 (Example: A 10 ppm sulfur gasoline sample: Maximum allowable standard deviation of 20 tests≤1.5*(1.73ppm/ 2.77) = 0.94 ppm). The 20 results must be a series of tests with a sequential record of analysis and no omissions. A laboratory facility may exclude a given sample or test result only if the exclusion is for a valid reason under good laboratory practices and it maintains records regarding the sample and test results and the reason for excluding them. (2) Accuracy. Beginning January 1, 2016, for motor vehicle gasoline, gasoline blendstock, and gasoline fuel additives subject to the gasoline sulfur standard at §§ 80.195 and 80.1603: (i) The arithmetic average of a continuous series of at least 10 tests performed using good laboratory practices on a commercially available gravimetric sulfur standard in the range of 1–10 ppm shall not differ from the accepted reference value (ARV) of the standard by more than 0.47 ppm sulfur, E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations where the accuracy criteria is 0.75*(1.5*r/2.77), where ‘‘r’’ is the repeatability for ARV of the commercially available gravimetric sulfur standard (Example: 0.75*(1.5*1.15ppm/2.77) = 0.47 ppm); (ii) The arithmetic average of a continuous series of at least 10 tests performed using good laboratory practices on a commercially available gravimetric sulfur standard in the range of 10–20 ppm shall not differ from the ARV of the standard by more than 0.94 ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where ‘‘r’’ is the repeatability for ARV of the commercially available gravimetric sulfur standard (Example: 0.75*(1.5*2.30ppm/2.77) = 0.94 ppm); and (iii) In applying the tests of paragraphs (b)(2)(i) and (ii) of this section, individual test results shall be compensated for any known chemical interferences using good laboratory practices. (3) The test method specified at § 80.46(a)(1) is exempt from the requirements of paragraphs (b)(1) and (2) of this section. (c) * * * (2) * * * (i) The arithmetic average of a continuous series of at least 10 tests performed using good laboratory practices on a commercially available gravimetric sulfur standard in the range of 1–10 ppm, say 10 ppm, shall not differ from the ARV of the standard by more than 0.47 ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where ‘‘r’’ is the repeatability for ARV of the commercially available gravimetric sulfur standard (Example: 0.75*(1.5*1.15ppm/2.77) = 0.47 ppm); (ii) The arithmetic average of a continuous series of at least 10 tests performed using good laboratory practices on a commercially available gravimetric sulfur standard in the range of 10–20 ppm, say 20 ppm, shall not differ from the ARV of the standard by more than 0.94 ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where ‘‘r’’ is the repeatability for ARV of the commercially available gravimetric sulfur standard (Example: 0.75*(1.5*2.30ppm/2.77) = 0.94 ppm); and * * * * * (3) The test method specified at § 80.46(a)(2) is exempt from the requirements of paragraphs (c)(1) and (2) of this section. (d) * * * (2) The test method specified at § 80.46(b)(1) is exempt from the requirements of paragraph (d)(1) of this section. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (e) * * * (2) The test method specified at § 80.46(f)(1) is exempt from the requirements of paragraph (e)(1) of this section. (f) * * * (2) The test method specified at § 80.46(g)(1) is exempt from the requirements of paragraph (f)(1) of this section. (g) * * * (2) The test method specified at § 80.46(c)(1) is exempt from the requirements of paragraph (g)(1) of this section. (h) * * * (2) The test method specified at § 80.46(d)(1) is exempt from the requirements of paragraph (h)(1) of this section. (i) * * * (2) The test methods specified at § 80.46(e)(1) are exempt from the requirements of paragraph (i)(1) of this section. (j) * * * (2) The test method specified at § 80.2(z) is exempt from the requirements of paragraph (j)(1) of this section. * * * * * (l) * * * (2)(i) The test facility demonstrates that the test method meets the applicable precision information for the method-defined or non-VCSB absolute fuel parameter as described in this section. * * * * * (4) The test methods specified at §§ 80.2(z) and 80.46(a)(1), (a)(2), (b)(1), (c)(1), (d)(1), (e)(1), (f)(1), and (g)(1) are exempt from the requirements of paragraphs (l)(1) through (3) of this section. * * * * * (n) * * * (1)(i) Accuracy SQC. Every facility shall conduct tests on every instrument with a commercially available gravimetric reference material, or check standard as defined in ASTM D6299 at least three times a year using good laboratory practices. The facility must construct ‘‘MR’’ and ‘‘I’’ charts with control lines as described in section 8.4 and appropriate Annex sections of this standard practice. In circumstances where the absolute difference between the mean of multiple back-to-back tests of the standard reference material and the ARV of the standard reference material is greater than 0.75 times the published reproducibility of the test method, the cause of such difference must be investigated by the facility. Records of the standard reference materials measurements as well as any PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 7071 investigations into any exceedance of these criteria must be kept for a period of five years. (ii) The expanded uncertainty of the ARV of consensus named fuels shall be included in the following accuracy qualification criterion: Accuracy qualification criterion = square root [(0.75R)∧2 + (0.75R)∧2/L], where L = the number of single results obtained from different labs used to calculate the consensus ARV. (2)(i) Precision SQC. Every facility shall conduct tests of every instrument with a quality control material as defined in paragraph 3.2.8 in ASTM D6299 either once per week or once per every 20 production tests, whichever is more frequent. The facility must construct and maintain an ‘‘I’’ chart as described in section 8 and section A1.5.1 and a ‘‘MR’’ chart as described in section A1.5.4. Any violations of control limit(s) shall be investigated by personnel of the facility and records kept for a period of five years. The test facility’s long term site precision standard deviation, as demonstrated by the ‘‘I’’ chart and ‘‘M’’ chart, must meet the applicable precision criterion as described in paragraph (b)(1) or (c)(1) of this section. * * * * * (o) * * * (1)(i) Accuracy SQC. Every facility shall conduct tests of every instrument with a commercially available check standard as defined in ASTM D6299 at least three times a year using good laboratory practices. The check standard must be an ordinary fuel with levels of the fuel parameter of interest close to either the applicable regulatory standard or the average level of use for the facility. For facilities using a VCSB designated method defined test method, the ARV of the check standard must be determined by the respective designated test method for the fuel parameter following the guidelines of ASTM D6299. Facilities using a VCSB alternative method defined test method must use the ARV of the check standard as determined in a VCSB Inter Laboratory Crosscheck Program (ILCP) or a commercially available ILCP following the guidelines of ASTM D6299. If the ARV is not provided in the ILCP, accuracy must be assessed based upon the respective EPA-designated test method using appropriate production samples. The facility must construct ‘‘MR’’ and ‘‘I’’ charts with control lines as described in section 8.4 and appropriate Annex sections of this standard practice. In circumstances where the absolute difference between test results and the ARV of the check E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 7072 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations standard based on the designated primary test method is greater than 0.75 times the published reproducibility of the designated primary test method, the cause of such difference must be investigated by the facility. Participation in a VCSB ILCP or a commercially available ILCP meeting the ASTM D6299 requirements for ILCP check standards, based on the designated primary test method, at least three times a year, and, meeting the requirements in this section for absolute differences between the test results and the ARV of the check standard based on the designated primary test method of less than 0.75 times the published reproducibility of the designated primary test method obtained through participation in the ILCP satisfies this Accuracy SQC requirement (Examples of VCSB ILCPs: ASTM Reformulated Gasoline ILCP or ASTM motor gasoline ILCP). Records of the standard reference materials measurements as well as any investigations into any exceedance of these criteria must be kept for a period of five years. (ii) The expanded uncertainty of the ARV of consensus named fuels shall be included in the following accuracy qualification criterion: Accuracy qualification criterion = square root [(0.75R)∧2 + (0.75R)∧2/L], where L = the number of single results obtained from different labs used to calculate the consensus ARV. (2)(i) Precision SQC. Every facility shall conduct tests of every instrument with a quality control material as defined in paragraph 3.2.8 in ASTM D6299 either once per week or once per every 20 production tests, whichever is more frequent. The facility must construct and maintain an ‘‘I’’ chart as described in section 8 and section A1.5.1 and a ‘‘MR’’ chart as described in section A1.5.4. Any violations of control limit(s) shall be investigated by personnel of the facility and records kept for a period of five years. The test facility’s long term site precision standard deviation, as demonstrated by the ‘‘I’’ chart and ‘‘M’’ chart, must meet the applicable precision criterion as described in paragraph (d)(1), (e)(1), (f)(1), (g)(1), (h)(1), (i)(1), or (j)(1) of this section. * * * * * (p) * * * (1)(i) Accuracy SQC for Non-VCSB Method-Defined test methods with minimal matrix effects. Every facility shall conduct tests on every instrument with a commercially available check standard as defined in the ASTM D6299 at least three times a year using good laboratory practices. The check standard VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 must be an ordinary fuel with levels of the fuel parameter of interest close to either the applicable regulatory standard or the average level of use for the facility. Facilities using a Non-VCSB alternative method defined test method must use the ARV of the check standard as determined in either a VCSB Inter Laboratory Crosscheck Program (ILCP) or a commercially available ILCP following the guidelines of ASTM D6299. If the ARV is not provided in the ILCP, accuracy must be assessed based upon the respective EPA designated test method using appropriate production samples. The facility must construct ‘‘MR’’ and ‘‘I’’ charts with control lines as described in section 8.4 and appropriate Annex sections of this standard practice. In circumstances where the absolute difference between the mean of multiple back-to-back tests of the standard reference material and the ARV of the standard reference material is greater than 0.75 times the published reproducibility of the fuel parameter’s respective designated test method, the cause of such difference must be investigated by the facility. Records of the standard reference materials measurements as well as any investigations into any exceedance of these criteria must be kept for a period of five years. (ii) The expanded uncertainty of the ARV of consensus named fuels shall be included in the following accuracy qualification criterion: Accuracy qualification criterion = square root [(0.75R)∧2 + (0.75R)∧2/L], where L = the number of single results obtained from different labs used to calculate the consensus ARV. (2)(i) Accuracy SQC for Non-VCSB Method-Defined test methods with high sensitivity to matrix effects. Every facility shall conduct tests on every instrument with a production fuel on at least a quarterly basis using good laboratory practices. The production fuel must be representative of the production fuels that are routinely analyzed by the facility. The ARV of the production fuel must be determined by the respective reference installation of the designated test method for the fuel parameter following the guidelines of ASTM D6299. The facility must construct ‘‘MR’’ and ‘‘I’’ charts with control lines as described in section 8.4 and appropriate Annex sections of this standard practice. In circumstances where the absolute difference between the mean of multiple back-to-back tests of the standard reference material and the ARV of the standard reference material is greater than 0.75 times the published reproducibility of the test method must be investigated by the PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 facility. Documentation on the identity of the reference installation and its control status must be maintained on the premises of the method-defined alternative test method. Records of the standard reference materials measurements as well as any investigations into any exceedances of this criterion must be kept for a period of five years. * * * * * (3)(i) Precision SQC. Every facility shall conduct tests of every instrument with a quality control material as defined in paragraph 3.2.8 in ASTM D6299 either once per week or once per every 20 production tests, whichever is more frequent. The facility must construct and maintain an ‘‘I’’ chart as described in section 8 and section A1.5.1 and a ‘‘MR’’ chart as described in section A1.5.4. Any violations of control limit(s) shall be investigated by personnel of the facility and records kept for a period of five years. The test facility’s long term site precision standard deviation, as demonstrated by the ‘‘I’’ chart and ‘‘M’’ chart, must meet the applicable precision criterion as described in paragraph (b)(1), (c)(1), (d)(1), (e)(1), (f)(1), (g)(1), (h)(1), (i)(1), or (j)(1) of this section. * * * * * ■ 9. Section 80.69 is amended by revising paragraph (a)(11)(viii)(C) to read as follows: § 80.69 Requirements for downstream oxygenate blending. (a) * * * (11) * * * (viii) * * * (C) The survey plan must be sent to the attention of ‘‘RFG Program (Survey Plan)’’ to the address in § 80.10(a); * * * * * Subpart E—Anti-Dumping 10. Section 80.93 is amended by revising paragraph (d)(4) to read as follows: ■ § 80.93 Individual baseline submission and approval. * * * * * (d) * * * (4) For U.S. Postal delivery, the petition shall be sent to the attention of ‘‘RFG Program (Baseline Petition)’’ to the address in § 80.10(a). * * * * * Subpart G—Detergent Gasoline 11. Section 80.174 is amended by revising paragraphs (b) and (c) to read as follows: ■ E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations § 80.174 Addresses. * * * * * (b) Other detergent registration and certification data, and certain other information which may be specified in this subpart, shall be sent to the attention of ‘‘Detergent Additive Certification’’ to the address in § 80.10(a). (c) Notifications to EPA regarding program exemptions, detergent dilution and commingling, and certain other information which may be specified in this subpart, shall be sent to the attention of ‘‘Detergent Enforcement Program’’ to the address in § 80.10(a). 12. Section 80.235 is amended by revising paragraph (b) to read as follows: ■ § 80.235 How does a refiner obtain approval as a small refiner? * * * * * (b) Applications for small refiner status must be sent to the attention of ‘‘Gasoline Sulfur Program (Small Refiner)’’ to the address in § 80.10(a). * * * * * ■ 13. Section 80.290 is amended by revising paragraph (b) to read as follows: § 80.290 How does a refiner apply for a sulfur baseline? * * * * * (b) The sulfur baseline request must be sent to the attention of ‘‘Gasoline Sulfur Program (Sulfur Baseline)’’ to the address in § 80.10(a). * * * * * Subpart I—Motor Vehicle Diesel Fuel; Nonroad, Locomotive, and Marine Diesel Fuel; and ECA Marine Fuel 14. Section 80.533 is amended by revising paragraph (b) as follows: ■ § 80.533 How does a refiner or importer apply for a motor vehicle or non-highway baseline for the generation of NRLM credits or the use of the NRLM small refiner compliance options? * * * * (b) The baseline must be sent to the attention of ‘‘Nonroad Rule Diesel Fuel Baseline’’ to the address in § 80.10(a). * * * * * ■ 15. Section 80.574 is amended by revising paragraph (b) as follows: lotter on DSKBCFDHB2PROD with RULES2 * § 80.574 What labeling requirements apply to retailers and wholesale purchaserconsumers of ECA marine fuel beginning June 1, 2014? * * * * * (b) Alternative labels to those specified in paragraph (a) of this section may be used as approved by EPA. Send 20:53 Feb 05, 2020 § 80.585 What is the process for approval of a test method for determining the sulfur content of diesel or ECA marine fuel? * Subpart H—Gasoline Sulfur VerDate Sep<11>2014 requests to the attention of ‘‘ECA Marine Fuel Alternative Label Request’’ to the address in § 80.10(a). ■ 16. Section 80.585 is amended: ■ a. In paragraph (d)(1), by removing ‘‘paragraph (a) or (b)’’ and adding ‘‘paragraph (b)’’ in its place; ■ b. In the first sentence of paragraph (d)(2), by removing ‘‘paragraph (a) or (b)’’ and adding ‘‘paragraph (b)’’ in its place; and ■ c. By revising paragraph (d)(4). The revision reads as follows: Jkt 250001 * * * * (d) * * * (4) The approval of any test method under paragraph (b) of this section shall be valid from the date of approval from the Administrator. * * * * * ■ 17. Section 80.595 is amended by revising paragraph (b) to read as follows: § 80.595 How does a small or GPA refiner apply for a motor vehicle diesel fuel volume baseline for the purpose of extending their gasoline sulfur standards? * * * * * (b) The volume baseline must be sent via certified mail with return receipt or express mail with return receipt to the attention of ‘‘Diesel Baseline’’ to the address in § 80.10(a). * * * * * ■ 18. Section 80.607 is amended by revising paragraph (a) to read as follows: § 80.607 What are the requirements for obtaining an exemption for diesel fuel used for research, development or testing purposes? (a) Written request for a research and development exemption. Any person may receive an exemption from the provisions of this subpart for diesel fuel or ECA marine fuel used for research, development, or testing purposes by submitting the information listed in paragraph (c) of this section to the attention of ‘‘Diesel Program (Diesel Exemption Request)’’ to the address in § 80.10(a). * * * * * ■ Subpart J—Gasoline Toxics ■ 19. Section 80.855 is amended by revising paragraph (c)(2) to read as follows: § 80.855 What is the compliance baseline for refineries or importers with insufficient data? * * * * * (c) * * * (2) Application process. Applications must be submitted to the attention of PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 7073 ‘‘Anti-Dumping Compliance Period’’ to the address in § 80.10(a). * * * * * Subpart L—Gasoline Benzene 20. Section 80.1240 is amended in paragraph (a)(1)(i) in the equation by revising the definition ‘‘OC’’ to read as follows: ■ § 80.1240 How is a refinery’s or importer’s compliance with the gasoline benzene requirements of this subpart determined? (a) * * * (1)(i) * * * OC = Benzene credits used by the refinery or importer to show compliance (gallons benzene). * * * * * ■ 21. Section 80.1285 is amended by revising paragraph (b) to read as follows: § 80.1285 How does a refiner apply for a benzene baseline? * * * * * (b) For U.S. Postal delivery, the benzene baseline application shall be sent to the attention of ‘‘MSAT2 Benzene’’ to the address in § 80.10(a). * * * * * ■ 22. Section 80.1340 is amended by revising paragraph (b) to read as follows: § 80.1340 How does a refiner obtain approval as a small refiner? * * * * * (b) Applications for small refiner status must be sent to the attention of ‘‘MSAT2 Benzene’’ to the address in § 80.10(a). * * * * * Subpart M—Renewable Fuel Standard 23. Section 80.1401 is amended by: a. Adding in alphabetical order definitions for ‘‘Certified nontransportation 15 ppm distillate fuel,’’ ‘‘Co-processed cellulosic diesel,’’ and ‘‘Covered location’’; ■ b. Revising the definition of ‘‘Exporter of renewable fuel’’ and ‘‘Foreign ethanol producer’’; ■ c. Adding in alphabetical order a definition for ‘‘Foreign renewable fuel producer’’; ■ d. Revising paragraph (2) in the definition of ‘‘Heating oil’’; ■ e. Adding in alphabetical order definitions for ‘‘Non-renewable feedstock’’ and ‘‘Non-RIN-generating foreign producer’’; ■ f. Revising paragraph (2) in the definition of ‘‘Renewable fuel’’; and ■ g. Adding in alphabetical order a definition for ‘‘RIN-generating foreign producer’’. The additions and revisions read as follows: ■ ■ E:\FR\FM\06FER2.SGM 06FER2 7074 § 80.1401 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations Definitions lotter on DSKBCFDHB2PROD with RULES2 * * * * * Certified non-transportation 15 ppm distillate fuel or certified NTDF means distillate fuel that meets all of the following: (1) It has been certified as complying with the 15 ppm sulfur standard, cetane/aromatics standard, and all applicable sampling, testing, and recordkeeping requirements of subpart I of this part. (2) It has been designated as 15 ppm heating oil, 15 ppm ECA marine fuel, or other non-transportation fuel (e.g., jet fuel, kerosene, heating oil, or No. 4 fuel) on its product transfer document and has not been designated as MVNRLM diesel fuel. (3) The PTD for the distillate fuel meets the requirements in § 80.1453(e). * * * * * Co-processed cellulosic diesel is any renewable fuel that meets the definition of cellulosic biofuel, as defined in this section 80.1401, and meets all of the requirements of paragraph (1) of this definition: (1)(i) Is a transportation fuel, transportation fuel additive, heating oil, or jet fuel. (ii) Meets the definition of either biodiesel or non-ester renewable diesel. (iii) Is registered as a motor vehicle fuel or fuel additive under 40 CFR part 79, if the fuel or fuel additive is intended for use in a motor vehicle. (2) Co-processed cellulosic diesel includes heating oil and jet fuel made from cellulosic feedstocks and cellulosic biofuel produced as a result of coprocessing cellulosic feedstocks with petroleum. * * * * * Covered location means the contiguous 48 states, Hawaii, and any state or territory that has received an approval from the Administrator to optin to the RFS program under § 80.1443. * * * * * Exporter of renewable fuel means all buyers, sellers, and owners of the renewable fuel in any transaction that results in renewable fuel being transferred from a covered location to a destination outside of the covered locations. * * * * * Foreign ethanol producer means a foreign renewable fuel producer who produces ethanol for use in transportation fuel, heating oil, or jet fuel but who does not add ethanol denaturant to their product as described in paragraph (2) of the definition of ‘‘renewable fuel’’ in this section. Foreign renewable fuel producer means a person from a foreign country VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 or from an area outside the covered locations who produces renewable fuel (including neat (undenatured) ethanol for use in transportation fuel, heating oil, or jet fuel). * * * * * Heating oil * * * (2) A fuel oil that is used to heat or cool interior spaces of homes or buildings to control ambient climate for human comfort. The fuel oil must be liquid at 60 degrees Fahrenheit and 1 atmosphere of pressure, and contain no more than 2.5% mass solids. * * * * * Non-renewable feedstock means a feedstock that does not meet the definition of renewable biomass. Non-RIN-generating foreign producer means a foreign renewable fuel producer that has been registered by EPA to produce renewable fuel for which RINs have not been generated. * * * * * Renewable fuel * * * (2) Ethanol covered by this definition shall be denatured using an ethanol denaturant as required in 27 CFR parts 19 through 21. Any volume of ethanol denaturant added to the undenatured ethanol by a producer or importer in excess of 2 volume percent shall not be included in the volume of ethanol for purposes of determining compliance with the requirements under this subpart. * * * * * RIN-generating foreign producer means a foreign renewable fuel producer that has been registered by EPA to generate RINs for renewable fuel it produces. * * * * * ■ 24. Section 80.1405 is amended by adding paragraph (a)(11) and revising the definitions of GEi and DEi in the equation in paragraph (c) to read as follows: DEi = The total amount of diesel fuel projected to be exempt in year i, in gallons, per §§ 80.1441 and 80.1442. * * * * * ■ 25. Section 80.1407 is amended by adding paragraphs (f)(9) through (11) to read as follows: § 80.1405 What are the Renewable Fuel Standards? (a) Beginning January 1, 2021, a party that owns certified NTDF, and only a party that owns certified NTDF, may redesignate NTDF as MVNRLM diesel fuel if they meet all of the following requirements: (1) Register as a refiner and register each facility where redesignation occurs as a refinery under § 80.76. NTDF may only be redesignated as MVNRLM diesel fuel at a facility registered as a refinery. (2) At each facility, calculate a balance of MVNRLM diesel fuel during each annual compliance period according to the following equation: MVNRLMBAL = MVNRLMO + MVNRLMINVCHG¥MVNRLMI (a) * * * (11) Renewable Fuel Standards for 2020. (i) The value of the cellulosic biofuel standard for 2020 shall be 0.34 percent. (ii) The value of the biomass-based diesel standard for 2020 shall be 2.10 percent. (iii) The value of the advanced biofuel standard for 2020 shall be 2.93 percent. (iv) The value of the renewable fuel standard for 2020 shall be 11.56 percent. * * * * * (c) * * * GEi = The total amount of gasoline projected to be exempt in year i, in gallons, per §§ 80.1441 and 80.1442. PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 § 80.1407. How are the Renewable Volume Obligations calculated? * * * * * (f) * * * (9) Distillate fuel with a sulfur content greater than 15 ppm that is clearly designated for a use other than transportation fuel, such as heating oil or ECA marine fuel. (10) Distillate fuel that meets a 15 ppm sulfur standard, is designated for non-transportation use, and that remains completely segregated from MVNRLM diesel fuel from the point of production through to the point of use for a non-transportation purpose, such as heating oil or ECA marine fuel. (11) Certified NTDF, if the refiner or importer has a reasonable expectation that the fuel will be used for nontransportation purposes. To establish a reasonable expectation that the fuel will be used for non-transportation purposes, a refiner or importer must, at a minimum, be able to demonstrate that they supply areas that use heating oil, ECA marine fuel, or 15 ppm distillate fuel for non-transportation purposes in quantities that are consistent with past practices or changed circumstances. EPA may consider any other relevant information, including the price of the fuel, in assessing whether a refiner or importer has a reasonable expectation that the fuel will be used for nontransportation purposes. ■ 26. Section 80.1408 is added to read as follows: § 80.1408. What are the requirements for parties that own and redesignate certified NTDF as MVNRLM diesel fuel? Where: E:\FR\FM\06FER2.SGM 06FER2 7075 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations MVNRLMBAL = the balance for MVNRLM diesel fuel for the compliance period. MVNRLMI = the total volume of all batches of fuel designated as MVNRLM diesel fuel owned when the fuel was received at the facility and acquired at the facility during the compliance period. Any MVNRLM diesel fuel produced (apart from redesignation of NTDF to MVNRLM diesel fuel) or imported into the facility must also be included in this volume. MVNRLMO = the total volume of all batches of fuel designated as MVNRLM diesel fuel owned and sold or transferred to other parties at the facility during the compliance period. MVNRLMINVCHG = the volume of MVNRLM diesel fuel owned at the end of the compliance period minus the volume of MVNRLM diesel fuel owned at the beginning of the compliance period, including accounting for any corrections in inventory due to volume swell or shrinkage, difference in measurement calibration between receiving and delivering meters, and similar matters, where corrections that increase inventory are defined as positive. (i) If MVNRLMBAL is greater than 0, an RVO is incurred by the redesignating party for the volume of diesel fuel equal to MVNRLM. The redesignating party must also comply with all of the following: (A) The reporting requirements of § 80.1451(a)(1)(xix). (B) The recordkeeping requirements of § 80.1454(t). (C) The attest engagement requirements of §§ 80.1464 and 80.1475, as applicable. (ii) If MVNRLMBAL is less than or equal to 0, no RVO is incurred by the redesignating party for any redesignated certified NTDF. These parties must comply with all of the following: (A) The reporting requirements of § 80.1451(i). (B) The recordkeeping requirements of § 80.1454(t). (b) Parties that incur an RVO under paragraph (a)(2)(i) of this section must comply with all applicable requirements for obligated parties under this subpart. (c) The provisions of this section do not apply to gasoline or diesel fuel that is designated for export. ■ 27. Section 80.1415 is amended by revising paragraph (c)(4) to read as follows: § 80.1415 How are equivalence values assigned to renewable fuel? * * * * * (c) * * * (4) Applications for equivalence values must be sent to the attention of ‘‘RFS2 Program (Equivalence Value Application)’’ to the address in § 80.10(a). * * * * * ■ 28. Section 80.1426 is amended: ■ a. By revising the section heading and paragraphs (a)(1)(iii), (a)(2), and (c)(4) and (5); and ■ b. In paragraph (f)(1), in Table 1 to § 80.1426, by revising the entries F, H, I, and M. The revisions read as follows: § 80.1426 How are RINs generated and assigned to batches of renewable fuel? (a) * * * (1) * * * (iii) The fuel was produced in compliance with the registration requirements of § 80.1450, the reporting requirements of § 80.1451, the recordkeeping requirements of § 80.1454, all conditions set forth in an approval document for a pathway petition submitted under § 80.1416, and all other applicable regulations of this subpart M. * * * * * (2) To generate RINs for imported renewable fuel, including any renewable fuel contained in imported transportation fuel, heating oil, or jet fuel, importers must obtain information from a non-RIN-generating foreign renewable fuel producer that is registered pursuant to § 80.1450 sufficient to make the appropriate determination regarding the applicable D code and compliance with the renewable biomass definition for each imported batch for which RINs are generated. * * * * * (c) * * * (4) Importers shall not generate RINs for renewable fuel imported from a nonRIN-generating foreign renewable fuel producer unless the foreign renewable fuel producer is registered with EPA as required in § 80.1450. (5) Importers shall not generate RINs for renewable fuel that has already been assigned RINs by a RIN-generating foreign renewable fuel producer. * * * * * (f) * * * (1) * * * TABLE 1 TO § 80.1426—APPLICABLE D CODES FOR EACH FUEL PATHWAY FOR USE IN GENERATING RINS Fuel type F ......... H ........ lotter on DSKBCFDHB2PROD with RULES2 I .......... Feedstock Production process requirements * * Biodiesel, renewable diesel, jet fuel and heating oil. * * Soy bean oil; Oil from annual covercrops; Oil from algae grown photosynthetically; Biogenic waste oils/fats/greases; Camelina sativa oil; Distillers corn oil; Distillers sorghum oil; Commingled distillers corn oil and sorghum oil. * * One of the following: Transesterification with or without esterification pre-treatment, or Hydrotreating; excludes processes that coprocess renewable biomass and petroleum. * * * Biodiesel, renewable diesel, jet fuel and heating oil. * * Soy bean oil; Oil from annual covercrops; Oil from algae grown photosynthetically; Biogenic waste oils/fats/greases; Camelina sativa oil; Distillers corn oil; Distillers sorghum oil; Commingled distillers corn oil and sorghum oil. Camelina sativa oil; Distillers sorghum oil; Distillers corn oil; Commingled distillers corn oil and distillers sorghum oil. * * One of the following: Transesterification with or without esterification pre-treatment, or Hydrotreating; includes only processes that co-process renewable biomass and petroleum. * Naphtha, LPG ............. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 Hydrotreating ................................................... E:\FR\FM\06FER2.SGM 06FER2 D-code 4 5 5 7076 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations TABLE 1 TO § 80.1426—APPLICABLE D CODES FOR EACH FUEL PATHWAY FOR USE IN GENERATING RINS—Continued M ........ Fuel type Feedstock Production process requirements * * Renewable Gasoline and Renewable Gasoline Blendstock; CoProcessed Cellulosic Diesel, Jet Fuel, and Heating Oil. * * Crop residue, slash, pre-commercial thinnings, tree residue, and separated yard waste; biogenic components of separated MSW; cellulosic components of separated food waste; and cellulosic components of annual cover crops. * * Catalytic Pyrolysis and Upgrading, Gasification and Upgrading, Thermo-Catalytic Hydrodeoxygenation and Upgrading, Direct Biological Conversion, Biological Conversion and Upgrading utilizing natural gas, biogas, and/or biomass as the only process energy sources providing that process used converts cellulosic biomass to fuel; any process utilizing biogas and/or biomass as the only process energy sources which converts cellulosic biomass to fuel. * * * * * * * * 29. Section 80.1427 is amended by revising the definition of ‘‘RVOi’’ in paragraph (b)(2) and by revising paragraph (c)(2) to read as follows: ■ § 80.1427 How are RINs used to demonstrate compliance? * * * * * (b) * * * (2) * * * RVOi = The Renewable Volume Obligation for the obligated party or exporter of renewable fuel for calendar year i, in gallons. * * * * * (c) * * * (2) In fulfillment of its ERVOs, each exporter of renewable fuel is subject to the provisions of paragraphs (a)(2), (3), (6), and (8) of this section. * * * * * ■ 30. Section 80.1429 is amended by revising paragraph (b)(3) to read as follows: § 80.1429 Requirements for separating RINs from volumes of renewable fuel. * * * * (b) * * * (3) Any exporter of renewable fuel must separate any RINs that have been assigned to the exported renewable fuel volume. An exporter of renewable fuel may separate up to 2.5 RINs per gallon of exported renewable fuel. * * * * * ■ 31. Section 80.1430 is amended by paragraph (a), the definition of ‘‘k’’ in paragraph (b)(1), and paragraphs (c), (d)(1), and (e) introductory text and adding paragraph (h) to read as follows: lotter on DSKBCFDHB2PROD with RULES2 * § 80.1430 Requirements for exporters of renewable fuels. (a) Any exporter of renewable fuel, whether in its neat form or blended shall acquire sufficient RINs to comply with all applicable Renewable Volume Obligations under paragraphs (b) VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 * * through (e) of this section representing the exported renewable fuel. No provision of this section applies to renewable fuel purchased directly from the renewable fuel producer and for which the exporter of renewable fuel can demonstrate that no RINs were generated through the recordkeeping requirements of § 80.1454(a)(6). (b) * * * (1) * * * k = A discrete volume of renewable fuel that the exporter of renewable fuel knows or has reason to know is cellulosic biofuel that is exported in a single shipment. * * * * * (c) If the exporter of renewable fuel knows or has reason to know that a volume of exported renewable fuel is cellulosic diesel, the exporter of renewable fuel must treat the exported volume as either cellulosic biofuel or biomass-based diesel when determining his Renewable Volume Obligations pursuant to paragraph (b) of this section. (d) * * * (1) If the equivalence value for a volume of exported renewable fuel can be determined pursuant to § 80.1415 based on its composition, then the appropriate equivalence value shall be used in the calculation of the exporter of renewable fuel’s Renewable Volume Obligations under paragraph (b) of this section. * * * * * (e) For renewable fuels that are in the form of a blend at the time of export, the exporter of renewable fuel shall determine the volume of exported renewable fuel based on one of the following: * * * * * (h) Each person meeting the definition of exporter of renewable fuel for a particular export transaction is jointly and severally liable for completion of the requirements of this section and all PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 * D-code * 3 * associated RIN retirement demonstration, registration, reporting, and attest engagement obligations under this subpart. However, these requirements for exporters of renewable fuel must be met only once for any export transaction. ■ 32. Section 80.1431 is amended by revising paragraph (b)(2) to read as follows: § 80.1431 Treatment of invalid RINs. * * * * * (b) * * * (2) Invalid RINs cannot be used to achieve compliance with the Renewable Volume Obligations of an obligated party or exporter of renewable fuel, regardless of the party’s good faith belief that the RINs were valid at the time they were acquired. * * * * * ■ 33. Section 80.1434 is added to read as follows: § 80.1434 RIN retirement. (a) A RIN must be retired in any of the following cases: (1) Demonstrate annual compliance. Except as specified in paragraph (b) of this section or § 80.1456, each party that is an obligated party under § 80.1406 and is obligated to meet the RVO under § 80.1407 must retire a sufficient number of RINs to demonstrate compliance with an applicable RVO. (2) Exported renewable fuel. Any exporter of renewable fuel that incurs an ERVO as described in § 80.1430(a) shall retire RINs pursuant to §§ 80.1430(b) through (g) and 80.1427(c). (3) Volume error correction. A RIN must be retired when it was based on incorrect volumes or volumes that have not been standardized to 60 °F as described in § 80.1426(f)(8). (4) Import volume correction. Where the port of entry volume is the lesser of the two volumes in § 80.1466(e)(1)(i), the importer shall calculate the E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations difference between the number of RINs originally assigned by the foreign producer and the number of RINs calculated under § 80.1426 for the volume of renewable fuel as measured at the port of entry, and retire that amount of RINs in accordance with § 80.1466(k)(4). (5) Spillage or disposal of renewable fuels. Except as provided in § 80.1432(c), in the event that a reported spillage or disposal of any volume of renewable fuel, the owner of the renewable fuel must notify any holder or holders of the attached RINs and retire a number of gallon-RINs corresponding to the volume of spilled or disposed of renewable fuel multiplied by its equivalence value in accordance with § 80.1432(b). (6) Contaminated or spoiled fuel. In the event that contamination or spoliation of any volume of renewable fuel is reported, the owner of the renewable fuel must notify any holder or holders of the attached RINs and retire a number of gallon-RINs corresponding to the volume of contaminated or spoiled renewable fuel multiplied by its equivalence value. (i) If the equivalence value for the contaminated or spoiled volume may be determined pursuant to § 80.1415 based on its composition, then the appropriate equivalence value shall be used. (ii) If the equivalence value for a contaminated or spoiled volume of renewable fuel cannot be determined, the equivalence value shall be 1.0. (iii) If the owner of a volume of renewable fuel that is contaminated or spoiled and reported establishes that no RINs were generated to represent the volume, then no gallon-RINs shall be retired. (7) Delayed RIN generation. In the event that a party generated a delayed RIN as described in § 80.1426(g)(1) through (4), parties must retire RINs as described in accordance with § 80.1426(g)(5) and (6). (8) Invalid RIN. In the case that a RIN is invalid as described in § 80.1431(a), the RIN will be considered invalid and must be retired as described in § 80.1431(b). (9) Potentially invalid RINs. In the case that a RIN is identified as a PIR under § 80.1474(b)(1), the PIRs or replacement RINs must be retired as described in § 80.1474(b)(2) through (5). (10) Replacement. As required by § 80.1431(b) or § 80.1474, any party that must replace an invalid RIN or PIR that was used for compliance must retire valid RINs to replace the invalid RINs originally used for any RVO. (11) Other. Any other instance identified by EPA. VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (b) In the case that retirement of a RIN is necessary, the following provisions apply: (1) Any party affected by such retirement must keep copies and adjust its records, reports, and compliance calculations in which the retired RIN was used. (2) The retired RIN must be reported in the applicable reports under § 80.1451. (3) The retired RIN must be reported in the EPA Moderated Transaction System pursuant to § 80.1452(c). (4) Where the importer of renewable fuel is required to retire RINs under paragraph (a)(5) of this section, the importer must report the retired RINs in the applicable reports under §§ 80.1451, 80.1466(k), and 80.1466(m). ■ 34. Section 80.1440 is amended by revising the section heading and paragraph (a) and adding paragraph (f) to read as follows: § 80.1440 What are the provisions for blenders who handle and blend less than 250,000 gallons of renewable fuel per year or who handle renewable fuel blended for fuels under a national security exemption? (a)(1) Renewable fuel blenders who handle and blend less than 250,000 gallons of renewable fuel per year, and who do not have one or more reported or unreported Renewable Volume Obligations, are permitted to delegate their RIN-related responsibilities to the party directly upstream of them who supplied the renewable fuel for blending. (2) Renewable fuel blenders who handle and blend renewable fuel for parties that have a national security exemption under paragraph (f) of this section, or a national security exemption under any other subpart of 40 CFR part 80 (e.g., §§ 80.606, 80.1655), and who do not have one or more reported or unreported Renewable Volume Obligations, are permitted to delegate their RIN-related responsibilities to the party directly upstream of them who supplied the renewable fuel for blending. * * * * * (f) The requirements described in paragraph (b) of this section may be delegated directly upstream for renewable fuel (neat or blended) that is produced, imported, sold, offered for sale, supplied, offered for supply, stored, dispensed, or transported for use in any of the following: (1) Tactical military vehicles, engines, or equipment having an EPA national security exemption from emission standards under 40 CFR 85.1708, 89.908, 92.908, 94.908, 1042.635, or 1068.225. PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 7077 (2) Tactical military vehicles, engines, or equipment that are not subject to a national security exemption from vehicle or engine emissions standards as described in paragraph (f)(1) of this section but, for national security purposes (for purposes of readiness for deployment overseas), need to be fueled on the same transportation fuel, heating oil, or jet fuel as the vehicles, engines, or equipment for which EPA has granted such a national security exemption. ■ 35. Section 80.1441 is amended by revising paragraph (h) to read as follows: § 80.1441 Small refinery exemption. * * * * * (h) Verification letters under paragraph (b) of this section, petitions for small refinery hardship extensions under paragraph (e) of this section, and small refinery exemption waiver notices under paragraph (f) of this section shall be sent to the attention of ‘‘RFS Program’’ to the address in § 80.10(a). ■ 36. Section 80.1442 is amended by revising paragraph (i) to read as follows: § 80.1442 What are the provisions for small refiners under the RFS program? * * * * * (i) Small refiner status verification letters, small refiner exemption waivers, or applications for extensions of the small refiner temporary exemption under this section must be sent to the attention of ‘‘RFS Program’’ to the address in § 80.10(a). ■ 37. Section 80.1443 is amended by revising paragraph (d)(2) to read as follows: § 80.1443 What are the opt-in provisions for noncontiguous states and territories? * * * * * (d) * * * (2) A petition submitted under this section should be sent to the attention of ‘‘RFS Program’’ to the address in § 80.10(a). * * * * * ■ 38. Section 80.1449 is amended by revising paragraph (d) to read as follows: § 80.1449 What are the Production Outlook Report requirements? * * * * * (d) Production outlook reports shall be sent to the attention of ‘‘RFS Program (Production Output Reports)’’ to the address in § 80.10(a). * * * * * ■ 39. Section 80.1450 is amended by revising paragraphs (b) introductory text, (b)(1)(vii)(A)(1), (b)(1)(vii)(B), (b)(1)(viii)(A), (b)(1)(ix)(A) introductory E:\FR\FM\06FER2.SGM 06FER2 7078 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations text, (b)(1)(xi)(A) and (B), the first sentence of paragraph (d)(1), and paragraphs (g)(9) and (h) to read as follows: § 80.1450 What are the registration requirements under the RFS program? lotter on DSKBCFDHB2PROD with RULES2 * * * * * (b) Producers. Any RIN-generating foreign producer, any non-RINgenerating foreign producer, or any domestic renewable fuel producer that generates RINs must provide EPA the information specified under § 80.76 if such information has not already been provided under the provisions of this part, and must receive EPA-issued company and facility identification numbers prior to the generation of any RINs for their fuel or for fuel made with their ethanol. Unless otherwise specifically indicated, all the following registration information must be submitted and accepted by EPA by July 1, 2010, or 60 days prior to the generation of RINs, whichever date comes later, subject to this subpart: (1) * * * (vii) * * * (A) * * * (1) The location of any establishment from which the waste stream consisting solely of separated yard waste is collected. * * * * * (B) For a producer of renewable fuel or a foreign producer of ethanol made from separated food waste per § 80.1426(f)(5)(i)(B) or from biogenic waste oils/fats/greases: (1) A plan documenting the type(s) of separated food waste or biogenic waste oils/fats/greases, the type(s) of establishment from which the waste is collected, how the waste will be collected, a description of ongoing verification measures that demonstrate such waste consists only of food waste (and an incidental amount of other components such as paper and plastics) or biogenic waste oils/fats/greases that is kept separate from other waste materials, and if applicable, how the cellulosic and non-cellulosic portions of the waste will be quantified. (2) [Reserved] * * * * * (viii) * * * (A) The location of the municipal waste establishment(s) from which the separated municipal solid waste is collected or from which material is collected that will be processed to produce separated municipal solid waste. * * * * * (ix) * * * (A) For a producer of ethanol from grain sorghum or a foreign ethanol VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 producer making product from grain sorghum and seeking to have it sold as renewable fuel after addition of ethanol denaturant, provide a plan that has been submitted and accepted by U.S. EPA that includes the following information: * * * * * (xi) * * * (A) An affidavit from the producer of the fuel oil meeting paragraph (2) of the definition of ‘‘heating oil’’ in § 80.1401 stating that the fuel oil for which RINs have been generated will be sold for the purposes of heating or cooling interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose. (B) Affidavits from the final end user or users of the fuel oil stating that the fuel oil meeting paragraph (2) of the definition of ‘‘heating oil’’ in § 80.1401 is being used or will be used for purposes of heating or cooling interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose, and acknowledging that any other use of the fuel oil would violate EPA regulations and subject the user to civil and/or criminal penalties under the Clean Air Act. * * * * * (d) * * * (1) Any producer of renewable fuel or any foreign ethanol producer that makes changes to their facility that will allow them to produce renewable fuel that is not reflected in the producer’s registration information on file with EPA must update their registration information and submit a copy of an updated independent third-party engineering review on file with EPA at least 60 days prior to producing the new type of renewable fuel. * * * * * * * * (g) * * * (9) Registration updates. (i) Any independent third-party auditor who makes changes to its quality assurance plan(s) that will allow it to audit new renewable fuel production facilities, as defined in § 80.1401, that is not reflected in the independent third-party auditor’s registration information on file with EPA must update its registration information and submit a copy of an updated QAP on file with EPA at least 60 days prior to auditing new renewable fuel production facilities. (ii) Any independent third-party auditor who makes any changes other than those specified in paragraphs (g)(9)(i), (iii), and (iv) of this section that will affect the third-party auditor’s registration information must update its registration information 7 days prior to the change. PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 (iii) Independent third-party auditors must update their QAPs at least 60 days prior to verifying RINs generated by a renewable fuel facility for a pathway not covered in the independent third-party auditor’s QAPs. (iv) Independent third-party auditors must update their QAPs at least 60 days prior to verifying RINs generated by any renewable fuel facility not identified in the independent third-party auditor’s existing registration. * * * * * (h) Deactivation of registration. (1) EPA may deactivate the registration of any party required to register under this section § 80.1450, using the process in paragraph (h)(2) of this section, if any of the following criteria are met: (i) The party has reported no activity in EMTS for twenty-four consecutive months. (ii) The party has failed to comply with the registration requirements of this section. (iii) The party has failed to submit any required notification or report within 30 days of the required submission date under § 80.1451. (iv) The attest engagement required under § 80.1464 has not been received within 30 days of the required submission date. (v) The party fails to pay a penalty or to perform any requirements under the terms of a court order, administrative order, consent decree, or administrative settlement between the party and EPA. (vi) The party submits false or incomplete information. (vii) The party denies EPA access or prevents EPA from completing authorized activities under sections 114 or 208 of the Clean Air Act despite presenting a warrant or court order. This includes a failure to provide reasonable assistance. (viii) The party fails to keep or provide the records required by this subpart. (ix) The party otherwise circumvents the intent of the Clean Air Act or of this subpart. (2) Except as provided in paragraph (h)(3) of this section, EPA will use the following process whenever it decides to deactivate the registration of a party: (i) EPA will provide written notification to the responsible corporate officer identifying the reasons or deficiencies for which EPA intends to deactivate the party’s registration. The party will have fourteen calendar days from the date of the notification to correct the deficiencies identified or explain why there is no need for corrective action. (ii) If the basis for EPA’s notice of intent to deactivate registration is the E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations lotter on DSKBCFDHB2PROD with RULES2 absence of EMTS activity under paragraph (h)(1)(i) of this section, a stated intent to engage in activity reported through EMTS will be sufficient to avoid deactivation of registration. (iii) If the party does not correct identified deficiencies under paragraphs (h)(1)(ii) through (ix) of this section, or does not provide an adequate explanation regarding why such correction is not necessary within the time allotted for response, EPA may deactivate the party’s registration without further notice to the party. (3) In instances of willfulness or those in which public health, interest, or safety requires otherwise, EPA may deactivate the registration of the party without any notice to the party. EPA will provide written notification to the responsible corporate officer identifying the reasons EPA deactivated the registration of the party. (4) Impact of registration deactivation: (i) A party whose registration is deactivated shall still be liable for violation of any requirements of this subpart. (ii) A party whose registration is deactivated will not be listed on any public list of actively registered parties that is maintained by EPA. (iii) A party whose registration is deactivated will not have access to any of the electronic reporting systems associated with the renewable fuel standard program, including the EPA Moderated Transaction System (EMTS). (iv) A party whose registration is deactivated must submit any corrections of deficiencies to EPA on forms, and following policies, established by EPA. (v) If a party whose registration has been deactivated wishes to re-register, they may seek to do so by submitting a new registration pursuant to the requirements in paragraphs (a) through (c), (e), and (g) of this section, as applicable. * * * * * ■ 40. Section 80.1451 is amended by: ■ a. Revising paragraphs (a)(1)(i) and (v); ■ b. Adding paragraph (a)(1)(xix); ■ c. Revising paragraphs (a)(4), (b) introductory text, (b)(1)(ii)(D) and (I), (g)(1)(ii)(D) and (I); ■ d. Redesignating paragraphs (i) and (j) as paragraphs (j) and (k); and ■ e. Adding new paragraph (i). The revisions and additions read as follows: § 80.1451 What are the reporting requirements under the RFS program? (a) * * * (1) * * * (i) The obligated party’s or exporter of renewable fuel’s name. * * * * * VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (v)(A) For the 2010 through 2019 compliance periods, the production volume and import volume of all of the products listed in § 80.1407(c) and (e) for the compliance period. (B) For the 2020 compliance period, separately, the production volume and import volume of all of the gasoline products listed in § 80.1407(c), the production volume and import volume of all of the MVNRLM diesel fuel products listed in § 80.1407(e), and the combined volume of all gasoline products and MVNRLM diesel fuel listed in § 80.1407(c) and (e) for the compliance period. (C) Beginning with the 2021 compliance period, separately, the production volume and import volume for the compliance period of all of the following: (1) All of the gasoline products listed in § 80.1407(c). (2) All of the MVNRLM diesel fuel products listed in § 80.1407(e). (3) The combined production volume of all gasoline products and MVNRLM diesel fuel. (4) Distillate fuel that is not transportation fuel. (5) Distillate fuel that is certified NTDF. * * * * * (xix) For parties that redesignate certified NTDF as MVNRLM diesel fuel under § 80.1408 at any time during the compliance period, the volumes MVNRLMBAL, MVNRLMO, MVNRLMINVCHG, and MVNRLMI as calculated in § 80.1408(a)(2). * * * * * (4) Reports required under this paragraph (a) must be signed and certified as meeting all the applicable requirements of this subpart by the owner or a responsible corporate officer of the obligated party or exporter of renewable fuel. (b) Renewable fuel producers (domestic and foreign) and importers. Any domestic producer or importer of renewable fuel who generates RINs, or any RIN-generating foreign producer must submit to EPA reports according to the schedule, and containing all of the following information: (1) * * * (ii) * * * (D) The importer EPA facility registration number and foreign renewable fuel producer company registration number, if applicable. * * * * * (I) The volume of ethanol denaturant and applicable equivalence value of each batch. * * * * * (g) * * * PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 7079 (1) * * * (ii) * * * (D) The importer EPA facility registration number and foreign renewable fuel producer company registration number, if applicable. * * * * * (I) The volume of ethanol denaturant and applicable equivalence value of each verified batch. * * * * * (i) Parties that redesignate certified NTDF as MVNRLM diesel fuel under § 80.1408 at any time during the compliance period, but do not incur an RVO under § 80.1408(a)(2)(i), must submit a report to EPA stating that they redesignated certified NTDF to MVNRLM diesel fuel during the compliance period, but that their net redesignated volume was less than or equal to zero, and they therefore did not incur an RVO for the compliance period. * * * * * ■ 41. Section 80.1452 is amended by revising paragraph (b)(11) and the last sentence in paragraph (c) introductory text to read as follows: § 80.1452 What are the requirements related to the EPA Moderated Transaction System (EMTS)? * * * * * (b) * * * (11) The volume of ethanol denaturant and applicable equivalence value of each batch. * * * * * (c) * * * The reportable event for a RIN separation or retirement occurs on the date of separation or retirement as described in § 80.1429 or § 80.1434. * * * * * ■ 42. Section 80.1453 is amended by revising paragraphs (b) and (d) and adding paragraph (e) to read as follows: § 80.1453 What are the product transfer document (PTD) requirements for the RFS program? * * * * * (b) Except for transfers to truck carriers, retailers, or wholesale purchaser-consumers, product codes may be used to convey the information required under paragraphs (a)(1) through (11) and (e) of this section if such codes are clearly understood by each transferee. * * * * * (d) For fuel oil meeting paragraph (2) of the definition of ‘‘heating oil’’ in § 80.1401, the PTD of the fuel oil shall state: ‘‘This volume of renewable fuel oil is designated and intended to be used to heat or cool interior spaces of homes or buildings to control ambient E:\FR\FM\06FER2.SGM 06FER2 7080 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations climate for human comfort. Do NOT use for process heat or cooling or any other purpose, as these uses are prohibited pursuant to 40 CFR 80.1460(g).’’. (e) Beginning January 1, 2021, on each occasion when any party transfers custody or ownership of certified NTDF, except when such fuel is dispensed into motor vehicles or nonroad vehicles, engines, or equipment, the transferor must provide to the transferee documents that include all the following information, as applicable: (1) The transferor of certified NTDF must list all applicable required information as specified at § 80.590 and, if the distillate fuel contains renewable fuel, all applicable required information in paragraphs (a), (b), and (d) of this section. (2) The transferor must include the following statement on the PTD: ‘‘15 ppm sulfur (maximum) certified NTDF—This fuel is designated for nontransportation use.’’ ■ 43. Section 80.1454 is amended by: ■ a. Revising paragraphs (a) introductory text, (a)(1), (d)(4), (h)(6)(iii), (j) introductory text, (j)(1), and (j)(2) introductory text; ■ b. Removing vacant paragraph (k) designation; ■ c. Revising paragraphs (n) and (q); ■ d. Redesignating paragraph (t) as paragraph (w); and ■ e. Adding new paragraph (t). The revisions and addition reads as follows: lotter on DSKBCFDHB2PROD with RULES2 § 80.1454 What are the recordkeeping requirements under the RFS program? (a) Requirements for obligated parties and exporters of renewable fuel. Beginning July 1, 2010, any obligated party (as described at § 80.1406) or exporter of renewable fuel (as described at § 80.1430) must keep all of the following records: (1) Product transfer documents consistent with § 80.1453 and associated with the obligated party’s or exporter of renewable fuel’s activity, if any, as transferor or transferee of renewable fuel or separated RINs. * * * * * (d) * * * (4) Domestic producers of renewable fuel made from any other type of renewable biomass must have documents from their feedstock supplier certifying that the feedstock qualifies as renewable biomass as defined in § 80.1401, describing the feedstock. Separated yard and food waste, biogenic oils/fats/greases, and separated municipal solid waste are also subject to the requirements in paragraph (j) of this section. * * * * * VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (h) * * * (6) * * * (iii) The survey plan must be sent to the attention of ‘‘RFS Program’’ to the address in § 80.10(a). * * * * * (j) A renewable fuel producer that produces fuel from separated yard waste (as described in § 80.1426(f)(5)(i)(A)), separated food waste (as described in § 80.1426(f)(5)(i)(B)), separated municipal solid waste (as described in § 80.1426(f)(5)(i)(C)), or biogenic waste oils/fats/greases must keep all the following additional records: (1) For separated yard waste, separated food waste, and biogenic waste oils/fats/greases: (i) Documents demonstrating the amounts, by weight, purchased of separated yard waste, separated food waste, or biogenic waste oils/fats/ greases for use as a feedstock in producing renewable fuel. (ii) Documents demonstrating the location of any establishment(s) from which the waste stream consisting solely of separated yard waste, separated food waste, or biogenic waste oils/fats/greases is collected. (iii) Such other records as may be requested by the Administrator. (2) For separated municipal solid waste: * * * * * (n) The records required under paragraphs (a) through (d), (f) through (l), and (t) of this section and under § 80.1453 shall be kept for five years from the date they were created, except that records related to transactions involving RINs shall be kept for five years from the date of the RIN transaction. * * * * * (q) The records required in paragraphs (b)(3) and (c)(1) of this section must be transferred with any renewable fuel sent to the importer of that renewable fuel by any non-RIN-generating foreign producer. * * * * * (t) Requirements for parties that redesignate certified NTDF as MVNRLM diesel fuel. Parties that redesignate certified NTDF as MVNRLM diesel fuel under § 80.1408 must keep all of the following additional records: (1) Records related to all transactions in which certified NTDF is redesignated as MVNRLM diesel fuel. (2) Records related to all transactions in which MVNRLM diesel fuel is redesignated to a non-transportation use. (3) Records related to the volume of MVNRLM diesel fuel received. (4) Records related to the volume of MVNRLM diesel fuel delivered. PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 (5) Records related to the volume of certified NTDF received. (6) Records related to the volume of certified NTDF delivered. * * * * * ■ 44. Section 80.1460 is amended by adding paragraph (b)(7), revising paragraph (g), and adding paragraph (j) to read as follows: § 80.1460 What acts are prohibited under the RFS program? * * * * * (b) * * * (7) Generate a RIN for fuel that fails to meet all the conditions set forth in an approval document for a pathway petition submitted under § 80.1416. * * * * * (g) Failing to use a renewable fuel oil for its intended use. No person shall use fuel oil that meets paragraph (2) of the definition of ‘‘heating oil’’ in § 80.1401 and for which RINs have been generated in an application other than to heat or cool interior spaces of homes or buildings to control ambient climate for human comfort. * * * * * (j) Redesignation violations. No person may exceed the balance requirements at § 80.1408(a)(2)(i) without incurring an RVO. ■ 45. Section 80.1461 is amended by revising paragraphs (a)(1) and (2) to read as follows: § 80.1461. Who is liable for violations under the RFS program? (a) * * * (1) Any person who violates a prohibition under § 80.1460(a) through (d) or § 80.1460(g) through (j) is liable for the violation of that prohibition. (2) Any person who causes another person to violate a prohibition under § 80.1460(a) through (d) or § 80.1460(g) through (j) is liable for a violation of § 80.1460(e). * * * * * ■ 46. Section 80.1463 is amended by revising paragraph (d) to read as follows: § 80.1463 What penalties apply under the RFS program? * * * * * (d) Any person liable under § 80.1461(a) for a violation of § 80.1460(b)(1) through (4), (6), or (7) is subject to a separate day of violation for each day that an invalid RIN remains available for an obligated party or exporter of renewable fuel to demonstrate compliance with the RFS program. ■ 47. Section 80.1464 is amended by revising paragraphs (a) introductory text, (a)(1)(i)(A), (a)(1)(iii), (a)(1)(iv) E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations introductory text, (a)(1)(iv)(A) and (D), and (a)(1)(v), adding paragraph (a)(1)(vii), and revising the first sentence of paragraph (b)(1)(ii) to read as follows: § 80.1464 What are the attest engagement requirements under the RFS program? lotter on DSKBCFDHB2PROD with RULES2 * * * * * (a) Obligated parties and exporters of renewable fuel. The following attest procedures shall be completed for any obligated party (as described at § 80.1406(a)) or exporter of renewable fuel (as described at § 80.1430): (1) * * * (i) * * * (A) The obligated party’s volume of all products listed in § 80.1407(c) and (e), or the exporter of renewable fuel’s volume of each category of exported renewable fuel identified in § 80.1430(b)(1) through (b)(4). * * * * * (iii) For obligated parties, compare the volumes of products listed in § 80.1407(c), (e), and (f) reported to EPA in the report required under § 80.1451(a)(1) with the volumes, excluding any renewable fuel volumes, contained in the inventory reconciliation analysis under § 80.133 and the volume of non-renewable diesel produced or imported. Verify that the volumes reported to EPA agree with the volumes in the inventory reconciliation analysis and the volumes of nonrenewable diesel produced or imported, and report as a finding any exception. (iv) For exporters of renewable fuel, perform all of the following: (A) Obtain the database, spreadsheet, or other documentation that the exporter of renewable fuel maintains for all exported renewable fuel. * * * * * (D) Select sample batches in accordance with the guidelines in § 80.127 from each separate category of renewable fuel exported and identified in § 80.1451(a); obtain invoices, bills of lading and other documentation for the representative samples; state whether any of these documents refer to the exported fuel as advanced biofuel or cellulosic biofuel; and report as a finding whether or not the exporter of renewable fuel calculated an advanced biofuel or cellulosic biofuel RVO for these fuels pursuant to § 80.1430(b)(1) or (3). (v) Compute and report as a finding the RVOs for the obligated party or exporter of renewable fuel, and any deficit RVOs carried over from the previous year or carried into the subsequent year, and verify that the values agree with the values reported to EPA. * * * * * VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (vii) For obligated parties that redesignate certified NTDF as MVNRLM diesel fuel under § 80.1408, perform the additional attest engagement procedures described at § 80.1475 and report any findings in the report described in paragraph (d) of this section. Parties that do not incur an RVO under § 80.1408(a)(2)(i) and do not otherwise need to complete an attest engagement under this paragraph (a) do not need to arrange for the additional attest engagement procedures under § 80.1475 to be performed. * * * * * (b) * * * (1) * * * (ii) Obtain production data for each renewable fuel batch by type of renewable fuel that was produced or imported during the year being reviewed; compute the RIN numbers, production dates, types, volumes of ethanol denaturant and applicable equivalence values, and production volumes for each batch; report the total RINs generated during the year being reviewed; and state whether this information agrees with the party’s reports to EPA. * * * * * * * * ■ 48. Section 80.1466 is amended by: ■ a. Revising the section heading, paragraphs (a) and (b), the paragraph (c) subject heading, paragraphs (c)(1), (d)(1)(iii) and (v), (d)(1)(vi)(B), (d)(3)(ii), (e)(2)(ii), (f) introductory text, (f)(1) introductory text, (f)(1)(ii)(C), (f)(1)(v)(A) and (C), (f)(1)(vii), (f)(2), (f)(4) through (8), (g), and (h) introductory text; ■ b. In the equation in paragraph (h)(1) revising the definition ‘‘G’’; ■ c. Revising paragraphs (h)(3)(iii), (h)(4), (i), (j)(2) through (4), (k)(1), (k)(2)(ii), (k)(4)(ii), the paragraph (l) subject heading, paragraphs (l)(1) introductory text, (l)(2)(i), (l)(3), (m)(3)(ii), (m)(6)(i), (n) introductory text, (n)(1), (3), and (4), (o) introductory text, and (o)(2); and ■ d. Adding paragraph (p). The revisions and addition read as follows: § 80.1466 What are the additional requirements under this subpart for foreign renewable fuel producers and importers of renewable fuels? (a) Applicability. This section only applies to foreign renewable fuel producers that are located outside the United States, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands (collectively referred to in this section as ‘‘the United States’’). (b) General requirements. A registered foreign renewable fuel producer under PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 7081 this section must meet all requirements that apply to renewable fuel producers under this subpart. (c) Designation, RIN-generating foreign producer certification, and product transfer documents. (1) Any registered foreign renewable fuel producer must designate each batch of such renewable fuel as ‘‘RFS–FRRF’’ at the time the renewable fuel is produced. * * * * * (d) * * * (1) * * * (iii) Obtain the EPA-assigned registration number of the foreign renewable fuel producer. * * * * * (v) Determine the date and time the vessel departs the port serving the RINgenerating foreign producer. (vi) * * * (B) That the RFS–FRRF remained segregated from Non-RFS–FRRF and other RFS–FRRF produced by a different foreign producer. * * * * * (3) * * * (ii) Be independent under the criteria specified in § 80.65(f)(2)(iii); and * * * * * (e) * * * (2) * * * (ii) Where the port of entry volume is the lesser of the two volumes in paragraph (e)(1)(i) of this section, the importer shall calculate the difference between the number of RINs originally assigned by the RIN-generating foreign producer and the number of RINs calculated under § 80.1426 for the volume of renewable fuel as measured at the port of entry, and acquire and retire that amount of RINs in accordance with paragraph (k)(3) of this section. (f) Foreign producer commitments. Any foreign renewable fuel producer shall commit to and comply with the following provisions as a condition to being registered as a foreign renewable fuel producer under this subpart: (1) Any EPA inspector or auditor must be given full, complete, and immediate access to conduct inspections and audits of the foreign renewable fuel producer facility. * * * * * (ii) * * * (C) Renewable fuel is stored or transported between the foreign renewable fuel producer and the United States, including storage tanks, vessels and pipelines. * * * * * (v) * * * (A) The volume of renewable fuel. * * * * * E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 7082 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations (C) Transfers of title or custody to renewable fuel. * * * * * (vii) Any employee of the foreign renewable fuel producer must be made available for interview by the EPA inspector or auditor, on request, within a reasonable time period. * * * * * (2) An agent for service of process located in the District of Columbia shall be named, and service on this agent constitutes service on the foreign renewable fuel producer or any employee of the foreign renewable fuel producer for any action by EPA or otherwise by the United States related to the requirements of this subpart. * * * * * (4) United States substantive and procedural laws shall apply to any civil or criminal enforcement action against the foreign renewable fuel producer or any employee of the foreign renewable fuel producer related to the provisions of this section. (5) Applying to be an approved foreign renewable fuel producer under this section, or producing or exporting renewable fuel under such approval, and all other actions to comply with the requirements of this subpart relating to such approval constitute actions or activities covered by and within the meaning of the provisions of 28 U.S.C. 1605(a)(2), but solely with respect to actions instituted against the foreign renewable fuel producer, its agents and employees in any court or other tribunal in the United States for conduct that violates the requirements applicable to the foreign renewable fuel producer under this subpart, including conduct that violates the False Statements Accountability Act of 1996 (18 U.S.C. 1001) and section 113(c)(2) of the Clean Air Act (42 U.S.C. 7413). (6) The foreign renewable fuel producer, or its agents or employees, will not seek to detain or to impose civil or criminal remedies against EPA inspectors or auditors for actions performed within the scope of EPA employment or contract related to the provisions of this section. (7) The commitment required by this paragraph shall be signed by the owner or president of the foreign renewable fuel producer company. (8) In any case where renewable fuel produced at a foreign renewable fuel production facility is stored or transported by another company between the production facility and the vessel that transports the renewable fuel to the United States, the foreign renewable fuel producer shall obtain from each such other company a VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 commitment that meets the requirements specified in paragraphs (f)(1) through (7) of this section, and these commitments shall be included in the foreign renewable fuel producer’s application to be an approved foreign renewable fuel producer under this subpart. (g) Sovereign immunity. By submitting an application to be an approved foreign renewable fuel producer under this subpart, or by producing and exporting renewable fuel to the United States under such approval, the foreign renewable fuel producer, and its agents and employees, without exception, become subject to the full operation of the administrative and judicial enforcement powers and provisions of the United States without limitation based on sovereign immunity, with respect to actions instituted against the foreign renewable fuel producer, its agents and employees in any court or other tribunal in the United States for conduct that violates the requirements applicable to the foreign renewable fuel producer under this subpart, including conduct that violates the False Statements Accountability Act of 1996 (18 U.S.C. 1001) and section 113(c)(2) of the Clean Air Act (42 U.S.C. 7413). (h) Bond posting. Any RIN-generating foreign producer shall meet the following requirements as a condition to approval as a RIN-generating foreign producer under this subpart: (1) * * * G = the greater of: the largest volume of renewable fuel produced by the RINgenerating foreign producer and exported to the United States, in gallons, during a single calendar year among the five preceding calendar years, or the largest volume of renewable fuel that the Rin-generating foreign producers expects to export to the United States during any calendar year identified in the Production Outlook Report required by § 80.1449. If the volume of renewable fuel exported to the United States increases above the largest volume identified in the Production Outlook Report during any calendar year, the RIN-generating foreign producer shall increase the bond to cover the shortfall within 90 days. * * * * * (3) * * * (iii) Include a commitment that the bond will remain in effect for at least five years following the end of latest annual reporting period that the RINgenerating foreign producer produces renewable fuel pursuant to the requirements of this subpart. (4) On any occasion a RIN-generating foreign producer bond is used to satisfy PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 any judgment, the RIN-generating foreign producer shall increase the bond to cover the amount used within 90 days of the date the bond is used. (i) English language reports. Any document submitted to EPA by a foreign renewable fuel producer shall be in English, or shall include an English language translation. (j) * * * (2) No foreign renewable fuel producer or other person may cause another person to commit an action prohibited in paragraph (j)(1) of this section, or that otherwise violates the requirements of this section. (3) No foreign renewable fuel producer or importer may generate RINs for the same volume of renewable fuel. (4) A foreign renewable fuel producer is prohibited from generating RINs in excess of the number for which the bond requirements of this section have been satisfied. (k) * * * (1) Renewable fuel shall be classified as RFS–FRRF according to the designation by the RIN-generating foreign producer if this designation is supported by product transfer documents prepared by the foreign producer as required in paragraph (c) of this section. (2) * * * (ii) Use the RIN-generating foreign producer’s RFS–FRRF certification to determine the name and EPA-assigned registration number of the RINgenerating foreign producer that produced the RFS–FRRF. * * * * * (4) * * * (ii) The RIN-generating foreign producer, containing the information determined under paragraph (k)(2)(i) of this section, and including identification of the port at which the product was offloaded, and any RINs retired under paragraph (e)(2) of this section. * * * * * (l) Truck imports of RFS–FRRF produced by a RIN-generating foreign producer. (1) Any RIN-generating foreign producer whose RFS–FRRF is transported into the United States by truck may petition EPA to use alternative procedures to meet all the following requirements: * * * * * (2) * * * (i) Contracts with any facilities that receive and/or transport RFS–FRRF that prohibit the commingling of RFS–FRRF with Non-RFS–FRRF or RFS–FRRF from other foreign renewable fuel producers. * * * * * (3) The petition described in this section must be submitted to EPA along E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations with the application for approval as a RIN-generating foreign producer under this subpart. (m) * * * (3) * * * (ii) Obtain the documents used by the independent third party to determine transportation and storage of the RFS– FRRF from the RIN-generating foreign producer’s facility to the load port, under paragraph (d) of this section. Obtain tank activity records for any storage tank where the RFS–FRRF is stored, and activity records for any mode of transportation used to transport the RFS–FRRF prior to being loaded onto the vessel. Use these records to determine whether the RFS–FRRF was produced at the RIN-generating foreign producer’s facility that is the subject of the attest engagement, and whether the RFS–FRRF was mixed with any NonRFS–FRRF or any RFS–FRRF produced at a different facility. * * * * * (6) * * * (i) Be independent of the RINgenerating foreign producer; * * * * * (n) Withdrawal or suspension of foreign renewable fuel producer approval. EPA may withdraw or suspend a foreign renewable fuel producer’s approval where any of the following occur: (1) A foreign renewable fuel producer fails to meet any requirement of this section. * * * * * (3) A foreign renewable fuel producer asserts a claim of, or a right to claim, sovereign immunity in an action to enforce the requirements in this subpart. (4) A foreign renewable fuel producer fails to pay a civil or criminal penalty that is not satisfied using the foreign renewable fuel producer bond specified in paragraph (h) of this section. (o) Additional requirements for applications, reports, and certificates. Any application for approval as a foreign renewable fuel producer, alternative procedures under paragraph (l) of this section, any report, certification, or other submission required under this section shall be: * * * * * (2) Signed by the president or owner of the foreign renewable fuel producer company, or by that person’s immediate designee, and shall contain the following declarations: (i) ‘‘I hereby certify: (A) That I have actual authority to sign on behalf of and to bind [NAME OF FOREIGN RENEWABLE FUEL PRODUCER] with regard to all statements contained herein; VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 (B) That I am aware that the information contained herein is being Certified, or submitted to the United States Environmental Protection Agency, under the requirements of 40 CFR part 80, subpart M, and that the information is material for determining compliance under these regulations; and (C) That I have read and understand the information being Certified or submitted, and this information is true, complete and correct to the best of my knowledge and belief after I have taken reasonable and appropriate steps to verify the accuracy thereof.’’ (ii) ‘‘I affirm that I have read and understand the provisions of 40 CFR part 80, subpart M, including 40 CFR 80.1465 apply to [NAME OF FOREIGN RENEWABLE FUEL PRODUCER]. Pursuant to Clean Air Act section 113(c) and 18 U.S.C. 1001, the penalty for furnishing false, incomplete or misleading information in this certification or submission is a fine of up to $10,000 U.S., and/or imprisonment for up to five years.’’. (p) Requirements for non-RINgenerating foreign producer. Any nonRIN-generating foreign producer must comply with the requirements of this section beginning on the effective date of the final rule or prior to EPA acceptance, whichever is later. ■ 49. Section 80.1469 is amended by revising paragraphs (c)(1)(ii) and (f)(1) introductory text to read as follows: § 80.1469 Requirements for Quality Assurance Plans. * * * * * (c) * * * (1) * * * (ii) If applicable, plans under § 80.1426(f)(5)(ii) are accepted and up to date. * * * * * (f) * * * (1) A new QAP shall be submitted to EPA according to paragraph (e) of this section and the third-party auditor shall update their registration according to § 80.1450(g)(9) whenever any of the following changes occur at a production facility audited by a third-party independent auditor and the auditor does not possess an appropriate pathway-specific QAP that encompasses the changes: * * * * * ■ 50. Section 80.1472 is amended by revising paragraphs (b)(3)(i) introductory text, (b)(3)(ii)(B), and (b)(3)(iii) to read as follows: § 80.1472 Requirements for quality assurance audits. * * * (b) * * * PO 00000 Frm 00069 * Fmt 4701 * Sfmt 4700 7083 (3) * * * (i) The independent third-party auditor shall conduct an on-site visit at the renewable fuel production facility or foreign ethanol production facility: * * * * * (ii) * * * (B) 380 days after the previous on-site visit if a previously approved (by EPA) remote monitoring system is in place at the renewable fuel production facility or foreign ethanol production facility, as applicable. The 380-day period shall start the day after the previous on-site visit ends. (iii) An on-site visit shall include verification of all QAP elements that require inspection or evaluation of the physical attributes of the renewable fuel production facility or foreign ethanol production facility. * * * * * ■ 51. Section 80.1475 is added as follows: § 80.1475 What are the additional attest engagement requirements for parties that redesignate certified NTDF as MVNRLM diesel fuel? (a) General requirements. (1) In addition to the attest engagement requirements under § 80.1464, all obligated parties required to arrange for additional attest engagement procedures under § 80.1464(a)(1)(vii) must have an annual attest engagement conducted by an auditor using the minimum attest procedures specified in this section. (2) All applicable requirements and procedures outlined in §§ 80.125 through 80.127 and § 80.130 apply to the auditors and attest engagement procedures specified in this section. (3) Obligated parties must include any additional information required under this section in the attest engagement report under § 80.1464(d). (4) Report as a finding if the party failed to either incur or satisfy an RVO if required. (b) EPA reports. Auditors must perform the following: (1) Obtain and read a copy of the obligated party’s reports filed with EPA as required by § 80.1451(a)(1)(xix) for the reporting period. (2) In the case of an obligated party’s report to EPA that represents aggregate calculations for more than one facility, obtain the facility-specific volume and property information that was used by the refiner to prepare the aggregate report. Foot and crossfoot the facilityspecific totals and agree to the values in the aggregate report. The procedures in paragraphs (b) and (c) of this section are then performed separately for each facility. E:\FR\FM\06FER2.SGM 06FER2 lotter on DSKBCFDHB2PROD with RULES2 7084 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations (3) Obtain a written representation from a company representative that the report copies are complete and accurate copies of the reports filed with EPA. (4) Identify, and report as a finding, the name of the commercial computer program used by the refiner or importer to track the data required by the regulations in this part, if any. (c) Inventory reconciliation analysis. Auditors must perform the following: (1) Obtain an inventory reconciliation analysis for the facility for the reporting period for each of the following and perform the procedures at paragraphs (c)(2) through (4) of this section separately for each of the following products: (i) The volume of certified NTDF that was redesignated as MVNRLM diesel fuel. (ii) The volume of MVNRLM diesel fuel that was redesignated to a nontransportation use. (iii) The volume of MVNRLM diesel fuel owned when the fuel was received at the facility and acquired at the facility during the compliance period. (iv) The volume of MVNRLM diesel fuel owned and sold or transferred to other parties at the facility during the compliance period. (v) The volume of certified NTDF received. (vi) The volume of certified NTDF delivered. (2) Foot and crossfoot the volume totals reflected in the analysis. (3) Agree the beginning and ending inventory amounts in the analysis to the facility’s inventory records. (4) If the obligated party delivered more MVNRLM diesel fuel than received, agree the annual balance with the reports obtained at § 80.1475(b)(1) and verify whether the obligated party incurred and satisfied its RVO under § 80.1408(a)(2)(i). (5) Report as a finding each of the volume totals along with any discrepancies. (d) Listing of tenders. Auditors must perform the following: (1) For each of the volumes listed in paragraphs (b)(1)(iii) through (b)(1)(vi) of this section, obtain a separate listing of all tenders from the refiner or importer for the reporting period. Each listing should provide for each tender the volume shipped and other information as needed to distinguish tenders. (2) Foot to the volume totals per the listings. (3) Agree the volume totals on the listing to the tender volume total in the inventory reconciliation analysis obtained in paragraph (b) of this section. (4) For each of the listings select a representative sample of the tenders in VerDate Sep<11>2014 20:53 Feb 05, 2020 Jkt 250001 accordance with the guidelines in § 80.127, and for each tender selected perform the following: (i) Obtain product transfer documents associated with the tender and agree the volume on the tender listing to the volume on the product transfer documents. (ii) Note whether the product transfer documents include the information required by § 80.590 and, for tenders involving the transfer of certified NTDF, the information required by § 80.1453(e). (5) Report as a finding any discrepancies. 53. Section 80.1600 is amended by removing the definition for ‘‘Ethanol denaturant’’. ■ 54. Section 80.1603 is amended by: ■ a. Revising paragraph (d)(1); ■ b. Redesignating paragraph (d)(2) as paragraph (d)(3) and adding a new paragraph (d)(2); and ■ c. In the equation in paragraph (f)(1) revising the definition of ‘‘OC’’. The revisions and addition read as follows: of the gasoline or BOB and the sulfur content of the added oxygenate pursuant to one of the methods listed in paragraphs (d)(1)(i) and (ii) of this section. A refiner or importer must choose to use only one method during each annual compliance period. (i) Testing the sulfur content of a sample of the oxygenate pursuant to § 80.46 or § 80.47, as applicable. The refiner or importer must demonstrate through records relating to sampling, testing, and blending that the test result was derived from a representative sample of the oxygenate that was blended with the batch of gasoline or BOB. (ii) If the oxygenate is denatured fuel ethanol, and the sulfur content has not been tested under paragraph (d)(1)(i) of this section, then the sulfur content must be assumed to be 5.00 ppm. (2) For denatured fuel ethanol, the refiner or importer may assume that the denatured fuel ethanol was blended with gasoline or BOB at a concentration of 10 volume percent, unless the refiner or importer can demonstrate that a different amount of denatured fuel ethanol was actually blended with a batch of gasoline or BOB. (i) The refiner or importer of conventional gasoline or CBOB must comply with the requirements of § 80.101(d)(4)(ii). (ii) The refiner or importer of reformulated gasoline or RBOB must comply with the requirements of § 80.69(a). (iii) Any gasoline or BOB must meet the per-gallon sulfur standard of paragraph (a)(2) of this section prior to calculating any dilution from the oxygenate added downstream. (iv) The reported volume of the batch is the combined volume of the reformulated gasoline, RBOB, conventional gasoline, or CBOB and the downstream added oxygenate. * * * * * (f) * * * (1) * * * OC = Sulfur credits used by the refinery or importer to show compliance, in ppm-gallons. * * * * * ■ 55. Section 80.1609 is amended by revising the last sentence of paragraph (a) to read as follows: § 80.1603 Gasoline sulfur standards for refiners and importers. § 80.1609 Oxygenate blender requirements. * (a) * * * Such oxygenate blenders are subject to the requirements of paragraph (b) of this section, the requirements and prohibitions applicable to downstream parties, the requirements of Subpart N—Additional Requirements for Gasoline-Ethanol Blends 52. Section 80.1501 is amended by revising the section heading and paragraphs (b)(3)(i) and (b)(5)(i) and removing and reserving paragraph (b)(5)(ii). The revisions read as follows: ■ § 80.1501 Labeling requirements that apply to retailers and wholesale purchaserconsumers of gasoline that contains greater than 10 volume percent ethanol and not more than 15 volume percent ethanol. * * * * * (b) * * * (3) * * * (i) The word ‘‘ATTENTION’’ shall be capitalized in 20-point, black, Helvetica Neue LT 77 Bold Condensed font, and shall be placed in the top 1.25 inches of the label as further described in paragraph (b)(4)(iii) of this section. * * * * * (5) * * * (i) A request for approval of an alternative label shall be sent to the attention of ‘‘E15 Alternative Label Request’’ to the address in § 80.10(a). * * * * * Subpart O—Gasoline Sulfur § 80.1600 [Amended] ■ * * * * (d) * * * (1) The refiner or importer shall calculate the sulfur content of the batch by volume weighting the sulfur content PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 E:\FR\FM\06FER2.SGM 06FER2 Federal Register / Vol. 85, No. 25 / Thursday, February 6, 2020 / Rules and Regulations § 80.1603(d)(3), and the prohibition specified in § 80.1660(e). * * * * * ■ 56. Section 80.1616 is amended by revising paragraph (c)(3) to read as follows: § 80.1616 Credit use and transfer. * * * * * (c) * * * (3) CRT2 credits generated under § 80.1615(d) from January 1, 2017, through December 31, 2019, may only be traded to and ultimately used from January 1, 2017, through December 31, 2019, by small refiners and small volume refineries approved under § 80.1622. ■ 57. Section 80.1622 is amended by revising paragraph (g) to read as follows: § 80.1622 Approval for small refiner and small volume refinery status. * * * * * (g) Small refiner and small volume refinery status applications, and any other correspondence required by this section, § 80.1620, or § 80.1621 shall be sent to the attention of ‘‘Tier 3 Program (Small Refiner/Small Volume Refinery Application)’’ to the address in § 80.10(a). ■ 58. Section 80.1625 is amended by revising paragraph (c)(2) to read as follows: § 80.1625 lotter on DSKBCFDHB2PROD with RULES2 * Hardship provisions. * * (c) * * * VerDate Sep<11>2014 * * 20:53 Feb 05, 2020 Jkt 250001 (2) Hardship applications under this section must be sent to the attention of ‘‘Tier 3 Program (Hardship Application)’’ to the address in § 80.10(a). ■ 59. Section 80.1650 is amended by revising paragraphs (b)(3), (e)(1)(iii)(A), and (g)(1)(iii)(A) to read as follows: § 80.1650 Registration. * * * * * (b) * * * (3) Any oxygenate blender required to register shall do so by November 1, 2016, or at least 90 days in advance of the first date that such person will blend oxygenate into gasoline, RBOB, or CBOB where the resulting gasoline is subject to the gasoline sulfur standards under this subpart O. * * * * * (e) * * * (1) * * * (iii) * * * (A) Whether records are kept on-site or off-site of the facility. * * * * * (g) * * * (1) * * * (iii) * * * (A) Whether records are kept on-site or off-site of the facility. * * * * * ■ 60. Section 80.1652 is amended by revising paragraph (a)(7) introductory text and adding paragraphs (a)(7)(v) and (vi) to read as follows: PO 00000 Frm 00071 Fmt 4701 Sfmt 9990 7085 § 80.1652 Reporting requirements for gasoline refiners, gasoline importers, oxygenate producers, and oxygenate importers. * * * * * (a) * * * (7) For each batch of BOB or gasoline produced or imported during the averaging period, all the following: * * * * * (v) The type and amount of oxygenate, along with identification of the method used to determine the type and amount of oxygenate content of the batch, as determined under § 80.1603(d). (vi) The sulfur content of the oxygenate, reported to two decimal places, along with identification of the method used to determine the sulfur content of the oxygenate, as determined under § 80.1603(d). * * * * * ■ 61. Section 80.1656 is amended by revising paragraph (h) to read as follows: § 80.1656 Exemptions for gasoline used for research, development, or testing purposes. * * * * * (h) Submission. Requests for research and development exemptions shall be sent to the attention of ‘‘Tier 3 Program (R&D Exemption Request)’’ to the address in § 80.10(a). [FR Doc. 2020–00431 Filed 2–5–20; 8:45 am] BILLING CODE 6560–50–P E:\FR\FM\06FER2.SGM 06FER2

Agencies

ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 85, Number 25 (Thursday, February 6, 2020)]
[Rules and Regulations]
[Pages 7016-7085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00431]



[[Page 7015]]

Vol. 85

Thursday,

No. 25

February 6, 2020

Part II





Environmental Protection Agency





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40 CFR Parts 79 and 80





Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based 
Diesel Volume for 2021 and Other Changes; Final Rule

Federal Register / Vol. 85 , No. 25 / Thursday, February 6, 2020 / 
Rules and Regulations

[[Page 7016]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 79 and 80

[EPA-HQ-OAR-2019-0136; FRL-10003-79-OAR]
RIN 2060-AU42


Renewable Fuel Standard Program: Standards for 2020 and Biomass-
Based Diesel Volume for 2021 and Other Changes

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under section 211 of the Clean Air Act, the Environmental 
Protection Agency (EPA) is required to set renewable fuel percentage 
standards every year. This action establishes the annual percentage 
standards for cellulosic biofuel, biomass-based diesel, advanced 
biofuel, and total renewable fuel that apply to gasoline and diesel 
transportation fuel produced or imported in the year 2020. Relying on 
statutory waiver authority that is available when the projected 
cellulosic biofuel production volume is less than the applicable volume 
specified in the statute, EPA is establishing volume requirements for 
cellulosic biofuel, advanced biofuel, and total renewable fuel that are 
below the statutory volume targets. We are also establishing the 
applicable volume of biomass-based diesel for 2021. In addition, we are 
finalizing changes to the percentage standard calculations to account 
for volumes of gasoline and diesel we project will be exempted from the 
renewable volume obligations. Finally, this action finalizes several 
regulatory changes to the Renewable Fuel Standard (RFS) program 
including new pathways, flexibilities for regulated parties, and 
clarifications of existing regulations.

DATES: This final rule is effective on April 6, 2020.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-HQ-OAR-2019-0136. All documents in the docket are 
listed on the https://www.regulations.gov website. Although listed in 
the index, some information is not publicly available, e.g., CBI or 
other information whose disclosure is restricted by statute. Certain 
other material is not available on the internet and will be publicly 
available only in hard copy form. Publicly available docket materials 
are available electronically through https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of 
Transportation and Air Quality, Assessment and Standards Division, 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 
48105; telephone number: 734-214-4131; email address: 
[email protected].

SUPPLEMENTARY INFORMATION: Entities potentially affected by this final 
rule are those involved with the production, distribution, and sale of 
transportation fuels, including gasoline and diesel fuel or renewable 
fuels such as ethanol, biodiesel, renewable diesel, and biogas. 
Potentially affected categories include:

----------------------------------------------------------------------------------------------------------------
                                                NAICS \1\                      Examples of potentially affected
                  Category                        codes       SIC \2\ codes                entities
----------------------------------------------------------------------------------------------------------------
Industry...................................          324110            2911  Petroleum refineries.
Industry...................................          325193            2869  Ethyl alcohol manufacturing.
Industry...................................          325199            2869  Other basic organic chemical
                                                                              manufacturing.
Industry...................................          424690            5169  Chemical and allied products
                                                                              merchant wholesalers.
Industry...................................          424710            5171  Petroleum bulk stations and
                                                                              terminals.
Industry...................................          424720            5172  Petroleum and petroleum products
                                                                              merchant wholesalers.
Industry...................................          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).

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

Outline of This Preamble

I. Executive Summary
    A. Approach To Setting Volume Requirements
    B. Cellulosic Biofuel
    C. Advanced Biofuel
    D. Total Renewable Fuel
    E. 2021 Biomass-Based Diesel
    F. Annual Percentage Standards
    G. Amendments to the RFS and Fuels Programs Regulations
    H. Response To Remand of 2016 Standards Rulemaking
II. Authority and Need for Waiver of Statutory Applicable Volumes
    A. Statutory Authorities for Reducing Volume Targets
    1. Cellulosic Waiver Authority
    2. General Waiver Authority
    B. Severability
    C. Treatment of Carryover RINs
    1. Carryover RIN Bank Size
    2. EPA's Decision Regarding the Treatment of Carryover RINs
III. Cellulosic Biofuel Volume for 2020
    A. Statutory Requirements
    B. Cellulosic Biofuel Industry Assessment
    1. Review of EPA's Projection of Cellulosic Biofuel in Previous 
Years
    2. Potential Domestic Producers
    3. Potential Foreign Sources of Cellulosic Biofuel
    4. Summary of Volume Projections for Individual Companies
    C. Projection From the Energy Information Administration
    D. Cellulosic Biofuel Volume for 2020
    1. Liquid Cellulosic Biofuel
    2. CNG/LNG Derived From Biogas
    3. Total Cellulosic Biofuel in 2020
IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020
    A. Volumetric Limitation on Use of the Cellulosic Waiver 
Authority
    B. Attainable Volumes of Advanced Biofuel
    1. Imported Sugarcane Ethanol
    2. Other Advanced Biofuel
    3. Biodiesel and Renewable Diesel
    a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve 
Advanced Biofuel Volume
    b. Historical Supply of Biodiesel and Renewable Diesel
    c. Consideration of Production Capacity and Distribution 
Infrastructure
    d. Consideration of the Availability of Advanced Feedstocks
    e. Biodiesel and Renewable Diesel Imports and Exports
    f. Attainable and Reasonably Attainable Volumes of Advanced 
Biodiesel and Renewable Diesel
    C. Volume Requirement for Advanced Biofuel
    D. Volume Requirement for Total Renewable Fuel
    V. Impacts of 2020 Volumes on Costs

[[Page 7017]]

    A. Illustrative Costs Analysis of 2020 Final Volumes Compared to 
the 2020 Statutory Volumes Baseline
    B. Illustrative Cost Analysis of the 2020 Final Volumes Compared 
to the 2019 Final Volumes
VI. Biomass-Based Diesel Volume for 2021
    A. Statutory Requirements
    B. Review of Implementation of the Program and the 2021 
Applicable Volume of Biomass-Based Diesel
    C. Consideration of Statutory Factors in CAA Section 
211(o)(2)(B)(ii)(I)-(VI) for 2021 and Determination of the 2021 
Biomass-Based Diesel Volume
    D. BBD Volume Requirement for 2021
VII. Percentage Standards for 2020
    A. Calculation of Percentage Standards
    B. Small Refineries and Small Refiners
    1. Changes to the Projected Volume of Gasoline and Diesel for 
Exempt Small Refineries
    2. Projecting the Exempted Volume of Gasoline and Diesel in 2020
    C. Final Standards
VIII. Administrative Actions
    A. Assessment of the Domestic Aggregate Compliance Approach
    B. Assessment of the Canadian Aggregate Compliance Approach
IX. Amendments to the RFS and Fuels Program Regulations
    A. Clarification of Diesel RVO Calculations
    1. Overview
    2. Downstream Re-Designation of Certified Non-Transportation 15 
ppm Distillate Fuel to MVNRLM Diesel Fuel
    B. Pathway Petition Conditions
    C. Esterification Pretreatment Pathway
    D. Distillers Corn Oil and Distillers Sorghum Oil Pathways
    E. Clarification of the Definition of Renewable Fuel Exporter 
and Associated Provisions
    F. REGS Rule Provisions
    1. Flexibilities for Renewable Fuel Blending for Military Use
    2. Heating Oil Used for Cooling
    3. Separated Food Waste Plans
    4. Additional Registration Deactivation Justifications
    5. New RIN Retirement Section
    6. New Pathway for Co-Processing Biomass With Petroleum to 
Produce Co-Processed Cellulosic Diesel, Jet Fuel, and Heating Oil
    7. Other Revisions to the Fuels Program
    a. Testing Revisions
    b. Oxygenate Added Downstream in Tier 3
    c. Technical Corrections and Clarifications
X. Public Participation
XI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs
    C. Paperwork Reduction Act (PRA)
    D. Regulatory Flexibility Act (RFA)
    E. Unfunded Mandates Reform Act (UMRA)
    F. Executive Order 13132: Federalism
    G. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    H. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    J. National Technology Transfer and Advancement Act (NTTAA)
    K. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    L. Congressional Review Act (CRA)
XII. Statutory Authority

I. Executive Summary

    The Renewable Fuel Standard (RFS) program began in 2006 pursuant to 
the requirements in Clean Air Act (CAA) section 211(o) that were added 
through the Energy Policy Act of 2005 (EPAct). The statutory 
requirements for the RFS program were subsequently modified through the 
Energy Independence and Security Act of 2007 (EISA), leading to the 
publication of major revisions to the regulatory requirements on March 
26, 2010.\1\ EISA's stated goals include moving the United States 
(U.S.) toward ``greater energy independence and security [and] 
increas[ing] the production of clean renewable fuels.'' \2\
---------------------------------------------------------------------------

    \1\ 75 FR 14670, March 26, 2010.
    \2\ Public Law 110-140, 121 Stat. 1492 (2007) (``EISA'').
---------------------------------------------------------------------------

    The statute includes annual volume targets and requires EPA to 
translate those volume targets (or alternative volume requirements 
established by EPA in accordance with statutory waiver authorities) 
into compliance obligations that obligated parties must meet every 
year. In this action we are establishing the applicable volumes for 
cellulosic biofuel, advanced biofuel, and total renewable fuel for 
2020, and biomass-based diesel (BBD) for 2021.\3\
---------------------------------------------------------------------------

    \3\ The 2020 BBD volume requirement was established in the 2019 
final rule. 83 FR 63704 (December 11, 2018).
---------------------------------------------------------------------------

    We are also finalizing changes to the percentage standard 
calculations to account for volumes of gasoline and diesel we project 
will be exempted from the renewable volume obligations, and 
establishing the annual percentage standards (also known as ``percent 
standards'') for cellulosic biofuel, BBD, advanced biofuel, and total 
renewable fuel that would apply to gasoline and diesel produced or 
imported in 2020.\4\
---------------------------------------------------------------------------

    \4\ For a list of the statutory provisions related to the 
determination of applicable volumes, see the 2018 final rule (82 FR 
58486, December 12, 2017; Table I.A-2).
---------------------------------------------------------------------------

    Finally, we are finalizing several regulatory changes to the RFS 
program to facilitate the implementation of this program going forward 
including new pathways, flexibilities for regulated parties, and 
clarifications of existing regulations.
    Today, nearly all gasoline used for transportation purposes 
contains 10 percent ethanol (E10), and on average diesel fuel contains 
nearly 5 percent of biodiesel and renewable diesel.\5\ However, the 
market has fallen well short of the statutory volumes for cellulosic 
biofuel, resulting in shortfalls in the advanced biofuel and total 
renewable fuel volumes. In this action, we are establishing a volume 
requirement for cellulosic biofuel at the level we project to be 
available for 2020, along with an associated applicable percentage 
standard. For advanced biofuel and total renewable fuel, we are 
finalizing volume requirements using the ``cellulosic waiver 
authority'' that result in advanced biofuel and total renewable fuel 
volume requirements that are lower than the statutory targets by the 
same magnitude as the reduction in the cellulosic biofuel reduction. 
This would effectively maintain the implied statutory volumes for non-
cellulosic biofuel and conventional biofuel.\6\
---------------------------------------------------------------------------

    \5\ Average biodiesel and/or renewable diesel blend percentages 
based on EIA's October 2019 Short Term Energy Outlook (STEO) and 
EPA's Moderated Transaction System (EMTS).
    \6\ The statutory total renewable fuel, advanced biofuel and 
cellulosic biofuel requirements for 2020 are 30.0, 15.0 and 10.5 
billion gallons respectively. This implies a conventional renewable 
fuel applicable volume (the difference between the total renewable 
fuel and advanced biofuel volumes) of 15.0 billion gallons, and a 
non-cellulosic advanced biofuel applicable volume (the difference 
between the advanced biofuel and cellulosic biofuel volumes) of 4.5 
billion gallons.
---------------------------------------------------------------------------

    The resulting volume requirements for 2020 are shown in Table I-1. 
Relative to the levels finalized for 2019, the 2020 volume requirements 
for cellulosic biofuel, advanced biofuel and total renewable fuel would 
be higher by approximately 170 million gallons. This entire increase 
for each category is attributable to the increased projection of 
cellulosic biofuel production in 2020 (see Section III for a further 
discussion of our cellulosic biofuel projection). We are also 
establishing the volume requirement for BBD for 2021 at 2.43 billion 
gallons. This volume is equal to the BBD volume finalized for 2020.

[[Page 7018]]



                                     Table I-1--Final Volume Requirements a
----------------------------------------------------------------------------------------------------------------
                                                  2020 Statutory   2020 Proposed    2020 Final      2021 Final
                                      2019 b          volumes         volumes         volumes         volumes
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (billion                 0.42           10.50            0.54            0.59             n/a
 gallons).......................
Biomass-based diesel (billion                2.1           >=1.0           c N/A          c 2.43            2.43
 gallons).......................
Advanced biofuel (billion                   4.92           15.00            5.04            5.09             n/a
 gallons).......................
Renewable fuel (billion gallons)           19.92           30.00           20.04           20.09             n/a
----------------------------------------------------------------------------------------------------------------
a All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent.
b The 2019 volume requirements for cellulosic biofuel, advanced biofuel, and renewable fuel were established in
  the 2019 final rule (83 FR 63704, December 11, 2018). The 2019 BBD volume requirement was established in the
  2018 final rule (82 FR 58486, December 12, 2017).
c The 2020 BBD volume requirement of 2.43 billion gallons was established in the 2019 final rule (83 FR 63704,
  December 11, 2018).

A. Approach To Setting Volume Requirements

    For advanced biofuel and total renewable fuel, we are reducing the 
statutory volumes based on the ``cellulosic waiver authority'' that 
result in advanced biofuel and total renewable fuel volume requirements 
that are lower than the statutory targets by the same magnitude as the 
reduction in the cellulosic biofuel applicable volume. Further 
discussion of our cellulosic waiver authority is found in Section II. 
This follows the same general approach as in the 2018 and 2019 final 
rules, as well as the 2020 proposed rule. The volumes for cellulosic 
biofuel, advanced biofuel, and total renewable fuel exceed the required 
volumes for these fuel types in 2019.

B. Cellulosic Biofuel

    The CAA requires EPA to annually determine the projected volume of 
cellulosic biofuel production for the following year. If the projected 
volume of cellulosic biofuel production is less than the applicable 
volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA 
must lower the applicable volume used to set the annual cellulosic 
biofuel percentage standard to the projected volume available. In this 
rule we are establishing a cellulosic biofuel volume requirement of 
0.59 billion ethanol-equivalent gallons for 2020 based on our 
projection. This volume is 0.17 billion ethanol-equivalent gallons 
higher than the cellulosic biofuel volume finalized for 2019. Our 
projection in Section III considers many factors, including the 
estimate of cellulosic biofuel production received from the Energy 
Information Administration (EIA); \7\ RIN generation data for past 
years and 2019 to date that is available to EPA through the EPA 
Moderated Transaction System (EMTS); the information we have received 
regarding individual facilities' capacities, production start dates, 
and biofuel production plans; a review of cellulosic biofuel production 
relative to EPA's projections in previous annual rules; and EPA's own 
engineering judgment. To project cellulosic biofuel production for 2020 
we used the same general methodology as in the 2018 and 2019 final 
rules, together with updated data.
---------------------------------------------------------------------------

    \7\ Letter from Linda Capuano, EIA Administrator to Andrew 
Wheeler, EPA Administrator. October 9, 2019. Available in docket 
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

C. Advanced Biofuel

    If we reduce the applicable volume of cellulosic biofuel below the 
volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the 
authority to reduce the applicable volumes of advanced biofuel and 
total renewable fuel by the same or a lesser amount. We refer to this 
as the ``cellulosic waiver authority.'' The conditions that caused us 
to reduce the 2019 volume requirement for advanced biofuel below the 
statutory target remain relevant in 2020.
    As in the 2019 final rule, we investigated the projected 
availability of non-cellulosic advanced biofuels in 2020. In Section 
IV, we describe our consideration of many factors, including:
     The ability of the market to make advanced biofuels 
available,
     The ability of the standards we set to bring about market 
changes in the time available,
     The potential impacts associated with diverting biofuels 
and/or biofuel feedstocks from current uses to the production of 
advanced biofuel used in the U.S.,
     The fact that the biodiesel tax credit is currently not 
available for 2020,
     Current tariffs on imports of biodiesel from Argentina and 
Indonesia and the proposal to change those tariffs, and
     The cost of advanced biofuels
    We also considered the size of the carryover RIN bank. Based on 
these considerations, we have determined that the statutory volume 
target for advanced biofuel should be reduced by the same amount as the 
reduction in the statutory volume target for cellulosic biofuel, 
consistent with our July 29, 2019, proposal (``the July 29 proposal''). 
Specifically, the statutory volume target for advanced biofuel should 
be reduced by 9.91 billion gallons. This maintains the implied 
statutory volume requirement for non-cellulosic advanced biofuel of 4.5 
billion gallons, and results in a final advanced biofuel volume 
requirement for 2020 of 5.09 billion gallons, which is 0.17 billion 
gallons higher than the advanced biofuel volume requirement for 2019.

D. Total Renewable Fuel

    As we have articulated in previous annual standard-setting 
rulemakings,\8\ we believe that the cellulosic waiver authority is best 
interpreted to require equal reductions in advanced biofuel and total 
renewable fuel. Consistent with previous years, we are reducing total 
renewable fuel by the same amount as the reduction in advanced biofuel, 
such that the resulting implied volume requirement for conventional 
renewable fuel would be 15 billion gallons, the same as the implied 
volume requirement in the statute. The result is that the final 2020 
volume requirement is 20.09 billion gallons.
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    \8\ See, e.g., 83 FR 63704 (December 11, 2018).
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E. 2021 Biomass-Based Diesel

    In EISA, Congress specified increasing applicable volumes of BBD 
through 2012. Beyond 2012, Congress stipulated that EPA, in 
coordination with DOE and USDA, was to establish the BBD volume based 
on a review of the implementation of the program during calendar years 
specified in the tables in CAA 211(o)(B)(i) and other statutory 
factors, provided that the required volume for BBD could not be less 
than 1.0 billion gallons. Starting in 2013, EPA has set the BBD volume 
requirement above the statutory minimum, most recently resulting in 
2.43 billion gallons for 2020. In this rule we are maintaining the BBD 
volume for 2021 at 2.43 billion gallons.

[[Page 7019]]

    Given current and recent market conditions, the advanced biofuel 
requirement is driving the production and use of biodiesel and 
renewable diesel volumes over and above volumes required through the 
separate BBD standard, and we expect this to continue. While EPA 
continues to believe it is appropriate to maintain the opportunity for 
other advanced biofuels to compete for market share, the vast majority 
of the advanced biofuel obligations in recent years have been satisfied 
with BBD. Thus, after a review of implementation of the program to date 
and considering the statutory factors, we are establishing, in 
coordination with USDA and DOE, an applicable volume of BBD for 2020 of 
2.43 billion gallons.

F. Annual Percentage Standards

    The renewable fuel standards are expressed as a volume percentage 
and are used by each refiner and importer of fossil-based gasoline or 
diesel to determine their renewable fuel volume obligations.
    Four separate percentage standards are required under the RFS 
program, corresponding to the four separate renewable fuel categories 
shown in Table I-1. The specific formulas we use in calculating the 
renewable fuel percentage standards are contained in the regulations at 
40 CFR 80.1405. On October 28, 2019, we proposed changes to our 
percentage standard formulas in 40 CFR 80.1405. (``October 28 
Proposal''). These changes were intended to project the exempted volume 
of gasoline and diesel due to small refinery exemptions, regardless of 
whether we grant those exemptions prior or after the annual rule. For 
2020, we proposed to project exempt volumes are based on a three-year 
average of the relief recommended by the Department of Energy (DOE) for 
2016-2018. In this action, we are finalizing these proposed changes. 
These changes result in increases to the percentage standards as 
compared to the percentage standards in the July 29 proposal.
    Consistent with these changes, we are also announcing our general 
policy approach to small refinery exemptions going forward, including 
for now-pending 2019 petitions as well as for future 2019 and 2020 
petitions. Although final decisions on any exemption petition must 
await EPA's receipt and adjudication of those petitions, EPA intends to 
grant relief consistent with DOE's recommendations where appropriate. 
This policy extends to DOE's recommendations of partial (50%) relief: 
Where appropriate, we intend to grant 50% relief where DOE recommends 
50% relief.
    The volume of transportation gasoline and diesel used to calculate 
the proposed percentage standards was based on Energy Information 
Administration's (EIA) October 2019 Short Term Energy Outlook (STEO), 
minus an estimate of fuel consumption in Alaska. The final applicable 
percentage standards for 2020 are shown in Table I.B.6-1. Details, 
including the projected gasoline and diesel volumes used, can be found 
in Section VII.

              Table I.F-1--Final 2020 Percentage Standards
------------------------------------------------------------------------
                                                            Percentage
                                                             standards
------------------------------------------------------------------------
Cellulosic biofuel......................................           0.34%
Biomass-based diesel....................................            2.10
Advanced biofuel........................................            2.93
Renewable fuel..........................................           11.56
------------------------------------------------------------------------

G. Amendments to the RFS and Fuels Programs Regulations

    In implementing the RFS program EPA has identified several areas 
where regulatory changes would assist EPA in implementing the RFS 
program in future years. EPA requested comment on several of these 
regulatory changes in the July 29 proposal: Clarification of diesel RVO 
calculations, pathway petition conditions, a biodiesel esterification 
pathway, distillers corn oil and distillers sorghum oil pathways, and 
renewable fuel exporter provisions. Each of these regulatory changes is 
discussed in greater detail in Section IX.
    Additionally, we proposed a number of changes to the RFS 
regulations as part of the proposed Renewables Enhancement and Growth 
Support (REGS) Rule.\9\ EPA noted that it was considering finalizing 
several of those proposed changes along with the 2020 RVO final 
rule,\10\ and are now finalizing the REGS Rule provisions listed below.
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    \9\ See 81 FR 80828 (November 16, 2016).
    \10\ See 84 FR 36765 (July 29, 2019).

 Flexibilities for Renewable Fuel Blending for Military Use 
(REGS Section VIII.E)
 Heating Oil Used for Cooling (REGS Section VIII.F)
 Separated Food Waste Plans (REGS Section VIII.G)
 Additional Registration Deactivation Justifications (REGS 
Section VIII.J)
 New RIN Retirement Section (REGS Section VIII.L)
 New Pathway for Co-Processing Biomass With Petroleum To 
Produce Cellulosic Diesel, Jet Fuel, and Heating Oil (REGS Section 
VIII.M)
 Other Revisions to the Fuels Program (REGS Section IX)

    The other provisions proposed in the REGS Rule remain under 
consideration but are not being finalized at this time.

H. Response to Remand of 2016 Standards Rulemaking

    In 2015, EPA established the total renewable fuel standard for 
2016, relying in part on the general waiver authority under a finding 
of inadequate domestic supply.\11\ Several parties challenged that 
action, and the U.S. Court of Appeals for the D.C. Circuit, in 
Americans for Clean Energy v. EPA, 864 F.3d 691 (2017) (hereafter 
``ACE''), vacated EPA's use of the general waiver authority under a 
finding of inadequate domestic supply, finding that such use exceeded 
EPA's authority under the Clean Air Act. Specifically, EPA had 
impermissibly considered demand-side factors in its assessment of 
inadequate domestic supply, rather than limiting that assessment to 
supply-side factors. The court remanded the rule back to EPA for 
further consideration in light of the court's ruling.
---------------------------------------------------------------------------

    \11\ See 80 FR 77420 (December 14, 2015); CAA section 
211(o)(7)(A)(ii).
---------------------------------------------------------------------------

    In the July 29 proposal, we proposed that the applicable 2016 
volume requirement for total renewable fuel and the associated 
percentage standard should not be changed. In light of the many 
comments received, we are still actively considering this issue. We are 
therefore not taking final agency action on this issue in today's final 
rule. We are instead deferring action on this issue to a separate 
action, which we anticipate in early 2020.

II. Authority and Need for Waiver of Statutory Applicable Volumes

    The CAA provides EPA with the authority to promulgate volume 
requirements below the applicable volume targets specified in the 
statute under specific circumstances. This section discusses those 
authorities. As described in the executive summary, we are setting the 
volume requirement for cellulosic biofuel at the level we project to be 
available for 2020, and an associated applicable percentage standard. 
For advanced biofuel and total renewable fuel, we are setting volume 
requirements and associated applicable percentage standards, based on 
use of the ``cellulosic waiver authority'' that would result in 
advanced biofuel and total renewable fuel volume requirements that are 
equivalent to the reduction in the cellulosic biofuel

[[Page 7020]]

reduction. This would effectively maintain the implied statutory 
volumes for non-cellulosic advanced and conventional renewable fuel.

A. Statutory Authorities for Reducing Volume Targets

    In CAA section 211(o)(2), Congress specified increasing annual 
volume targets for total renewable fuel, advanced biofuel, and 
cellulosic biofuel for each year through 2022. However, Congress also 
recognized that under certain circumstances it would be appropriate for 
EPA to set volume requirements at a lower level than reflected in the 
statutory volume targets, and thus provided waiver provisions in CAA 
section 211(o)(7). Congress also specified increasing annual volume 
targets for BBD through 2012 and authorized EPA to set volume 
requirements for subsequent years (i.e., after 2012) in coordination 
with USDA and DOE, and based upon consideration of specified factors.
1. Cellulosic Waiver Authority
    Section 211(o)(7)(D)(i) of the CAA provides that if EPA determines 
that the projected volume of cellulosic biofuel production for a given 
year is less than the applicable volume specified in the statute, then 
EPA must reduce the applicable volume of cellulosic biofuel required to 
the projected volume available for that calendar year. In making this 
projection, EPA may not ``adopt a methodology in which the risk of 
overestimation is set deliberately to outweigh the risk of 
underestimation'' but must make a projection that ``takes neutral aim 
at accuracy.'' API v. EPA, 706 F.3d 474, 479, 476 (D.C. Cir. 2013). 
Pursuant to this provision, EPA has set the cellulosic biofuel 
requirement lower than the statutory volume for each year since 2010. 
As described in Section III.D, the projected volume of cellulosic 
biofuel production for 2020 is less than the 10.5 billion gallon volume 
target in the statute. Therefore, for 2020, we are finalizing a 
cellulosic biofuel volume lower than the statutory applicable volume, 
in accordance with this provision.
    CAA section 211(o)(7)(D)(i) also provides EPA with the authority to 
reduce the applicable volume of total renewable fuel and advanced 
biofuel in years when it reduces the applicable volume of cellulosic 
biofuel under that provision. The reduction must be less than or equal 
to the reduction in cellulosic biofuel. For 2020, we are reducing the 
applicable volumes of advanced biofuel and total renewable fuel under 
this authority.
    EPA has used the cellulosic waiver authority to lower the advanced 
biofuel and total renewable fuel volumes every year since 2014 as a 
result of waiving the cellulosic volumes. Further discussion of the 
cellulosic waiver authority, and EPA's interpretation of it, can be 
found in the preamble to the 2017 final rule.\12\
---------------------------------------------------------------------------

    \12\ See 81 FR 89752-89753 (December 12, 2016); see also API v. 
EPA, 706 F.3d 474 (D.C. Cir. 2013) (requiring that EPA's cellulosic 
biofuel projections reflect a neutral aim at accuracy); Monroe 
Energy v. EPA, 750 F.3d 909, 915-16 (D.C. Cir. 2014) (affirming 
EPA's broad discretion under the cellulosic waiver authority to 
reduce volumes of advanced biofuel and total renewable fuel); 
Americans for Clean Energy v. EPA (``ACE''), 864 F.3d 691, 730-735 
(D.C. Cir. 2017) (same); Alon Refining Krotz Spring, Inc. v. EPA, 
936 F.3d 628, 662-663 (D.C. Cir. 2019) (same); American Fuel & 
Petrochemical Manufacturers v. EPA, 937 F.3d 559, 577-78 (D.C. Cir. 
2019) (same).
---------------------------------------------------------------------------

    In this action we are using the cellulosic waiver authority to 
reduce the statutory volume targets for advanced biofuel and total 
renewable fuel by equal amounts, consistent with our long-held 
interpretation of this provision and our approach in setting the 2014-
2019 standards. This approach considers the Congressional objectives 
reflected in the volume tables in the statute, and the environmental 
objectives that generally favor the use of advanced biofuels over non-
advanced biofuels.\13\ As described in Section IV, we are reducing the 
advanced biofuel volume under the cellulosic waiver authority by the 
amount of the reduction in cellulosic biofuel and providing an equal 
reduction under the cellulosic waiver authority in the applicable 
volume of total renewable fuel. We are taking this action both because 
we do not believe that the statutory volumes can be achieved, and 
because we believe that backfilling of the shortfall in cellulosic with 
advanced biofuel would not be appropriate in light of concerns about 
high costs of the advanced biofuels and the potential for feedstock 
switching. The volumes of advanced biofuel and total renewable fuel 
resulting from this exercise of the cellulosic waiver authority provide 
for an implied volume allowance for conventional renewable fuel of 15 
billion gallons, and an implied volume allowance for non-cellulosic 
advanced biofuel of 4.5 billion gallons, equal to the implied statutory 
volumes for 2020. As discussed in Section IV, we also believe that the 
resulting volume of advanced biofuel is attainable, and that the 
resulting volume of total renewable fuel can be made available by the 
market.
---------------------------------------------------------------------------

    \13\ See 81 FR 89752-89753 (December 12, 2016). See also 78 FR 
49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015). 
Advanced biofuels are required to have lifecycle GHG emissions that 
are at least 50% less than the baseline defined in EISA. Non-
advanced biofuels are required to have lifecycle GHG emissions that 
are at least 20% less than the baseline defined in EISA unless the 
fuel producer meets the grandfathering provisions in 40 CFR 80.1403. 
Beginning in 2015, all growth in the volumes established by Congress 
come from advanced biofuels.
---------------------------------------------------------------------------

2. General Waiver Authority
    Section 211(o)(7)(A) of the CAA provides that EPA, in consultation 
with the Secretary of Agriculture and the Secretary of Energy, may 
waive the applicable volumes specified in the Act in whole or in part 
based on a petition by one or more States, by any person subject to the 
requirements of the Act, or by the EPA Administrator on his own motion. 
Such a waiver must be based on a determination by the Administrator, 
after public notice and opportunity for comment that: (1) 
Implementation of the requirement would severely harm the economy or 
the environment of a State, a region, or the United States; or (2) 
there is an inadequate domestic supply.
    EPA received comments requesting that EPA should use the general 
waiver authority to further reduce volumes under findings of inadequate 
domestic supply and/or severe harm to the economy or environment, as 
well as comments to the contrary. Based on our review of the comments 
and updated data, and consistent with EPA's rationale and decisions in 
setting the 2019 standards, we decline to exercise our discretion to 
reduce volumes under the general waiver authority. Further discussion 
of these issues is found in the Response To Comments (``RTC'') 
document.\14\
---------------------------------------------------------------------------

    \14\ See also ``Endangered Species Act No Effect Finding for the 
2020 Final Rule.''
---------------------------------------------------------------------------

B. Severability

    The various portions of this rule are severable. Specifically, the 
following portions are severable from each other: The percentage 
standards for 2020 (described in Section VII); the 2021 BBD volume 
requirement (Section VI); the administrative actions (Section VIII); 
and the regulatory amendments (Section IX). In addition, each of the 
regulatory amendments is severable from the other regulatory 
amendments. If any of the above portions is set aside by a reviewing 
court, we intend the remainder of this action to remain effective. For 
instance, if a reviewing court sets aside one of the regulatory 
amendments, we intend for the 2020 percentage standards to go into 
effect.

C. Treatment of Carryover RINs

    Consistent with our approach in the rules establishing the RFS 
standards for

[[Page 7021]]

2013 through 2019, we have also considered the availability and role of 
carryover RINs in setting the cellulosic biofuel, advanced biofuel, and 
total renewable fuel volume requirements for 2020. Neither the statute 
nor EPA regulations specify how or whether EPA should consider the 
availability of carryover RINs in exercising our statutory 
authorities.\15\ As noted in the context of the rules establishing the 
RFS standards for 2014 through 2019, we believe that a bank of 
carryover RINs is extremely important in providing obligated parties 
compliance flexibility in the face of substantial uncertainties in the 
transportation fuel marketplace, and in providing a liquid and well-
functioning RIN market upon which success of the entire program 
depends.\16\ Carryover RINs provide flexibility in the face of a 
variety of unforeseeable circumstances that could limit the 
availability of RINs and reduce spikes in compliance costs, including 
weather-related damage to renewable fuel feedstocks and other 
circumstances potentially affecting the production and distribution of 
renewable fuel. On the other hand, carryover RINs can be used for 
compliance purposes, and in the context of the 2013 RFS rulemaking we 
noted that an abundance of carryover RINs available in that year, 
together with possible increases in renewable fuel production and 
import, justified maintaining the advanced and total renewable fuel 
volume requirements for that year at the levels specified in the 
statute.\17\ In general, we have authority to consider the size of the 
carryover RIN bank in deciding whether and to what extent to exercise 
any of our discretionary waiver authorities.\18\ EPA's approach to the 
consideration of carryover RINs in exercising our cellulosic waiver 
authority was affirmed in Monroe Energy and ACE.\19\
---------------------------------------------------------------------------

    \15\ CAA section 211(o)(5) requires that EPA establish a credit 
program as part of its RFS regulations, and that the credits be 
valid for obligated parties to show compliance for 12 months as of 
the date of generation. EPA implemented this requirement through the 
use of RINs, which can be used to demonstrate compliance for the 
year in which they are generated or the subsequent compliance year. 
Obligated parties can obtain more RINs than they need in a given 
compliance year, allowing them to ``carry over'' these excess RINs 
for use in the subsequent compliance year, although our regulations 
limit the use of these carryover RINs to 20 percent of the obligated 
party's RVO. For the bank of carryover RINs to be preserved from one 
year to the next, individual carryover RINs are used for compliance 
before they expire and are essentially replaced with newer vintage 
RINs that are then held for use in the next year. For example, 
vintage 2018 carryover RINs must be used for compliance in 2019, or 
they will expire. However, vintage 2019 RINs can then be ``banked'' 
for use in 2020.
    \16\ See 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55 
(December 12, 2016), 82 FR 58493-95 (December 12, 2017), and 83 FR 
63708-10 (December 11, 2018).
    \17\ See 79 FR 49793-95 (August 15, 2013).
    \18\ These discretionary waiver authorities include the 
discretionary portion of the cellulosic waiver authority, CAA 
section 211(o)(7)(D)(i) (``the Administrator may also reduce the 
applicable volume of renewable fuel and advanced biofuels 
requirement''), the general waiver authority, CAA section 
211(o)(7)(A) (``The Administrator . . . may waive the 
requirements''), and the BBD waiver authority with regard to the 
extent of the reduction in the BBD volume, CAA section 
211(o)(7)(E)(ii) (``the Administrator . . . shall issue an order to 
reduce . . . the quantity of biomass-based diesel . . . by an 
appropriate quantity'').
    \19\ Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014); ACE, 
864 F.3d at 713.
---------------------------------------------------------------------------

    The RIN system was established in accordance with CAA section 
211(o)(5), which authorizes the generation of credits by any person who 
refines, blends, or imports renewable fuel in excess of the 
requirements of the statute.\20\ In the RFS1 and RFS2 rulemakings, we 
also established a 20 percent rollover cap on the amount of an 
obligated party's RVO that can be met using previous-year RINs.\21\ In 
implementing the RFS program, we have observed that an adequate 
carryover RIN bank serves to make the RIN market liquid wherein RINs 
are freely traded in an open market making them readily available and 
accessible to those obligated parties who need them for compliance at 
prices established by that open market. Just as the economy as a whole 
functions best when individuals and businesses prudently plan for 
unforeseen events by maintaining inventories and reserve money 
accounts, we believe that the RFS program functions best when 
sufficient carryover RINs are held in reserve for potential use by the 
RIN holders themselves, or for possible sale to others that may not 
have established their own carryover RIN reserves. Were there to be too 
few RINs in reserve, then even minor disruptions causing shortfalls in 
renewable fuel production or distribution, or higher than expected 
transportation fuel demand (requiring greater volumes of renewable fuel 
to comply with the percentage standards that apply to all volumes of 
transportation fuel, including the unexpected volumes) could lead to 
the need for a new waiver of the standards and higher compliance costs, 
undermining the market certainty so critical to the RFS program. 
Moreover, a significant drawdown of the carryover RIN bank leading to a 
scarcity of RINs may stop the market from functioning in an efficient 
manner (i.e., one in which there are a sufficient number of reasonably 
available RINs for obligated parties seeking to purchase them), even 
where the market overall could satisfy the standards. For all of these 
reasons, the collective carryover RIN bank provides a necessary 
programmatic buffer that both facilitates individual compliance, 
provides for smooth overall functioning of the program, and is 
consistent with the statutory provision allowing for the generation and 
use of credits.\22\
---------------------------------------------------------------------------

    \20\ See 75 FR 14670 (March 26, 2010) and 72 FR 23900 (May 1, 
2007).
    \21\ See 75 FR 14734-35 (March 26, 2010) and 72 FR 23934-35 (May 
1, 2007).
    \22\ Here we use the term ``buffer'' as shorthand reference to 
all of the benefits that are provided by a sufficient bank of 
carryover RINs.
---------------------------------------------------------------------------

1. Carryover RIN Bank Size
    We estimate that there are currently approximately 3.48 billion 
total carryover RINs available, an increase of 1.29 billion RINs from 
the previous estimate of 2.19 billion total carryover RINs in the July 
29 proposal.\23\ We also estimate that there are currently 
approximately 680 million advanced carryover RINs available (which are 
a subset of the 3.48 billion total carryover RINs), an increase of 290 
million RINs from the previous estimate in the July 29 proposal. This 
increase in the carryover RIN bank is primarily the result of the 
millions of RINs that were unretired by small refineries that were 
granted hardship exemptions after the July 29 proposal.\24\ These 
volumes of carryover RINs are approximately 17 percent of the 2020 
total renewable fuel volume requirement and 13 percent of the 2020 
advanced biofuel volume requirement, which are less than the 20 percent 
maximum limit permitted by the RFS regulations to be carried over for 
use in complying with the 2020 standards.\25\
---------------------------------------------------------------------------

    \23\ The calculations performed to estimate the number of 
carryover RINs currently available can be found in the memorandum, 
``Carryover RIN Bank Calculations for 2020 Final Rule,'' available 
in the docket.
    \24\ Information about the number of small refinery exemptions 
(SREs) granted and the volume of RINs not required to be retired as 
a result of those exemptions can be found at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
    \25\ See 40 CFR 80.1427(a)(5).
---------------------------------------------------------------------------

    However, there remains considerable uncertainty surrounding the 
ultimate size of the carryover RIN bank available for compliance with 
the 2020 standards for several reasons, including the possibility of 
additional small refinery exemptions, higher or lower than expected 
transportation fuel demand (requiring greater or lower volumes of 
renewable fuel to comply with the percentage standards that apply to 
all

[[Page 7022]]

volumes of transportation fuel), and the impact of 2019 RFS compliance 
on the bank of carryover RINs. In addition, we note that there have 
been enforcement actions in past years that have resulted in the 
retirement of carryover RINs to make up for the generation and use of 
invalid RINs and/or the failure to retire RINs for exported renewable 
fuel. Future enforcement actions could have similar results and require 
that obligated parties and/or renewable fuel exporters settle past 
enforcement-related obligations in addition to complying with the 
annual standards, thereby potentially creating demand for RINs greater 
than can be accommodated through actual renewable fuel blending in 
2020. In light of these uncertainties, the net result could be a bank 
of total carryover RINs larger or smaller than 17 percent of the 2020 
total renewable fuel volume requirement, and a bank of advanced 
carryover RINs larger or smaller than 13 percent of the 2020 advanced 
biofuel volume requirement.
2. EPA's Decision Regarding the Treatment of Carryover RINs
    We have evaluated the volume of carryover RINs currently available 
and considered whether it would justify an intentional drawdown of the 
carryover RIN bank in setting the 2020 volume requirements. We also 
carefully considered the comments received, including comments on the 
role of carryover RINs under our waiver authorities and the policy 
implications of our decision.\26\ For the reasons described throughout 
Section II.C, we do not believe we should intentionally draw down the 
carryover RIN bank in setting the 2020 volumes. The current bank of 
carryover RINs provides an important and necessary programmatic and 
cost spike buffer that will both facilitate individual compliance and 
provide for smooth overall functioning of the program. We believe that 
a balanced consideration of the possible role of carryover RINs in 
achieving the statutory volumes for cellulosic biofuel, advanced 
biofuel, and total renewable fuel, versus maintaining an adequate bank 
of carryover RINs for important programmatic functions, is appropriate 
when EPA exercises its discretion under its statutory authorities, and 
that the statute does not specify the extent to which EPA should 
require a drawdown in the bank of carryover RINs when it exercises its 
waiver authorities. Therefore, for the reasons noted above and 
consistent with the approach we took in the rules establishing the RFS 
standards for 2014 through 2019, we have decided to maintain our 
proposed approach and are not setting the 2020 volume requirements at 
levels that would envision an intentional drawdown in the bank of 
carryover RINs. We note that we may or may not take a similar approach 
in future years; we will assess the situation on a case-by-case basis 
going forward and take into account the size of the carryover RIN bank 
in the future and any lessons learned from implementing past rules.
---------------------------------------------------------------------------

    \26\ In their comments on the 2020 NPRM, parties generally 
expressed two opposing points of view. Commenters representing 
obligated parties supported EPA's proposed decision to not assume a 
drawdown in the bank of carryover RINs in determining the 
appropriate volume requirements, reiterating the importance of 
maintaining the carryover RIN bank in order to provide obligated 
parties with necessary compliance flexibilities, better market 
trading liquidity, and a cushion against future program uncertainty. 
Commenters representing renewable fuel producers, however, stated 
that not accounting for carryover RINs goes against Congressional 
intent of the RFS program to increase renewable fuel volumes every 
year and deters investment in cellulosic and advanced biofuels. A 
full description of comments received, and our detailed responses to 
them, is available in the RTC document in the docket.
---------------------------------------------------------------------------

III. Cellulosic Biofuel Volume for 2020

    In the past several years, production of cellulosic biofuel has 
continued to increase. Cellulosic biofuel production reached record 
levels in 2018, driven largely by CNG and LNG derived from biogas.\27\ 
The projected volume of cellulosic biofuel production in 2019 is even 
higher that the volume produced in 2018. Production of liquid 
cellulosic biofuel has also increased in recent years, even as the 
total production of liquid cellulosic biofuels remains much smaller 
than the production volumes of CNG and LNG derived from biogas (see 
Figure III-1). This section describes our assessment of the volume of 
qualifying cellulosic biofuel that we project will be produced or 
imported into the U.S. in 2020, and some of the uncertainties 
associated with those volumes.
---------------------------------------------------------------------------

    \27\ The majority of the cellulosic RINs generated for CNG/LNG 
are sourced from biogas from landfills; however, the biogas may come 
from a variety of sources including municipal wastewater treatment 
facility digesters, agricultural digesters, separated municipal 
solid waste (MSW) digesters, and the cellulosic components of 
biomass processed in other waste digesters.

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[[Page 7023]]

[GRAPHIC] [TIFF OMITTED] TR06FE20.000

    In order to project the volume of cellulosic biofuel production in 
2020, we considered numerous factors, including EIA's projection of 
cellulosic biofuel production in 2020, the accuracy of the 
methodologies used to project cellulosic biofuel production in previous 
years, data reported to EPA through EMTS, and information we collected 
through meetings with representatives of facilities that have produced 
or have the potential to produce qualifying volumes of cellulosic 
biofuel in 2020.
    There are two main elements to the cellulosic biofuel production 
projection: Liquid cellulosic biofuel and CNG/LNG derived from biogas. 
To project the range of potential production volumes of liquid 
cellulosic biofuel we used the same general methodology as the 
methodology used in the 2018 and 2019 final rules. We have adjusted the 
percentile values used to select a point estimate within a projected 
production range for each group of companies based on updated 
information (through September 2019) with the objective of improving 
the accuracy of the projections. To project the production of 
cellulosic biofuel RINs for CNG/LNG derived from biogas, we used the 
same general year-over-year growth rate methodology as in the 2018 and 
2019 final rules, with updated RIN generation data through September 
2019. This methodology reflects the mature status of this industry, the 
large number of facilities registered to generate cellulosic biofuel 
RINs from these fuels, and EPA's continued attempts to refine its 
methodology to yield estimates that are as accurate as possible. This 
methodology is an improvement on the methodology that EPA used to 
project cellulosic biofuel production for CNG/LNG derived from biogas 
in the 2017 and previous years (see Section III.B for a further 
discussion of the accuracy of EPA's methodology in previous years). The 
methodologies used to project the production of liquid cellulosic 
biofuels and cellulosic CNG/LNG derived from biogas are described in 
more detail in Sections III.D-1 and III.D-2.
    The balance of this section is organized as follows. Section III.A 
provides a brief description of the statutory requirements. Section 
III.B reviews the accuracy of EPA's projections in prior years, and 
also discusses the companies EPA assessed in the process of projecting 
qualifying cellulosic biofuel production in the U.S. Section III.C 
discusses EIA's projection of cellulosic biofuel production in 2020. 
Section III.D discusses the methodologies used by EPA to project 
cellulosic biofuel production in 2020 and the resulting projection of 
0.59 billion ethanol-equivalent gallons.

A. Statutory Requirements

    CAA section 211(o)(2)(B)(i)(III) states the statutory volume 
targets for cellulosic biofuel. The volume of cellulosic biofuel 
specified in the statute for 2020 is 10.5 billion gallons. The statute 
provides that if EPA determines, based on a letter provided to the EPA 
by EIA, that the projected volume of cellulosic biofuel production in a 
given year is less than the statutory volume, then EPA shall reduce the 
applicable volume of cellulosic biofuel to the projected volume 
available during that calendar year.\28\
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    \28\ CAA section 211(o)(7)(D)(i). The U.S. Court of Appeals for 
the District of Columbia Circuit evaluated this requirement in API 
v. EPA, 706 F.3d 474, 479-480 (D.C. Cir. 2013), in the context of a 
challenge to the 2012 cellulosic biofuel standard. The Court stated 
that in projecting potentially available volumes of cellulosic 
biofuel EPA must apply an ``outcome-neutral methodology'' aimed at 
providing a prediction of ``what will actually happen.'' Id. at 480, 
479. The Court also determined that Congress did not require 
``slavish adherence by EPA to the EIA estimate'' and that EPA could 
``read the phrase `based on' as requiring great respect but allowing 
deviation consistent with that respect.'' In addition, EPA has 
consistently interpreted the term ``projected volume of cellulosic 
biofuel production'' in CAA section 211(o)(7)(D)(i) to include 
volumes of cellulosic biofuel likely to be made available in the 
U.S., including from both domestic production and imports (see, 
e.g., 80 FR 77420 (December 14, 2015) and 81 FR 89746 (December 12, 
2016)). This interpretation is consistent with the statutory 
direction to establish the cellulosic volume at the ``projected 
volume available.'' We do not believe it would be reasonable to 
include in the projection all cellulosic biofuel produced throughout 
the world, regardless of likelihood of import to the U.S., since 
volumes that are not imported would not be available to obligated 
parties for compliance and including them in the projection would 
render the resulting volume requirement and percentage standards 
unachievable through the use of cellulosic biofuel RINs.

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[[Page 7024]]

    In addition, if EPA reduces the required volume of cellulosic 
biofuel below the level specified in the statute, we may reduce the 
applicable volumes of advanced biofuels and total renewable fuel by the 
same or a lesser volume,\29\ and we are also required to make 
cellulosic waiver credits available.\30\ Our consideration of the 2020 
volume requirements for advanced biofuel and total renewable fuel is 
presented in Section IV.
---------------------------------------------------------------------------

    \29\ CAA section 211(o)(7)(D)(i).
    \30\ See CAA section 211(o)(7)(D)(ii); 40 CFR 80.1456.
---------------------------------------------------------------------------

B. Cellulosic Biofuel Industry Assessment

    In this section, we first explain our general approach to assessing 
facilities or groups of facilities (which we collectively refer to as 
``facilities'') that have the potential to produce cellulosic biofuel 
in 2020. We then review the accuracy of EPA's projections in prior 
years. Next, we discuss the criteria used to determine whether to 
include potential domestic and foreign sources of cellulosic biofuel in 
our projection for 2020. Finally, we provide a summary table of all 
facilities that we expect to produce cellulosic biofuel in 2020.
    In order to project cellulosic biofuel production for 2020, we have 
tracked the progress of a number of potential cellulosic biofuel 
production facilities, located both in the U.S. and in foreign 
countries. We considered a number of factors, including EIA's 
projection of cellulosic biofuel production in 2020, information from 
EMTS, the registration status of potential biofuel production 
facilities as cellulosic biofuel producers in the RFS program, publicly 
available information (including press releases and news reports), and 
information provided by representatives of potential cellulosic biofuel 
producers. As discussed in greater detail in Section III.D.1, our 
projection of liquid cellulosic biofuel is based on a facility-by-
facility assessment of each of the likely sources of cellulosic biofuel 
in 2020, while our projection of CNG/LNG derived from biogas is based 
on an industry-wide assessment. To make a determination of which 
facilities are most likely to produce liquid cellulosic biofuel and 
generate cellulosic biofuel RINs in 2020, each potential producer of 
liquid cellulosic biofuel was investigated further to determine the 
current status of its facilities and its likely cellulosic biofuel 
production and RIN generation volumes for 2020. Both in our discussions 
with representatives of individual companies and as part of our 
internal evaluation process, we gathered and analyzed information 
including, but not limited to, the funding status of these facilities, 
current status of the production technologies, anticipated construction 
and production ramp-up periods, facility registration status, and 
annual fuel production and RIN generation targets.
1. Review of EPA's Projection of Cellulosic Biofuel in Previous Years
    As an initial matter, it is useful to review the accuracy of EPA's 
past cellulosic biofuel projections. The record of actual cellulosic 
biofuel production, including both cellulosic biofuel (which generate 
D3 RINs) and cellulosic diesel (which generate D7 RINs), and EPA's 
projected production volumes from 2015-2019 are shown in Table III.B-1. 
These data indicate that EPA's projection was lower than the actual 
number of cellulosic RINs made available in 2015,\31\ higher than the 
actual number of RINs made available in 2016 and 2017, and lower than 
the actual number of RINs made available in 2018. Based on our current 
projection of cellulosic biofuel production for 2019 based on data 
through September 2019, EPA's projection of cellulosic biofuel in 2019 
also appears likely to be lower than actual RIN generation in 2019. The 
fact that the projections made using this methodology have been 
somewhat inaccurate, under-estimating the actual number of RINs made 
available in 2015, 2018, and likely 2019, and over-estimating in 2016 
and 2017, reflects the inherent difficulty with projecting cellulosic 
biofuel production. It also emphasizes the importance of continuing to 
make refinements to our projection methodology in order to make our 
projections more accurate.
---------------------------------------------------------------------------

    \31\ EPA only projected cellulosic biofuel production for the 
final three months of 2015, since data on the availability of 
cellulosic biofuel RINs (D3+D7) for the first nine months of the 
year were available at the time the analyses were completed for the 
final rule.

                                     Table III.B.1-1--Projected and Actual Cellulosic Biofuel Production (2015-2018)
                                                                   [Million gallons] a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Projected volume \b\                        Actual production volume \c\
                                                         -----------------------------------------------------------------------------------------------
                                                              Liquid          CNG/LNG          Total          Liquid          CNG/LNG          Total
                                                            cellulosic     derived from     cellulosic      cellulosic     derived from     cellulosic
                                                              biofuel         biogas        biofuel \d\       biofuel         biogas        biofuel \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015 \e\................................................               2              33              35             0.5            52.8            53.3
2016....................................................              23             207             230             4.1           186.2           190.3
2017....................................................              13             298             311            11.8           239.5           251.3
2018....................................................              14             274             288            10.6           303.2           313.8
2019 \f\................................................              20             399             418            15.5           418.2           433.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ As noted in Section III.A. above, EPA has consistently interpreted the term ``projected volume of cellulosic biofuel production'' to include volumes
  of cellulosic biofuel likely to be made available in the U.S., including from both domestic production and imports. The volumes in this table
  therefore include both domestic production of cellulosic biofuel and imported cellulosic biofuel.
\b\ Projected volumes for 2015 and 2016 can be found in the 2014-2016 Final Rule (80 FR 77506, 77508, December 14, 2015); projected volumes for 2017 can
  be found in the 2017 Final Rule (81 FR 89760, December 12, 2016); projected volumes for 2018 can be found in the 2018 Final Rule (82 FR 58503,
  December 12, 2017); projected volumes for 2019 can be found in the 2019 Final Rule (83 FR 63704, December 11, 2018).
\c\ Actual production volumes are the total number of RINs generated minus the number of RINs retired for reasons other than compliance with the annual
  standards, based on EMTS data.
\d\ Total cellulosic biofuel may not be precisely equal to the sum of liquid cellulosic biofuel and CNG/LNG derived from biogas due to rounding.
\e\ Projected and actual volumes for 2015 represent only the final 3 months of 2015 (October-December) as EPA used actual RIN generation data for the
  first 9 months of the year.

[[Page 7025]]

 
\f\ Actual production in 2019 is a projection based on actual data from January-September 2019 and a projection of likely production for October-
  December 2019.

    EPA's projections of liquid cellulosic biofuel were higher than the 
actual volume of liquid cellulosic biofuel produced each year from 2015 
to 2018.\32\ Depending on liquid cellulosic biofuel production in the 
last 3 months or 2019, our projection for 2019 may ultimately be an 
over-projection or under-projection of actual production, however at 
this time it appears likely to result in an over-projection. As a 
result of the over-projections in 2015-2016 (and the anticipated over-
projection in 2017), and in an effort to take into account the most 
recent data available and make the liquid cellulosic biofuel 
projections more accurate, EPA adjusted our methodology in the 2018 
final rule.\33\ The adjustments to our methodology adopted in the 2018 
final rule resulted in a projection that is close to the volume of 
liquid cellulosic biofuel produced in 2018 and appear likely to result 
in a reasonably accurate projection in 2019. In this final rule we are 
again applying the approach we first used in the 2018 final rule: Using 
percentile values based on actual production in previous years, 
relative to the projected volume of liquid cellulosic biofuel in these 
years. We have adjusted the percentile values to project liquid 
cellulosic biofuel production based on actual liquid cellulosic biofuel 
production in 2016 to 2019. We believe that the use of the methodology 
(described in more detail in Section III.D.1), with the adjusted 
percentile values, results in a projection that reflects a neutral aim 
at accuracy since it accounts for expected growth in the near future by 
using historical data that is free of any subjective bias.
---------------------------------------------------------------------------

    \32\ We note, however, that because the projected volume of 
liquid cellulosic biofuel in each year was very small relative to 
the total volume of cellulosic biofuel, these over-projections had a 
minimal impact on the accuracy of our projections of cellulosic 
biofuel for each of these years.
    \33\ 82 FR 58486 (December 12, 2017).
---------------------------------------------------------------------------

    We next turn to the projection of CNG/LNG derived from biogas. For 
2018 and 2019, EPA used an industry-wide approach, rather than an 
approach that projects volumes for individual companies or facilities, 
to project the production of CNG/LNG derived from biogas. EPA used a 
facility-by-facility approach to project the production of CNG/LNG 
derived from biogas from 2015-2017. Notably the facility-by-facility 
methodology resulted in significant over-estimates of CNG/LNG 
production in 2016 and 2017, leading EPA to develop the alternative 
industry wide projection methodology first used in 2018. This updated 
approach reflects the fact that this industry is far more mature than 
the liquid cellulosic biofuel industry, with a far greater number of 
potential producers of CNG/LNG derived from biogas. In such cases, 
industry-wide projection methods can be more accurate than a facility-
by-facility approach, especially as macro market and economic factors 
become more influential on total production than the success or 
challenges at any single facility. The industry-wide projection 
methodology slightly under-projected the production of CNG/LNG derived 
from biogas in 2018 and appears likely to slightly under-project the 
production of these fuels in 2019. However, the difference between the 
projected and actual production volume of these fuels was smaller than 
in 2017.
    As further described in Section III.D.2, EPA is again projecting 
production of CNG/LNG derived from biogas using the industry-wide 
approach. We calculate a year-over-year rate of growth in the renewable 
CNG/LNG industry and apply this year-over-year growth rate to the total 
number of cellulosic RINs generated and available to be used for 
compliance with the annual standards in 2018 to estimate the production 
of CNG/LNG derived from biogas in 2020.\34\ We have applied the growth 
rate to the number of available 2018 RINs generated for CNG/LNG derived 
from biogas as data from this year allows us to adequately account for 
not only RIN generation, but also for RINs retired for reasons other 
than compliance with the annual standards. While more recent RIN 
generation data is available, the retirement of RINs for reasons other 
than compliance with the annual standards generally lags RIN 
generation, sometimes by up to a year or more.
---------------------------------------------------------------------------

    \34\ To project the volume of CNG/LNG derived from biogas in 
2020, we multiply the number of 2018 RINs generated for these fuels 
and available to be used for compliance with the annual standards by 
the calculated growth rate to project production of these fuels in 
2019 and then multiply the resulting number by the growth rate again 
to project the production of these fuels in 2020.
---------------------------------------------------------------------------

    The production volumes of cellulosic biofuel in previous years also 
highlight that the production of CNG/LNG derived from biogas has been 
significantly higher than the production of liquid cellulosic biofuel 
in previous years. This is likely the result of a combination of 
several factors, including the mature state of the technology used to 
produce CNG/LNG derived from biogas relative to the technologies used 
to produce liquid cellulosic biofuel and the relatively low production 
cost of CNG/LNG derived from biogas (discussed in further detail in 
Section V). These factors are unlikely to change in 2020. While we 
project production volumes of liquid cellulosic biofuel and CNG/LNG 
derived from biogas separately, the actual volume of each fuel type 
produced may be higher or lower than projected.
2. Potential Domestic Producers
    There are several companies and facilities located in the U.S. that 
have either already begun producing cellulosic biofuel for use as 
transportation fuel, heating oil, or jet fuel at a commercial 
scale,\35\ or are anticipated to be in a position to do so at some time 
during 2020. The RFS program provides a strong financial incentive for 
domestic cellulosic biofuel producers to sell any fuel they produce for 
domestic consumption.\36\ To date nearly all cellulosic biofuel 
produced in the U.S. has been used domestically \37\ and all the 
domestic facilities we have contacted in deriving our projections 
intend to produce fuel on a commercial scale for domestic consumption 
and plan to use approved pathways. These factors give us a high degree 
of confidence that cellulosic biofuel RINs will be generated for all 
cellulosic biofuel produced by domestic commercial scale facilities. To 
generate RINs, each of these facilities must be registered with EPA 
under the RFS program and comply with all the regulatory requirements. 
This includes using an approved RIN-generating pathway and verifying 
that their feedstocks meet the definition of renewable biomass. Most of 
the domestic companies and facilities considered in our assessment of 
potential cellulosic biofuel producers in 2019 have already 
successfully

[[Page 7026]]

completed facility registration, and have successfully generated 
RINs.\38\ A brief description of each of the domestic companies (or 
group of companies for cellulosic CNG/LNG producers and the facilities 
using Edeniq's technology) that EPA believes may produce commercial-
scale volumes of RIN generating cellulosic biofuel by the end of 2020 
can be found in a memorandum to the docket for this final rule.\39\ 
General information on each of these companies or group of companies 
considered in our projection of the potentially available volume of 
cellulosic biofuel in 2020 is summarized in Table III.B.4-1.
---------------------------------------------------------------------------

    \35\ For a further discussion of EPA's decision to focus on 
commercial scale facilities, rather than R&D and pilot scale 
facilities, see the 2019 proposed rule (83 FR 32031, July 10, 2018).
    \36\ According to data from EMTS, the average price for a 2019 
cellulosic biofuel RINs sold in 2019 (through September 2019) was 
$1.30. Alternatively, obligated parties can satisfy their cellulosic 
biofuel obligations by purchasing an advanced (or biomass-based 
diesel) RIN and a cellulosic waiver credit. The average price for a 
2019 advanced biofuel RINs sold in 2019 (through September 2019) was 
$0.43 while the price for a 2019 cellulosic waiver credit is $1.77 
(EPA-420-B-18-052).
    \37\ The only known exception was a small volume of fuel 
produced at a demonstration scale facility exported to be used for 
promotional purposes.
    \38\ Most of the facilities listed in Table III.B.3-1 are 
registered to produce cellulosic (D3 or D7) RINs with the exception 
of several of the producers of CNG/LNG derived from biogas and Red 
Rock Biofuels. EPA is unaware of any outstanding issues that would 
reasonably be expected to prevent these facilities from registering 
as cellulosic biofuel producers and producing qualifying cellulosic 
biofuel in 2020.
    \39\ ``Cellulosic Biofuel Producer Company Descriptions (May 
2019),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-
2019-0136.
---------------------------------------------------------------------------

3. Potential Foreign Sources of Cellulosic Biofuel
    In addition to the potential sources of cellulosic biofuel located 
in the U.S., there are several foreign cellulosic biofuel companies 
that may produce cellulosic biofuel in 2020. These include facilities 
owned and operated by Beta Renewables, Enerkem, Ensyn, GranBio, and 
Raizen. All of these facilities use fuel production pathways that have 
been approved by EPA for cellulosic RIN generation provided eligible 
sources of renewable feedstock are used and other regulatory 
requirements are satisfied. These companies would therefore be eligible 
to register their facilities under the RFS program and generate RINs 
for any qualifying fuel imported into the U.S. While these facilities 
may be able to generate RINs for any volumes of cellulosic biofuel they 
import into the U.S., demand for the cellulosic biofuels they produce 
is expected to be high in their own local markets.
    EPA's projection of cellulosic biofuel production in 2020 includes 
cellulosic biofuel that is projected to be imported into the U.S. in 
2020, including potential imports from all the registered foreign 
facilities under the RFS program. We believe that due to the strong 
demand for cellulosic biofuel in local markets and the time necessary 
for potential foreign cellulosic biofuel producers to register under 
the RFS program and arrange for the importation of cellulosic biofuel 
to the U.S., cellulosic biofuel imports from foreign facilities not 
currently registered to generate cellulosic biofuel RINs are generally 
highly unlikely in 2020. For purposes of our 2020 cellulosic biofuel 
projection we have excluded potential volumes from foreign cellulosic 
biofuel production facilities that are not currently registered under 
the RFS program.
    Cellulosic biofuel produced at three foreign facilities (Ensyn's 
Renfrew facility, GranBio's Brazilian facility, and Raizen's Brazilian 
facility) generated cellulosic biofuel RINs for fuel exported to the 
U.S. since 2017; projected volumes from each of these facilities are 
included in our projection of available volumes for 2020. EPA has also 
included projected volume from two additional foreign facilities. These 
two facilities (Enerkem's Canadian facility and Ensyn's Port-Cartier, 
Quebec facility) have both completed the registration process as 
cellulosic biofuel producers. We believe that it is appropriate to 
include volume from these facilities in light of their proximity to the 
U.S., the proven technology used by these facilities, the volumes of 
cellulosic biofuel exported to the U.S. by the company in previous 
years (in the case of Ensyn), and the company's stated intentions to 
market fuel produced at these facilities to qualifying markets in the 
U.S. All of the facilities included in EPA's cellulosic biofuel 
projection for 2020 are listed in Table III.B.4-1.
4. Summary of Volume Projections for Individual Companies
    General information on each of the cellulosic biofuel producers (or 
group of producers, for producers of CNG/LNG derived from biogas and 
producers of liquid cellulosic biofuel using Edeniq's technology) that 
factored into our projection of cellulosic biofuel production for 2020 
is shown in Table III.B.4-1. This table includes both facilities that 
have already generated cellulosic RINs, as well as those that have not 
yet generated cellulosic RINs, but are projected to do so by the end of 
2020. As discussed above, we have focused on commercial-scale 
cellulosic biofuel production facilities. Each of these facilities (or 
group of facilities) is discussed further in a memorandum to the 
docket.\40\
---------------------------------------------------------------------------

    \40\ ``Cellulosic Biofuel Producer Company Descriptions (May 
2019),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-
2019-0136.

                              Table III.B.4-1--Projected Producers of Cellulosic Biofuel for U.S. Consumption in 2020 \41\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Facility capacity
          Company name                 Location            Feedstock             Fuel          (million gallons   Construction start   First production
                                                                                                per year) \42\           date                \43\
--------------------------------------------------------------------------------------------------------------------------------------------------------
CNG/LNG Producers \44\..........  Various...........  Biogas............  CNG/LNG...........  Various...........  Various...........  Various.
Edeniq..........................  Various...........  Corn Kernel Fiber.  Ethanol...........  Various...........  Various...........  October 2016.
Enerkem.........................  Edmonton, AL,       Separated MSW.....  Ethanol...........  \45\ 10...........  2012..............  September
                                   Canada.                                                                                             2017.\46\
Ensyn...........................  Renfrew, ON,        Wood Waste........  Heating Oil.......  3.................  2005..............  2014.
                                   Canada.
Ensyn...........................  Port-Cartier, QC,   Wood Waste........  Heating Oil.......  10.5..............  June 2016.........  January 2018.
                                   Canada.
GranBio.........................  S[atilde]o Miguel   Sugarcane bagasse.  Ethanol...........  21................  Mid 2012..........  September 2014.
                                   dos Campos,
                                   Brazil.
QCCP/Syngenta...................  Galva, IA.........  Corn Kernel Fiber.  Ethanol...........  4.................  Late 2013.........  October 2014.
Red Rock Biofuels...............  Lakeview, OR......  Wood Waste........  Diesel, Jet Fuel,   15................  July 2018.........  1Q 2020.
                                                                           Naphtha.
Raizen..........................  Piracicaba City,    Sugarcane bagasse.  Ethanol...........  11................  January 2014......  July 2015.
                                   Brazil.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 7027]]

C. Projection From the Energy Information Administration
---------------------------------------------------------------------------

    \41\ Despite generating cellulosic RINs in previous years Poet-
DSM's facility has not been included in Table III.B.4-1 after 
announcing their plans to suspend commercial production at this 
facility.
    \42\ The Facility Capacity is generally equal to the nameplate 
capacity provided to EPA by company representatives or found in 
publicly available information. Capacities are listed in physical 
gallons (rather than ethanol-equivalent gallons). If the facility 
has completed registration and the total permitted capacity is lower 
than the nameplate capacity, then this lower volume is used as the 
facility capacity.
    \43\ Where a quarter is listed for the first production date EPA 
has assumed production begins in the middle month of the quarter 
(i.e., August for the 3rd quarter) for the purposes of projecting 
volumes.
    \44\ For more information on these facilities see ``December 
2019 Assessment of Cellulosic Biofuel Production from Biogas 
(2020),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-
OAR-2019-0136.
    \45\ The nameplate capacity of Enerkem's facility is 10 million 
gallons per year. However, we anticipate that a portion of their 
feedstock will be non-biogenic municipal solid waste (MSW). RINs 
cannot be generated for the portion of the fuel produced from non-
biogenic feedstocks. We have taken this into account in our 
production projection for this facility (See ``May 2019 Liquid 
Cellulosic Biofuel Projections for 2020 CBI'').
    \46\ This date reflects the first production of ethanol from 
this facility. The facility began production of methanol in 2015.
---------------------------------------------------------------------------

    Section 211(o)(3)(A) of the CAA requires EIA to ``provide to the 
Administrator of the Environmental Protection Agency an estimate, with 
respect to the following calendar year, of the volumes of 
transportation fuel, biomass-based diesel, and cellulosic biofuel 
projected to be sold or introduced into commerce in the United 
States.'' EIA provided these estimates to EPA on October 9, 2019.\47\ 
With regard to domestically produced cellulosic ethanol, the EIA 
estimated that the available volume in 2020 would be 7 million gallons. 
In its letter, EIA did not identify the facilities on which their 
estimate of liquid cellulosic biofuel production was based. EIA did, 
however, indicate in the letter that it only included domestic 
production of cellulosic ethanol in their projections. These EIA 
projections, therefore, do not include cellulosic biofuel produced by 
foreign entities and imported into the U.S., nor estimates of 
cellulosic diesel, cellulosic heating oil or CNG/LNG produced from 
biogas, which together represent approximately 99 percent of our 
projected cellulosic biofuel volume for 2020. When limiting the scope 
of our projection to the companies assessed by EIA, we note that our 
volume projections are similar. EPA projects approximately 5 million 
gallons of cellulosic ethanol will be produced domestically in 2020.
---------------------------------------------------------------------------

    \47\ Letter from Linda Capuano, EIA Administrator to Andrew 
Wheeler, EPA Administrator. October 9, 2019. Available in docket 
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

D. Cellulosic Biofuel Volume for 2020

1. Liquid Cellulosic Biofuel
    For our 2020 liquid cellulosic biofuel projection, we use the same 
general approach as we have in projecting these volumes in previous 
years. We begin by first categorizing potential liquid cellulosic 
biofuel producers in 2020 according to whether or not they have 
achieved consistent commercial scale production of cellulosic biofuel 
to date. We refer to these facilities as consistent producers and new 
producers, respectively. Next, we define a range of likely production 
volumes for 2020 for each group of companies. Finally, we use a 
percentile value to project from the established range a single 
projected production volume for each group of companies in 2020. As in 
the 2018 and 2019 final rules, we calculated percentile values for each 
group of companies based on the past performance of each group relative 
to our projected production ranges. This methodology is briefly 
described in this section and is described in detail in memoranda to 
the docket.\48\
---------------------------------------------------------------------------

    \48\ ``December 2019 Liquid Cellulosic Biofuel Projections for 
2020 CBI'' and ``Calculating the Percentile Values Used to Project 
Liquid Cellulosic Biofuel Production for the 2020 FRM,'' memorandums 
from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    We first separate the list of potential producers of cellulosic 
biofuel (listed in Table III.B.4-1) into two groups according to 
whether the facilities have achieved consistent commercial-scale 
production and cellulosic biofuel RIN generation. We next defined a 
range of likely production volumes for each group of potential 
cellulosic biofuel producers. The low end of the range for each group 
of producers reflects actual RIN generation data over the last 12 
months for which data were available at the time our technical 
assessment was completed (October 2018-September 2019).\49\ For 
potential producers that have not yet generated any cellulosic RINs, 
the low end of the range is zero. For the high end of the range, we 
considered a variety of factors, including the expected start-up date 
and ramp-up period, facility capacity, and the number of RINs the 
producer expects to generate in 2020.\50\ The projected range for each 
group of companies is shown in Tables III.D.1-1 and III.D.1-2.\51\
---------------------------------------------------------------------------

    \49\ Consistent with previous years, we have considered whether 
there is reason to believe any of the facilities considered as 
potential cellulosic biofuel producers for 2020 is likely to produce 
a smaller volume of cellulosic biofuel in 2020 than in the previous 
12 months for which data are available. At this time, EPA is not 
aware of any information that would indicate lower production in 
2020 from any facility considered than in the previous 12 months for 
which data are available. Despite generating cellulosic RINs in 
previous years Poet-DSM's facility has not been included in our 
projection of cellulosic biofuel production in 2020 after announcing 
their plans to suspend commercial production at this facility.
    \50\ As in our 2015-2019 projections, EPA calculated a high end 
of the range for each facility (or group of facilities) based on the 
expected start-up date and a six-month straight-line ramp-up period. 
The high end of the range for each facility (or group of facilities) 
is equal to the value calculated by EPA using this methodology, or 
the number of RINs the producer expects to generate in 2020, 
whichever is lower.
    \51\ More information on the data and methods EPA used to 
calculate each of the ranges in these tables in contained in 
``December 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI'' 
memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-
0136. We have not shown the projected ranges for each individual 
company. This is because the high end of the range for some of these 
companies are based on the company's production projections, which 
they consider confidential business information (CBI). Additionally, 
the low end of the range for facilities that have achieved 
consistent commercial scale production is based on actual RIN 
generation data in the most recent 12 months, which is also claimed 
as CBI.

   Table III.D.1-1--2020 Production Ranges for New Producers of Liquid
                           Cellulosic Biofuel
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                         Low end of the  High end of the
          Companies included                 range           range a
------------------------------------------------------------------------
Enerkem, Ensyn (Port Cartier                         0               30
 facility), BioEnergy, Red Rock
 Biofuels.............................
------------------------------------------------------------------------
a Rounded to the nearest million gallons.


[[Page 7028]]


   Table III.D.1-2--2020 Production Ranges for Consistent Producers of
                        Liquid Cellulosic Biofuel
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                         Low end of the  High end of the
          Companies included                range a          range b
------------------------------------------------------------------------
Facilities using Edeniq's technology                10               36
 (registered facilities), Ensyn
 (Renfrew facility), GranBio, QCCP/
 Syngenta, Raizen.....................
------------------------------------------------------------------------
a Rounded to the nearest million gallons.

    After defining likely production ranges for each group of 
companies, we next determined the percentile values to use in 
projecting a production volume for each group of companies. We 
calculated the percentile values using actual production data from 2016 
through 2019.\52\ The first full year in which EPA used the current 
methodology for developing the range potential production volumes for 
each company was 2016, while 2019 is the most recent year for which we 
have data.
---------------------------------------------------------------------------

    \52\ To calculate the percentile value that would have resulted 
in a projection equal to actual production for 2019 we projected 
actual liquid cellulosic biofuel production for 2019 using data 
through September 2019 and an updated projection of liquid 
cellulosic biofuel production for October-December 2019.
---------------------------------------------------------------------------

    For each group of companies and for each year from 2016-2019, Table 
III.C.1-3 shows the projected ranges for liquid cellulosic biofuel 
production (from the 2014-16, 2017, 2018, and 2019 final rules), actual 
production, and the percentile values that would have resulted in a 
projection equal to the actual production volume.

             Table III.D.1-3--Projected and Actual Liquid Cellulosic Biofuel Production in 2016-2019
                                                [Million gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                      Actual
                                                  Low end of the    High end of     production        Actual
                                                       range         the range         \53\         percentile
----------------------------------------------------------------------------------------------------------------
                                               New Producers \54\
----------------------------------------------------------------------------------------------------------------
2016............................................               0              76            1.06             1st
2017............................................               0              33            8.79            27th
2018............................................               0              47            2.87             6th
2019............................................               0              10            0.00             0th
Average a.......................................             N/A             N/A             N/A             9th
----------------------------------------------------------------------------------------------------------------
                                            Consistent Producers \55\
----------------------------------------------------------------------------------------------------------------
2016............................................               2               5            3.28            43rd
2017............................................             3.5               7            3.02           -14th
2018............................................               7              24            7.74             4th
2019............................................              14              44           15.51             5th
Average a.......................................             N/A             N/A             N/A            10th
----------------------------------------------------------------------------------------------------------------
a We have not averaged the low and high ends of the ranges, or actual production, as we believe it is more
  appropriate to average the actual percentiles from 2016-2019 rather than calculating a percentile value for
  2016-2019 in aggregate. This approach gives equal weight to the accuracy of our projections for each year from
  2016-2019, rather than allowing the average percentiles calculated to be dominated by years with greater
  projected volumes.

    Based upon this analysis, EPA has projected cellulosic biofuel 
production from new producers at the 9th percentile of the calculated 
range and from consistent producers at the 10th percentile.\56\ These 
percentiles are calculated by averaging the percentiles that would have 
produced cellulosic biofuel projections equal to the volumes produced 
by each group of companies in 2016-2019. Prior to 2016, EPA used 
different methodologies to project available volumes of cellulosic 
biofuel and thus believes it inappropriate to calculate percentile 
values based on projections from those years.\57\
---------------------------------------------------------------------------

    \53\ Actual production is calculated by subtracting RINs retired 
for any reason other than compliance with the RFS standards from the 
total number of cellulosic RINs generated.
    \54\ Companies characterized as new producers in the 2014-2016, 
2017, 2018, and 2019 final rules were as follows: Abengoa (2016), 
CoolPlanet (2016), DuPont (2016, 2017), Edeniq (2016, 2017), Enerkem 
(2018, 2019), Ensyn Port Cartier (2018, 2019), GranBio (2016, 2017), 
IneosBio (2016), and Poet (2016, 2017).
    \55\ Companies characterized as consistent producers in the 
2014-2016, 2017, 2018, and 2019 final rules were as follows: Edeniq 
Active Facilities (2018, 2019), Ensyn Renfrew (2016-2019), GranBio 
(2018, 2019), Poet (2018, 2019), Quad County Corn Processors/
Syngenta (2016-2019), and Raizen (2019).
    \56\ For more detail on the calculation of the percentile values 
used in this final rule see ``Calculating the Percentile Values Used 
to Project Liquid Cellulosic Biofuel Production for 2020 FRM,'' 
available in EPA docket EPA-HQ-OAR-2019-0136.
    \57\ EPA used a similar projection methodology for 2015 as in 
2016-2018, however we only projected cellulosic biofuel production 
volume for the final 3 months of the year, as actual production data 
were available for the first 9 months. We do not believe it is 
appropriate to consider data from a year for which 9 months of the 
data were known at the time the projection was made in determining 
the percentile values used to project volume over a full year.
---------------------------------------------------------------------------

    We then used these percentile values, together with the ranges 
determined for each group of companies discussed above, to project a 
volume for each group of companies in 2020. These calculations are 
summarized in Table III.D.1-4.

[[Page 7029]]



                     Table III.D.1-4--Projected Volume of Liquid Cellulosic Biofuel in 2020
                                      [Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                    High end of
                                                  Low end of the    the range a     Percentile       Projected
                                                      range a                                        volume a
----------------------------------------------------------------------------------------------------------------
Liquid Cellulosic Biofuel Producers; Producers                 0              30             9th               3
 without Consistent Commercial Scale Production.
Liquid Cellulosic Biofuel Producers; Producers                10              36            10th              13
 with Consistent Commercial Scale Production....
                                                 ---------------------------------------------------------------
    Total.......................................             N/A             N/A             N/A            b 15
----------------------------------------------------------------------------------------------------------------
a Volumes rounded to the nearest million gallons.
b Volumes do not add due to rounding.

2. CNG/LNG Derived From Biogas
    For 2020, EPA is using the same industry wide projection approach 
as used for 2018 and 2019 based on a year-over-year growth rate to 
project production of CNG/LNG derived from biogas used as 
transportation fuel.\58\ EPA calculated the year-over-year growth rate 
in CNG/LNG derived from biogas by comparing RIN generation from October 
2018 to September 2019 (the most recent 12 months for which data are 
available) to RIN generation in the 12 months that immediately precede 
this time period (October 2017 to September 2018). The growth rate 
calculated using this data is 37.9 percent.\59\ These RIN generation 
volumes are shown in Table III.D.2-1.
---------------------------------------------------------------------------

    \58\ Historically RIN generation for CNG/LNG derived from biogas 
has increased each year. It is possible, however, that RIN 
generation for these fuels in the most recent 12 months for which 
data are available could be lower than the preceding 12 months. We 
believe our methodology accounts for this possibility. In such a 
case, the calculated rate of growth would be negative.
    \59\ This growth rate is higher than the growth rates used to 
project CNG/LNG volumes in the 2019 final rule (29.0%, see 83 FR 
63717, December 11, 2018) and the 2018 final rule (21.6%, see 82 FR 
58502, December 12, 2017).

             Table III.D.2-1--Generation of Cellulosic Biofuel RINs for CNG/LNG Derived From Biogas
                                             [Million gallons] \60\
----------------------------------------------------------------------------------------------------------------
 RIN generation (October 2017-September  RIN generation (October 2018-September
                 2018)                                    2019)                      Year-over-year increase
----------------------------------------------------------------------------------------------------------------
                         278,134,565                             383,605,247                            37.9%
----------------------------------------------------------------------------------------------------------------

    EPA then applied this 37.9 percent year-over-year growth rate to 
the total number of 2018 cellulosic RINs generated and available for 
compliance for CNG/LNG. This methodology results in a projection of 
576.8 million gallons of CNG/LNG derived from biogas in 2020. In this 
rule, as in the 2018 and 2019 final rules, we are again applying the 
calculated year-over-year rate of growth to the volume of CNG/LNG 
actually supplied in 2018 (taking into account actual RIN generation as 
well as RINs retired for reasons other than compliance with the annual 
volume obligations) to provide an updated projection of the production 
of these fuels in 2019, and then applying the rate of growth to this 
updated 2019 projection to project the production of these fuels in 
2020.\61\
---------------------------------------------------------------------------

    \60\ Further detail on the data used to calculate each of these 
numbers in this table, as well as the projected volume of CNG/LNG 
derived from biogas used as transportation fuel in 2020 can be found 
in ``December 2019 Assessment of Cellulosic Biofuel Production from 
Biogas (2020)'' memorandum from Dallas Burkholder to EPA Docket PA-
HQ-OAR-2019-0136.
    \61\ To calculate this value, EPA multiplied the number of 2018 
RINs generated and available for compliance for CNG/LNG derived from 
biogas (303.2 million), by 1.379 (representing a 37.9 percent year-
over-year increase) to project production of CNG/LNG in 2019, and 
multiplied this number (418.2 million RINs) by 1.379 again to 
project production of CNG/LNG in 2020.
---------------------------------------------------------------------------

    We believe that projecting the production of CNG/LNG derived from 
biogas in this manner appropriately takes into consideration the actual 
recent rate of growth of this industry, and that this growth rate 
accounts for both the potential for future growth and the challenges 
associated with increasing RIN generation from these fuels in future 
years. This methodology may not be appropriate to use as the projected 
volume of CNG/LNG derived from biogas approaches the total volume of 
CNG/LNG that is used as transportation fuel, as RINs can be generated 
only for CNG/LNG used as transportation fuel. We do not believe that 
this is yet a constraint as our projection for 2020 is below the total 
volume of CNG/LNG that is currently used as transportation fuel.\62\
---------------------------------------------------------------------------

    \62\ EPA is aware of several estimates for the quantity of CNG/
LNG that will be used as transportation fuel in 2020. As discussed 
in a paper prepared by Bates White for the Coalition for Renewable 
Gas (``Renewable Natural Gas Supply and Demand for Transportation.'' 
Bates White Economic Consulting, April 5, 2019) these estimates 
range from nearly 600 million ethanol-equivalent gallons in 2020 
(February 2019 STEO) to over 1.5 billion gallons (Fuels Institute--
US Share). As discussed in further detail in a memorandum to the 
docket (``December 2019 Assessment of Cellulosic Biofuel Production 
from Biogas (2020)'' memorandum from Dallas Burkholder to EPA Docket 
EPA-HQ-OAR-2019-0136) we believe the higher projections are likely 
to be more accurate. Thus, the volume of CNG/LNG used as 
transportation fuel would not appear to constrain the number of RINs 
generated for this fuel in 2020.
---------------------------------------------------------------------------

3. Total Cellulosic Biofuel in 2020
    After projecting production of cellulosic biofuel from liquid 
cellulosic biofuel production facilities and producers of CNG/LNG 
derived from biogas, EPA combined these projections to project total 
cellulosic biofuel production for 2020. These projections are shown in 
Table III.D.3-1. Using the methodologies described in this section, we 
project that 0.59 billion ethanol-equivalent gallons of qualifying 
cellulosic biofuel will be produced in 2020. We believe that projecting 
overall production in 2020 in the manner described above results in a 
neutral estimate (neither biased to produce a projection that is too 
high nor too low) of likely cellulosic biofuel production in 2020.

[[Page 7030]]



     Table III.D.3-1--Projected Volume of Cellulosic Biofuel in 2020
------------------------------------------------------------------------
                                                             Projected
                                                             volume a
------------------------------------------------------------------------
Liquid Cellulosic Biofuel Producers; Producers without                 3
 Consistent Commercial Scale Production (million
 gallons)...............................................
Liquid Cellulosic Biofuel Producers; Producers with                   13
 Consistent Commercial Scale Production (million
 gallons)...............................................
CNG/LNG Derived from Biogas (million gallons)...........             577
                                                         ---------------
    Total (billion gallons).............................            0.59
------------------------------------------------------------------------
a Rounded to the nearest million gallons.

    Unlike in previous years, we have rounded the final projected 
volume of cellulosic biofuel to the nearest 10 million gallons as 
proposed. This is consistent with the volumes in the tables containing 
the statutory volume targets for cellulosic biofuel through 2022, which 
also specify volumes to no more than the nearest 10 million gallons 
(and in many cases only to the nearest 100 million gallons). While in 
previous years we have rounded the required cellulosic biofuel volume 
to the nearest million gallon, the projected volume of cellulosic 
biofuel has grown such that this level of precision is unnecessary, and 
likely unfounded. By rounding to the nearest 10 million gallons the 
total projected volume of cellulosic biofuel is affected in the most 
extreme case by only 5 million gallons, or approximately 1 percent of 
the total projected volume. The uncertainty in the projected volume of 
cellulosic biofuel is significantly higher than any error introduced by 
rounding the projected volume to the nearest 10 million gallons.

IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020

    The national volume targets for advanced biofuel and total 
renewable fuel to be used under the RFS program each year through 2022 
are specified in CAA section 211(o)(2)(B)(i)(I) and (II). Congress set 
annual renewable fuel volume targets that envisioned growth at a pace 
that far exceeded historical growth and, for years after 2011, 
prioritized that growth as occurring principally in advanced biofuels 
(contrary to previous growth patterns where most growth was in 
conventional renewable fuel). Congressional intent is evident in the 
fact that the implied statutory volume requirement for conventional 
renewable fuel is 15 billion gallons for all years after 2014, while 
the advanced biofuel volume requirements, driven largely by growth in 
cellulosic biofuel, continue to grow each year through 2022 to a total 
of 21 billion gallons. Early growth in conventional renewable fuels was 
expected to provide a bridge to the new, more beneficial cellulosic 
biofuels in the later years.\63\
---------------------------------------------------------------------------

    \63\ See, for instance, comments from Growth Energy where they 
note that `` . . . producers of starch ethanol . . . are leading 
investors in cellulosic biofuels, which may be derived from corn.'' 
Page 31 of ``Comments from Growth Energy on proposed 2018 
standards,'' available in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    Due to a projected shortfall in the availability of cellulosic 
biofuel, and consistent with our long-held interpretation that the 
cellulosic waiver authority is best interpreted to provide equal 
reductions to advanced biofuel and total renewable fuel volumes, we are 
reducing the statutory volume targets for both advanced biofuel and 
total renewable fuel for 2020 by the maximum amount permitted under the 
cellulosic waiver authority, 9.91 billion gallons. Section IV.A 
explains the volumetric limitation on our use of the cellulosic waiver 
authority to reduce advanced biofuel and total renewable fuel volumes. 
Section IV.B presents our technical analysis of the reasonably 
attainable and attainable volumes of advanced biofuel. Sections IV.C 
and IV.D further explain our decision to exercise the maximum 
discretion available under the cellulosic waiver authority to reduce 
advanced biofuel and total renewable fuel, respectively.
    To begin, we have evaluated the capabilities of the market and are 
making a finding that the 15.0 billion gallons specified in the statute 
for advanced biofuel cannot be reached in 2020. This is primarily due 
to the expected continued shortfall in cellulosic biofuel; production 
of this fuel type has consistently fallen short of the statutory 
targets by 90 percent or more, and as described in Section III, we 
project that it will fall far short of the statutory target of 10.5 
billion gallons in 2020. For this and other reasons described in this 
section we are reducing the advanced biofuel statutory target by 9.91 
billion gallons for 2020.
    In previous years when we have used the cellulosic waiver 
authority, we have determined the extent to which we should reduce 
advanced biofuel volumes by considering a number of different factors 
under the broad discretion which that authority provides, including:

 The availability of advanced biofuels (e.g., historic data on 
domestic supply, expiration of the biodiesel blenders' tax credit, 
potential imports of biodiesel in light of the Commerce Department's 
determination on tariffs on biodiesel imports from Argentina and 
Indonesia, potential imports of sugarcane ethanol, and anticipated 
changes in the production of feedstocks for advanced biodiesel and 
renewable diesel)
 The energy security and greenhouse gas (GHG) impacts of 
advanced biofuels
 The availability of carryover RINs
 The intent of Congress as reflected in the statutory volumes 
tables to substantially increase the use of advanced biofuels over time
 Increased costs associated with the use of advanced biofuels, 
and
 The increasing likelihood of adverse unintended impacts 
associated with use of advanced biofuel volumes achieved through 
diversion of foreign fuels or substitution of advanced feedstocks from 
other uses to biofuel production.

    Before the 2018 standards were set, the consideration of these 
factors led us to conclude that it was appropriate to set the advanced 
biofuel standard in a manner that would allow the partial backfilling 
of missing cellulosic volumes with non-cellulosic advanced 
biofuels.\64\ In the 2018 and 2019 standards final rules, we concluded 
that partial backfilling of missing cellulosic biofuel volumes with 
advanced biofuel was not warranted, primarily due to a shortfall in 
reasonably attainable volumes of advanced biofuels, high costs, the 
potential for feedstock switching and/or foreign fuel diversion which 
could compromise GHG benefits and disrupt markets, and an interest in 
preserving the existing carryover RIN bank.^{65 66}
---------------------------------------------------------------------------

    \64\ For instance, see 81 FR 89750 (December 12, 2016).
    \65\ See 82 FR 58504 (December 12, 2017).
    \66\ See 83 FR 63719 (December 11, 2018).

---------------------------------------------------------------------------

[[Page 7031]]

    For 2020, we have determined that the concerns surrounding partial 
backfilling of missing cellulosic biofuel with advanced biofuel remain 
valid. As a result, we are reducing the statutory volume target for 
advanced biofuel by the same amount as the reduction in cellulosic 
biofuel. This results in the non-cellulosic component of the advanced 
biofuel volume requirement being equal to 4.50 billion gallons in 2020, 
which is the same as the implied statutory volume requirement for non-
cellulosic advanced biofuel for 2020.
    The impact of our exercise of the cellulosic waiver authority is 
that after waiving the statutory volume target for cellulosic biofuel 
down to the projected available level, and then reducing the statutory 
volume target for advanced biofuel by the same amount, the resulting 
volume requirement for advanced biofuel for 2020 is 5.09 billion 
gallons. This volume requirement is 170 million gallons more than the 
applicable volume used to derive the 2019 percentage standard. 
Furthermore, after applying the same reduction to the statutory volume 
target for total renewable fuel, the volume requirement for total 
renewable fuel is also 170 million gallons more than the applicable 
volume used to derive the 2019 percentage standard. These increases are 
entirely attributable to a 170 million gallon increase in the 
cellulosic biofuel volume requirement. The implied volumes of non-
cellulosic advanced biofuel and conventional renewable fuel will remain 
the same as in 2019 at 4.5 and 15 billion gallons respectively.

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    As described in Section II.A, when making reductions in advanced 
biofuel and total renewable fuel under the cellulosic waiver authority, 
the statute limits those reductions to no more than the reduction in 
cellulosic biofuel. As described in Section III.C, we are establishing 
a 2020 applicable volume for cellulosic biofuel of 590 million gallons, 
representing a reduction of 9,910 million gallons from the statutory 
target of 10,500 million gallons. As a result, 9,910 million gallons is 
the maximum volume reduction for advanced biofuel and total renewable 
fuel that is permissible using the cellulosic waiver authority. Use of 
the cellulosic waiver authority to this maximum extent would result in 
volumes of 5.09 and 20.09 billion gallons for advanced biofuel and 
total renewable fuel, respectively.

   Table IV.A-1--Lowest Permissible Volumes Using Only the Cellulosic
                            Waiver Authority
                            [Million gallons]
------------------------------------------------------------------------
                                            Advanced     Total renewable
                                             biofuel           fuel
------------------------------------------------------------------------
Statutory target.......................          15,000           30,000
Maximum reduction permitted under the             9,910            9,910
 cellulosic waiver authority...........
Lowest 2020 volume requirement                    5,090           20,090
 permitted using only the cellulosic
 waiver authority......................
------------------------------------------------------------------------

    We are authorized under the cellulosic waiver authority to reduce 
the advanced biofuel and total renewable fuel volumes ``by the same or 
a lesser'' amount as the reduction in the cellulosic biofuel 
volume.\67\ As discussed in Section II.A, EPA has broad discretion in 
using the cellulosic waiver authority in instances where its use is 
authorized under the statute, since Congress did not specify factors 
that EPA must consider in determining whether to use the authority to 
reduce advanced biofuel or total renewable fuel, nor what the 
appropriate volume reductions (within the range permitted by statute) 
should be. Thus, we have the authority to set the 2020 advanced biofuel 
volume requirement at a level that is designed to partially backfill 
for the shortfall in cellulosic biofuel. However, as discussed below, 
we do not believe this would be appropriate for 2020.
---------------------------------------------------------------------------

    \67\ CAA section 211(o)(7)(D)(i).
---------------------------------------------------------------------------

B. Attainable Volumes of Advanced Biofuel

    We have evaluated whether it would be appropriate to require 5.09 
billion ethanol-equivalent gallons of advanced biofuel for 2020. In 
doing so, we have considered both attainable and reasonably attainable 
volumes of advanced biofuel to inform our exercise of the cellulosic 
\68\ waiver authority. As we explained in the 2019 final rule, both 
``reasonably attainable'' and ``attainable'' are terms of art defined 
by EPA.\69\ Volumes described as ``reasonably attainable'' are those 
that can be reached with minimal market disruptions, increased costs, 
reduced GHG benefits, and diversion of advanced biofuels or advanced 
biofuel feedstocks from existing uses. Volumes described as 
``attainable,'' in contrast, are those we believe can be reached but 
would likely result in market disruption, higher costs, and/or reduced 
GHG benefits. Neither ``reasonably attainable'' nor ``attainable'' are 
meant to convey the ``maximum achievable'' level, which, as we 
explained in the 2017 final rule, we do not consider to be an 
appropriate target under the cellulosic waiver authority.\70\ Finally, 
we note that our assessments of the ``reasonably attainable'' and 
``attainable'' volumes of non-cellulosic advanced biofuels are not 
intended to be as exacting as our projection of cellulosic biofuel 
production, described in Section III of this rule.\71\
---------------------------------------------------------------------------

    \68\ 83 FR 63704, 63721 (December 11, 2019).
    \69\ Our consideration of ``reasonably attainable'' volumes is 
not intended to imply that ``attainable'' volumes are unreasonable 
or otherwise inappropriate. As we explain in this section, we 
believe that an advanced biofuel volume of 5.09 billion gallons, 
although not reasonably attainable, is attainable, and that 
establishing such volume is an appropriate exercise of our 
cellulosic waiver authority.
    \70\ 81 FR 89762 (December 12, 2016). The maximum achievable 
volume may be relevant to our consideration of whether to exercise 
the general waiver authority on the basis of inadequate domestic 
supply. However, for 2020, we have determined that after exercising 
our cellulosic waiver authority to the full extent permitted, the 
resulting advanced biofuel volume is attainable. Therefore, further 
reductions using the general waiver authority on the basis of 
inadequate domestic supply are not necessary.
    \71\ The statute directs EPA to lower the cellulosic biofuel 
volume to the projected production level where that level falls 
short of the statutory volume. Under API v. EPA, 706 F.3d 474, 479-
80 (D.C. Cir. 2013), we must project this production level with 
neutral aim at accuracy, that is, make a technical determination 
about the market's ability to produce cellulosic biofuels. By 
contrast, the discretionary portion of the cellulosic waiver 
authority does not explicitly require EPA to project the 
availability of advanced biofuels, but instead confers broad 
discretion on EPA. Moreover, while we have chosen to estimate 
reasonably attainable and attainable volumes of advanced biofuel, 
these volumes do not equate to projected production alone. Rather, 
in exercising the discretionary portion of the cellulosic waiver 
authority, we also consider a range of policy factors--such as 
costs, greenhouse gas emissions, energy security, market 
disruptions, etc., as described throughout this section.

---------------------------------------------------------------------------

[[Page 7032]]

    As in prior rulemakings, we begin by considering what volumes of 
advanced biofuels are reasonably attainable. In ACE, the Court noted 
that in assessing what volumes are ``reasonably attainable,'' EPA had 
considered the availability of feedstocks, domestic production 
capacity, imports, and market capacity to produce, distribute, and 
consume renewable fuel.\72\ These considerations include both demand-
side and supply-side factors.\73\ We are taking a similar approach for 
2020. We are establishing the advanced biofuel volume requirement at a 
level that takes into consideration both the benefits and drawbacks of 
an increase in the implied non-cellulosic advanced biofuel volume 
requirement, as well as the ability of the market to make such 
increased volumes available.
---------------------------------------------------------------------------

    \72\ See ACE, 864 F.3d at 735-36.
    \73\ See id. at 730-35.
---------------------------------------------------------------------------

    Our individual assessments of reasonably attainable volumes of each 
type of advanced biofuel reflect this approach. As discussed in further 
detail in this section, we find that 70 million gallons of imported 
advanced ethanol, 50 million gallons of other advanced biofuels, and 
2.77 billion gallons of advanced biodiesel and renewable diesel are 
reasonably attainable. Together with our projected volume of 590 
million gallons of cellulosic biofuel, the sum of these volumes is 5.00 
billion gallons.\74\ This is the volume of advanced biofuel that we 
believe is reasonably attainable.
---------------------------------------------------------------------------

    \74\ 0.07 + 0.05 + 2.77 x 1.55 + 0.59 = 5.00.
---------------------------------------------------------------------------

    As described in Section IV.A above, 5.09 billion gallons is the 
lowest level that we could set under the cellulosic waiver authority. 
Since the volume that we have determined to be reasonably attainable--
5.00 billion gallons--is less than the lowest volume we can set under 
the cellulosic waiver authority, we also have considered whether the 
market can make more than 5.00 billion gallons of advanced biofuel, 
notwithstanding the potential for feedstock/fuel diversions. That is, 
we assess whether 5.09 billion gallons is merely ``attainable,'' as 
opposed to ``reasonably attainable.'' In particular, we assess whether 
additional volumes of advanced biodiesel and renewable diesel are 
attainable. We conclude that 2.83 billion gallons of advanced biodiesel 
and renewable diesel are attainable, notwithstanding potential 
feedstock/fuel diversions. This quantity of advanced biodiesel and 
renewable diesel, together with the cellulosic biofuel, sugarcane 
ethanol, and other advanced biofuels described above, will enable the 
market to make available 5.09 billion gallons of advanced biofuels.
1. Imported Sugarcane Ethanol
    The predominant available source of advanced biofuel other than 
cellulosic biofuel and BBD has historically been imported sugarcane 
ethanol. Imported sugarcane ethanol from Brazil is the predominant form 
of imported ethanol and the only significant source of imported 
advanced ethanol. In setting the 2019 standards, we estimated that 100 
million gallons of imported sugarcane ethanol would be reasonably 
attainable.\75\ This was based on a combination of data from recent 
years demonstrating relatively low import volumes and older data 
indicating that higher volumes were possible. We also noted the high 
variability in ethanol import volumes in the past (including of 
Brazilian sugarcane ethanol), increasing gasoline consumption in 
Brazil, and variability in Brazilian production of sugar as reasons 
that it would be inappropriate to assume that sugarcane ethanol imports 
would reach the much higher levels suggested by some stakeholders.
---------------------------------------------------------------------------

    \75\ 83 FR 63704 (December 11, 2018).
---------------------------------------------------------------------------

    At the time of the 2019 standards final rule, we used available 
data from a portion of 2018 to estimate that import volumes of 
sugarcane ethanol were likely to fall significantly below the 200 
million gallons we had assumed when we set the 2018 standards. Since 
the 2019 final rule, new data reveals a continued trend of low imports. 
Specifically, import data for all of 2018 is now available and 
indicates that imports of sugarcane ethanol reached just 54 million 
gallons.

[[Page 7033]]

[GRAPHIC] [TIFF OMITTED] TR06FE20.001

    Data for 2019 through August indicate that advanced ethanol imports 
reached 95 million gallons. While we cannot project precisely what 
total import volumes will be by the end of 2019, as a first 
approximation is may be reasonable to assume that the monthly rate of 
import is consistent throughout the year. If so, then total 2019 
imports could be 143 million gallons.
    However, there is little evidence that the increase potentially 
exhibited in 2019 would continue into 2020 as there is no consistent 
upward or downward trend after 2013. Moreover, several factors create 
disincentives for increasing imports above the levels in recent years, 
including the E10 blendwall, the potential existence of a recurring tax 
credit for biodiesel and renewable diesel with which sugarcane ethanol 
competes within the advanced biofuel category, and the fact that 
imported sugarcane ethanol typically costs more than corn ethanol.\76\ 
As a result of these factors and the lower levels that have occurred in 
recent years, we believe it would be appropriate to reduce the expected 
volume of imported sugarcane ethanol below 100 million gallons.
---------------------------------------------------------------------------

    \76\ The difference between D5 and D6 RIN prices can also 
influence the relative attractiveness to consumers of advanced 
ethanol compared to conventional ethanol. However, there has been 
considerable variability in this particular RIN price difference 
over the last few years.
---------------------------------------------------------------------------

    Imports of sugarcane ethanol appear to have stabilized in the 2014 
to 2018 timeframe in comparison to previous years. The average for 
these years is 67 million gallons. Due to the difficulty in precisely 
projecting future import volumes as described further below, we believe 
that a rounded value of 70 million gallons would be more appropriate 
and thus we use 70 million gallons of imported sugarcane ethanol for 
the purposes of projecting reasonably attainable volumes of advanced 
biofuel for 2020. We believe the volume of fuel imported in previous 
years is a reasonable way to project the reasonably attainable volume 
of sugarcane ethanol in 2020.
    In the July 29 proposal, we projected that 60 million gallons of 
imported sugarcane ethanol would be available in 2020. Our revised 
estimate of 70 million gallons reflects updated data on 2018 imports as 
well as a more robust quantitative approach to calculating recent 
actual imports.
    We note that the future projection of imports of sugarcane ethanol 
is inherently imprecise and that actual imports in 2020 could be lower 
or higher than 70 million gallons. Factors that could affect import 
volumes include uncertainty in the Brazilian political climate, weather 
and harvests in Brazil, world ethanol demand and prices, constraints 
associated with the E10 blendwall in the U.S., the status of the 
biodiesel tax credit which affects the economic attractiveness of 
sugarcane ethanol's primary competitor, world demand for and prices of 
sugar, and the cost of sugarcane ethanol relative to that of corn 
ethanol. After considering these factors, and in light of the high 
degree of variability in historical imports of sugarcane ethanol, we 
believe that 70

[[Page 7034]]

million gallons is reasonably attainable for 2020.\77\
---------------------------------------------------------------------------

    \77\ Given the relatively small volumes of sugarcane ethanol we 
are projecting (approximately 1 percent of the advanced biofuel 
standard), even a significant deviation in its actual availability 
would likely have negligible impact on the market's ability to meet 
the advanced biofuel volumes.
---------------------------------------------------------------------------

2. Other Advanced Biofuel
    In addition to cellulosic biofuel, imported sugarcane ethanol, and 
advanced biodiesel and renewable diesel, there are other advanced 
biofuels that can be counted in the determination of reasonably 
attainable volumes of advanced biofuel for 2020. These other advanced 
biofuels include non-cellulosic CNG, naphtha, heating oil, and 
domestically produced advanced ethanol. However, the supply of these 
fuels has been relatively low in the last several years.

                          Table IV.B.2-1--Historical Supply of Other Advanced Biofuels
                                      [Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                     Domestic
                                      CNG/LNG       Heating oil       Naphtha         ethanol        Total \a\
----------------------------------------------------------------------------------------------------------------
2013............................              26               0               3              23              52
2014............................              20               0              18              26              64
2015............................               0               1              24              25              50
2016............................               0               2              27              27              56
2017............................               2               2              32              26              62
2018............................               0               1              18              27              46
----------------------------------------------------------------------------------------------------------------
\a\ Excludes consideration of D5 renewable diesel, as this category of renewable fuel is considered as part of
  biodiesel and renewable diesel as discussed in Section IV.B.3.

    The significant decrease after 2014 in CNG/LNG from biogas as 
advanced biofuel with a D code of 5 is due to the re-categorization in 
2014 of landfill biogas from advanced (D code 5) to cellulosic (D code 
3).\78\ Subsequently, total supply of these other advanced biofuels has 
exhibited no consistent trend during 2015 to 2018. The average during 
those four years was 54 million gallons. However, due to the high 
variability, and consistent with the approach we are taking for 
estimating volumes of imported sugarcane ethanol, we believe that this 
average should be rounded to the nearest 10 million gallons. As a 
result, we have used 50 million gallons to represent other advanced 
biofuels in the context of estimating attainable volumes of advanced 
biofuel.\79\ As with sugarcane ethanol, we have not conducted an in-
depth assessment of the volume of other advanced biofuels that could be 
made available to the U.S. without diverting this fuel from other 
markets. We believe the volume of fuel supplied in previous years is a 
reasonable way to project the reasonably attainable volume of other 
advanced biofuels in 2020.
---------------------------------------------------------------------------

    \78\ 79 FR 42128 (July 18, 2014).
    \79\ As with sugarcane ethanol, given the relatively small 
volumes of other advanced biofuels we are projecting (approximately 
1% of the advanced biofuel standard), even a significant deviation 
in its actual availability would likely have negligible impact on 
the market's ability to meet the advanced biofuel volumes.
---------------------------------------------------------------------------

    We acknowledge that, in the July 29 proposal, we proposed using 60 
million gallons of other advanced biofuel in estimating attainable 
volumes of advanced biofuel. This value was based on the same data 
shown in Table IV.B.2-1, but using a more qualitative approach wherein 
60 million gallons was deemed representative of both historical volumes 
and those that could be attained in 2020. For this final rule we have 
chosen to use a mathematical approach that is consistent with the 
approach we have taken for imported sugarcane ethanol, and which we 
believe represents a more robust methodology for making future 
projections. As the change in the projected 2020 volume of other 
advanced biofuel is very small, we do not believe this change in 
approach meaningfully affects the broader assessment of advanced 
biofuel volumes. Moreover, we note that this final action uses a volume 
of imported sugarcane ethanol that is 10 million gallons higher than 
that proposed, while simultaneously using a volume of other advanced 
that is 10 million gallons lower than that proposed. The net effect on 
projections of advanced biofuel for both of these changes combined is 
zero.
    We recognize that the potential exists for additional volumes of 
advanced biofuel from sources such as jet fuel, liquefied petroleum gas 
(LPG), butanol, and liquefied natural gas (as distinct from CNG), as 
well as non-cellulosic CNG from biogas produced in digesters. However, 
since they have been produced, if at all, in only de minimis and 
sporadic amounts in the past, we do not have a reasonable basis for 
projecting substantial volumes from these sources in 2020.\80\
---------------------------------------------------------------------------

    \80\ No RIN-generating volumes of these other advanced biofuels 
were produced in 2018, and less than 1 million gallons total in 
prior years.
---------------------------------------------------------------------------

3. Biodiesel and Renewable Diesel
    Having projected the available volume of cellulosic biofuel, and 
the reasonably attainable volumes of imported sugarcane ethanol and 
``other'' advanced biofuels, we next assess the availability of 
advanced biodiesel and renewable diesel by considering a wide range of 
factors. First, we calculate the amount of advanced biodiesel and 
renewable diesel that would be needed to meet the 5.09 billion ethanol-
equivalent gallon advanced requirement were we to exercise our maximum 
discretion under the cellulosic waiver authority discussed in Section 
IV.A. This calculation, shown in Table IV.B.3-1, helps inform the 
exercise of our waiver authorities. Second, we consider the historical 
availability of these fuels, including the impacts of biodiesel tax 
policy and tariffs. Third, we consider other factors that could 
potentially limit the availability of these fuels including the 
production capacity of advanced biodiesel and renewable diesel 
production facilities, and the ability for the market to distribute and 
use these fuels. Fourth, we assess the availability of advanced 
feedstocks. As part of this analysis, we consider the volume of 
advanced biodiesel and renewable diesel that can be made available with 
minimal diversions of advanced feedstocks and biofuels from existing 
uses, i.e., the reasonably attainable volume of advanced biodiesel and 
renewable diesel. We calculate this volume based on our projection of 
growth in qualifying feedstocks and on the reasonably attainable volume 
calculated in the 2019 final rule. Fifth, we consider how changes to 
the import and export of advanced biodiesel and

[[Page 7035]]

renewable diesel could impact the available volume of these fuels.
    These analyses support three key findings. First, were EPA to 
exercise the cellulosic waiver authority to the maximum extent, we 
would require an advanced biofuel volume of 5.09 billion ethanol-
equivalent gallons, of which we estimate 4.37 billion ethanol-
equivalent gallons (2.83 billion actual gallons of biodiesel and 
renewable diesel) would be met by advanced biodiesel and renewable 
diesel. Second, the reasonably attainable volume of advanced biodiesel 
and renewable diesel, which can be achieved with minimal diversions of 
advanced feedstocks and biofuels (2.77 billion gallons) is slightly 
lower than this volume. This finding, together with the high cost of 
advanced biofuels, supports our decision to exercise the cellulosic 
waiver authority to the maximum extent and not to permit backfilling of 
missing cellulosic volumes with additional advanced biofuels. Third, 
2.83 billion gallons of advanced biodiesel and renewable diesel are 
attainable by the market. These findings, together with additional 
discussions in the RTC document and docket memoranda, supports our 
decisions to neither require the use of additional volumes of advanced 
biofuel to backfill for the shortfall in cellulosic biofuel nor to 
further waive volumes under the general waiver authority.\81\
---------------------------------------------------------------------------

    \81\ We note that we have not attempted to determine the maximum 
achievable volume of these fuels. While the maximum achievable 
volume of advanced biodiesel and renewable diesel in 2020 is likely 
greater than 2.83 billion gallons we do not believe it would be 
appropriate to require a greater volume of these fuels due to the 
high cost and increased likelihood of adverse unintended impacts 
associated with these fuels.
---------------------------------------------------------------------------

a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve 
Advanced Biofuel Volume
    We begin by calculating the volume of advanced biodiesel and 
renewable diesel that would be needed to meet the 2020 advanced biofuel 
volume were EPA to exercise the cellulosic waiver authority to the 
maximum extent. This important benchmark informs EPA's consideration of 
our waiver authorities, albeit as only one factor among many. 
Specifically, in past annual rules where the reasonably attainable 
volume of biodiesel and renewable diesel has exceeded this benchmark, 
as was the case in 2017 and 2018, EPA has considered whether or not to 
allow additional volumes of these fuels to backfill for missing 
cellulosic biofuel volumes. By contrast, where the reasonably 
attainable volume of advanced biodiesel and renewable diesel has been 
less than this benchmark, as was the case in 2019, this weighs in favor 
of exercising the cellulosic waiver authority to the maximum extent so 
as to minimize diversions of advanced biofuels and feedstocks and the 
associated harms and the need for additional volumes of high cost 
advanced biofuel. Relatedly, were EPA to find that volume of advanced 
biodiesel and renewable diesel needed to meet this benchmark is not 
attainable, that would weigh in favor of EPA exercising its discretion 
under additional waiver authorities, to the extent available, to make 
further reductions to the advanced biofuel volume.
    As shown in Table IV.B.3-1, were EPA to exercise the cellulosic 
waiver authority to the maximum extent, the required volume of advanced 
biofuel  would be 5.09 billion ethanol-equivalent gallons. After 
subtracting from this volume the available volume of cellulosic biofuel 
and reasonably attainable volumes of imported sugarcane ethanol and 
``other'' advanced biofuels, we estimate that approximately 2.83 
billion gallons of advanced biodiesel and renewable diesel would be 
needed to meet the 2020 advanced biofuel volume.
---------------------------------------------------------------------------

    \82\ To calculate the volume of advanced biodiesel and renewable 
diesel that would generate the 4.37 billion RINs needed to meet the 
advanced biofuel volume EPA divided the 4.37 billion RINs by 1.55, 
which is the approximate average (weighted by the volume of these 
fuels expected to be produced in 2020) of the equivalence values for 
biodiesel (generally 1.5) and renewable diesel (generally 1.7).

   Table IV.B.3-1--Determination of Volume of Biodiesel and Renewable
    Diesel Needed in 2020 To Achieve 5.09 Billion Gallons of Advanced
                                 Biofuel
          [Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Target 2020 advanced biofuel volume requirement absent             5,090
 any backfilling of missing cellulosic biofuel..........
Cellulosic biofuel......................................             590
Imported sugarcane ethanol..............................              70
Other advanced..........................................              50
Calculated advanced biodiesel and renewable diesel           4,380\2,826
 needed (ethanol-equivalent gallons/physical gallons)
 \82\...................................................
------------------------------------------------------------------------

b. Historical Supply of Biodiesel and Renewable Diesel
    We next consider the volumes of advanced biodiesel and renewable 
diesel supplied in previous years, as well as the impacts of biodiesel 
tax policy and tariffs on these volumes. A review of the volumes of 
advanced biodiesel and renewable diesel used in previous years is 
especially useful in projecting the potential availability of these 
fuels, since there are a number of complex and inter-related factors 
beyond simply total production capacity (including the availability of 
advanced biodiesel and renewable diesel feedstocks,\83\ the expiration 
of the biodiesel tax credit, changes to tariffs on biodiesel from 
Argentina and Indonesia, import and distribution infrastructure, and 
other market-based factors) that could affect the supply of advanced 
biodiesel and renewable diesel. While historic data and trends alone 
are insufficient to project the volumes of biodiesel and renewable 
diesel that could be provided in future years, historic data can serve 
as a useful reference in considering future volumes.
---------------------------------------------------------------------------

    \83\ Throughout this section we refer to advanced biodiesel and 
renewable diesel as well as advanced biodiesel and renewable diesel 
feedstocks. In this context, advanced biodiesel and renewable diesel 
refer to any biodiesel or renewable diesel for which RINs can be 
generated that satisfy an obligated party's advanced biofuel 
obligation (i.e., D4 or D5 RINs). While cellulosic diesel (D7) can 
also contribute towards an obligated party's advanced biofuel 
obligation, these fuels are discussed in Section III rather than in 
this section. An advanced biodiesel or renewable feedstock refers to 
any of the biodiesel, renewable diesel, jet fuel, and heating oil 
feedstocks listed in Table 1 to 40 CFR 80.1426 or in petition 
approvals issued pursuant to section 80.1416, that can be used to 
produce fuel that qualifies for D4 or D5 RINs. These feedstocks 
include, for example, soy bean oil; oil from annual cover crops; oil 
from algae grown photosynthetically; biogenic waste oils/fats/
greases; non-food grade corn oil; camelina sativa oil; and canola/
rapeseed oil (See pathways F, G, and H of Table 1 to section 
80.1426).
---------------------------------------------------------------------------

    Past experience suggests that a high percentage of the biodiesel 
and renewable diesel used in the U.S. (from both domestic production 
and imports) qualifies as advanced biofuel.\84\ In

[[Page 7036]]

previous years, biodiesel and renewable diesel produced in the U.S. 
have been almost exclusively advanced biofuel.\85\ Volumes of imported 
biodiesel and renewable diesel, which include both advanced and 
conventional biodiesel and renewable diesel, have varied significantly 
from year to year, as they are impacted both by domestic and foreign 
policies, as well as many economic factors. Production, import, export, 
and total volumes of advanced biodiesel and renewable diesel are shown 
in Table IV.B.3-2, while volumes of conventional biodiesel and 
renewable diesel are shown in the following Table IV.B.3-3.
---------------------------------------------------------------------------

    \84\ From 2011 through 2018 approximately 96 percent of all 
biodiesel and renewable diesel supplied to the U.S. (including 
domestically produced and imported biodiesel and renewable diesel) 
qualified as advanced biodiesel and renewable diesel (14,214 million 
gallons of the 14,869 million gallons) according to EMTS data. This 
section focuses on the availability of advanced biodiesel and 
renewable diesel to meet the advanced biofuel volume. For a 
discussion of the availability of all biodiesel and renewable diesel 
that could be used to meet the total renewable fuel volume see 
``Updated market impacts of biofuels in 2020,'' memorandum from 
David Korotney to docket EPA-HQ-OAR-2019-0136.
    \85\ From 2011 through 2018 over 99.9 percent of all the 
domestically produced biodiesel and renewable diesel supplied to the 
U.S. qualified as advanced biodiesel and renewable diesel (12,268 
million gallons of the 12,275 million gallons) according to EMTS 
data.
    \86\ For this final rule EPA reviewed the data available in EMTS 
and updated historical renewable fuel production and RIN generation 
data. This updated data can be found in ``Historical RIN supply as 
of 8-12-19,'' memorandum from David Korotney to EPA docket EPA-HQ-
OAR-2019-0136. Tables in this final rule that contain historical 
data (such as Tables IV.B.3-2, IV.B.3-3, VI.B.1-1 and VI.B.1-2) have 
been updated accordingly.

                               Table IV.B.3-2 \86\--Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2019
                                                                  [Million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2011       2012       2013     2014 \b\   2015 \b\     2016       2017       2018     2019 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel...................................        969        984      1,364      1,296      1,245      1,581      1,530      1,843       1825
(Annual Change)......................................      (N/A)      (+15)     (+380)      (-68)      (-51)     (+336)      (-51)     (+313)      (-18)
Domestic Renewable Diesel............................         59         50        112        158        174        236        251        306        531
(Annual Change)......................................      (N/A)       (-9)      (+62)      (+46)      (+16)      (+62)      (+15)      (+55)     (+225)
Imported Biodiesel...................................         43         39        153        130        261        562        462        175        246
(Annual Change)......................................      (N/A)       (-4)     (+114)      (-23)     (+131)     (+301)     (-100)     (-287)      (+71)
Imported Renewable Diesel............................          0         28        145        130        120        165        191        178        256
(Annual Change)......................................      (N/A)      (+28)     (+117)      (-15)      (-10)      (+45)      (+26)      (-13)      (+78)
Exported Biodiesel and Renewable Diesel..............         32         68         84         87         94        129        166        154        122
(Annual Change)......................................      (N/A)      (+36)      (+16)       (+3)       (+7)      (+35)      (+37)      (-12)      (-32)
                                                      --------------------------------------------------------------------------------------------------
    Total \d\........................................      1,039      1,033      1,690      1,627      1,706      2,415      2,268      2,348      2,736
    (Annual Change)..................................      (N/A)       (-6)     (+657)      (-63)      (+79)     (+709)     (-147)      (+80)     (+388)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the
  RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ Data for 2019 is based on actual production and import data through September 2019, and a projection for October-December 2019. For more information
  on how the volumes for 2019 were determined see ``Projecting Advanced Biofuel Production and Imports for 2019 (November 2019),'' Memorandum from
  Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.
\d\ Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports.


                                   Table IV.B.3-3--Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2019
                                                                  [Million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2011       2012       2013     2014 \b\   2015 \b\     2016       2017       2018     2019 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel...................................          2          0          1          1          0          0          0          0          0
(Annual Change)......................................      (N/A)       (-2)       (+1)       (+0)       (-1)       (+0)       (+0)       (+0)       (+0)
Domestic Renewable Diesel............................          0          0          0          0          0          0          0          0          0
(Annual Change)......................................      (N/A)       (+0)       (+0)       (+0)       (+0)       (+0)       (+0)       (+0)       (+0)
Imported Biodiesel...................................          0          0         31         52         74        113          0          0          0
(Annual Change)......................................      (N/A)       (+0)      (+31)      (+21)      (+22)      (+39)     (-113)       (+0)       (+0)
Imported Renewable Diesel............................          0          0         70          2         87         45          2          1          0
(Annual Change)......................................      (N/A)       (+0)      (+70)      (-68)      (+85)      (-42)      (-43)       (-1)       (-1)
Exported Biodiesel and Renewable Diesel..............          0          0          0          0          1          1          0          0          0
(Annual Change)......................................      (N/A)       (+0)       (+0)       (+0)       (+1)       (+0)       (-1)       (+0)       (+0)
                                                      --------------------------------------------------------------------------------------------------
    Total \d\........................................          2          0        102         55        160        157          2          1          0
    (Annual Change)..................................      (N/A)       (-2)     (+102)      (-47)     (+105)       (-3)     (-155)       (-1)       (-1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with
  the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ While a significant number of D6 RINs have been generated for biodiesel and renewable diesel in 2019 in recent years nearly all of these RINs have
  later been retired for reasons other than compliance with the volume obligations. Since D6 RIN prices have been relatively low in 2019 and the
  biodiesel tax credit is currently not available we are not projecting any production or import of D6 biodiesel or renewable diesel in 2019.
\d\ Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports.


[[Page 7037]]

    As we explained above, to meet an advanced biofuel volume of 5.09 
billion ethanol-equivalent gallons we project that the market would 
supply 2.83 billion gallons of advanced biodiesel and renewable diesel. 
This volume (2.83 billion gallons) is approximately 90 million gallons 
greater than the volume of these fuels projected to be supplied in 2019 
based on data through September 2019. Since 2011, the year-over-year 
changes in the volume of advanced biodiesel and renewable diesel used 
in the U.S. have varied greatly, from a low of 147 million fewer 
gallons from 2016 to 2017 to a high of 709 million additional gallons 
from 2015 to 2016. These changes were likely influenced by multiple 
factors such as the cost of biodiesel feedstocks and petroleum diesel, 
the status of the biodiesel blenders tax credit, growth in marketing of 
biodiesel at high volume truck stops and centrally fueled fleet 
locations, demand for biodiesel and renewable diesel in other 
countries, biofuel policies in both the U.S. and foreign countries, and 
the volumes of renewable fuels (particularly advanced biofuels) 
required by the RFS. This historical information does not indicate that 
the maximum previously observed increase of 709 million gallons of 
advanced biodiesel and renewable diesel would be reasonable to expect 
in 2020, nor does it indicate that the low (or negative) growth rates 
observed in other years would recur. Rather, these data illustrate both 
the magnitude of the changes in advanced biodiesel and renewable diesel 
in previous years and the significant variability in these changes.
    The historic data indicates that the biodiesel tax policy in the 
U.S. can have a significant impact on the volume of biodiesel and 
renewable diesel used in the U.S. in any given year.\87\ While the 
biodiesel blenders tax credit has applied in each year from 2010 to 
2017, it has only been prospectively in effect during the calendar year 
in 2011, 2013, and 2016, while other years it has been applied 
retroactively. Each of the years in which the biodiesel blenders tax 
credit was in effect during the calendar year (2013 and 2016) resulted 
in significant increases in the volume of advanced biodiesel and 
renewable diesel used in the U.S. over the previous year (656 million 
gallons and 742 million gallons respectively). However, following these 
large increases in 2013 and 2016, there was little to no growth in the 
use of advanced biodiesel and renewable diesel in the following years. 
More recent data from 2019 suggests that while the availability of the 
tax credit certainly incentivizes an increasing supply of biodiesel and 
renewable diesel, supply increases can also occur in the absence of the 
tax credit, likely as the result of the incentives provided by the RFS 
program and other economic factors. The availability of this tax credit 
also provides biodiesel and renewable diesel with a competitive 
advantage relative to other advanced biofuels that do not qualify for 
the tax credit.\88\
---------------------------------------------------------------------------

    \87\ We note that the status of the tax credit does not impact 
our assessment of the reasonably attainable volume of advanced 
biodiesel and renewable diesel in 2020 as that assessment is 
primarily based on feedstock availability. The status of the tax 
credit could potentially affect the maximum achievable volume of 
these fuels, but our assessment demonstrates that 2.83 billion 
gallons of advanced biodiesel and renewable diesel is attainable 
whether or not the tax credit is renewed prospectively (or 
retrospectively) for 2020.
    \88\ For a further discussion of the impact of the tax credit on 
the supply of biodiesel and renewable diesel, see the discussion 
from the proposed rule (84 FR 36783, July 29, 2019).
---------------------------------------------------------------------------

    Another important factor highlighted by the historic data is the 
tariffs imposed by the U.S. on biodiesel imported from Argentina and 
Indonesia. In December 2017 the U.S. International Trade Commission 
adopted tariffs on biodiesel imported from Argentina and Indonesia.\89\ 
According to data from EIA,\90\ no biodiesel was imported from 
Argentina or Indonesia since September 2017, after a preliminary 
decision to impose tariffs on biodiesel imported from these countries 
was announced in August 2017. As a result of these tariffs, total 
imports of biodiesel into the U.S. were significantly lower in 2018 
than they had been in 2016 and 2017. The decrease in imported biodiesel 
did not, however, result in a decrease in the volume of advanced 
biodiesel and renewable diesel supplied to the U.S. in 2018. Instead, 
higher domestic production of advanced biodiesel and renewable diesel, 
in combination with lower exported volumes of domestically produced 
biodiesel, resulted in an overall increase in the volume of advanced 
biodiesel and renewable diesel supplied in 2018. On July 9, 2019, the 
Department of Commerce published a preliminary determination to reduce 
the countervailing duty on biodiesel imported from Argentina.\91\ If 
finalized this could result in increasing volumes of biodiesel imports 
from Argentina in future years.
---------------------------------------------------------------------------

    \89\ ``Biodiesel from Argentina and Indonesia Injures U.S. 
Industry, says USITC,'' Available online at: https://www.usitc.gov/press_room/news_release/2017/er1205ll876.htm.
    \90\ See ``EIA Biomass-Based Diesel Import Data'' available in 
docket EPA-HQ-OAR-2019-0136.
    \91\ 84 FR 32714 (July 9, 2019).
---------------------------------------------------------------------------

    The historical data suggests that the 2.83 billion gallons of 
advanced biodiesel and renewable diesel projected to be used to meet an 
advanced biofuel volume of 5.09 billion ethanol-equivalent gallons is 
attainable. This would represent a projected increase of approximately 
90 million gallons from 2019 to 2020. This increase is less than the 
average increase in the volume of advanced biodiesel and renewable 
diesel used in the U.S. from 2011 through 2019 (212 million gallons per 
year) and significantly less than the highest annual increase during 
this time (742 million gallons from 2015 to 2016). We note, however, 
that this assessment does not consider the sources of feedstock that 
would be used to meet this increase, or the potential impacts of 
supplying 2.83 billion gallons of advanced biodiesel and renewable 
diesel, which are discussed in greater detail in the following 
sections.
c. Consideration of Production Capacity and Distribution Infrastructure
    After reviewing the historical volume of advanced biodiesel and 
renewable diesel used in the U.S., EPA next considers other factors 
that may impact the production, import, and use of advanced biodiesel 
and renewable diesel in 2020. The production capacity of registered 
advanced biodiesel and renewable diesel production facilities is highly 
unlikely to limit the production of these fuels, as the total 
production capacity for biodiesel and renewable diesel at registered 
facilities in the U.S. (4.1 billion gallons) exceeds the volume of 
these fuels that are projected to be needed to meet the advanced 
biofuel volume for 2020 after exercising the cellulosic waiver 
authority (2.83 billion gallons).\92\ Significant registered production 
also exists internationally. Similarly, the ability for the market to 
distribute and use advanced biodiesel and renewable diesel appears 
unlikely constrain the growth of these fuels to a volume lower than 
2.83 billion gallons. The investments required to distribute and use 
this volume of biodiesel and renewable diesel are expected to be 
manageable by the marketplace given the RIN value incentive, as this 
volume is approximately 90 million gallons greater than the volume of 
biodiesel and renewable diesel produced, imported, and used in the U.S. 
in 2019. The magnitude of the increase projected

[[Page 7038]]

from 2019 to 2020 (90 million gallons) is much smaller than the 
increases observed in previous years. These factors further support our 
finding that 2.83 billion gallons of advanced biodiesel and renewable 
diesel is attainable.
---------------------------------------------------------------------------

    \92\ The production capacity of the sub-set of biodiesel and 
renewable diesel producers that generated RINs in 2018 is 
approximately 2.9 billion gallons. See ``Biodiesel and Renewable 
Diesel Registered Capacity (March 2019)'' Memorandum from Dallas 
Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

d. Consideration of the Availability of Advanced Feedstocks
    We next consider the availability of advanced feedstocks that can 
be used to produce advanced biodiesel and renewable diesel. This 
assessment has two parts. First, we assess whether there are sufficient 
advanced feedstocks to produce 2.83 billion gallons of advanced 
biodiesel and renewable diesel. We find that the quantity of feedstocks 
exceeds the amount needed to do so, further supporting our conclusion 
that 2.83 billion gallons of advanced biodiesel and renewable diesel is 
attainable. Second, we assess whether the growth in advanced feedstocks 
suffices to produce 2.83 billion gallons of advanced biodiesel and 
renewable diesel without diverting advanced feedstocks or biofuels from 
existing uses, i.e., the reasonably attainable volume. We find that the 
reasonably attainable volume falls slightly short at 2.77 billion 
gallons.
    We believe the most reliable source for projecting the expected 
increase in virgin vegetable oils in the U.S. is USDA's World 
Agricultural Supply and Demand Estimates (WASDE). At the time of our 
assessment for this rule, the October 2019 version was the most current 
version of the WASDE report. The October 2019 WASDE projects that 
production of vegetable oil in the U.S. in the 2019/2020 market year 
will be sufficient to produce approximately 3.6 billion gallons of 
biodiesel and renewable diesel (including both advanced and 
conventional biofuels) if the entire volume of vegetable oil was used 
to produce these fuels. Additional advanced biodiesel and renewable 
diesel could also be produced from waste fats, oils, and greases as 
they have been in past years.\93\ Thus, the availability of domestic 
vegetable oils, in combination the potential to source additional 
feedstocks from waste fats, oils, and greases, supports our conclusion 
that 2.83 billion gallons of advanced biodiesel and renewable diesel is 
attainable.
---------------------------------------------------------------------------

    \93\ See ``Projections of FOG biodiesel and renewable diesel 
2015-2018,'' memorandum from David Korotney to EPA Docket, EPA-HQ-
OAR-2019-0136.
---------------------------------------------------------------------------

    In addition, the global production of vegetable oil projected in 
the 2019/2020 marketing year in the October 2019 WASDE would be 
sufficient to produce approximately 59.3 billion gallons of biodiesel 
and renewable diesel (including both advanced and conventional 
biofuels).\94\ While it would not be reasonable to assume that all, or 
even a significant portion, of global vegetable oil production globally 
or domestically could be available to produce biodiesel or renewable 
diesel supplied to the U.S. for a number of reasons,\95\ the large 
global supply of vegetable oil further indicates that 2.83 billion 
gallons of advanced biodiesel and renewable diesel is attainable in 
2020.
---------------------------------------------------------------------------

    \94\ The October 2019 WASDE projects production of vegetable 
oils in 2019/2020 in the U.S. and the World to be 12.58 and 207.50 
million metric tons respectively. To convert projected vegetable oil 
production to potential biodiesel and renewable diesel production we 
have used a conversion of 7.7 pounds of feedstock per gallon of 
biodiesel or renewable diesel (World Agricultural Supply and Demand 
Estimates. United States Department of Agriculture, Office of the 
Chief Economist. October 10, 2019. ISSN 1554-9089). In addition, 
global production of biodiesel is projected to be 44.2 billion 
liters (11.7 billion gallons) in 2020 according to the July 2019 
OECD-FAO Agricultural Outlook. Based on the projected production of 
biodiesel by country we estimate that over 80% of this biodiesel 
(all biodiesel except that produced in Columbia, Indonesia, 
Malaysia, and Thailand) could qualify as advanced biofuel if the 
feedstocks meet the definition of renewable biomass.
    \95\ These reasons include the demand for vegetable oil in the 
food, feed, and industrial markets both domestically and globally; 
constraints related to the production, import, distribution, and use 
of significantly higher volumes of biodiesel and renewable diesel; 
and the fact that biodiesel and renewable diesel produced from much 
of the vegetable oil available globally would not qualify as an 
advanced biofuel under the RFS program.
---------------------------------------------------------------------------

    We now turn to the reasonably attainable volume of advanced 
biodiesel and renewable diesel, which we find to be 2.77 billion 
gallons. This volume represents the amount of advanced biodiesel and 
renewable diesel that can be supplied without relying on the diversion 
of advanced biofuels and feedstocks from existing uses and the 
associated harms of such diversions. We calculate this volume by 
summing the reasonable attainable volume from last year's final rule 
(2.61 billion gallons) with the volume that can be produced from the 
projected increase in advanced feedstocks from 2019 to 2020 (159 
million gallons).\96\
---------------------------------------------------------------------------

    \96\ As discussed in more detail in this section, this 159 
million gallons increase is projected to be comprised of 94 million 
gallons from increased vegetable oil production, 17 million gallons 
from distillers corn oil, and 48 million gallons from waste fats, 
oils, and greases.
---------------------------------------------------------------------------

    We acknowledge that an increase in the required use of advanced 
biodiesel and renewable diesel could be realized through the production 
or collection of additional advanced feedstocks, a diversion of 
advanced feedstocks from other uses, or a diversion of advanced 
biodiesel and renewable diesel from existing markets in other 
countries. As already explained, the volume of advanced biodiesel and 
renewable diesel and their corresponding feedstocks projected to be 
produced globally exceeds the volume projected to be required in 2020 
(2.83 billion gallons of advanced biodiesel and renewable diesel and 
the corresponding volume of advanced feedstocks) by a significant 
margin. However, we expect that increases in advanced biofuel and 
renewable fuel volumes beyond those that can be produced from the 
projected growth in advanced feedstock production and/or consumption 
(e.g., by diverting advanced feedstocks or advanced biodiesel and 
renewable diesel from existing markets and uses) would be increasingly 
likely to incur adverse unintended impacts.\97\
---------------------------------------------------------------------------

    \97\ The volume of advanced biodiesel and renewable diesel 
projected to be used to meet the advanced biofuel volume (2.83 
billion gallons) is approximately 1 billion gallons greater than the 
volume of these fuels we projected would be used to meet the 
advanced biofuel volume for 2022 in the 2010 RFS final rule analyses 
(1.82 billion gallons). For a further discussion of this issue see 
Section 4.2.2.4 of the RTC.
---------------------------------------------------------------------------

    This is because of several factors, notably the potential 
disruption of the current biogenic fats, oils, and greases market, the 
associated cost impacts to other industries resulting from feedstock 
diversion, and the potential adverse effect on lifecycle GHG emissions 
and energy security associated with feedstocks for biofuel production 
that would have been used for other purposes and which must then be 
backfilled with other feedstocks.\98\ Similarly, increasing the supply 
of biodiesel and renewable diesel to the U.S. by diverting fuel that 
would otherwise have been used in other countries results in higher 
lifecycle GHG emissions than if the supply of these fuels was increased 
by an increased collection of waste fats and oils or increased 
production of feedstocks that are byproducts of other industries, 
especially if this diversion results in increased consumption of 
petroleum fuels in the countries that would have otherwise consumed the 
biodiesel or renewable diesel. By assessing the expected growth in the 
production of advanced feedstocks, we are attempting to minimize the 
incentives for the RFS program to increase the supply of advanced

[[Page 7039]]

biodiesel and renewable diesel through feedstock switching or diverting 
biodiesel and renewable diesel from foreign markets to the U.S.
---------------------------------------------------------------------------

    \98\ For instance, see the draft GHG assessment of palm oil 
biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012). We 
believe palm or petroleum-derived products would likely be used to 
replace advanced biodiesel and renewable diesel diverted to the U.S. 
as these products are currently the lowest cost substitutes.
---------------------------------------------------------------------------

    Advanced biodiesel and renewable diesel feedstocks include both 
waste oils, fats, and greases; and oils from planted crops. The 
projected growth in these feedstocks is expected to be modest relative 
to the volume of these feedstocks that is currently being used to 
produce biodiesel and renewable diesel. Most of the waste oils, fats, 
and greases that can be recovered economically are already being 
recovered and used in biodiesel and renewable diesel production or for 
other purposes. The availability of animal fats will likely increase 
with beef, pork, and poultry production. Most of the vegetable oil used 
to produce advanced biodiesel and renewable diesel that is sourced from 
planted crops comes from crops primarily grown for purposes other than 
providing feedstocks for biodiesel and renewable diesel, such as for 
livestock feed, with the oil that is used as feedstock for renewable 
fuel production a co-product.\99\ This is true for soybeans and corn, 
which are the two largest sources of feedstock from planted crops used 
for biodiesel production in the U.S.\100\ We do not believe that the 
increased demand for soybean oil or corn oil caused by a higher 2020 
advanced biofuel standard would result in an increase in soybean or 
corn prices large enough to induce significant changes in agricultural 
activity.\101\ However, production of these feedstocks is likely to 
increase over time as crop yields, oil extraction rates, and demand for 
the primary products increase.
---------------------------------------------------------------------------

    \99\ For example, corn oil is a co-product of corn grown 
primarily for animal feed or ethanol production, while soy and 
canola are primarily grown as livestock feed.
    \100\ According to EIA data 7,542 million pounds of soy bean oil 
and 2,085 million pounds of corn oil were used to produce biodiesel 
in the U.S. in 2018. Other significant sources of feedstock were 
yellow grease (1,668 million pounds), canola oil (total volume 
withheld, but monthly data suggests greater than 700 million 
pounds), and white grease (618 million pounds).''Monthly Biodiesel 
Production Report with Data for February 2019,'' U.S. Energy 
Information Administration. April 2019.
    \101\ This position is supported by several commenters, 
including the American Soybean Association (EPA-HQ-OAR-2019-0136-
0177) and the Nebraska Soybean Association (EPA-HQ-OAR-2019-0136-
0117).
---------------------------------------------------------------------------

    Based on the October 2019 WASDE report the projected increase in 
vegetable oil production in the U.S. from the 2018/2019 marketing year 
to the 2019/2020 marketing year is 0.33 million metric tons per 
year.\102\ This additional quantity of vegetable oils could be used to 
produce approximately 94 million additional gallons of advanced 
biodiesel or renewable diesel in 2020 relative to 2019.\103\
---------------------------------------------------------------------------

    \102\ U.S. vegetable oil production is projected to be 12.25 
million metric tons in the 2018/2019 agricultural marketing year and 
12.58 million metric tons in the 2019/2020 agricultural marketing 
year.
    \103\ To calculate this volume, we have used a conversion of 7.7 
pounds of feedstock per gallon of biodiesel or renewable diesel. 
This is based on the expected conversion of soybean oil (https://extension.missouri.edu/p/G1990), which is the largest source of 
feedstock used to produce advanced biodiesel and renewable diesel. 
Conversion rates for other types of vegetable oils used to produce 
biodiesel and renewable diesel are similar to those for soybean oil.
---------------------------------------------------------------------------

    In the 2019 final rule we also noted that the WASDE projected a 
decrease in trade of both oilseeds and vegetable oils. The projected 
decrease in oilseed trade was likely due to tariffs enacted by China on 
soybean exports from the U.S. While the projected trade in oilseeds is 
expected to increase slightly from 2018/2019 to 2019/2020, trade in 
vegetable oils is projected to decrease by 0.12 million metric tons 
from 2018/2019 to 2019/2020. If converted to biodiesel, this volume of 
vegetable oils could be used to produce approximately 34 million 
additional gallons of advanced biodiesel or renewable diesel in 2020 
relative to 2019. As in the 2019 final rule, we did not include in our 
projection of the reasonably attainable volumes the potential biodiesel 
or renewable diesel that could theoretically be produced from the 
oilseeds and vegetable oil projected to remain in the U.S. due to 
changes in trade of these products. This is because any biodiesel and 
renewable diesel produced from soybeans previously exported are 
necessarily diverted from other uses (even if the reason for this 
diversion is the tariffs, rather than the RFS program), and biodiesel 
produced from these diverted feedstocks is therefore more likely to 
have the adverse unintended effects as previously discussed.
    In addition to virgin vegetable oils, we also expect increasing 
volumes of distillers corn oil \104\ to be available for use in 2020. 
The WASDE report does not project distillers corn oil production, so 
EPA must use an alternative source to project the growth in the 
production of this feedstock. For this final rule we use results from 
the World Agricultural Economic and Environmental Services (WAEES) 
model to project the growth in the production of distillers corn 
oil.\105\ In assessing the likely increase in the availability of 
distillers corn oil from 2019 to 2020, the authors of the WAEES model 
considered the effects of an increasing adoption rate of distillers 
corn oil extraction technologies at domestic ethanol production 
facilities, as well as increased corn oil extraction rates enabled by 
advances in this technology. The WAEES model projects that production 
of distillers corn oil will increase by approximately 130 million 
pounds from the 2018/2019 to the 2019/2020 agricultural marketing year. 
This quantity of feedstock could be used to produce approximately 17 
million gallons of advanced biodiesel or renewable diesel. We believe 
it is reasonable to use these estimates from the WAEES model for these 
purposes based on the projected increase in the use of corn oil 
extraction and corn oil yield increases.
---------------------------------------------------------------------------

    \104\ Distillers corn oil is non-food grade corn oil produced by 
ethanol production facilities.
    \105\ For the purposes of this rule, EPA relied on WAEES 
modeling results submitted as comments by the National Biodiesel 
Board on the 2020 proposed rule (Kruse, J., ``Implications of an 
Alternative 2021 Biomass Based Diesel Volume Obligation for Global 
Agriculture and Biofuels,'' August 26, 2019, World Agricultural 
Economic and Environmental Services (WAEES)).
---------------------------------------------------------------------------

    While much of the increase in advanced biodiesel and renewable 
diesel feedstocks produced in the U.S. from 2019 to 2020 is expected to 
come from virgin vegetable oils and distillers corn oil, increases in 
the supply of other sources of advanced biodiesel and renewable diesel 
feedstocks, such as biogenic waste fats, oils, and greases (FOG), could 
also occur. In scenarios with increases to the advanced biofuel and 
biomass-based diesel volume requirements in 2020 and 2021 the WAEES 
model projects minimal increases in the volume of biodiesel produced 
from total other fats and oils in the 2018/2019 and 2019/2020 marketing 
years.\106\ Conversely, an assessment conducted by LMC International in 
2017 and submitted in comments on our 2018 proposed rule projected that 
the waste oil supply in the U.S. could increase by approximately 2.4 
million metric tons from 2016 to 2022.\107\ This estimate represents a 
growth rate of approximately 0.4 billion tons per year, or enough 
feedstock to produce approximately 115 million gallons of biodiesel and 
renewable diesel per year. This estimate, however, only accounts for 
potential sources of feedstock and

[[Page 7040]]

not for the economic viability of recovering waste oils.
---------------------------------------------------------------------------

    \106\ The WAEES model projects a 7 million gallon increase in 
2019/2020 and a 16 million gallon increase in 2020/2021. See Kruse, 
J., ``Implications of an Alternative Biomass Based Diesel Volume 
Obligation for Global Agriculture and Biofuels,'' August 26, 2019, 
World Agricultural Economic and Environmental Services.
    \107\ LMC International. Global Waste Grease Supply. August 2017 
(EPA-HQ-OAR-2017-0091-3880).
---------------------------------------------------------------------------

    To project the increase in the use of biogenic FOG we used 
historical data to determine the increase in the use of these 
feedstocks to produce biodiesel and renewable diesel. From 2015-2018, 
advanced biodiesel and renewable diesel produced from biogenic FOG 
increased by an average of 48 million gallons per year.\108\ This 
annual increase is higher than the increase in the use of these 
feedstocks projected by the WAEES model, but lower than the potential 
increase projected by LMC. We have included an additional 48 million 
gallons of advanced biodiesel and renewable diesel from FOG in our 
assessment of the reasonably attainable volume for 2020, consistent 
with the observed annual increase in advanced biodiesel and renewable 
diesel produced from these feedstocks in recent years.
---------------------------------------------------------------------------

    \108\ ``Projections of FOG biodiesel and renewable diesel 2015-
2018,'' memorandum from David Korotney to EPA Docket, EPA-HQ-OAR-
2019-0136.
---------------------------------------------------------------------------

    In total, we project that increases in feedstocks produced in the 
U.S. are sufficient to produce approximately 159 million more gallons 
of advanced biodiesel and renewable diesel in 2020 relative to 2019. 
This number includes 94 million gallons from increased vegetable oil 
production, 17 million gallons from increased corn oil production, and 
48 million gallons from increased waste oil collection. This increase 
does not include the projected 34 million gallons of biodiesel that 
could be produced from the projected reduction in vegetable oil trade 
since decreases in exported volumes of vegetable oils represent 
feedstocks diverted from use in other countries. Our projection also 
does not consider factors that could potentially affect the 
availability of advanced biofuel feedstocks that could be used to 
produce biodiesel or renewable diesel, such as changes in the volume of 
vegetable oils used in food markets or other non-biofuel industries. In 
our 2019 final rule, we determined that 2.61 billion gallons of 
advanced biodiesel and renewable diesel were reasonably attainable in 
2019,\109\ therefore our projection of the reasonably attainable volume 
of advanced biodiesel and renewable diesel in 2020 is 2.77 billion 
gallons.\110\
---------------------------------------------------------------------------

    \109\ 83 FR 63704 (December 11, 2018).
    \110\ We calculated the reasonably attainable volume for 2020 by 
adding the projected increase in advanced feedstocks (159 million 
gallons) to the reasonably attainable volume of these fuels we 
projected for 2019 (2.61 billion gallons). Another possible approach 
would be to add the 159-million-gallon increment in the reasonably 
attainable volume to the volume we now project to be used in 2019, 
2.74 billion gallons (rather than the reasonably attainable volume 
we projected for 2019). This would result in a reasonably attainable 
volume of 2.90 billion gallons. While this approach uses more recent 
data on the availability of advanced biodiesel and renewable diesel 
in 2019, it does not account for whether or not the additional use 
of these fuels in 2019, beyond the reasonably attainable volume 
calculated in the 2019 final rule, resulted in diversions of 
advanced biofuels or feedstocks. In any event, even were we to adopt 
this approach, it would make no difference to our final decision on 
the volumes as (1) the difference in the calculated reasonably 
attainable volume is slight, (2) the high costs of advanced 
biodiesel and renewable diesel would justify exercising the maximum 
cellulosic waiver in any event, and (3) the volume we are finalizing 
is attainable under either approach.
---------------------------------------------------------------------------

e. Biodiesel and Renewable Diesel Imports and Exports
    EPA next considered potential changes in the imports of advanced 
biodiesel and renewable diesel produced in other countries. In previous 
years, significant volumes of foreign produced advanced biodiesel and 
renewable diesel have been supplied to markets in the U.S. (see Table 
IV.B.2-1). These significant imports were likely the result of a strong 
U.S. demand for advanced biodiesel and renewable diesel, supported by 
the RFS standards, the low carbon fuel standard (LCFS) in California, 
the biodiesel blenders tax credit, and the opportunity for imported 
biodiesel and renewable diesel to realize these incentives. We have not 
included the potential for increased (or decreased) volumes of imported 
advanced biodiesel and renewable diesel in our projection of the 
reasonably attainable volume for 2020. As discussed previously, any 
increases in the import of advanced biodiesel and renewable diesel is 
necessarily diverted from other markets. There is also a far higher 
degree of uncertainty related to the availability and production of 
advanced biodiesel and renewable diesel in foreign countries, as this 
supply can be affected by a number of unpredictable factors such as the 
imposition of tariffs and increased incentives for the use of these 
fuels in other countries (such as tax incentives or blend mandates). 
EPA also lacks the data necessary to determine the quantity of these 
fuels that would otherwise be produced and used in other countries, and 
thus the degree to which the RFS standards are simply diverting this 
fuel from use in other countries as opposed to incentivizing additional 
production.
    While we do not consider changes in imports or exports of advanced 
biodiesel and renewable diesel in our projection of the reasonably 
attainable volume, changes to the volume of these fuels that is 
imported and exported could potentially impact the attainable volume. 
Imports of advanced biodiesel and renewable diesel are projected to 
increase by 150 million gallons from 2018 to 2019 (from approximately 
350 million gallons in 2018 to approximately 500 million gallons in 
2019, see Table IV.B.3-2). At the same time, data through July 2019 
suggests that the U.S. will export approximately 122 million gallons of 
domestically produced biodiesel in 2019.\111\ Increased imports and/or 
decreased exports of these fuels in 2020 could contribute to the market 
supplying 2.83 billion gallons of advanced biodiesel and renewable 
diesel. The higher volumes of imported advanced biodiesel and renewable 
diesel in previous years (shown in Table IV.B.3-2) suggest that these 
changes are possible, especially if the tariffs on biodiesel imported 
from Argentina are reduced. Thus the potential for increased imports 
and decreased exports further supports our determination that 2.83 
billion gallons of advanced biodiesel and renewable diesel is 
attainable.
---------------------------------------------------------------------------

    \111\ Projection is based on EIA data on exports of biomass-
based diesel (biodiesel) through July 2019. For more detail on this 
projection see ``Projecting Advanced Biofuel Production and Imports 
for 2019 (November 2019),'' memorandum from Dallas Burkholder to EPA 
docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    While changes to the volumes of imports/exports of advanced 
biodiesel and renewable could supply the approximately 60 million 
gallon difference between the reasonably attainable volume of these 
fuels (2.77 billion gallons) and the volume needed to meet an advanced 
biofuel volume of 5.09 billion ethanol-equivalent gallons (2.83 billion 
gallons), these changes are not without impacts. Diverting this fuel to 
markets in the U.S. may be complicated as doing so would likely require 
higher prices for these fuels in the U.S. to divert the fuels from 
foreign markets that are presumably more profitable currently. It may 
also be more difficult and costly to distribute this additional volume 
of biodiesel and renewable diesel to domestic markets than the current 
foreign markets. Finally, reducing advanced biodiesel and renewable 
diesel exports may indirectly result in the decreased availability of 
imported volumes of these fuels, as other countries seek to replace 
volumes previously imported from the U.S.
f. Attainable and Reasonably Attainable Volumes of Advanced Biodiesel 
and Renewable Diesel
    In sum, the 2.83 billion gallons of advanced biodiesel and 
renewable

[[Page 7041]]

diesel projected to be needed to achieve an advanced biofuel volume of 
5.09 billion ethanol-equivalent gallons are attainable. We have reached 
this conclusion based on our analysis of the above factors, including 
historical supply of biodiesel and renewable diesel, the impacts of tax 
policy and tariffs, production capacity and distribution 
infrastructure, availability of advanced feedstocks, and imports and 
exports. By contrast, we find that only 2.77 billion gallons of 
advanced biodiesel and renewable diesel are reasonably attainable. This 
estimate is based on our analysis of growth in qualifying feedstocks, 
and represents the volume that can be supplied with minimal diversions 
of advanced biofuels and feedstocks from existing uses, and the 
associated harms of such diversions. These assessments support EPA's 
decision to establish the advanced biofuel volume for 2020 at 5.09 
billion gallons, a volume which neither requires the use of EPA's 
general waiver authority nor the use of additional volumes of advanced 
biofuel in place of cellulosic biofuel.

C. Volume Requirement for Advanced Biofuel

    In exercising the cellulosic waiver authority for 2017 and earlier, 
we determined it was appropriate to require a partial backfilling of 
missing cellulosic volumes with volumes of non-cellulosic advanced 
biofuel we determined to be reasonably attainable, notwithstanding the 
increase in costs associated with those decisions.\112\ For the 2018 
and 2019 standards, in contrast, we placed a greater emphasis on costs 
in the context of balancing the various considerations, ultimately 
concluding that the applicable volume requirement should be based on 
the maximum reduction permitted under the cellulosic waiver authority, 
effectively preventing any backfilling of missing cellulosic biofuel 
with advanced biofuel. In setting the 2019 standards, we also found 
that greater volumes of advanced biofuel would be attainable but did 
not believe that requiring higher volumes would be appropriate as such 
volumes were not reasonably attainable and would lead to diversion of 
advanced feedstocks or biofuels and the associated harms.
---------------------------------------------------------------------------

    \112\ See, e.g., Renewable Fuel Standards for 2014, 2015 and 
2016, and the Biomass-Based Volume for 2017: Response to Comments 
(EPA-420-R-15-024, November 2015), pages 628-631, available in 
docket EPA-HQ-OAR-2015-0111-3671.
---------------------------------------------------------------------------

    For 2020, we are following the same approach as in 2018 and 2019 
and exercising the cellulosic waiver authority to reduce the advanced 
biofuel requirement by the maximum extent permitted. This results in an 
advanced biofuel volume of 5.09 billion gallons. This also preserves 
the implied statutory volume target for non-cellulosic advanced biofuel 
at 4.5 billion gallons, identical to that for 2019. As in the 2019 
standards, we are taking this approach for two reasons, each of which 
is an independent and sufficient justification. First, as in 2019, the 
reasonably attainable volume of advanced biofuel for 2020 falls short 
of the volume resulting from the maximum exercise of the cellulosic 
authority. It is thus appropriate to exercise the cellulosic waiver 
authority to the maximum extent to minimize the harms associated with 
advanced biofuel and feedstock diversions.
    Second, even if greater volumes of advanced biofuel are reasonably 
attainable, the high cost of these fuels independently justifies 
reducing the advanced biofuel volume for 2020 by the maximum amount 
permitted under the cellulosic waiver authority. In the 2019 final rule 
we presented illustrative cost projections for sugarcane ethanol and 
soybean biodiesel in 2019, the two advanced biofuels that would be most 
likely to provide the marginal increase in volumes of advanced biofuel 
in 2019 in comparison to 2018. Sugarcane ethanol results in a cost 
increase compared to gasoline that ranges from $0.39-$1.04 per ethanol-
equivalent gallon. Soybean biodiesel results in a cost increase 
compared to diesel fuel that ranges from $0.74-$1.23 per ethanol-
equivalent gallon. Thus, the cost of these renewable fuels is high as 
compared to the petroleum fuels they displace.
    In conclusion, we believe that a 2020 advanced biofuel volume 
requirement of 5.09 billion ethanol-equivalent gallons is appropriate 
following our assessment of volumes that are attainable and in 
consideration of carryover RINs, potential feedstock/fuel diversions, 
and costs. Comments requesting higher or lower volumes are addressed in 
the separate Response to Comments document.

D. Volume Requirement for Total Renewable Fuel

    As discussed in Section II.A.1, we believe that the cellulosic 
waiver provision is best interpreted as requiring that the advanced 
biofuel and total renewable fuel volumes be reduced by equal amounts. 
For the reasons we have previously articulated, we believe this 
interpretation is consistent with the statutory language and best 
effectuates the objectives of the statute, including the environmental 
objectives that generally favor the use of advanced biofuels over non-
advanced biofuels and the legislative intent reflected in the statutory 
volume tables.\113\ If we were to reduce the total renewable fuel 
volume requirement by a lesser amount than the advanced biofuel volume 
requirement, we would effectively increase the opportunity for 
conventional biofuels to participate in the RFS program beyond the 
implied statutory volume of 15 billion gallons. Applying an equal 
reduction of 9.91 billion gallons to both the statutory target for 
advanced biofuel and the statutory target for total renewable fuel 
results in a total renewable fuel volume of 20.09 billion gallons as 
shown in Table IV.A-1. This volume of total renewable fuel results in 
an implied volume of 15 billion gallons of conventional renewable fuel, 
which is the same as in the 2019 final rule. We have investigated the 
different ways that the market could respond to a total renewable fuel 
volume requirement of 20.09 billion gallons in a memorandum to the 
docket.\114\ \115\
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    \113\ See 81 FR 89752-89753 (December 12, 2016). See also 78 FR 
49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015).
    \114\ ``Updated market impacts of biofuels in 2020,'' memorandum 
from David Korotney to docket EPA-HQ-OAR-2019-0136. In prior 
actions, similar analyses to those described in this memorandum 
indicated that the market was capable of both producing and 
consuming the required volume of renewable fuels, and that as a 
result there was no basis for finding an inadequate domestic supply 
of total renewable fuel. See 82 FR 34229 & n.82 (July 21, 2017). 
Given the D.C. Circuit's decision in ACE, however, assessment of 
demand-side constraints is no longer relevant for determining 
inadequate domestic supply. Even so, we believe consideration of the 
ways that the market could make this volume available may still be 
generally relevant to whether and how EPA exercises its waiver 
authorities, such as our consideration of whether the volumes will 
cause severe economic harm.
    \115\ We note that the previously cited memorandum discusses the 
potential for total ethanol consumption in 2020, but does not make 
specific projections for E0, E15 and E85. Volumes of these ethanol 
blends are highly dependent upon consumer demand and retail 
distribution infrastructure. In prior annual rules, we assessed 
volumes of these blends in determining whether and to what extent to 
exercise the inadequate domestic supply waiver prong of the general 
waiver authority. The D.C. Circuit's decision ACE precludes 
assessment of demand-side constraints in determining inadequate 
domestic supply. While we could still assess such blend volumes in 
deciding whether and to what extent to exercise our other 
discretionary waiver authorities, and in evaluating the market's 
ability to meet the total renewable fuel requirement, doing so is 
not necessary. In terms of the market's ability to satisfy the total 
renewable fuel requirement, the more relevant consideration is 
whether the pool-wide ethanol volume, together with volumes of other 
biofuels, suffices. We note that EPA does not establish separate 
standards for E0, E15, or E85. Moreover, there has historically been 
a lack of reliable data on volumes of these blends, making reliance 
on the pool-wide ethanol volume a more technically robust approach.
---------------------------------------------------------------------------

    We note that the statute provides other authorities for EPA to 
reduce the required volumes beyond that permitted

[[Page 7042]]

by the cellulosic waiver. As explained in Section II of this rule and 
in Section 2 of the Response to Comments document, we do not believe it 
is appropriate to further reduce volumes under the general waiver 
authority.
    We acknowledge that there is some uncertainty regarding whether the 
market will actually make available 5.09 billion ethanol-equivalent 
gallons of advanced biofuel or 20.09 billion ethanol-equivalent gallons 
of total renewable fuel in 2020. In the event that the market is not 
able to meet these volume requirements with biofuels produced and used 
in 2020, the carryover RIN bank represents a source of RINs that could 
help obligated parties meet them if the market fails to supply 
sufficient advanced biofuels. As discussed in greater detail in Section 
II.B.1, carryover RINs provide obligated parties compliance flexibility 
in the face of substantial uncertainties in the transportation fuel 
marketplace and provide a liquid and well-functioning RIN market upon 
which success of the entire program depends. We currently estimate that 
there are approximately 680 million advanced biofuel carryover RINs and 
2.80 billion non-advanced (D6) carryover RINs available.

V. Impacts of 2020 Volumes on Costs

    In this section, EPA presents its assessment of the illustrative 
costs of this final RFS annual rulemaking. It is important to note that 
these illustrative costs do not attempt to capture the full impacts of 
this final rule. We frame the analyses we have performed for this rule 
as ``illustrative'' so as not to give the impression of comprehensive 
estimates. These estimates are provided for the purpose of showing how 
the cost to produce a gallon of a ``representative'' renewable fuel 
compares to the cost of fossil fuels (e.g., petroleum-derived fuels). 
There are a significant number of caveats that must be considered when 
interpreting these illustrative cost estimates. For example, there are 
many different feedstocks that could be used to produce biofuels, and 
there is a significant amount of heterogeneity in the costs associated 
with these different feedstocks and fuels. Some renewable fuels may be 
cost competitive with the fossil fuels they replace; however, we do not 
have cost data on every type of feedstock and every type of fuel. 
Therefore, we do not attempt to capture this range of potential costs 
in our illustrative estimates.
    The renewable fuel volumes for which we provide cost estimates are 
described in Section III. In this section, we estimate illustrative 
costs for two different cases. In the first case, we provide 
illustrative cost estimates by comparing the final 2020 RFS renewable 
fuel volumes to 2020 RFS statutory renewable fuel volumes. In the 
second case, we examine the final 2020 RFS renewable fuel volumes to 
the final 2019 RFS renewable fuel volumes to estimate changes in the 
annual costs of the final 2020 RFS annual rule in comparison to the 
final 2019 RFS annual rule.\116\
---------------------------------------------------------------------------

    \116\ This action imposes renewable fuel standards only for 
2020. However, solely for E.O. 13771 purposes in this section, we 
estimate the costs of the relevant volumes as though they applied in 
future years as well. Therefore, we use the term ``annual costs'' in 
this section.
---------------------------------------------------------------------------

A. Illustrative Costs Analysis of 2020 Final Volumes Compared to the 
2020 Statutory Volumes Baseline

    In this section, EPA provides illustrative cost estimates that 
compare the final 2020 RFS cellulosic renewable volume requirement to 
the 2020 RFS cellulosic statutory renewable fuel volume that would be 
required absent the exercise of our cellulosic waiver authority under 
CAA section 211(o)(7)(D)(i). As described in Section III, we are 
finalizing a cellulosic volume of 0.59 billion gallons for 2020, using 
our cellulosic waiver authority to waive the statutory cellulosic 
volume of 10.5 billion gallons by 9.91 billion gallons. Estimating the 
cost savings from renewable fuel volumes that are not projected to be 
produced is inherently challenging. EPA has taken the relatively 
straightforward methodology of multiplying the waived cellulosic volume 
by the wholesale per-gallon costs of cellulosic biofuel production 
relative to the fossil fuels they displace.
    While there may be growth in other cellulosic renewable fuel 
sources, we believe it is appropriate to use cellulosic ethanol 
produced from corn kernel fiber at an existing corn starch ethanol 
production facility as representative of cellulosic renewable fuel. As 
explained in Section III, we believe that production of the major 
alternative cellulosic biofuel--compressed natural gas/liquefied 
natural gas (CNG/LNG)-derived from biogas--is constrained in 2020 due 
to a limitation in the number of vehicles capable of using this form of 
fuel.\117\
---------------------------------------------------------------------------

    \117\ See Section III.D.2 for a further discussion of the 
quantity of CNG/LNG projected to be used as transportation fuel in 
2020.
---------------------------------------------------------------------------

    EPA uses a ``bottom-up'' engineering cost analysis to quantify the 
costs of producing a gallon of cellulosic ethanol derived from corn 
kernel fiber. There are multiple processes that could yield cellulosic 
ethanol from corn kernel fiber. EPA assumes a cellulosic ethanol 
production process that generates biofuel using distiller's grains, a 
co-product of generating corn starch ethanol that is commonly dried and 
sold into the feed market as distillers dried grains with solubles 
(DDGS), as the renewable biomass feedstock. We assume an enzymatic 
hydrolysis process with cellulosic enzymes to break down the cellulosic 
components of the distiller's grains. This process for generating 
cellulosic ethanol is similar to approaches currently used by industry 
to generate cellulosic ethanol at a commercial scale, and we believe 
these cost estimates are likely representative of the range of 
different technology options being developed to produce ethanol from 
corn kernel fiber. We then compare the per-gallon costs of the 
cellulosic ethanol to the fossil fuel that would be replaced at the 
wholesale stage, since that is when the two are blended together.
    These cost estimates do not consider taxes, retail margins, or 
other costs or transfers that occur at or after the point of blending. 
Transfers are payments within society and are not additional costs 
(e.g., RIN payments are one example of a transfer payment). We do not 
attempt to estimate potential cost savings related to avoided 
infrastructure costs (e.g., the cost savings of not having to provide 
pumps and storage tanks associated with higher-level ethanol blends). 
When estimating per-gallon costs, we consider the costs of gasoline on 
an energy-equivalent basis as compared to ethanol, since more ethanol 
gallons must be consumed to travel the same distance as on gasoline due 
to the ethanol's lower energy content.
    Table V.A-1 below presents the cellulosic fuel cost savings 
associated with this final rule that are estimated using this 
approach.\118\ The per-gallon cost differences for cellulosic ethanol 
range from $0.46-$3.30 per ethanol-equivalent gallon ($/EEG).\119\ 
Given that commercial cellulosic ethanol production is still at an 
early stage in its deployment, these cost estimates have a significant 
range. Multiplying the per-

[[Page 7043]]

gallon cost differences by the amount of cellulosic biofuel waived in 
this final rule results in approximately $4.6-$33 billion in cost 
savings.
---------------------------------------------------------------------------

    \118\ Details of the data and assumptions used can be found in a 
Memorandum available in the docket entitled ``Cost Impacts of the 
Final 2020 Annual Renewable Fuel Standards'', Memorandum from 
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in 
docket EPA-HQ-OAR-2019-0136.
    \119\ For the purposes of the cost estimates in this section, 
EPA has not attempted to adjust the price of the petroleum fuels to 
account for the impact of the RFS program, since the changes in the 
renewable fuel volume are relatively modest in comparison to the 
quantity of fuel associated with the petroleum market. Rather, we 
have used the wholesale price projections for gasoline and diesel as 
reported in EIA's October 2019 STEO.

    Table V.A-1--Illustrative Costs Analysis of 2020 Final Cellulosic
             Volumes Compared to the 2020 Statutory Volumes
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic Volume Required (Million Ethanol-                         590
 Equivalent Gallons)..............................
Change in Required Cellulosic Biofuel from 2020                  (9,910)
 Statutory Volume (Million Ethanol-Equivalent
 Gallons).........................................
Cost Difference Between Cellulosic Corn Kernel               $0.46-$3.30
 Fiber Ethanol and Gasoline Per-Gallon ($/Ethanol-
 Equivalent Gallons) \120\ ($/EEG) \121\..........
Annual Change in Overall Costs (Million $) \122\..    $(4,600)-$(33,000)
------------------------------------------------------------------------

B. Illustrative Cost Analysis of the 2020 Final Volumes Compared to the 
2019 Final Volumes
---------------------------------------------------------------------------

    \120\ For this table and all subsequent tables in this section, 
approximate costs in per-gallon cost difference estimates are 
rounded to the cents place.
    \121\ Since the proposed rule, we have updated these per-gallon 
and total annual cost differences based on EIA's updated projections 
for petroleum gasoline costs in 2020 from the October Short-Term 
Energy Outlook.
    \122\ For this table and all subsequent tables in this section, 
approximate resulting costs (other than in per-gallon cost 
difference estimates) are rounded to two significant figures.
---------------------------------------------------------------------------

    In this section, we provide illustrative cost estimates for the 
final 2020 RFS volumes compared to the final 2019 RFS volumes. In 
comparison to the final 2019 RFS volumes, the final 2020 RFS volumes 
result in an overall increase of 172 million ethanol-equivalent gallons 
of cellulosic biofuel derived from CNG/LNG from landfill biogas. To 
estimate the cost of production of CNG/LNG derived from landfill gas 
(LFG), EPA uses Version 3.2 of the Landfill Gas Energy Cost Model, or 
LFGcost-Web.\123\ LFGcost-Web is a software tool developed by EPA's 
Landfill Methane Outreach Program (LMOP) to conduct initial economic 
feasibility analysis of developing LFG energy recovery projects in the 
United States. The default inputs and cost estimates by LFGcost-Web are 
based on typical project designs and for typical landfill situations. 
The Model attempts to include all equipment, site work, permits, 
operating activities, and maintenance that would normally be required 
for constructing and operating a typical project.
---------------------------------------------------------------------------

    \123\ The current version of this model and user's manual are 
downloadable from the LMOP website. https://www.epa.gov/lmop/download-lfgcost-web/.
---------------------------------------------------------------------------

    Table V.B-1 presents estimates of per energy-equivalent gallon 
costs for producing CNG/LNG derived from landfill biogas relative to 
natural gas at the wholesale level. These per-gallon costs are then 
multiplied by the increase in the final 2020 RFS cellulosic biofuel 
volume relative to the 2019 final RFS cellulosic biofuel volume to 
obtain an estimate of costs of using increased qualities of CNG/LNG 
from landfill biogas. An estimate of overall costs associated with the 
increase in the cellulosic biofuel volume is calculated as the range of 
$(1.1)-$17 million.

  Table V.B-1--Illustrative Costs Analysis of the 2020 Final Cellulosic
           Volume Compared to the 2019 Cellulosic Volume \124\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                            Cellulosic Volume
------------------------------------------------------------------------
Change in Volume (Million Ethanol-Equivalent                         172
 Gallons).........................................
------------------------------------------------------------------------
                    CNG/LNG Derived from Biogas Costs
------------------------------------------------------------------------
Cost Difference Between CNG/LNG Derived from               $(0.01)-$0.10
 Landfill Biogas and Natural Gas Per Gallon ($/
 Ethanol-Equivalent Gallons) ($/EEG)..............
Annual Increase in Overall Costs (Million $)......            $(1.1)-$17
------------------------------------------------------------------------

    The annual volume-setting process encourages consideration of the 
RFS program on a piecemeal (i.e., year-to-year) basis, which may not 
reflect the full, long-term costs and benefits of the program. For the 
purposes of this final rule, other than the estimates of costs of 
producing a ``representative'' renewable fuel compared to cost of 
fossil fuel, EPA did not quantitatively assess other direct and 
indirect costs or benefits of changes in renewable fuel volumes. These 
direct and indirect costs and benefits may include infrastructure 
costs, investment, climate change impacts, air quality impacts, and 
energy security benefits, which all to some degree may be affected by 
the annual volumes. For example, we do not have a quantified estimate 
of the lifecycle GHG or energy security benefits for a single year 
(e.g., 2020). Also, there are impacts that are difficult to quantify, 
such as rural economic development and employment changes from more 
diversified fuel sources, that are not quantified in this rulemaking. 
While some of these impacts were analyzed in the 2010 final rulemaking 
that established the current RFS program, we have not analyzed these 
impacts for the 2020 volume requirements.\125\
---------------------------------------------------------------------------

    \124\ For the proposed 2020 annual RFS rule, we estimated that 
there would be an increase of cellulosic biofuel derived from CNG/
LNG from landfill biogas of 126 million gallons (ethanol-equivalent) 
compared to the 2019 final annual RFS volumes. The total costs of 
the proposed 2020 cellulosic volume compared to 2019 RFS cellulosic 
volume range from $(3.2)-$10 million. In this final rule, both the 
projected volume increase of CNG/LNG derived from biogas and the 
cost of natural gas to which this fuel is compared have been 
updated.
    \125\ RFS2 Regulatory Impact Analysis (RIA). U.S. EPA 2010, 
Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. 
EPA-420-R-10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332.
---------------------------------------------------------------------------

VI. Biomass-Based Diesel Volume for 2021

    In this section we discuss the BBD applicable volume for 2021. We 
are setting this volume in advance of those for other renewable fuel 
categories in light of the statutory requirement in CAA section 
211(o)(2)(B)(ii) to establish the applicable volume of BBD for years 
after 2012 no later than 14 months before the applicable volume will 
apply. We are not at this time setting the BBD

[[Page 7044]]

percentage standards that would apply to obligated parties in 2021 but 
intend to do so in late 2020, after receiving EIA's estimate of 
gasoline and diesel consumption for 2021. At that time, we will also 
set the percentage standards for the other renewable fuel types for 
2021. Although the BBD applicable volume sets a floor for required BBD 
use, because the BBD volume requirement is nested within both the 
advanced biofuel and the total renewable fuel volume requirements, any 
BBD produced can be used to satisfy both of these other applicable 
volume requirements, even beyond the mandated BBD volume.

A. Statutory Requirements

    The statute establishes applicable volume targets for years through 
2022 for cellulosic biofuel, advanced biofuel, and total renewable 
fuel. For BBD, applicable volume targets are specified in the statute 
only through 2012. For years after those for which volumes are 
specified in the statute, EPA is required under CAA section 
211(o)(2)(B)(ii) to determine the applicable volume of BBD, in 
coordination with the Secretary of Energy and the Secretary of 
Agriculture, based on a review of the implementation of the program 
during calendar years for which the statute specifies the volumes and 
an analysis of the following factors:
    1. The impact of the production and use of renewable fuels on the 
environment, including on air quality, climate change, conversion of 
wetlands, ecosystems, wildlife habitat, water quality, and water 
supply;
    2. The impact of renewable fuels on the energy security of the 
United States;
    3. The expected annual rate of future commercial production of 
renewable fuels, including advanced biofuels in each category 
(cellulosic biofuel and BBD);
    4. The impact of renewable fuels on the infrastructure of the 
United States, including deliverability of materials, goods, and 
products other than renewable fuel, and the sufficiency of 
infrastructure to deliver and use renewable fuel;
    5. The impact of the use of renewable fuels on the cost to 
consumers of transportation fuel and on the cost to transport goods; 
and
    6. The impact of the use of renewable fuels on other factors, 
including job creation, the price and supply of agricultural 
commodities, rural economic development, and food prices.
    The statute also specifies that the volume requirement for BBD 
cannot be less than the applicable volume specified in the statute for 
calendar year 2012, which is 1.0 billion gallons.\126\ The statute does 
not, however, establish any other numeric criteria, and provides EPA 
discretion over how to weigh the importance of the often competing 
factors and the overarching goals of the statute when the EPA sets the 
applicable volumes of BBD in years after those for which the statute 
specifies such volumes. In the period 2013-2022, the statute specifies 
increasing applicable volumes of cellulosic biofuel, advanced biofuel, 
and total renewable fuel, but provides no numeric criteria, beyond the 
1.0 billion gallon minimum, on the level at which BBD volumes should be 
set.
---------------------------------------------------------------------------

    \126\ See CAA section 211(o)(2)(B)(v).
---------------------------------------------------------------------------

    In establishing the BBD and cellulosic standards as nested within 
the advanced biofuel standard, Congress clearly intended to support 
development of BBD and especially cellulosic biofuels, while also 
providing an incentive for the growth of other non-specified types of 
advanced biofuels. In general, the advanced biofuel standard provides 
an opportunity for other advanced biofuels (advanced biofuels that do 
not qualify as cellulosic biofuel or BBD) to compete with cellulosic 
biofuel and BBD to satisfy the advanced biofuel standard after the 
cellulosic biofuel and BBD standards have been met.
    In Alon Refining Krotz Spring, Inc. v. EPA, the D.C. Circuit 
affirmed EPA's approach to setting the 2017 BBD volume as ``consistent 
with the structure and purposes of the statute.'' \127\ In today's 
rule, we have applied the same general methodology upheld in Alon with 
updated information. Similar to the rule reviewed in Alon, today's rule 
finds that it is the advanced biofuel standard, when set in 2021, that 
will drive the use of BBD in 2021. Furthermore, in light of the 
benefits of incentivizing other advanced biofuels, we choose to 
preserve the existing gap for other advanced biofuels, and accordingly 
establish the BBD volume at the same level as for 2020: 2.43 billion 
gallons.
---------------------------------------------------------------------------

    \127\ Alon Refining Krotz Springs, Inc. v. EPA, 936 F.3d 628, 
666 (D.C. Cir 2019).
---------------------------------------------------------------------------

B. Review of Implementation of the Program and the 2021 Applicable 
Volume of Biomass-Based Diesel

    One of the considerations in determining the BBD volume for 2021 is 
a review of the implementation of the program to date, as it affects 
BBD. This review is required by the CAA, and also provides insight into 
the capabilities of the industry to produce, import, export, 
distribute, and use BBD. It also helps us to understand what factors, 
beyond the BBD standard, may incentivize the availability of BBD. In 
reviewing the program, we assess numerous regulatory, economic, and 
technical factors, including the availability of BBD in past years 
relative to the BBD and advanced standards; the prices of BBD, 
advanced, and conventional RINs; the competition between BBD and other 
advanced biofuels in meeting the portion of the advanced standard not 
required to be met by BBD or cellulosic RINs; the maturation of the BBD 
industry over the course of the RFS program; and the effects of the BBD 
standard on the production and development of both BBD and other 
advanced biofuels.
    Table VI.B.1-1 shows, for 2011-2019, the number of BBD RINs 
generated, the number of RINs retired due to export, the number of RINs 
retired for reasons other than compliance with the annual BBD 
standards, and the consequent number of available BBD RINs; for 2011-
2019, the BBD and advanced biofuel standards; and for 2020, the BBD and 
advanced biofuel standards.

[[Page 7045]]



              Table VI.B.1-1--Biomass-Based Diesel (D4) RIN Generation and Advanced Biofuel and Biomass-Based Diesel Standards in 2011-2020
                                                             [Million RINs or gallons] \128\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           BBD RINs                                            Advanced
                                                                                           retired,    Available       BBD          BBD        biofuel
                                                                 BBD RINs     Exported       non-      BBD RINs a    standard     standard     standard
                                                                generated    BBD (RINs)   compliance               (gallons) b    (RINs) b     (RINs) b
                                                                                           reasons
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011.........................................................        1,692           48          102        1,542          800        1,200        1,350
2012.........................................................        1,738          102           91        1,545        1,000        1,500        2,000
2013.........................................................        2,740          125          101        2,514        1,280        1,920        2,750
2014.........................................................        2,710          134           99        2,477        1,630      c 2,490        2,670
2015.........................................................        2,796          145           45        2,606        1,730      c 2,655        2,880
2016.........................................................        4,009          203          121        3,685        1,900        2,850        3,610
2017.........................................................        3,849          257          115        3,477        2,000        3,000        4,280
2018.........................................................        3,871          247           59        3,565        2,100        3,150        4,290
d 2019.......................................................        4,381          183            0        4,198        2,100        3,150        4,920
2020.........................................................          N/A          N/A          N/A          N/A        2,430        3,645        5,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Available BBD RINs may not be exactly equal to BBD RINs Generated minus Exported RINs and BBD RINs Retired, Non-Compliance Reasons, due to rounding.
b The volumes for each year are those used as the basis for calculating the percentage standards in the final rule. They have not been retroactively
  adjusted for subsequent events, such as differences between projected and actual gasoline and diesel use and exempted small refinery volumes.
c Each gallon of biodiesel qualifies for 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5
  and 1.7 RINs per gallon, but generally has an equivalence value of 1.7. While some fuels that qualify as BBD generate more than 1.5 RINs per gallon,
  EPA multiplies the required volume of BBD by 1.5 in calculating the percent standard per 80.1405(c). In 2014 and 2015 however, the number of RINs in
  the BBD Standard column is not exactly equal to 1.5 times the BBD volume standard as these standards were established based on actual RIN generation
  data for 2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015, rather than by
  multiplying the required volume of BBD by 1.5. Some of the volume used to meet the BBD standard in these years was renewable diesel, with an
  equivalence value higher than 1.5.
d 2019 ``BBD RINs generated,'' ``Exported BBD,'' and ``BBD RINs retired, Non-compliance reason'' are projected based on data through September 2019.

    In reviewing historical BBD RIN generation and use, we see that the 
number of RINs available for compliance purposes exceeded the volume 
required to meet the BBD standard in 2011-13 and 2016-19.\129\ 
Additional production and use of biodiesel was likely driven by a 
number of factors, including demand to satisfy the advanced biofuel and 
total renewable fuels standards, the biodiesel tax credit,\130\ and 
various other State and local incentives and mandates allowing for 
favorable blending economics. Moreover, additional production of BBD, 
beyond the volumes shown in the above table, was exported.
---------------------------------------------------------------------------

    \128\ Available BBD RINs Generated, Exported BBD RINs, and BBD 
RINs Retired for Non-Compliance Reasons information from EMTs.
    \129\ The number of RINs available in 2014 and 2015 was 
approximately equal to the number required for compliance in those 
years, as the standards for these years were finalized at the end of 
November 2015 and EPA's intent at that time was to set the standards 
for 2014 and 2015 to reflect actual BBD use. See 80 FR 77490-92, 
77495 (December 14, 2015).
    \130\ The biodiesel tax credit was reauthorized in January 2013. 
It applied retroactively for 2012 and for the remainder of 2013. It 
was once again extended in December 2014 and applied retroactively 
to all of 2014 as well as to the remaining weeks of 2014. In 
December 2015 the biodiesel tax credit was authorized and applied 
retroactively for all of 2015 as well as through the end of 2016. In 
February 2018 the biodiesel tax credit was authorized and applied 
retroactively for all of 2017. The biodiesel tax credit is not 
currently in place for 2018, 2019, or 2020.
---------------------------------------------------------------------------

    The prices paid for advanced biofuel and BBD RINs beginning in 
early 2013 through September 2019 (the last month for which data is 
available) also support the conclusion that the advanced biofuel, and 
in some periods the total renewable fuel standards, provide a 
sufficient incentive for additional biodiesel volume beyond what is 
required by the BBD standard. Because the BBD standard is nested within 
the advanced biofuel and total renewable fuel standards, and therefore 
can help to satisfy three RVOs, we would expect the price of BBD RINs 
to exceed that of advanced and conventional renewable RINs.\131\ If, 
however, BBD RINs are being used (or are expected to be used) by 
obligated parties to satisfy their advanced biofuel obligations, above 
and beyond the BBD standard, we would expect the prices of advanced 
biofuel and BBD RINs to converge.\132\ Further, if BBD RINs are being 
used (or are expected to be used) to satisfy obligated parties' total 
renewable fuel obligation, above and beyond their BBD and advanced 
biofuel requirements, we would expect the price for all three RIN types 
to converge.
---------------------------------------------------------------------------

    \131\ This is because when an obligated party retires a BBD RIN 
(D4) to help satisfy their BBD obligation, the nested nature of the 
BBD standard means that this RIN also counts towards satisfying 
their advanced and total renewable fuel obligations. Advanced RINs 
(D5) count towards both the advanced and total renewable fuel 
obligations, while conventional RINs (D6) count towards only the 
total renewable fuel obligation.
    \132\ We would still expect D4 RINs to be valued at a slight 
premium to D5 and D6 RINs in this case (and D5 RINs at a slight 
premium to D6 RINs) to reflect the greater flexibility of the D4 
RINs to be used towards the BBD, advanced biofuel, and total 
renewable fuel standard. This pricing has been observed over the 
past several years.
---------------------------------------------------------------------------

    When examining RIN price data from 2011 through September 2019, 
shown in Figure VI.B.2-1, we see that beginning in early 2013 and 
through September 2019 the advanced RIN (D5) price and BBD (D4) RIN 
prices were approximately equal. Similarly, from early 2013 through 
late 2016 the conventional renewable fuel (D6) RIN and BBD RIN prices 
were approximately equal. This demonstrates that the advanced biofuel 
standard, and in some periods the total renewable fuel standard, are 
capable of incentivizing increased BBD volumes beyond the BBD standard. 
The advanced biofuel standard has incentivized additional volumes of 
BBD since 2013, while the total standard had incentivized additional 
volumes of BBD from 2013 through 2016.\133\ We do note, however,

[[Page 7046]]

that in 2011-2012 the BBD RIN price was significantly higher than both 
the advanced biofuel and conventional renewable fuel RIN prices. At 
this time, the E10 blendwall had not yet been reached, and it was 
likely more cost effective for most obligated parties to satisfy the 
portion of the advanced biofuel requirement that exceeded the BBD and 
cellulosic biofuel requirements with advanced ethanol.
---------------------------------------------------------------------------

    \133\ Although we did not issue a rule establishing the final 
2013 standards until August of 2013, we believe that the market 
anticipated the final standards, based on EPA's July 2011 proposal 
and the volume targets for advanced and total renewable fuel 
established in the statute. (76 FR 38844, 38843 July 1, 2011). 
Similarly, for 2014 and 2015, although we issued the final standards 
in late 2015, the proposed rule incentivized the market to use BBD 
volumes exceeding the proposed BBD standard to help satisfy the 
proposed advanced and total standards. See 80 FR 33100 (2014-16 
standards proposed June 10, 2015); 78 FR 71732 (2014 standards 
proposed Nov. 29, 2013).
[GRAPHIC] [TIFF OMITTED] TR06FE20.002

    We also examined the opportunity for advanced biofuels other than 
BBD and cellulosic biofuels, as shown in Table VI.B.1-2. We believe it 
is important to preserve this opportunity for other advanced biofuels, 
and we are conscious of public comments claiming that BBD volume 
requirements that are a significant portion of the advanced volume 
requirements effectively disincentivize the future development of other 
promising advanced biofuel pathways.\134\ A variety of different types 
of advanced biofuels, rather than a single type such as BBD, would 
increase energy security (e.g., by increasing the diversity of 
feedstock sources used to make biofuels, thereby reducing the impacts 
associated with a shortfall in a particular type of feedstock) and 
increase the likelihood of the development of lower cost advanced 
biofuels that meet the same GHG reduction threshold as BBD.\135\
---------------------------------------------------------------------------

    \134\ See, e.g., Comments from Advanced Biofuel Association, 
available in EPA docket EPA-HQ-OAR-2018-0167-1277.
    \135\ All types of advanced biofuel, including BBD, must achieve 
lifecycle GHG reductions of at least 50 percent. See CAA section 
211(o)(1)(B)(i), (D).

                Table VI.B.1-2--Opportunity for and RIN Generation of ``Other'' Advanced Biofuels
                                                 [Million RINs]
----------------------------------------------------------------------------------------------------------------
                                                                                             Available BBD  (D4)
                                                    Opportunity for    Available advanced    RINs in  excess of
                                                  ``other'' advanced        (D5) RINs       the BBD  requirement
                                                     biofuels \a\                                    \b\
----------------------------------------------------------------------------------------------------------------
2011............................................                 150                   223                   342
2012............................................                 500                   597                    45
2013............................................                 829                   548                   594
2014 \c\........................................                 147                   143                   -13
2015 \c\........................................                 102                   147                   -49
2016............................................                 530                    98                   835

[[Page 7047]]

 
2017............................................                 969                   144                   477
2018............................................                 852                   178                   415
2019 \d\........................................               1,352                   310                 1,048
----------------------------------------------------------------------------------------------------------------
\a\ The opportunity for ``other'' advanced biofuel is calculated by subtracting the number of cellulosic biofuel
  and BBD RINs required each year from the number of advanced biofuel RINs required. This portion of the
  advanced standard can be satisfied by advanced (D5) RINs, BBD RINs in excess of those required by the BBD
  standard, or cellulosic RINs in excess of those required by the cellulosic standard.
\b\ The available BBD (D4) RINs in excess of the BBD requirement is calculated by subtracting the required BBD
  volume (multiplied by 1.5 to account for the equivalence value of biodiesel) required each year from the
  number of BBD RINs available for compliance in that year. This number does not include carryover RINs, nor do
  we account for factors that may impact the number of BBD RINs that must be retired for compliance, such as
  differences between the projected and actual volume of obligated gasoline and diesel. The required BBD volume
  has not been retroactively adjusted for subsequent events, such as differences between projected and actual
  gasoline and diesel use and exempted small refinery volumes.
\c\ The 2014 and 2015 volume requirements were established in November 2015 and were set equal to the number of
  RINs projected to be available for each year.
\d\ Available advanced RINs and available D4 RINs in excess of the BBD requirement are projected based on data
  through September 2019.

    In each year since 2016, there has been a significant gap for other 
advanced biofuels, but this gap has nonetheless been dominated by BBD. 
While the RFS volumes created the opportunity for up to 530 million, 
969 million, 852 million, and 1,352 million gallons of ``other'' 
advanced for 2016, 2017, 2018, and 2019 respectively to be used to 
satisfy the advanced biofuel obligation, only 98 million, 144 million, 
178 million, and 310 million gallons of ``other'' advanced biofuels 
were generated. This is significantly less than the volumes of 
``other'' advanced available in 2012-2013. Despite creating space 
within the advanced biofuel standard for ``other'' advanced, in recent 
years, only a small fraction of that space has been filled with 
``other'' advanced, and BBD continues to fill most of the gap between 
the BBD standard and the advanced standard. Thus, there does not appear 
to be a compelling reason to increase the ``space'' maintained for 
``other'' advanced biofuel volumes.
    This conclusion is consistent with our approach in the 2019 final 
rule, when we established the 2019 advanced biofuel volume and the 2020 
BBD volume. The overall volume of non-cellulosic advanced biofuel 
increased by 500 million gallons for 2019. For the 2020 BBD volume, we 
determined that it was appropriate to also increase the BBD volume by 
the same energy-equivalent amount (330 million physical gallons) as it 
would preserve the space already available for other advanced biofuels 
to compete in 2018 (850 million RINs). This space is many times the 
amount of other advanced biofuels used in each year starting from 2016.
    In this action, we are maintaining the implied non-cellulosic 
advanced biofuel standard for 2021 that is presented in the statute, 
and that is equivalent to the implied non-cellulosic advanced biofuel 
standard for 2020. For the 2021 BBD volume, we thus find that it is 
appropriate to maintain the BBD volume for 2021 at 2.43 billion 
gallons. Even in an optimistic scenario, we do not believe that the use 
of other advanced biofuels will approach 850 million gallons by 2021. 
We recognize, however, the dynamic nature of the fuels marketplace, and 
the impact that the BBD blender's tax credit can have on the relative 
economics of BBD versus other advanced biofuels, so going forward we 
intend to assess the appropriate space for other advanced biofuels in 
subsequent rules setting BBD volumes.
    At the same time, the rationale for preserving the ``space'' for 
``other'' advanced biofuels remains. We note that the BBD industry in 
the U.S. and abroad has matured since EPA first increased the required 
volume of BBD beyond the statutory minimum in 2013.\136\ To assess the 
maturity of the biodiesel industry, EPA compared information on BBD RIN 
generation by company in 2012 and 2018 (the most recent year for which 
complete RIN generation by company is available). In 2012, the annual 
average RIN generation per company producing BBD was about 11 million 
RINs (about 7.3 million gallons) with approximately 50 percent of 
companies producing less than 1 million gallons of BBD a year.\137\ 
Since that time, the BBD industry has matured in a number of critical 
areas, including growth in the size of companies, the consolidation of 
the industry, and more stable funding and access to capital. By 2018, 
the average BBD RIN generation per company had climbed to over 36 
million RINs (23.7 million gallons) annually, more than a 3-fold 
increase. Only 20 percent of the companies produced less than 1 million 
gallons of BBD in 2017.\138\
---------------------------------------------------------------------------

    \136\ See also generally 84 FR 36794-95 (further explaining our 
approach in establishing the 2013 BBD volume and our experience 
since that time).
    \137\ ``BBD RIN Generation by Company in 2012 and 2018,'' 
available in EPA docket EPA-HQ-OAR-2019-0136.
    \138\ Id.
---------------------------------------------------------------------------

    We recognize that the space for other advanced biofuels in 2021 
will ultimately depend on the 2021 advanced biofuel volume. While EPA 
is not establishing the advanced biofuel volume for 2021 in this 
action, we anticipate that the non-cellulosic advanced biofuel volume 
for 2021, when established, will be greater than 3.65 billion gallons 
(equivalent to 2.43 billion gallons of BBD, after applying the 1.5 
equivalence ratio). This expectation is consistent with our actions in 
previous years. Accordingly, we expect that the 2021 advanced biofuel 
volume, together with the 2021 BBD volume established today, will 
continue to preserve a considerable portion of the advanced biofuel 
volume that could be satisfied by either additional gallons of BBD or 
by other unspecified and potentially less costly types of qualifying 
advanced biofuels.

C. Consideration of Statutory Factors in CAA Section 
211(o)(2)(B)(ii)(I)-(VI) for 2021 and Determination of the 2021 
Biomass-Based Diesel Volume

    As in past annual standard-setting rulemakings, we find that 
additional volumes of BBD would displace other advanced biofuel, due to 
the nested

[[Page 7048]]

nature of the standards,\139\ as opposed to petroleum fuels. More 
specifically, for a given advanced biofuel standard, greater or lesser 
BBD volume requirements generally do not change the amount of advanced 
biofuel used to displace petroleum fuels; the total volume of advanced 
biofuels is unchanged regardless of the BBD volume requirement. Thus 
increasing the BBD volume requirement would result in the displacement 
of other types of advanced biofuels that could have been used to meet 
the advanced biofuels volume requirement.
---------------------------------------------------------------------------

    \139\ The BBD volume requirement is nested within the advanced 
biofuel requirement, and the advanced biofuel requirement is, in 
turn, nested within the total renewable fuel volume requirement. See 
CAA section 211(o)(2)(B)(i)(IV), (II). This means that any BBD 
produced can be used to satisfy both these other applicable volume 
requirements even beyond the BBD volume requirement.
---------------------------------------------------------------------------

    As a result, as in past assessments of the factors articulated in 
CAA 211(o)(2)(B)(ii)(I)-(VI), we consider BBD in comparison to other 
advanced biofuels, and not in comparison to petroleum diesel. Our 
primary assessment of the statutory factors is that because the BBD 
requirement is nested within the advanced biofuel volume requirement, 
we expect that the 2021 advanced volume requirement will determine the 
level of BBD use, production, and imports that occur in 2021. 
Therefore, we continue to believe that approximately the same overall 
volume of BBD would likely be supplied in 2021 regardless of the 2021 
BBD volume requirement. In the long-term, however, leaving adequate 
room for growth of other advanced biofuels could have a beneficial 
impact on certain statutory factors. Notably, this incentivizes the 
development of other advanced biofuels with potentially superior cost, 
climate, environmental, and other characteristics, relative to BBD. We 
present a detailed analysis of the statutory factors for the BBD volume 
requirement in a memorandum to the docket.\140\
---------------------------------------------------------------------------

    \140\ ``Memorandum to docket: Statutory Factors Assessment for 
the 2021 Biomass-Based Diesel (BBD) Applicable Volumes.'' See Docket 
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

D. BBD Volume Requirement for 2021

    Based on the above analysis, we are setting the applicable volume 
of BBD at 2.43 billion gallons for 2021. We believe this volume sets 
the appropriate floor for BBD, and that the volume of BBD actually used 
in 2021 will be driven by the level of the advanced biofuel and 
potentially the total renewable fuel standards that the Agency will 
establish for 2021. In addition, despite providing a significant degree 
of space for ``other'' advanced biofuels in recent years, far smaller 
volumes of ``other'' advanced have been utilized to meet the advanced 
standard. The BBD volume we are finalizing today continues to preserve 
the existing gap between the advanced biofuel volume and the sum of the 
cellulosic biofuel and BBD volumes. We believe this provides sufficient 
incentive to producers of ``other'' advanced biofuels, while also 
acknowledging that the advanced standard has been met predominantly 
with biomass-based diesel. Namely, this would allow other advanced 
biofuels to continue to compete with excess volumes of BBD for market 
share under the advanced biofuel standard. This would provide 
significant long term certainty for investments in other advanced 
biofuels that over time could compete with BBD to fill the advanced 
biofuel standard. In sum, our assessment of the statutory factors and 
the implementation of the program supports a volume of 2.43 billion 
gallons.

VII. Percentage Standards for 2020

    The renewable fuel standards are expressed as volume percentages 
and are used by each obligated party to determine their Renewable 
Volume Obligations (RVOs). Since there are four separate standards 
under the RFS program, there are likewise four separate RVOs applicable 
to each obligated party. Each standard applies to the sum of all non-
renewable gasoline and diesel produced or imported.
    Sections II through IV provide our rationale and basis for the 
final volume requirements for 2020.\141\ The volumes used to determine 
the final percentage standards are shown in Table VII-1.
---------------------------------------------------------------------------

    \141\ The 2020 volume requirement for BBD was established in the 
2019 standards final rule (83 FR 63704, December 11, 2018)
---------------------------------------------------------------------------



  Table VII-1--Volumes for Use in Determining the Final 2020 Applicable
                          Percentage Standards
                            [Billion gallons]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel.........................................         0.59
Biomass-based diesel.......................................         2.43
Advanced biofuel...........................................         5.09
Renewable fuel.............................................        20.09
------------------------------------------------------------------------

    For the purposes of converting these volumes into percentage 
standards, we generally use two decimal places to be consistent with 
the volume targets as given in the statute, and similarly two decimal 
places in the percentage standards. In past years we have used three 
decimal places for cellulosic biofuel in both the volume requirement 
and percentage standards to more precisely capture the smaller volume 
projections and the unique methodology that in some cases results in 
estimates of only a few million gallons for a group of cellulosic 
biofuel producers (see Section III for a further discussion of the 
methodology for projecting cellulosic biofuel production and our 
decision to round the projected volume of cellulosic biofuel to the 
nearest 10 million gallons). However, the volume requirements for 
cellulosic biofuel have increased over time. We have therefore 
determined that volume requirements and percentage standards for 
cellulosic biofuel will now use two decimal places.
    In this section, we also discuss our regulatory change to the 
percent standard formulas to account for a projection of the aggregate 
volume for SREs that we expect to grant for the 2020 compliance year. 
This section also provides our rationale for that projection of exempt 
gasoline and diesel volume. Additionally, we also provide our approach 
for evaluating SREs going forward, including for the currently pending 
2019 petitions and for 2020 petitions we receive in the future.

A. Calculation of Percentage Standards

    The formulas used to calculate the percentage standards applicable 
to producers and importers of gasoline and diesel are provided in 40 
CFR 80.1405. The formulas rely on estimates of the volumes of gasoline 
and diesel fuel, for both highway and nonroad uses, which are projected 
to be used in the year in which the standards will apply. The projected 
gasoline and diesel volumes are provided by EIA and include projections 
of ethanol and biomass-based diesel used in transportation fuel.\142\ 
Since the percentage standards apply only to the non-renewable gasoline 
and diesel produced or imported, the volumes of renewable fuel are 
subtracted out of the EIA projections of gasoline and diesel.
---------------------------------------------------------------------------

    \142\ Letter from Linda Capuano, EIA Administrator to Andrew 
Wheeler, EPA Administrator. October 9, 2019. Available in docket 
EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    Transportation fuels other than gasoline or diesel, such as natural 
gas, propane, and electricity from fossil fuels, are not currently 
subject to the standards, and volumes of such fuels are not used in 
calculating the annual percentage standards. Since under the 
regulations the standards apply only to producers and importers of 
gasoline and diesel, these are the transportation fuels

[[Page 7049]]

used to set the percentage standards, as well as to determine the 
annual volume obligations of an individual gasoline or diesel producer 
or importer under 40 CFR 80.1407.
    As specified in the RFS2 final rule,\143\ the percentage standards 
are based on energy-equivalent gallons of renewable fuel, with the 
cellulosic biofuel, advanced biofuel, and total renewable fuel 
standards based on ethanol equivalence and the BBD standard based on 
biodiesel equivalence. However, all RIN generation is based on ethanol-
equivalence. For example, the RFS regulations provide that production 
or import of a gallon of qualifying biodiesel will lead to the 
generation of 1.5 RINs. The formula specified in the regulations for 
calculation of the BBD percentage standard is based on biodiesel-
equivalence, and thus assumes that all BBD used to satisfy the BBD 
standard is biodiesel and requires that the applicable volume 
requirement be multiplied by 1.5 in order to calculate a percentage 
standard that is on the same basis (i.e., ethanol-equivalent) as the 
other three standards. However, BBD often contains some renewable 
diesel, and a gallon of renewable diesel typically generates 1.7 
RINs.\144\ In addition, there is often some renewable diesel in the 
conventional renewable fuel pool. As a result, the actual number of 
RINs generated by biodiesel and renewable diesel is used in the context 
of our assessment of the applicable volume requirements and associated 
percentage standards for advanced biofuel and total renewable fuel, and 
likewise in obligated parties' determination of compliance with any of 
the applicable standards. While there is a difference in the treatment 
of biodiesel and renewable diesel in the context of determining the 
percentage standard for BBD versus determining the percentage standard 
for advanced biofuel and total renewable fuel, it is not a significant 
one given our approach to determining the BBD volume requirement. Our 
intent in setting the BBD applicable volume is to provide a level of 
guaranteed volume for BBD, but as described in Section VII.B of the 
2019 standards final rule, we do not expect the BBD standard to be 
binding in 2020.\145\ That is, we expect that actual supply of BBD, as 
well as supply of conventional biodiesel and renewable diesel, will be 
driven by the advanced biofuel and total renewable fuel standards and 
will exceed the BBD standard.
---------------------------------------------------------------------------

    \143\ See 75 FR 14670 (March 26, 2010).
    \144\ Under 40 CFR 80.1415(b)(4), renewable diesel with a lower 
heating value of at least 123,500 Btu/gallon is assigned an 
equivalence value of 1.7. A minority of renewable diesel has a lower 
heating value below 123,500 BTU/gallon and is therefore assigned an 
equivalence value of 1.5 or 1.6 based on applications submitted 
under 40 CFR 80.1415(c)(2).
    \145\ 83 FR 63704 (December 11, 2018).
---------------------------------------------------------------------------

B. Small Refineries and Small Refiners

    In CAA section 211(o)(9), enacted as part of the EPAct, and amended 
by EISA, Congress provided a temporary exemption to small refineries 
\146\ through December 31, 2010. Congress provided that small 
refineries could receive a temporary extension of the exemption beyond 
2010 based either on the results of a required DOE study, or for the 
reason of ``disproportionate economic hardship'' in response to small 
refinery petitions submitted ``at any time.'' CAA section 
211(o)(9)(B)(i).
---------------------------------------------------------------------------

    \146\ A small refiner that meets the requirements of 40 CFR 
80.1442 may also be eligible for an exemption.
---------------------------------------------------------------------------

    Pursuant to this petition process, EPA often granted SREs for a 
given compliance year after the applicable percentage standards for 
that compliance year had been established. Under our prior approach to 
calculating the percentage standards, we did not account for these 
exemptions in establishing the percentage standards.\147\ We only 
accounted for exemptions already granted at the time of the final 
annual rule.\148\
---------------------------------------------------------------------------

    \147\ We adopted this interpretation of our regulations in the 
2011 final rule. 75 FR 76804. We reaffirmed it in annual rulemakings 
since then, including most recently in the 2019 final rule. 83 FR 
63740; see also, e.g., 77 FR 1320, 1340; 78 FR 49794, 49825-49826; 
80 FR 77420, 77511. We also proposed to follow this interpretation 
in the July 29 proposal for this final rule. 84 FR 36797 (July 29, 
2019).
    \148\ See, e.g., 80 FR 77420, 77511 (December 14, 2015).
---------------------------------------------------------------------------

    In the October 28 proposal, we proposed to modify the regulations 
at 40 CFR 80.1405(c) to account for a projection of the total exempted 
volume of gasoline and diesel produced at small refineries, including 
for those exemptions granted after the final annual rule.\149\ We are 
finalizing the change as proposed. The result is that our calculation 
of the applicable percentage standards for 2020 takes into account a 
projection of the total exempted volume of gasoline and diesel produced 
by small refineries in 2020.
---------------------------------------------------------------------------

    \149\ 84 FR 57677.
---------------------------------------------------------------------------

1. Changes to the Projected Volume of Gasoline and Diesel for Exempt 
Small Refineries
    The formulas used to calculate the percentage standards applicable 
to producers and importers of gasoline and diesel are provided in 40 
CFR 80.1405(c). The formula for the percentage standard calculation for 
total renewable fuel, including the definitions of the terms prior to 
this action, is shown below. The formulas for the other three 
percentage standards follow the same format, with the numerator of the 
fraction replaced with the annual volume of cellulosic biofuel, 
biomass-based diesel, and advanced biofuel, respectively. In this 
action we are only modifying the definitions of the terms 
GEi and DEi, which previously referred to the 
amount of gasoline and diesel projected to be produced by exempt small 
refineries, to now refer to the amount of gasoline and diesel projected 
to be exempt. All other terms remain in the same and were not 
reexamined in this rulemaking.
[GRAPHIC] [TIFF OMITTED] TR06FE20.003

Where:
StdRF,i = The renewable fuel standard for year i, in 
percent.
RFVRF,i = Annual volume of renewable fuel required by 42 
U.S.C. 7545(o)(2)(B) for year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48 
contiguous states and Hawaii, in year i, in gallons.
Di = Amount of diesel projected to be used in the 48 
contiguous states and Hawaii, in year i, in gallons.
RGi = Amount of renewable fuel blended into gasoline that 
is projected to be consumed in the 48 contiguous states and Hawaii, 
in year i, in gallons.
RDi = Amount of renewable fuel blended into diesel that 
is projected to be consumed in the 48 contiguous states and Hawaii, 
in year i, in gallons.
GSi = Amount of gasoline projected to be used in Alaska 
or a U.S. territory, in year i, if the state or territory has opted-
in or opts-in, in gallons.
RGSi = Amount of renewable fuel blended into gasoline 
that is projected to be consumed in Alaska or a U.S. territory,

[[Page 7050]]

in year i, if the state or territory opts-in, in gallons.
DSi = Amount of diesel projected to be used in Alaska or 
a U.S. territory, in year i, if the state or territory has opted-in 
or opts-in, in gallons.
RDSi = Amount of renewable fuel blended into diesel that 
is projected to be consumed in Alaska or a U.S. territory, in year 
i, if the state or territory opts-in, in gallons.
GEi = The amount of gasoline projected to be produced by 
exempt small refineries and small refiners, in year i, in gallons in 
any year they are exempt per Sec. Sec.  80.1441 and 80.1442.
DEi = The amount of diesel fuel projected to be produced 
by exempt small refineries and small refiners in year i, in gallons, 
in any year they are exempt per Sec. Sec.  80.1441 and 80.1442.

    Historically, EPA has interpreted the terms GEi and 
DEi to refer to the amount of gasoline and diesel projected 
to be produced by small refineries that have already been granted 
exemptions from their RFS obligations prior to our issuing the final 
rule for the relevant compliance year.\150\ As a result of this 
interpretation, any SREs granted after we issued the annual rule 
containing the percentage standards for that year effectively reduced 
the required volume of renewable fuel for that year. For example, in 
August 2019 we granted 31 SREs for the 2018 compliance year after the 
percentage standards for 2018 had been established.\151\ These SREs 
reduced the obligated volume of gasoline and diesel for 2018 by 13.42 
billion gallons, effectively reducing the required volume of total 
renewable fuel for 2018 by 1.43 billion RINs.
---------------------------------------------------------------------------

    \150\ See, e.g., 84 FR 36797 (July 29, 2019).
    \151\ The percentage standards for 2018 were established in 
December 2017 (82 FR 58486, December 12, 2017).
---------------------------------------------------------------------------

    In comments on the July 29 proposal, many commenters requested that 
EPA adopt a different interpretation of the terms for the amount of 
gasoline and diesel projected to be produced by exempt small refineries 
in the existing percentage standard formula.\152\ Many commenters 
requested that these terms refer to a projection of the exempted volume 
of gasoline and diesel produced by small refineries, regardless of 
whether EPA had already adjudicated such exemption petitions by the 
time of the final rule. These commenters argued that this 
interpretation of the regulations is reasonable and better implements 
the statutory requirement that EPA must ``ensure'' the renewable fuel 
volumes are met. Some commenters suggested that adjusting the 
percentage standards formula is more important now than in earlier 
years of the program as we have recently granted exemptions for more 
significant volumes of gasoline and diesel, potentially resulting in 
more significant volumes that are not being met at the time of 
compliance.\153\ A petition for administrative reconsideration raised 
similar issues, asking EPA to reconsider our approach for accounting 
for exempted volumes through the formula at 40 CFR 80.1405(c).\154\ In 
the October 28 proposal, EPA undertook a process to revisit this issue, 
albeit under our inherent authority to revise or amend a rulemaking, 
rather than as an exercise of our reconsideration authority under CAA 
section 307(d)(7)(B).\155\
---------------------------------------------------------------------------

    \152\ See, e.g., comments from the Renewable Fuels Association 
(Docket Item No. EPA-HQ-OAR-2019-0136-0281).
    \153\ See, e.g., comments from Growth Energy (Docket Item No. 
EPA-HQ-OAR-2019-0136-0312).
    \154\ ``Petition for Reconsideration of 40 CFR 80.1405(c), EPA 
Docket No. EPA-HQ-OAR-2005-0161, promulgated in 75 FR 14670 (Mar. 
26, 2010); Petition for Reconsideration of Periodic Reviews for the 
Renewable Fuel Standard Program, 82 FR 58364 (Dec. 12, 2017)'' (June 
4, 2018).
    \155\ See 84 FR 57680 & n.13 (explaining in greater detail the 
basis for EPA's reconsideration of this issue).
---------------------------------------------------------------------------

    In the October 28 proposal we proposed to change the definitions of 
the two relevant terms in the percentage standard formula at 40 CFR 
80.1405(c), GEi and DEi. We proposed that these 
terms represent a projection of the exempted volume of gasoline and 
diesel, regardless of whether we had adjudicated exemptions for that 
year by the time of the final rule establishing the percentage 
standards. We are finalizing these changes, and in turn, also 
completing the process of revisiting this issue that we undertook as 
described above in response to the above-noted administrative petition. 
The term ``GEi'', representing the volume of exempt 
gasoline, is now defined as ``the total amount of gasoline projected to 
be exempt in year i, in gallons, per Sec. Sec.  80.1441 and 80.1442.'' 
Similarly, the term ``DEi'', representing the volume of 
exempt diesel, is now defined as ``the total amount of diesel projected 
to be exempt in year i, in gallons, per Sec. Sec.  80.1441 and 
80.1442.''
    We begin by explaining our legal authority to adopt the new 
definitions, as well as our rationale for the change in our policy. 
While the statute does not specifically require EPA to redistribute 
exempted volumes in this manner, we believe that this is a reasonable 
interpretation of our authority under Chevron v. NRDC.\156\ Indeed, 
making this projection harmonizes various statutory provisions. The 
statute authorizes small refineries to petition for and EPA to grant an 
exemption based on disproportionate economic hardship ``at any time,'' 
\157\ while also directing EPA to promulgate standards by November 30 
of the prior year to ``ensure[]'' that the renewable fuel volumes are 
met.\158\ In other words, small refineries may seek and EPA may grant 
hardship exemptions at any time, including after the percentage 
standards are established. Meanwhile, EPA may account for a projection 
of these exemptions in the annual rule to ``ensure'' the renewable fuel 
volumes.\159\
---------------------------------------------------------------------------

    \156\ Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 
U.S. 837, 842-44 (1984).
    \157\ CAA section 211(o)(9)(B)(i).
    \158\ CAA section 211(o)(3)(B)(i); see also CAA section 
211(o)(2)(A)(i), (2)(A)(iii)(I), CAA section 301(a). This 
projection, moreover, is hardly unique in the RFS program as 
Congress required numerous projections in the implementation of the 
program. See, e.g., CAA section 211(o)(7)(D) (projection of the 
volume of cellulosic biofuel production); (o)(3)(A) (projection of 
the volumes of transportation fuel, biomass-based diesel, and 
cellulosic biofuel).
    \159\ See CAA section 211(o)(2)(A)(i), (2)(A)(iii)(I), 
(3)(B)(i); see also CAA section 301(a).
---------------------------------------------------------------------------

    In more concrete terms, should EPA grant SREs without accounting 
for them in the percentage formula, those exemptions would effectively 
reduce the volumes of renewable fuel required by the RFS program, 
potentially impacting renewable fuel use in the U.S.\160\ By contrast, 
under our new approach, the percentage standard for each category of 
renewable fuel would increase to account for a projection of the 
exempted volume. These higher percentage standards would have the 
effect of ensuring that the required volumes of renewable fuel are met 
when small refineries are granted exemptions from their 2020 
obligations after the issuance of the final rule, provided EPA's 
projection of the exempted volume is accurate.
---------------------------------------------------------------------------

    \160\ We note that there are other factors, besides the RFS 
program, that affect renewable fuel use. See, e.g., ``Endangered 
Species Act No Effect Finding for the 2020 Final Rule,'' available 
in the docket for this action.
---------------------------------------------------------------------------

    This new approach entails a change in policy.\161\ We previously 
did not account for exemptions granted after the annual rule, and at 
times we even suggested that doing so was improper.\162\ We believe our 
changed approach is appropriate and largely avoids the problems we 
previously identified. First, we had previously stated that ``the Act 
is best interpreted to require issuance of a single annual standard in 
November that is applicable in the following calendar year, thereby 
providing advance notice and certainty to obligated parties regarding 
their

[[Page 7051]]

regulatory requirements. Periodic revisions to the standards to reflect 
waivers issued to small refineries or refiners would be inconsistent 
with the statutory text, and would introduce an undesirable level of 
uncertainty for obligated parties.'' \163\ Today's changes are 
consistent with these views. By projecting exempted volumes in advance 
of issuing annual standards, we can issue a single set of standards for 
each year without the need for periodic revisions and the associated 
uncertainty for obligated parties.
---------------------------------------------------------------------------

    \161\ FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 
(2009).
    \162\ See 78 FR 49825-49826; 77 FR 1340; EPA's Br., Doc No. 
1757157, D.C. Cir. No. 17-1258, AFPM v. EPA (Oct. 25, 2018) (``EPA 
Br. in AFPM'').
    \163\ 77 FR 1340.
---------------------------------------------------------------------------

    Second, we also had previously noted that ``Congress allowed for 
some imprecision to exist in the actual volumes of renewable fuel that 
are consumed as a result of the percentage standards that we set each 
November. . . .'' \164\ Relatedly, we had noted the inherent 
difficulties of projecting exempted small refinery volumes.\165\ We 
still agree that Congress allowed for some imprecision to exist in the 
actual required volumes of renewable fuel, and that projecting future 
exempted volumes involves some uncertainty.
---------------------------------------------------------------------------

    \164\ 77 FR 1340 (January 9, 2012).
    \165\ EPA Br. in AFPM 72-77.
---------------------------------------------------------------------------

    But several recent developments persuade us to reach a different 
conclusion in accounting for a projection of exempted small refinery 
volumes. For one, we are projecting the aggregate exempted volume in 
2020. We thus need not wrestle with the difficulties of predicting 
precisely which refineries will apply or the economic circumstances of 
specific refineries in 2020. We only need to estimate the total 
exempted volume. Moreover, we have the benefit of additional experience 
administering the RFS program and knowledge of the relatively high 
levels of exempted volumes in recent years, where exempted volumes 
associated with SREs granted after the annual percentage standards were 
established have constituted a significant portion of the total volume 
of obligated fuel, resulting in fewer RINs being used to comply with 
the RFS standards.
    Finally, in recent annual rulemakings, EPA has not articulated its 
prospective policy to adjudicating SRE petitions for those compliance 
years. For instance, in the 2018 final rule, we did not state our 
policy to adjudicating 2018 SRE petitions. Instead we articulated that 
policy in a separate memorandum issued after the annual rule.\166\ 
Since EPA's policy to adjudicating SRE petitions affects the exempted 
volume, not having established this policy at the time of the annual 
rule made it very challenging to project the exempted volume. In 
today's rule, by contrast, we are articulating our prospective policy 
to adjudicating SRE petitions (beginning with the 2019 SRE petitions 
and including the 2020 SRE petitions) concurrently with issuing this 
final rule. Doing so augments our ability to reasonably project the 
exempted volume for 2020. We explain this policy further below.
---------------------------------------------------------------------------

    \166\ ``Decision on 2018 Small Refinery Exemption Petitions,'' 
Memorandum from Anne Idsal, Acting Assistant Administrator, Office 
of Air and Radiation to Sarah Dunham, Director, Office of 
Transportation and Air Quality. August 9, 2019.
---------------------------------------------------------------------------

2. Projecting the Exempted Volume of Gasoline and Diesel in 2020
    As already noted, we acknowledge the inherent uncertainty in 
projecting the exempted volume. More concretely, an imprecise 
projection has consequences on the actual required volume of renewable 
fuel. If we over-project the volume of gasoline and diesel produced by 
exempt small refineries in 2020, the actual required volumes of 
renewable fuel will be higher than the volumes used in calculating the 
percentage standards. By contrast, if we under-project the volume of 
exempted gasoline and diesel, the actual required volumes of renewable 
fuel will be lower than the volumes used in calculating the percentage 
standards. If we project the volume correctly, we will ensure that, as 
far as exempted small refinery volumes are concerned, the actual 
required volume is equal to the volume established in this final 
rule.\167\
---------------------------------------------------------------------------

    \167\ The actual required volume is subject to other 
uncertainties besides small refinery exemptions, such as unexpected 
changes in gasoline and diesel use.
---------------------------------------------------------------------------

    In selecting the methodology for projecting the exempted volume, we 
thus aim to make a neutral projection of exemptions based on the 
information now before us. As proposed, we are finalizing a projection 
methodology based on a 2016-18 annual average of exempted volumes had 
EPA strictly followed DOE recommendations in those years, including by 
granting 50 percent relief where DOE recommended 50 percent relief. We 
explain why we do so below, beginning with our decision to base the 
projection on DOE recommendations and then our decision to use a 2016-
18 annual average. Finally, we state the projected exempt volumes of 
gasoline and diesel based on this approach and the corresponding number 
of RINs.
    First, we choose to base the projection of exempted volumes on 
DOE's recommendations for two reasons, one prospective and one 
retrospective. Prospectively, this is our general approach to 
adjudicating SRE petitions going forward, beginning with 2019 SRE 
petitions and including 2020 SRE petitions. Our approach to evaluating 
SREs going forward is to follow DOE's recommendations, including 
granting partial (i.e., 50 percent) exemptions, where appropriate. The 
statute authorizes EPA to evaluate petitions for SREs considering DOE's 
study, recommendation, and other economic factors. While final 
decisions on 2020 SREs must await EPA's receipt and adjudication of 
those petitions, we generally have the statutory authority to issue a 
final decision consistent with DOE's recommendation.\168\ This reading 
of the statute is consistent with congressional guidance to DOE \169\ 
and EPA.\170\
---------------------------------------------------------------------------

    \168\ Other factors, such as judicial resolution of pending 
decisions or subsequent Congressional direction, could potentially 
affect EPA's SRE policy going forward.
    \169\ See Consolidated Appropriations Act, 2016, Public Law 114-
113 (2015), Explanatory Statement to Senate amendment to H.R. 2029 
Military Construction and Veterans Affairs and Related Agencies 
Appropriations Act, 2016, Division D--Energy and Water Development 
and Related Agencies Appropriations Act, 2016, available at https://docs.house.gov/meetings/RU/RU00/20151216/104298/HMTG-114-RU00-20151216-SD005.pdf. Congress in this Statement directed DOE, under 
certain circumstances, ``to recommend to the EPA Administrator a 50 
percent waiver of RFS requirements for the [small refinery] 
petitioner.'' Id. at 35. Consistent with that guidance and since 
2014, DOE has recommended 50 percent exemptions as it deemed 
appropriate.
    \170\ S. Rep. 114-281. Congress in this Report provided that 
``[w]hen making decisions about small refinery exemptions under the 
RFS program, the Agency is directed to follow DOE's 
recommendations.'' See also Consolidated Appropriations Act, 2019, 
Public Law No. 116-6 (2019), H. Rep. 116-9 at 741, continuing the 
directive contained in Senate Report 114-281. See also Sen. Rep. 
116-123, Department of the Interior, Environment, and Related 
Agencies Appropriations Bill, 2020, Report Accompanying Sen. 2580, 
at 87-88 (Sept. 26, 2019) (again ``continu[ing] the directive 
contained in Senate Report 114-281 related to small refinery 
relief''), available at https://www.congress.gov/116/crpt/srpt123/CRPT-116srpt123.pdf. This guidance, read together with that 
discussed in the previous footnote, supports the interpretation that 
DOE has authority to recommend partial exemptions for particular 
small refineries, and that EPA has discretion to follow that 
recommendation and grant a partial exemption.
---------------------------------------------------------------------------

    We acknowledge that on August 9, 2019, we took final agency action 
on 36 then-pending small refinery petitions for the 2018 compliance 
year (``August 9 Memorandum Decision''),\171\ and stated that the 
``best interpretation'' of the statute was that EPA should either grant 
or deny petitions in full, and ``not

[[Page 7052]]

grant partial relief.'' Specifically, we observed that the statute 
provided for exemptions as an ``extension of the exemption under 
subparagraph (A)'', where subparagraph (A) stated that the RFS program 
requirements ``shall not apply to small refineries under calendar year 
2011.'' \172\ We had implemented the ``subparagraph (A)'' pre-2011 
exemption as a full exemption for all qualifying small refineries. 
Consistent with this interpretation, we concluded that ``when Congress 
authorized the Administrator to provide an `extension' of that 
exemption for the reason of [disproportionate economic hardship], 
Congress intended that extension to be a full, and not partial, 
exemption.'' \173\
---------------------------------------------------------------------------

    \171\ ``Decision on 2018 Small Refinery Exemption Petitions,'' 
Memorandum from Anne Idsal, Acting Assistant Administrator, Office 
of Air and Radiation to Sarah Dunham, Director, Office of 
Transportation and Air Quality. August 9, 2019 (``August 9 
Memorandum Decision'').
    \172\ CAA section 211(o)(9)(B), (o)(9)(A).
    \173\ August 9 Memorandum Decision at 2.
---------------------------------------------------------------------------

    We believe, however, that this is not the only reasonable way to 
adjudicate exemption petitions. Had Congress spoken directly to the 
issue of the amount of relief EPA could provide to small refineries, 
EPA would be bound by that directive. However, the statute is silent 
with respect to EPA's authority to issue partial exemptions. Nothing in 
the statute directly addresses this issue. No statutory language exists 
characterizing the scope of an exemption; there are no terms employed 
such as ``partial'' or ``full,'' or ``50%'' or ``100%.'' Moreover, 
nothing in the statute obligates EPA to provide full relief where we 
find that only partial relief is warranted.
    We think there is another reasonable reading of this provision of 
the statute: EPA may issue partial exemptions. Notably, EPA may 
determine that only partial relief is warranted based on a particular 
small refinery's circumstances. In that case, it is reasonable for the 
level of relief that EPA grants to reflect that determination. For 
purposes of making the projection of the aggregate exempted volume of 
gasoline and diesel in 2020, and going forward, we are adopting this 
interpretation of the statute,\174\ and thereby depart from the 
interpretation taken in the August 9 Memorandum Decision, under which 
EPA ``shall either grant or deny petitions for small refinery hardship 
in full, and not grant partial relief.'' \175\ We adopt this new 
approach for several reasons, consistent with FCC v. Fox Television 
Stations, Inc.\176\
---------------------------------------------------------------------------

    \174\ See Chevron, 467 U.S. at 842-44.
    \175\ August 9 Memorandum Decision at 2.
    \176\ See generally FCC, 556 U.S. at 515.
---------------------------------------------------------------------------

    As already noted, this new policy would allow EPA to ensure that 
the level of relief that it grants appropriately reflects the 
particular small refinery's disproportionate economic hardship. This 
allows EPA to more precisely calibrate its RFS policy, and to strike an 
appropriate balance between furthering the production and use of 
renewable fuels while granting relief to small refineries that meet the 
statutory criteria. This balance, moreover, is also appropriate in 
light of the above-cited recent Congressional direction.\177\
---------------------------------------------------------------------------

    \177\ See supra notes 20 and 21.
---------------------------------------------------------------------------

    Even independent of our prospective SRE policy, we believe this 
approach is a reasonable estimate of the aggregate exempted volume 
based on a retrospective review of EPA's past SRE policies. In prior 
years, EPA has taken different approaches in evaluating small refinery 
petitions. As noted above, in the August 9 Memorandum Decision, we 
granted full exemptions to petitioners where DOE either recommended 
full or 50 percent relief. That is, in cases where DOE found a small 
refinery experienced either disproportionate impacts or viability 
impairment, EPA found the small refinery experienced disproportionate 
economic hardship and granted a full exemption. By contrast, in earlier 
years of the program, we denied petitions and provided no exemption in 
certain cases where DOE recommended a 50 percent exemption, finding 
that disproportionate economic hardship existed only where the small 
refinery experienced both disproportionate impacts and viability 
impairment.\178\ Our approach to projection, then, takes a middle 
ground between these prior approaches, and is a reasonable estimate of 
the aggregate exempted volume in 2020.
---------------------------------------------------------------------------

    \178\ See, e.g., Hermes Consol., LLC v. EPA, 787 F.3d 568, 575 
(D.C. Cir. 2015).
---------------------------------------------------------------------------

    We now turn to our decision to use the 2016-18 annual average under 
this methodology. As we have not yet received SRE petitions for 2020, 
we must estimate the aggregate amount of DOE recommended relief for 
that year. To do so, it is instructive to look back at what the 
exempted volumes of gasoline and diesel in previous years would have 
been had EPA followed DOE's recommendations, including granting partial 
exemptions. These volumes, along with the Renewable Volume Obligation 
(RVO) that would have been exempted, are shown in Table VII.B-1.

  Table VII.B-1--Estimated Exempted Volume of Gasoline and Diesel and Estimated RVO Exempted by Compliance Year
                                         Following DOE's Recommendations
----------------------------------------------------------------------------------------------------------------
                                                 Estimated exempted    Estimated exempted       Estimated RVO
                Compliance year                  volume of gasoline     volume of diesel      exempted (million
                                                  (million gallons)     (million gallons)           RINs)
----------------------------------------------------------------------------------------------------------------
2016..........................................                 2,450                 1,930                   440
2017..........................................                 5,650                 3,870                  1020
2018..........................................                 4,620                 3,270                   840
----------------------------------------------------------------------------------------------------------------

    As demonstrated in Table VII.B-1, the volume of gasoline and diesel 
that would have been exempted if EPA had followed DOE's recommendations 
has varied significantly in previous years.\179\ This is because there 
are many factors that affect the number of SREs that are granted in a 
given year and the aggregate exempted volume. We believe that it is 
appropriate to use an average volume of the gasoline and diesel that 
would have been exempted over a three-year period as our projection of 
gasoline and diesel that will be exempted in 2020, rather than the 
volume of gasoline and diesel that would have been exempted in any 
single year. This approach averages out the effects of unique events or 
market circumstances that occurred in individual past years that may or 
may not occur in 2020. Given that the last year for which we have data 
on small refinery exemptions is 2018,\180\ we take the average exempted 
volume from 2016-18.
---------------------------------------------------------------------------

    \179\ Information about the number of SREs granted and the 
volume of RINs not required to be retired as a result of those 
exemptions can be found at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
    \180\ To date, we have adjudicated all 2018 small refinery 
exemption petitions submitted to us. EPA has not yet adjudicated any 
small refinery exemptions for the 2019 or 2020 compliance years.
---------------------------------------------------------------------------

    The average volume of these fuels that would have been exempted in 
2016-18

[[Page 7053]]

if EPA had followed DOE's recommendations is 4,240 and 3,020 million 
gallons, for gasoline and diesel fuel, respectively. We use these 
values for GEi and DEi, respectively, in calculating the percentage 
standards for each of the renewable fuel types. We also note that these 
exempted volumes would have resulted in an average reduction to the RVO 
of approximately 770 million RINs.

C. Final Standards

    The formulas in 40 CFR 80.1405 for the calculation of the 
percentage standards require the specification of a total of 14 
variables covering factors such as the renewable fuel volume 
requirements, projected gasoline and diesel demand for all states and 
territories where the RFS program applies, renewable fuels projected by 
EIA to be included in the gasoline and diesel demand, and projected 
gasoline and diesel volumes from exempt small refineries. The values of 
all the variables used for this final rule are shown in Table VII.C-1 
for the applicable 2020 standards.\181\
---------------------------------------------------------------------------

    \181\ To determine the 49-state values for gasoline and diesel, 
the amount of these fuels used in Alaska is subtracted from the 
totals provided by EIA because petroleum based fuels used in Alaska 
do not incur RFS obligations. The Alaska fractions are determined 
from the June 28, 2019 EIA State Energy Data System (SEDS), Energy 
Consumption Estimates.

    Table VII.C-1--Values for Terms in Calculation of the Final 2020
                             Standards \182\
                            (billion gallons)
------------------------------------------------------------------------
                                                         Value for 2020
            Term                     Description            standards
------------------------------------------------------------------------
RFVCB.......................  Required volume of                    0.59
                               cellulosic biofuel.
RFVBBD......................  Required volume of                    2.43
                               biomass-based diesel
                               \a\.
RFVAB.......................  Required volume of                    5.09
                               advanced biofuel.
RFVRF.......................  Required volume of                   20.09
                               renewable fuel.
G...........................  Projected volume of                 142.68
                               gasoline.
D...........................  Projected volume of                  55.30
                               diesel.
RG..........................  Projected volume of                  14.42
                               renewables in gasoline.
RD..........................  Projected volume of                   2.48
                               renewables in diesel.
GS..........................  Projected volume of                      0
                               gasoline for opt-in
                               areas.
RGS.........................  Projected volume of                      0
                               renewables in gasoline
                               for opt-in areas.
DS..........................  Projected volume of                      0
                               diesel for opt-in areas.
RDS.........................  Projected volume of                      0
                               renewables in diesel
                               for opt-in areas.
GE..........................  Projected volume of                   4.24
                               gasoline for exempt
                               small refineries.
DE..........................  Projected volume of                   3.02
                               diesel for exempt small
                               refineries.
------------------------------------------------------------------------
\a\ The BBD volume used in the formula represents physical gallons. The
  formula contains a 1.5 multiplier to convert this physical volume to
  ethanol-equivalent volume.

     
---------------------------------------------------------------------------

    \182\ See ``Calculation of final % standards for 2020'' in 
docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    Projected volumes of gasoline and diesel, and the renewable fuels 
contained within them, were provided by EIA in a letter to EPA that is 
required under the statute, and represent consumption values from the 
October 2019 version of EIA's Short-Term Energy Outlook.\183\ An 
estimate of fuel consumed in Alaska, derived from the June 28, 2019 
release of EIA's State Energy Data System (SEDS) and based on the 2017 
volumes contained therein, was subtracted from the nationwide volumes.
---------------------------------------------------------------------------

    \183\ ``EIA letter to EPA with 2020 volume projections 10-9-
2019,'' available in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    Using the volumes shown in Table VII.C-1, we have calculated the 
final percentage standards for 2020 as shown in Table VII.C-2.

           Table VII.C-2--Final Percentage Standards for 2020
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel.........................................        0.34%
Biomass-based diesel.......................................    \a\ 2.10%
Advanced biofuel...........................................         2.93
Renewable fuel.............................................       11.56%
------------------------------------------------------------------------
\a\ Based on the ethanol-equivalent volume of BBD.

VIII. Administrative Actions

A. Assessment of the Domestic Aggregate Compliance Approach

    The RFS regulations specify an ``aggregate compliance'' approach 
for demonstrating that planted crops and crop residue from the U.S. 
complies with the ``renewable biomass'' requirements that address lands 
from which qualifying feedstocks may be harvested.\184\ In the 2010 
RFS2 rulemaking, EPA established a baseline number of acres for U.S. 
agricultural land in 2007 (the year of EISA enactment) and determined 
that as long as this baseline number of acres was not exceeded, it was 
unlikely that new land outside of the 2007 baseline would be devoted to 
crop production based on historical trends and economic considerations. 
The regulations specify, therefore, that renewable fuel producers using 
planted crops or crop residue from the U.S. as feedstock in renewable 
fuel production need not undertake individual recordkeeping and 
reporting related to documenting that their feedstocks come from 
qualifying lands, unless EPA determines through one of its annual 
evaluations that the 2007 baseline acreage of 402 million acres 
agricultural land has been exceeded.
---------------------------------------------------------------------------

    \184\ 40 CFR 80.1454(g). EPA has applied this ``aggregate 
compliance'' approach for the United States in annual RFS 
rulemakings since establishing it in the 2010 RFS2 rule. See 75 FR 
14701-04. In this annual rulemaking, we have not reexamined or 
reopened this policy, including the regulations at 80.1454(g) and 
80.1457. Similarly, as further explained below, we have applied this 
approach for Canada since our approval of Canada's petition to use 
aggregate compliance in 2011. In this rulemaking, we have also not 
reexamined or reopened our decision on that petition. Any comments 
on these issues are beyond the scope of this rulemaking.
---------------------------------------------------------------------------

    In the 2010 RFS2 rulemaking, EPA committed to make an annual 
finding concerning whether the 2007 baseline amount of U.S. 
agricultural land has been exceeded in a given year. If the baseline is 
found to have been exceeded, then producers using U.S. planted crops 
and crop residue as feedstocks for renewable fuel production would be 
required to comply with individual recordkeeping and reporting 
requirements to verify

[[Page 7054]]

that their feedstocks are renewable biomass.
    Based on data provided by the USDA Farm Service Agency (FSA) and 
Natural Resources Conservation Service (NRCS), we have estimated that 
U.S. agricultural land reached approximately 379.8 million acres in 
2019 and thus did not exceed the 2007 baseline acreage of 402 million 
acres. The USDA data used to make this derivation can be found in the 
docket to this rule.\185\
---------------------------------------------------------------------------

    \185\ USDA also provided EPA with 2019 data from the 
discontinued Grassland Reserve Program (GRP) and Wetlands Reserve 
Program (WRP). Given this data, EPA estimated the total U.S. 
agricultural land both including and omitting the GRP and WRP 
acreage. In 2019, combined land under GRP and WRP totaled 2,974,573 
acres. Subtracting the GRP, WRP, and Agriculture Conservation 
Easement Program acreage yields an estimate of 376,853,632 acres or 
approximately 376.9 million total acres of U.S. agricultural land in 
2019. Omitting the GRP and WRP data yields approximately 379.8 
million acres of U.S. agricultural land in 2019.
---------------------------------------------------------------------------

B. Assessment of the Canadian Aggregate Compliance Approach

    The RFS regulations specify a petition process through which EPA 
may approve the use of an aggregate compliance approach for planted 
crops and crop residue from foreign countries.\186\ On September 29, 
2011, EPA approved such a petition from the Government of Canada.\187\
---------------------------------------------------------------------------

    \186\ 40 CFR 80.1457.
    \187\ See ``EPA Decision on Canadian Aggregate Compliance 
Approach Petition'' available in docket EPA-HQ-OAR-2019-0136.
---------------------------------------------------------------------------

    The total agricultural land in Canada in 2019 is estimated at 118.1 
million acres. This total agricultural land area includes 95.9 million 
acres of cropland and summer fallow, 12.4 million acres of pastureland 
and 9.8 million acres of agricultural land under conservation 
practices. This acreage estimate is based on the same methodology used 
to set the 2007 baseline acreage for Canadian agricultural land in 
EPA's response to Canada's petition. The data used to make this 
calculation can be found in the docket to this rule. This acreage does 
not exceed the 2007 baseline acreage of 122.1 million acres.

IX. Amendments to the RFS and Fuels Program Regulations

    In implementing the RFS program, we have identified several changes 
to the program that will assist with implementation in future years. 
These regulatory changes include both revisions we proposed in the July 
29 proposal--clarification of diesel RVO calculations, pathway petition 
conditions, a biodiesel esterification pretreatment pathway, distillers 
corn oil and distillers sorghum oil pathways, and renewable fuel 
exporter provisions--and certain provisions of the 2016 REGS rule 
proposal that we are finalizing here.\188\ These regulatory changes are 
described in this section. Comments on these regulatory revisions from 
both the 2016 REGS and 2020 RVO proposals, as well as EPA's responses, 
are contained in the response to comments (RTC) document in the docket 
for this action.\189\
---------------------------------------------------------------------------

    \188\ See 81 FR 80828 (November 16, 2016).
    \189\ All comments submitted on the REGS proposal can be found 
in Docket No. EPA-HQ-OAR-2016-0041. Specific comments relevant to 
the provisions that were under consideration for finalization in 
this action have also been added to the docket for this action 
(Docket Item No. EPA-HQ-OAR-2019-0136-0002). We are only responding 
to comments from the REGS proposal on the provisions that are being 
finalized in this action. Comments on the remaining provisions in 
the REGS proposal, as well as those on provisions listed in the July 
29 proposal but that are not being finalized here, remain under 
consideration. We are not responding to them in this action.
---------------------------------------------------------------------------

A. Clarification of Diesel RVO Calculations

1. Overview
    We are finalizing certain provisions regarding clarification of 
diesel RVO calculations. Specifically, we are finalizing the ``primary 
approach'' proposed in the July 29 proposal, with some modifications 
based on comments received. We are not finalizing either of the two 
alternative approaches presented in the July 29 proposal, after 
consideration of negative comments on these two approaches.
    Historically, home heating oil (HO) and diesel fuel were virtually 
indistinguishable because both contained the same distillation range of 
hydrocarbons and high level of sulfur. EPA's diesel fuel sulfur 
regulations resulted in a distinction in the marketplace beginning in 
the 1990s and concluding in 2010 with the phase-in of the ultra-low 
sulfur diesel regulations for diesel fuel used in motor vehicles and 
motor vehicle engines (MV diesel fuel). Similarly, beginning in 2004, 
EPA promulgated requirements for diesel fuel used in nonroad, 
locomotive, and marine vehicles and engines (NRLM diesel fuel) that 
concluded phasing in at the end of 2014. Thus, all diesel fuel for use 
in motor vehicles and motor vehicle engines, and nonroad, locomotive, 
and marine vehicles and engines, is currently required to meet a 15 ppm 
sulfur per-gallon standard, under regulations set out in 40 CFR part 
80, subpart I \190\ (For purposes of subpart I, such diesel fuel is 
also now collectively known as MVNRLM diesel fuel). We did not set 
standards for HO under subpart I, with the result that it remained high 
in sulfur content and cost less to produce than MVNRLM diesel fuel. As 
such, subpart I also requires all parties in the distribution system to 
ensure that diesel fuel containing 15 ppm sulfur or less (referred to 
as 15 ppm diesel fuel, ultra-low sulfur diesel fuel, or ULSD) remains 
segregated from higher sulfur fuels and to take measures to prevent 
sulfur contamination of ULSD.\191\
---------------------------------------------------------------------------

    \190\ Subpart I includes an exception to this requirement that 
allows diesel fuel used in locomotive or marine engines to meet a 
500 ppm sulfur standard if the fuel is produced from transmix 
processors and distributed under an approved compliance plan.
    \191\ See, e.g., 40 CFR 80.610(g).
---------------------------------------------------------------------------

    The RFS regulations, which place an RVO on the production and 
importation of diesel transportation fuel, but not on the production or 
importation of HO, were promulgated in 2010 and, similar to subpart I 
regulations, made the same presumption that HO and MVNRLM diesel fuel 
would be segregated. The RFS regulations did not anticipate that these 
fuels would become indistinguishable, have the same value in the 
marketplace (apart from their RFS compliance cost), and be commingled 
in the fuel distribution system. For example, 40 CFR 80.1407 set forth 
requirements for obligated parties to include all products meeting the 
definition of MVNRLM diesel fuel, collectively called ``diesel fuel,'' 
at 40 CFR 80.2(qqq) that are produced or imported during a compliance 
period in the volume used to calculate their RVOs unless the diesel 
fuel is not transportation fuel.\192\ Under definitions of MV and NRLM 
diesel fuel, these products include diesel fuel that is ``made 
available'' for use in motor vehicles and motor vehicle engines, and 
nonroad, locomotive, or marine vehicles and engines.\193\
---------------------------------------------------------------------------

    \192\ See 40 CFR 80.1407(e) and (f).
    \193\ See 40 CFR 80.2(y) and (nnn).
---------------------------------------------------------------------------

    When the RFS regulations were promulgated in 2010, the lower 
production cost of HO relative to diesel fuel provided economic 
incentive for refiners, pipelines, and terminals to produce and 
distribute HO separately from diesel fuel. After we promulgated the RFS 
regulations, however, many states began implementing programs designed 
to reduce the sulfur content of HO to 15 ppm or less (15 ppm HO). 
Currently, the majority of HO is required to meet a 15 ppm sulfur 
standard under numerous state and city programs in the Northeast and 
Mid-Atlantic,\194\ making HO once again indistinguishable from ULSD and 
of the same economic value as MVNRLM

[[Page 7055]]

diesel fuel.\195\ Further, in 2015, additional regulations became 
effective that required marine diesel fuel used in Emissions Control 
Areas (ECA marine fuel) to contain 1,000 ppm sulfur or less.\196\ In 
response, many companies have opted to produce and distribute ECA 
marine fuel containing 15 ppm sulfur or less (15 ppm ECA marine fuel) 
fungibly with 15 ppm diesel fuel, rather than invest in infrastructure 
to distribute and segregate higher-sulfur ECA marine fuel. Since HO, 
ECA marine fuel, and other non-transportation fuels that meet a 15 ppm 
sulfur standard are essentially identical in the marketplace, we 
believe that some parties in the fuel distribution system are 
distributing them together--i.e., commingling MVNRLM diesel fuel with 
15 ppm HO and 15 ppm ECA marine fuel.
---------------------------------------------------------------------------

    \194\ Connecticut, Delaware, Maine, Massachusetts, New 
Hampshire, New Jersey, New York, Rhode Island, Vermont, the District 
of Columbia, and the city of Philadelphia.
    \195\ See the New England Fuel Institute's (NEFI) ``State Sulfur 
& Bioheat Requirements for No. 2 Heating Oil in the Northeast & Mid-
Atlantic States,'' available in the docket for this action.
    \196\ See 40 CFR 80.610(e)(6). ECA marine fuel is not 
transportation fuel under the RFS regulations. Therefore, refiners 
and importers do not incur an RVO for ECA marine fuel that they 
produce or import.
---------------------------------------------------------------------------

    The regulations in 40 CFR part 80, subpart I, do not prohibit 
parties from commingling MVNRLM diesel fuel with other 15 ppm 
distillate fuel (i.e., distillate fuel that contains 15 ppm sulfur or 
less) that is designated for non-transportation purposes. However, 
commingled fuel must meet all of the applicable requirements in subpart 
I because the resulting fuel is ``made available'' for use in motor 
vehicles, or nonroad, locomotive, or marine vehicles and engines.\197\ 
This means that any refiner or importer that produces or imports 15 ppm 
distillate fuel that is designated for non-transportation purposes and 
is commingled with MVNRLM diesel fuel must also certify the fuel as 
meeting the sampling, testing, reporting, and recordkeeping 
requirements in subpart I.\198\
---------------------------------------------------------------------------

    \197\ See 40 CFR 80.2(y) and (nnn).
    \198\ We have received requests from a number of regulated 
parties asking the agency to amend the fuels regulations to allow 
parties to more easily mix and fungibly ship HO, ECA marine fuel, 
and MVNRLM fuel that meet the 15 ppm sulfur standard. In a separate 
action, we intend to propose additional amendments that would 
significantly streamline these regulations (see RIN 2060-AT31 in 
EPA's Regulatory Agenda).
---------------------------------------------------------------------------

    Although this approach does not create compliance issues relating 
to subpart I requirements, at proposal we explained that we were 
concerned that some obligated parties (e.g., refiners and importers) 
under the RFS program may be calculating RVOs without accounting for 
all of their 15 ppm distillate fuel that is ultimately sold for use as 
MVNRLM diesel fuel. Specifically, obligated parties may be excluding 15 
ppm HO or 15 ppm ECA marine fuel from their RVO calculations, and 
downstream parties may be re-designating this fuel as MVNRLM diesel 
fuel and not incurring an RVO.\199\
---------------------------------------------------------------------------

    \199\ A similar situation exists with respect to #1 diesel fuel, 
which is used/blended in the winter due to cold temperature 
constraints and its often-identical counterparts of kerosene and jet 
fuel.
---------------------------------------------------------------------------

    We also explained that with the convergence of the MVNRLM diesel 
fuel, HO, and ECA marine fuel sulfur standards, some stakeholders had 
expressed confusion to EPA on accounting for 15 ppm distillate fuel 
that leaves the obligated party's gate designated as HO, ECA marine 
fuel, or other non-transportation fuels, but is subsequently re-
designated as either MVNRLM diesel fuel or ultimately used as MVNRLM 
diesel fuel by a downstream entity. Specifically, some obligated 
parties had asked whether they are required to add re-designated MVNRLM 
diesel fuel back to their RVO calculations while some downstream 
entities had asked whether they are required to incur an RVO for MVNRLM 
diesel fuel they re-designate from non-transportation fuel to 
transportation fuel.
    We further explained in the July 29 proposal that we intended for 
any diesel fuel not used as transportation fuel, such as HO or ECA 
marine fuel, to be excluded from RVO calculations in keeping with 
statutory requirements.\200\ We also intended for all diesel fuel 
ultimately used as transportation fuel to incur an RVO, even 15 ppm 
distillate fuel that is initially designated as non-transportation fuel 
and subsequently re-designated as transportation fuel by downstream 
parties.\201\ Thus, existing regulations allow downstream parties who 
are registered as refiners and who comply with all sampling, testing, 
recordkeeping, and other refiner requirements to ``produce'' MVNRLM 
diesel fuel from HO, ECA marine fuel, and other non-transportation 
fuels. These refiners incur RVOs for all MVNRLM diesel fuel that they 
``produce'' from the non-transportation fuel. However, we believe that 
stakeholder confusion over who should account for re-designated fuel in 
their RVO may be causing the omission of some re-designated MVNRLM 
diesel fuel from RVO calculations altogether. Therefore, we are 
revising the RFS regulations to more clearly specify how volumes of re-
designated MVNRLM diesel fuel are accounted for in obligated parties' 
RVO calculations in order to ensure that the RFS mandates continue to 
be met.
---------------------------------------------------------------------------

    \200\ See 40 CFR 80.1407(f)(8).
    \201\ With the other exceptions listed in 40 CFR 80.1407(f).
---------------------------------------------------------------------------

    Consistent with our proposal, we are clarifying the requirement for 
refiners and importers to include distillate fuel in their RVO 
compliance calculations and providing exceptions for the following 
three additional categories of fuel:
     Distillate fuel, such as HO or ECA marine fuel, with a 
sulfur content greater than 15 ppm that is clearly designated for a use 
other than transportation fuel.
     Distillate fuel that meets the 15 ppm sulfur standard, 
that is designated for non-transportation use, and that remains 
completely segregated from MVNRLM diesel fuel from the point of 
production through to the point of use for a non-transportation 
purpose.
     Distillate fuel that meets the 15 ppm diesel sulfur 
standard, that is ultimately used for non-transportation purposes, and 
that does not remain completely segregated from MVNRLM diesel fuel.
    As also explained in the July 29 proposal, since the first two 
categories of distillate fuel above are completely segregated from 
MVNRLM diesel fuel, we do not believe that they would be used as 
transportation fuel and are therefore not finalizing any additional 
requirements for these fuels to be excluded from a refiner or 
importer's RVO compliance calculations. However, consistent with the 
July 29 proposal, and as described below, because the third category of 
distillate fuel is not completely segregated and is indistinguishable 
from MVNRLM diesel fuel, we are finalizing additional requirements for 
this type of distillate fuel to be excluded from a refiner or 
importer's RVO compliance calculations.
2. Downstream Re-Designation of Certified Non-Transportation 15 ppm 
Distillate Fuel to MVNRLM Diesel Fuel
    Consistent with the July 29 proposal, and in order to allow 
refiners and importers to exclude distillate fuel that that meets the 
15 ppm diesel sulfur standard, is ultimately used for non-
transportation purposes, and does not remain completely segregated from 
MVNRLM diesel fuel from their RVO calculations, we are establishing a 
new category of distillate fuel: Certified non-transportation 15 ppm 
distillate fuel (``certified NTDF''). We are defining certified NTDF as 
distillate fuel that meets all of the following requirements:
     Fuel that is certified as complying with the 15 ppm sulfur 
standard, cetane/aromatics standard, and all applicable sampling, 
testing, and

[[Page 7056]]

recordkeeping requirements of 40 CFR part 80, subpart I.
     Fuel that is designated on the product transfer document 
as 15 ppm HO, 15 ppm ECA marine fuel, or other non-transportation fuel 
(e.g., jet fuel, kerosene, No. 4 fuel, or distillate fuel for export 
only) with a notation that the fuel is ``15 ppm sulfur (maximum) 
certified NTDF--This fuel is designated for non-transportation use.'' 
with no designation as MVNRLM diesel fuel.
    Some commenters noted that our proposed PTD language stating, 
``This fuel meets all MVNRLM diesel fuel standards'' could potentially 
cause confusion as to whether the fuel qualified as MVNRLM diesel fuel 
or not. We are therefore finalizing PTD language similar to that 
suggested by commenters, which avoids any reference to MVNRLM diesel 
fuel.
    In order to prevent refiners and importers from circumventing the 
requirement to incur an RVO for all transportation fuel by simply 
designating transportation fuel as non-transportation fuel, we had 
proposed that refiners or importers must have a reasonable expectation 
that their NTDF will be used as HO, ECA marine fuel, or another non-
transportation purpose in order to exclude it from their RVO 
calculations. We proposed that refiners or importers would need to meet 
the following three criteria to demonstrate they have a reasonable 
expectation that NTDF will not be used as transportation fuel:
     The refiner or importer supplies areas that use HO, ECA 
marine fuel, or 15 ppm distillate fuel for non-transportation purposes 
in the quantities being supplied by the refiner or importer.
     The refiner or importer has entered into a contractual 
arrangement that prohibits the buyer from selling the fuel as MVNRLM 
diesel fuel.
     The volume of fuel designated as HO, ECA marine fuel, or 
other non-transportation purposes is consistent with the refiner's or 
importer's past practices or reflect changed market conditions.
    We also noted that EPA may consider any other relevant information 
in assessing whether a refiner or importer has a reasonable expectation 
that the fuel was used for non-transportation purposes.
    We received comments indicating that it would be complex and 
disruptive to require refiners and importers to enter into contractual 
arrangements that prohibit the buyers from selling NTDF as MVNRLM 
diesel fuel. We agree with these comments and have eliminated this 
criterion. In light of these comments and in order to simplify the 
proposed regulations, we have also consolidated the first and third 
criterion into one sentence that states ``[t]o establish a reasonable 
expectation that the fuel will be used for non-transportation purposes, 
a refiner or importer must, at a minimum, be able to demonstrate that 
they supply areas that use heating oil, ECA marine fuel, or 15 ppm 
distillate fuel for non-transportation purposes in quantities that are 
consistent with past practices or changed circumstances.'' With these 
changes, we are finalizing the requirement that refiners or importers 
may only exclude NTDF from their compliance calculations if they have a 
reasonable expectation that the fuel will be used for non-
transportation purposes.
    Some commenters also noted that there is normally a noticeable 
price difference between fuel sold for transportation fuel and non-
transportation fuel, and that this price difference is a relevant 
consideration for determining if the fuel was intended to be sold as 
transportation fuel or non-transportation fuel. We agree with this 
comment and the final rule explicitly identifies price as relevant 
information that EPA may consider in evaluating whether a refiner or 
importer had a reasonable expectation that the fuel will be sold for 
non-transportation purposes.
    As previously noted, our intent is to ensure that all fuel 
ultimately used as MVNRLM diesel fuel incurs an RVO. In order to 
achieve this goal, we are also finalizing requirements that will allow 
parties in the fuel distribution system (e.g., downstream of the 
original refinery or import facility) to sell certified NTDF as MVNRLM 
diesel fuel without incurring an RVO if the total volume of MVNRLM 
diesel fuel delivered during each compliance period does not exceed the 
amount of MVNRLM diesel fuel received during that compliance period. 
Any party who re-designates certified NTDF as MVNRLM diesel fuel is a 
refiner for purposes of the RFS program and is therefore required to 
register as a refiner. They will also be required to calculate whether 
the volume of MVNRLM diesel fuel that they deliver exceeds the volume 
of MVNRLM diesel fuel that they receive, during an annual compliance 
period. If a downstream party delivers a volume of MVNRLM diesel fuel 
that exceeds the volume of MVNRLM diesel fuel they received during a 
compliance period, they are required to treat the difference as diesel 
fuel that they ``produced'' and incur an RVO on this volume. This will 
enable proper accounting for the aggregate volume of non-transportation 
fuel that is re-designated as MVNRLM diesel fuel under the RFS program. 
This one-sided test allows MVNRLM diesel fuel to be sold as HO or ECA 
marine fuel but prevents the erosion of the renewable fuel mandate. 
These parties will also be subject to recordkeeping requirements to 
ensure the enforceability of this program.
    We received several comments recommending modifications and 
clarifications to the proposed volume balance provisions, and are 
finalizing the following changes in response to these comments:
     We are adding an equation to the regulations that provides 
specific guidance on how to calculate the volume balance. This is in 
response to a comment suggesting that EPA should include a balance 
equation for diesel fuel, similar to the heating oil balance in 40 CFR 
80.599(c)(3) and (4). The new balance equation accounts for changes in 
diesel inventory, in addition to diesel volumes in and out.
     We are clarifying that the volume balance requirement 
applies to each facility that is registered as a diesel refinery. This 
is in response to comments suggesting that EPA clarify whether the 
volume balances were applicable on a facility basis or an aggregated 
basis. Our intent was that the balances apply on a facility basis and 
have clarified this in the final regulations.
    One commenter also recommended that the new provisions for 
redesignation of certified NTDF to MVNRLM diesel fuel should apply to 
the owner of the certified NTDF at the time of redesignation and not 
the custody holder of the certified NTDF, or the original refiner of 
the NTDF. We agree with this recommendation and have included final 
rule requirements that reflect this recommendation. Since the owner of 
certified NTDF would be responsible for making any decisions regarding 
redesignation of NTDF to MVNRLM diesel fuel, we intend for the owner of 
the certified NTDF to meet the regulatory requirements associated with 
redesignation, such as registration, reporting, and incurring an RVO.
    We are also finalizing corresponding reporting requirements, 
including requiring refiners and importers to report the volume of 
MVNRLM diesel fuel they produce or import, the volume of distillate 
fuel they produce or import that is not transportation fuel, and the 
volume of distillate fuel they produce or import that is certified 
NTDF. We are also requiring some downstream parties who redesignate 
NTDF as MVNRLM diesel fuel to submit reports to EPA identifying the 
volume of MVNRLM

[[Page 7057]]

diesel fuel received, the volume of MVNRLM diesel fuel delivered, the 
volume of fuel re-designated from certified NTDF to MVNRLM diesel fuel, 
and the volume of MVNRLM diesel fuel redesignated to non-transportation 
use. Further, for purposes of evaluating compliance, we are also:
     Requiring parties who re-designate certified NTDF to 
MVNRLM diesel fuel to keep all records relating to these transactions.
     Prohibiting a party from exceeding its balance 
requirements without incurring an RVO.
     Ensuring that the attest auditors review relevant 
information to ensure compliance with applicable RFS program 
requirements.
    Some commenters stated that it was not necessary to require that 
volume balance reports and attest engagements be submitted by all 
parties who redesignate certified NTDF to MVNRLM diesel fuel, and that 
EPA should only require reports from those parties who redesignated a 
net positive volume of certified NTDF to MVNRLM diesel fuel (i.e., 
incurred an RVO). We agree with these comments and are finalizing 
provisions to require parties that only incur an RVO through 
redesignation of certified NTDF to MVNRLM diesel fuel to submit volume 
balance reports and meet the required attest engagements. Obligated 
parties that would otherwise have an attest engagement performed (e.g., 
because they produced gasoline or diesel fuel, exported renewable 
fuels, etc.) would now have the attest auditor perform the additional 
attest engagement procedures for the obligated party. We believe that 
the types of reports and records attest auditors review for obligated 
parties annual attest engagements would already include much of the 
information we are requiring and would therefore represent a minimal 
increase in burden for these obligated parties. Parties that 
redesignate certified NTDF to MVNRLM diesel fuel during a compliance 
period but did not incur an RVO (because they redesignated an 
equivalent or greater volume of MVNRLM diesel fuel to non-
transportation fuel during the compliance period) are required to 
submit a short report stating that they redesignated certified NTDF to 
MVNRLM diesel fuel, but did not incur an RVO. We are also not 
finalizing the proposed requirement for quarterly reports, since 
compliance will be on an annual basis and can be demonstrated through 
annual reports.
    Lastly, implementation of these new provisions will be delayed 
until January 1, 2021, to allow time for updates to product codes and 
tracking software used by distillate distributors. Some commenters 
suggested that this would be helpful for them to avoid implementing the 
new regulations in the middle of a compliance period, and we agree with 
these commenters.

B. Pathway Petition Conditions

    We are clarifying our authority to enforce conditions created by 
requirements included in an approval document for a facility-specific 
pathway petition submitted under 40 CFR 80.1416. Since December 2010, 
we have approved over 100 facility-specific pathway petitions. To 
qualify for the generation of RINs under an approved pathway petition, 
the fuel produced under that pathway must also meet the conditions and 
applicable regulatory provisions specified in EPA's petition approval 
document and the other definitional and regulatory requirements for 
renewable fuel specified in the CAA and EPA implementing regulations, 
including for RIN generation, registration, reporting, and 
recordkeeping. Common conditions include, but are not limited to, 
compliance monitoring plans detailing how parties will accurately and 
reliably measure and record the energy and material inputs and outputs 
required to ensure fuels are produced consistent with the 
specifications evaluated in the lifecycle analysis, process flow 
diagrams showing the energy used for feedstock, fuel, and co-product 
operations, and certifications signed by responsible corporate officers 
(RCOs).
    We have authority to bring an enforcement action of these 
conditions under 40 CFR 80.1460(a), which prohibits producing or 
importing a renewable fuel without complying with the RIN generation 
and assignment requirements. The RFS regulations provide that RINs may 
only be generated if the fuel qualifies for a D code pursuant to 40 CFR 
80.1426(f) or an approved petition submitted under 40 CFR 80.1416.\202\ 
If any of the conditions required by an approval document for a pathway 
petition are not met, then the fuel does not qualify for a D code per 
the terms of the approval, and RINs may not be generated. These 
conditions are also enforceable under 40 CFR 80.1460(b)(2), which 
prohibits creating a RIN that is invalid; a RIN is invalid if it was 
improperly generated.\203\ As stated above, a RIN is improperly 
generated if the fuel representing the RIN does not qualify for a D 
code, which is the case if a fuel producer does not follow all of the 
required conditions in the pathway petition approval document.
---------------------------------------------------------------------------

    \202\ See 40 CFR 80.1426(a)(1)(i).
    \203\ See 40 CFR 80.1431(a)(ix).
---------------------------------------------------------------------------

    We are adding a provision at 40 CFR 80.1426(a)(1)(iii) to clarify 
that renewable fuel that qualifies for a D code pursuant to an approved 
petition submitted under 40 CFR 80.1416 must be produced in compliance 
with all conditions set forth in the petition approval document (in 
addition to the applicable statutory requirements and requirements of 
subpart M). We are also adding a prohibited act at 40 CFR 80.1460(b)(7) 
for generating a RIN for fuel that fails to meet all the conditions set 
forth in a petition approval document for a pathway petition submitted 
under 40 CFR 80.1416 in order to provide more clarity regarding our 
ability to bring enforcement actions for failure to meet such 
conditions.

C. Esterification Pretreatment Pathway

    We are revising rows F and H of Table 1 to 40 CFR 80.1426 by 
changing the existing approved production process ``Trans-
Esterification'' to be ``Transesterification with or without 
esterification pretreatment.'' We are finalizing these revisions to 
rows F and H without modifying the feedstocks listed in those rows, as 
these changes do not make any additional feedstocks eligible beyond 
those already listed in rows F and H. Table 1 to 40 CFR 80.1426 
includes pathways for the production of biodiesel using specified 
feedstocks and the production process transesterification.\204\
---------------------------------------------------------------------------

    \204\ While we expect these pathways to be used predominately 
for biodiesel, they may also be used for heating oil and jet fuel. 
Renewable diesel is excluded because it is by definition ``not a 
mono-alkyl ester'' (40 CFR 80.1401) and that is what 
transesterification produces.
---------------------------------------------------------------------------

    Transesterification is the most commonly used method to produce 
biodiesel and involves reacting triglycerides with methanol, typically 
under the presence of a base catalyst.\205\ While the main component of 
oils, fats, and grease feedstocks are typically triglycerides, other 
components, such as free fatty acids (FFAs), can also exist. Removal or 
conversion of the FFAs is important where the traditional base-
catalyzed transesterification production process is used; if they are 
not removed or converted prior to this process, FFAs will react with 
base catalysts to produce soaps that inhibit the transesterification 
reaction.
---------------------------------------------------------------------------

    \205\ Commonly used base catalysts include sodium hydroxide 
(NaOH), potassium hydroxide (KOH) and sodium methoxide 
(NaOCH3).
---------------------------------------------------------------------------

    One of the most widely used methods for treating biodiesel 
feedstocks with a higher FFA content is acid catalysis. Acid catalysis 
typically uses a strong

[[Page 7058]]

acid, such as sulfuric acid, to catalyze the esterification of the FFAs 
prior to the transesterification of the triglycerides as a pre-
treatment step. Acid esterification can be applied to feedstocks with 
FFA contents above 5 percent to produce biodiesel. Because the 
transesterification of triglycerides is slow under acid catalysis, a 
technique commonly used to overcome the reaction rate issue is to first 
convert the FFAs through an acid esterification (also known as an acid 
``pretreatment'' step), and then follow-up with the traditional base-
catalyzed transesterification of triglycerides.
    Under the RFS2 final rule, biodiesel from biogenic waste oils/fats/
greases qualifies for D-codes 4 or 5 using a transesterification 
process. This conclusion was based on the analysis of yellow grease as 
a feedstock, where there was an acid pretreatment of the FFAs contained 
in the feedstock. In fact, one of the material inputs assumed in the 
modeling for the final RFS2 rule yellow grease pathway was sulfuric 
acid, which is the catalyst commonly used for acid esterification.\206\ 
As we had not stipulated transesterification with esterification 
pretreatment as a qualified production process in rows F and H to Table 
1 to 40 CFR 80.1426, we are revising these entries to include 
``transesterification with or without esterification pre-treatment'' as 
a production process requirement so that RINs may be generated for 
biodiesel produced by the esterification pretreatment, as well as for 
the biodiesel produced through transesterification.\207\
---------------------------------------------------------------------------

    \206\ Section 2.4.7.3.3 of the Regulatory Impact Analysis for 
the March 2010 final rule describes the material inputs evaluated 
for biodiesel production. For conversion of yellow grease to 
biodiesel, sulfuric acid accounted for 4.7 percent of the material 
inputs on a mass basis (0.02 kg per gallon of biodiesel).
    \207\ In 2012, we issued a direct final rule and a parallel 
proposed rule (see 77 FR 700 and 77 FR 462, respectively; January 5, 
2012) that would have determined that, among other regulatory 
changes, biodiesel produced from esterification met the GHG 
reduction requirements. Because we received adverse comment, we 
withdrew the direct final rule in its entirety (see 77 FR 13009, 
March 5, 2012). In the 2013 final rule based on the parallel 
proposal (78 FR 14190, March 5, 2013), we decided not to finalize a 
determination at that time on biodiesel produced from esterification 
and noted that we would instead make a final determination at a 
later time.
---------------------------------------------------------------------------

    In the July 29 proposal, we also proposed to add a standalone 
esterification pathway to rows F and H to Table 1 to 40 CFR 80.1426, 
which would allow parties who have processing units that can take 
feedstocks listed in rows F and H of Table 1 to 40 CFR 80.1426 that 
have high-FFA content and separate the FFAs and triglycerides for 
chemical processing in separate standalone esterification and 
transesterification units to generate RINs for the biodiesel produced. 
However, we are not at this time finalizing the proposed standalone 
esterification pathway. It remains under consideration and may be 
finalized in a future action.

D. Distillers Corn Oil and Distillers Sorghum Oil Pathways

    We are adding distillers corn oil and commingled distillers corn 
oil and sorghum oil as feedstocks to row I of Table 1 to 40 CFR 
80.1426. While the lifecycle GHG emissions associated with using a very 
similar feedstock--distillers sorghum oil--as part of this pathway were 
evaluated in the grain sorghum oil pathway final rule (``sorghum oil 
rule''),\208\ these two feedstocks were not added to row I as part of 
that rulemaking. This section discusses the addition of distillers corn 
oil and commingled distillers corn oil and sorghum oil as feedstocks to 
row I and presents the lifecycle GHG emissions associated with these 
pathways. We also explain why the most likely effect of adding these 
pathways will be to reduce the number of petitions submitted pursuant 
to 40 CFR 80.1416.
---------------------------------------------------------------------------

    \208\ See 83 FR 37735 (August 2, 2018).
---------------------------------------------------------------------------

    The March 2010 RFS2 rule included pathways for biodiesel and 
renewable diesel produced from non-food grade corn oil. The March 2013 
Pathways I rule added pathways for heating oil and jet fuel from non-
food grade corn oil in rows F and H of Table 1 to 40 CFR 80.1426, and 
added pathways for naphtha and LPG from Camelina sativa oil in row 
I.\209\ The sorghum oil rule amended the RFS regulations to add a new 
definition of distillers sorghum oil and to replace existing references 
to non-food grade corn oil with the newly defined term ``distillers 
corn oil.'' That rule also added a number of pathways to rows F and H 
of Table 1 to 40 CFR 80.1426 for biodiesel, renewable diesel, jet fuel, 
and heating oil produced from distillers sorghum oil and commingled 
distillers sorghum and corn oil. Pathways for naphtha and LPG produced 
from distillers sorghum oil via a hydrotreating process were also added 
to row I of Table 1 to 40 CFR 80.1426.
---------------------------------------------------------------------------

    \209\ See 78 FR 14190 (March 5, 2013).
---------------------------------------------------------------------------

    Commingled distillers corn oil and sorghum oil was added as a 
feedstock to rows F and H of Table 1 to 40 CFR 80.1426 because 
distillers sorghum oil is often co-produced with distillers corn oil at 
ethanol plants using a combination of grain sorghum and corn as 
feedstocks for ethanol production. Due to the recovery process of the 
oils from the distillers grains and solubles (DGS), where the ethanol 
plant is using a feedstock that combines grain sorghum and corn, it is 
not possible to physically separate the distillers sorghum and corn 
oils into two streams, nor is it possible to account for the volume of 
sorghum oil or corn oil in this mixture. For these and other 
reasons,\210\ after concluding that distillers sorghum oil satisfies 
the 50 percent GHG reduction threshold required for the advanced 
biofuel and biomass-based diesel, we added both distillers sorghum oil 
and ``commingled distillers corn oil and sorghum oil'' to rows F and H 
of Table 1 to 40 CFR 80.1426 in the sorghum oil rule. However, unlike 
rows F and H, row I did not include a pathway using ``non-food grade 
corn oil'' prior to that final rule, nor did we propose to add 
``distillers corn oil'' to that row in the December 2017 sorghum oil 
proposed rule.\211\ Thus, in the absence of an assessment of lifecycle 
emissions showing that distillers corn oil also meets the GHG reduction 
threshold required for the pathways therein, in the sorghum oil rule we 
decided ``it would be premature for EPA to add either distillers corn 
oil or commingled distillers corn and sorghum oil as feedstocks in row 
I.'' \212\ Currently, in order to generate D-code 5 RINs for naphtha 
and/or LPG produced from distillers corn oil and/or commingled 
distillers corn and sorghum oil, a fuel producer would first need to 
petition EPA pursuant to 40 CFR 80.1416, have EPA review and approve 
their requested pathway, and then submit and have EPA accept the 
registration for the new pathway. Adding these feedstocks to row I 
eliminates the need for these petitions.
---------------------------------------------------------------------------

    \210\ For the other reasons discussed in the sorghum oil rule 
preamble, see 83 FR 37737-39 (August 2, 2018).
    \211\ See 82 FR 61205 (December 27, 2017).
    \212\ See 83 FR 37738 (August 2, 2018).
---------------------------------------------------------------------------

    Table IX.D-1 shows the lifecycle GHG emissions associated with 
renewable diesel, jet fuel, naphtha, and LPG produced from distillers 
sorghum oil. These results are based on the analysis completed for the 
sorghum oil rule.\213\ The lifecycle GHG emissions associated with the 
statutory baseline fuels, 2005 average diesel and gasoline, are shown 
for comparison. Based on the distillers sorghum oil results, as 
explained below we have concluded that naphtha and LPG produced from 
distillers corn oil and commingled distillers corn and sorghum oil also 
satisfy the 50 percent lifecycle GHG reduction requirement at CAA 
section 211(o)(1)(B), relative to the

[[Page 7059]]

statutory petroleum baseline, to be eligible for advanced biofuel RINs.
---------------------------------------------------------------------------

    \213\ See Table III.4 of the sorghum oil rule preamble (83 FR 
37743, August 2, 2018).

       Table IX.D-1--Lifecycle GHG Emissions Associated With Biofuels Produced From Distillers Sorghum Oil
                                                [kgCO2-eq/mmBtu]
----------------------------------------------------------------------------------------------------------------
                                     Renewable
              Fuel                  diesel, jet       Naphtha           LPG         2005 Diesel    2005 Gasoline
                                       fuel                                          baseline        baseline
----------------------------------------------------------------------------------------------------------------
Production Process..............                   Hydrotreating
                                             Refining
                                 -------------------------------------------------------------------------------
Livestock Sector Impacts........            19.4            19.4            19.4  ..............  ..............
Feedstock Production............             6.2             6.2             6.2            18.0            19.2
Feedstock Transport.............             0.3             0.3             0.3  ..............  ..............
Feedstock Pretreatment..........             0.0             0.0             0.0  ..............  ..............
Fuel Production.................             8.0             8.0             8.0  ..............  ..............
Fuel Distribution...............             0.8             0.8             0.8  ..............  ..............
Fuel Use........................             0.7             1.7             1.5            79.0            79.0
                                 -------------------------------------------------------------------------------
    Total.......................            35.4            36.4            36.2            97.0            98.2
Percent Reduction...............             64%             63%             63%  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    Although the lifecycle GHG analysis for the sorghum oil rule 
focused on distillers sorghum oil, we believe it is also applicable to 
distillers corn oil and commingled distillers corn oil and sorghum oil 
for purposes of determining whether these satisfy the 50 percent GHG 
reduction requirement. For the sorghum oil rule, we estimated the 
livestock sector impacts associated with distillers sorghum oil based 
on a set of assumptions about the type of feed that would need to 
backfill for the reduction in mass of de-oiled DGS as compared to full-
oil DGS. For that analysis we calculated a substitution rate for how 
much corn would be needed to backfill in livestock feed for every pound 
of grain sorghum oil diverted to biofuel production, by livestock type. 
The amounts of corn needed to replace each pound of extracted sorghum 
oil were largely based on studies that evaluated the nutritional values 
of regular and reduced-oil distillers grains produced as a co-product 
of corn starch ethanol.\214\ Given that the underlying data for our 
distillers sorghum oil assessment was largely based on studies 
conducted on corn ethanol co-products, we believe it is appropriate to 
apply the same results to similar pathways using distillers corn oil 
feedstock. Based on the similarities between the two products and how 
they are produced (i.e., co-produced at ethanol plants), we are also 
assuming that the lifecycle GHG emission for distillers corn oil and 
distillers sorghum oil are the same for the other lifecycle stages 
evaluated (e.g., feedstock production, fuel production).
---------------------------------------------------------------------------

    \214\ See Table III.2 (Full-Oil and Reduced-Oil Sorghum 
Distillers Grains with Solubles Displacement Ratios) of the sorghum 
oil rule (83 FR 37741, August 2, 2018) and accompanying footnote 
number 36, which lists the sources for the data in that table.
---------------------------------------------------------------------------

    One difference between distillers corn oil and sorghum oil is the 
rate of oil recovered per pound of corn versus grain sorghum processed. 
The distillers sorghum oil petition submitted by the National Sorghum 
Producers reported that 0.67 pounds of distillers sorghum oil are 
recovered per bushel of grain sorghum processed to ethanol, whereas 
0.84 pounds of distillers corn oil is extracted per bushel of 
corn.\215\ Adjusting for this difference results in slightly lower 
livestock sector GHG emissions associated with naphtha and LPG produced 
from distillers corn oil.\216\ Based on this adjustment the results in 
Table IX.D-1 change from a 63 percent GHG reduction for naphtha and LPG 
produced from distillers sorghum oil to a 64 percent reduction for 
naphtha and LPG production from distillers corn oil. We have therefore 
concluded that these pathways satisfy the 50 percent GHG reduction 
requirement to qualify as advanced biofuel under the RFS program and 
are adding ``distillers corn oil'' and ``commingled distillers corn oil 
and sorghum oil'' as feedstocks in row I to Table 1 to 40 CFR 80.1426.
---------------------------------------------------------------------------

    \215\ See Table 4 of ``Grain Sorghum Oil Pathway Petition,'' 
Docket Item No. EPA-HQ-OAR-2017-0655-0005.
    \216\ The source of the difference is the amount of corn needed 
to replace one pound of full-oil versus reduced-oiled DDGS in beef 
cattle diets. In our analysis for the sorghum oil rule, we assumed, 
based on the best available data provided by NSP, USDA, and 
commenters, that reduced-oil DDGS are replaced at a lower rate 
(1.173 lbs corn per lbs DDGS) than full-oil DDGS (1.196 lbs corn per 
lbs DDGS). Increasing the rate of oil extraction produces less de-
oiled DDGS and requires corn replacement at the lower rate of 1.173. 
Thus, all else equal, higher rates of oil extraction result in lower 
GHG emissions per pound of oil extracted. It is possible this effect 
would disappear if we had higher resolution data on corn 
displacement ratios for DDGS with different oil contents, but such 
data are currently not available.
---------------------------------------------------------------------------

E. Clarification of the Definition of Renewable Fuel Exporter and 
Associated Provisions

    We are finalizing our proposed clarification of the definition of 
``exporter of renewable fuel.'' These changes are meant to ensure 
appropriate flexibility for market participants to meet export 
obligations and to ensure RINs are properly retired, as well to as to 
clarify exporter obligations for parties who transfer renewable fuel 
between the 48 states or Hawaii and an approved opt-in area (i.e., 
Alaska or the U.S. territories were any of them to opt-in).
    The RFS regulations require an exporter of renewable fuel to 
acquire sufficient RINs to comply with all applicable RVOs incurred 
from the volumes of the renewable fuel exported.\217\ We previously 
defined ``exporter of renewable fuel'' in 40 CFR 80.1401 as: ``(1) A 
person that transfers any renewable fuel from a location within the 
contiguous 48 states or Hawaii to a location outside the contiguous 48 
states and Hawaii; and (2) A person that transfers any renewable fuel 
from a location in the contiguous 48 states or Hawaii to Alaska or a 
United

[[Page 7060]]

States territory, unless that state or territory has received an 
approval from the Administrator to opt in to the renewable fuel program 
pursuant to Sec.  80.1443.'' \218\
---------------------------------------------------------------------------

    \217\ In this rulemaking, we did not reexamine our well-settled 
policy of exporter RVOs, which generally require exporters to retire 
RINs for biofuels they export. We established this policy when we 
promulgated the regulations implementing the RFS1 and RFS2 programs 
in 2007 and 2010. See 72 FR 23936 (May 1, 2007); 75 FR 14724 (March 
26, 2010). We did not reexamine this issue in this rulemaking, and 
comments on it are beyond the scope of the rulemaking. We are not 
making any substantive changes to the relevant provisions, 
particularly those at 40 CFR 80.1430(a) or (b). Consistent with our 
long-standing policy, exporters of renewable fuel must continue to 
acquire sufficient RINs to comply with all applicable RVOs.
    \218\ 75 FR 14865 (March 26, 2010).
---------------------------------------------------------------------------

    We are revising these regulations for two key reasons. First, 
during implementation of the RFS program, we have observed contract 
structuring practices that may have eroded compliance assurance. 
Notably, we have observed instances of export transactions in which 
parties have sold renewable fuel for export to entities purporting to 
accept RIN retirement obligations that were then not fulfilled by the 
buyer. These instances demonstrate that the RFS program could benefit 
from regulatory changes designed to ensure that exporter obligations 
are fulfilled. Therefore, we are revising the definition to resolve any 
potential ambiguity and clarify which parties may and may not be liable 
for exporter obligations in order to ensure exporter obligations are 
fulfilled.
    Second, the previous definition could have been construed to 
include parties who transfer renewable fuel from the contiguous 48 
states and Hawaii, to an area (either Alaska or a U.S. territory) that 
has received an approval to opt-in to the RFS program. We did not 
intend to impose a RIN retirement obligation on these parties. We are 
therefore clarifying how exporter obligations apply to renewable fuel 
transferred between the 48 states and Hawaii, and opt-in areas.
    To achieve these goals when we developed the proposal, we initially 
considered whether to amend the RFS program regulations consistent with 
the Foreign Trade Regulations (FTR) and other federal export-related 
regulations, such as United States Principal Party in Interest (USPPI) 
and Foreign Principal Party in Interest (FPPI).\219\ While there were 
some commenters that suggested adopting those terms, we chose not to do 
so for the following reasons. The FTR and other export-related 
obligations in other federal programs use a traditional definition of 
``export'' where exported goods leave the U.S. The RFS program 
addresses obligations incurred through the transfer of renewable fuel 
from areas covered by the program to both domestic and foreign areas 
not covered by the program. For instance, the transport of goods from 
Oregon to Alaska would not qualify as export under most federal export 
regulations, but the transport of biofuel from Oregon, a covered area, 
to Alaska, a non-covered area (unless Alaska chooses to opt in), would 
qualify as export under the RFS program. In addition, if we merely 
adopted the FTR approach to allow allocation of exporter obligations 
among parties to an export transaction, we have concerns that a party 
that is insolvent or lacking assets in the U.S. could undertake those 
obligations, and enforcement efforts could become overly resource 
intensive where the fuel has left the country. For these reasons, we do 
not believe it would be appropriate to amend the RFS program 
regulations to define an exporter as the USPPI or the FPPI.
---------------------------------------------------------------------------

    \219\ See, e.g., 15 CFR 772.1 (defining exporter as ``[t]he 
person in the United States who has the authority of a principal 
party in interest to determine and control the sending of items out 
of the United States''). We also considered and rejected other 
alternatives, which we discuss further in the RTC document in the 
docket for this action.
---------------------------------------------------------------------------

    In reviewing the FTR, we also considered the concept of routed 
export transactions and the associated flexibility for parties to an 
export transaction to structure that transaction to place some 
responsibilities with an FPPI.\220\ We believe that this framework is 
reflective of market custom, practice, and capability to contractually 
allocate liabilities and indemnities among parties to a commercial 
transaction. We prefer regulations that accommodate these 
flexibilities, while also balancing the need to protect RFS program 
integrity. Specifically, we want to allow parties to an export 
transaction to allocate RFS program exporter obligations as they see 
fit among themselves, but we also want to protect against contract 
structuring that may erode compliance assurance.
---------------------------------------------------------------------------

    \220\ Routed export transaction is the term used to describe an 
export transaction in which an FPPI directs the movement of goods 
out of the U.S. and authorizes a U.S. agent to file certain 
information required by the FTR.
---------------------------------------------------------------------------

    Therefore, we are revising the definition of ``exporter of 
renewable fuel'' to mean ``all buyers, sellers, and owners of the 
renewable fuel in any transaction that results in renewable fuel being 
transferred from a covered location to a destination outside of the 
covered locations.'' In conjunction with this revision, we are creating 
a definition of ``covered location'' as ``the contiguous 48 states, 
Hawaii, and any state or territory that has received an approval from 
the Administrator to opt-in to the RFS program under Sec.  80.1443.'' 
As described above, this revised definition permits contract 
flexibilities frequently employed in export transactions with respect 
to export obligations under other regulatory programs, such as the FTR. 
All buyers, sellers, and owners of the renewable fuel in a transaction 
that results in renewable fuel being transferred from a covered 
location to a destination outside of any covered location may 
contractually allocate RFS program obligations, indemnities, and 
pricing as they see fit in light of the regulatory requirements. At the 
same time, the revised definition provides enhanced compliance 
assurance so as to maintain a level playing field among would-be 
exporters and ensures RIN retirement so as to maintain the integrity of 
that market in accordance with the regulatory requirements. Ultimately, 
the revised definition contributes to satisfying Congress's mandate 
that EPA promulgate regulations that ``ensure'' the nationally-
applicable renewable fuel volumes are met.\221\ We note, moreover, that 
the existing RFS regulations provide that ``[n]o person shall cause 
another person to commit an act in violation of any prohibited act 
under this section.'' \222\ We believe that this prohibition coupled 
with the revised definitions will deter parties from engaging in sham 
transactions to evade RIN retirement obligations by transferring 
ownership of renewable fuels to undercapitalized entities that do not 
meet their RIN retirement obligations. This includes the specific 
earlier-described practices we have already observed. The revised 
definition also clarifies how exporter obligations apply to transfers 
to and from the contiguous 48 states and Hawaii, and opt-in areas 
(i.e., Alaska and U.S. territories were they to opt-in). Notably, it 
avoids imposing exporter obligations on biofuels transferred from the 
48 states and Hawaii to an opt-in area.
---------------------------------------------------------------------------

    \221\ CAA section 211(o)(2)(A)(i); see also CAA section 301(a).
    \222\ See 40 CFR 80.1460(c).
---------------------------------------------------------------------------

    Under the revised definition, multiple parties may meet the 
definition of an exporter of renewable fuel for the same volume of 
renewable fuel. In addition, although the definition uses the term 
``transaction,'' in many cases there may be more than one discrete 
exchange or interaction that results in a volume of renewable fuel 
being exported. We intend the regulatory term ``transaction'' to cover 
all those exchanges and interactions in which the buyers, sellers, and 
owners know or have reason to know will result in renewable fuel being 
transferred from a covered location to a destination outside of any 
covered location.\223\ For instance, a person holding title to 
renewable fuel in the U.S. may sell renewable fuel to another person 
(either inside or outside of the

[[Page 7061]]

covered areas) and cause the renewable fuel to leave the covered areas. 
Further, that buyer and seller may have a third party hold title to the 
renewable fuel during transit out of the covered areas. In this case, 
the buyer and the seller, both of whom are also owners of the renewable 
fuel, and the third-party holding company, as another owner of the 
renewable fuel in the transaction, would be jointly-and-severally 
liable for complying with the exporter provisions.\224\
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    \223\ To clarify this point, we have revised the regulatory text 
from the proposed ``a transaction'' to ``any transaction'' in this 
final rulemaking.
    \224\ This example is meant to be a stylized illustration of how 
our regulations could apply. It is not meant to exhaustively detail 
the entities that could meet the definition of exporter of renewable 
fuel in this type of transaction. To the extent that other parties 
meet the definition of exporter of renewable fuel, they would also 
be subject to the exporter provisions.
---------------------------------------------------------------------------

    However, our revised regulations create broad flexibility for 
parties to assign responsibilities as they see fit among themselves in 
structuring an export transaction. These parties may contractually 
allocate RIN retirement, and associated registration, reporting, and 
attest engagement obligations, to any one of the parties that meets the 
definition of an exporter of renewable fuel. The party undertaking 
these requirements would then register as an exporter of renewable fuel 
as set forth in 40 CFR 80.1450(a). This approach is also consistent 
with our approach to the term ``refiner,'' under which multiple parties 
could be considered the refiner of a batch of fuel. In such instances, 
we have stated that each party meeting the definition of refiner will 
be held jointly-and-severally liable for refiner requirements, and we 
are adopting a consistent approach for exporters of renewable 
fuel.\225\ However, our revised regulations create broad flexibility 
for parties to assign responsibilities as they see fit among themselves 
in structuring an export transaction. These parties may contractually 
allocate RIN retirement, and associated registration, reporting, and 
attest engagement obligations, to any one of the parties that meets the 
definition of an exporter of renewable fuel. The party undertaking 
these requirements would then register as an exporter of renewable fuel 
as set forth in 40 CFR 80.1450(a). This approach is also consistent 
with our approach to the term ``refiner,'' under which multiple parties 
could be considered the refiner of a batch of fuel. In such instances, 
we have stated that each party meeting the definition of refiner will 
be held jointly-and-severally liable for refiner requirements, and we 
are adopting a consistent approach for exporters of renewable 
fuel.\226\
---------------------------------------------------------------------------

    \225\ See ``Consolidated List of Reformulated Gasoline and Anti-
Dumping Questions and Answers: July 1, 1994 through November 10, 
1997,'' EPA420-R-03-009, at 256 (July 2003) (discussing a scenario 
in which two parties would be considered refiners and would be 
independently responsible for all refinery requirements, which would 
only need to be met once).
    \226\ See ``Consolidated List of Reformulated Gasoline and Anti-
Dumping Questions and Answers: July 1, 1994 through November 10, 
1997,'' EPA420-R-03-009, at 256 (July 2003) (discussing a scenario 
in which two parties would be considered refiners and would be 
independently responsible for all refinery requirements, which would 
only need to be met once).
---------------------------------------------------------------------------

    EPA does not consider a person to be an exporter of renewable fuel 
if that person does not know and does not have reason to know that the 
renewable fuel will be exported. For instance, a renewable fuel 
producer who produces a batch of fuel, generates RINs, and sells the 
renewable fuel with attached RINs into the fungible fuel distribution 
system would not be considered an exporter of renewable fuel under the 
revised definition unless they know or have reason to know that the 
batch of fuel would be exported. More specifically, the mere fact that 
a producer introduces renewable fuels into the stream of commerce, 
coupled with the fact that a significant portion of domestically 
produced biofuel is exported, does not make the producer an exporter of 
renewable fuel.
    We are also finalizing minor, non-substantive changes throughout 
the RFS regulations to more consistently use the term ``exporter of 
renewable fuel'' rather than the term ``exporter.'' These clarifying 
edits reflect that the ``exporter of renewable fuel'' may be different 
than the ``exporter'' under other state and federal regulatory 
programs.

F. REGS Rule Provisions

    We are finalizing a number of changes to the RFS and fuels programs 
that were previously proposed in the REGS rule,\227\ and that we listed 
in the preamble to July 29 proposal as candidates for finalization in 
this action.\228\ In reaching our final decisions on these provisions 
we considered relevant comments on both the 2016 REGS proposal and the 
July 29 proposal. As noted in the July 29 proposal, we believe these 
provisions to be relatively straightforward and would reduce the burden 
of RFS program implementation. Commenters were generally supportive of 
these provisions and we are largely finalizing them as proposed; 
changes to the final provisions relative to the 2016 REGS proposal are 
discussed in detail in the following sections.
---------------------------------------------------------------------------

    \227\ See 81 FR 80828 (November 16, 2016).
    \228\ We are not taking final action at this time on several 
changes from the REGS proposal that were listed in the July 29 
proposal (Allowing Production of Biomass-Based Diesel From Separated 
Food Waste (REGS Section VIII.C), RFS Facility Ownership Changes 
(REGS Section VIII.H), Public Access to Information (REGS Section 
VIII.O), and Redesignation of Renewable Fuel on a PTD for Non-
Qualifying Uses (REGS Section VIII.R), and certain portions of Other 
Revisions to the Fuels Program (REGS Section IX), primarily related 
to test methods). These provisions, along with the other provisions 
in the REGS proposal that are not being finalized here, remain under 
consideration and may be finalized in a future action.
---------------------------------------------------------------------------

1. Flexibilities for Renewable Fuel Blending for Military Use
    We are amending 40 CFR 80.1440 to provide new flexibilities for 
parties that blend renewable fuel to produce fuels for use as 
transportation fuel, heating oil, or jet fuel under a national security 
exemption or that sell neat renewable fuel for use in vehicles, 
engines, and equipment that have a national security exemption for 
emissions certification. Specifically, these parties will be able to 
delegate to an upstream party the RIN-related responsibilities (i.e., 
RIN separation, reporting, recordkeeping, and attest engagement 
requirements) associated with the renewable fuel. These parties could 
include the U.S. Military itself, or contractors working for the U.S. 
Military. The RFS program has a provision that allows blenders that 
handle and blend small volumes of renewable fuel per year (less than 
250,000 gallons per year) to delegate RIN-related responsibilities to 
an upstream party. We have received a number of inquiries from parties 
that have wished to provide renewable fuel, either neat or blended into 
transportation fuel, for use by the U.S. Military as part of Department 
of Defense (DOD) renewable military initiatives. One obstacle to this 
use of renewable fuel by the DOD is that, unlike other EPA fuels 
programs, there were no exemptions related to national security uses in 
the RFS regulatory program.
    We believe that it is appropriate to allow DOD or its contractors 
to delegate RFS RIN responsibilities to upstream parties; doing so 
removes a potential obstacle to the use of renewable fuels by DOD and 
will promote use of renewable fuel by the military. Therefore, we are 
finalizing similar upstream delegation provisions for neat and blended 
renewable fuels supplied to DOD under a national security exemption as 
those already in place for small renewable fuel blenders.
2. Heating Oil Used for Cooling
    We are expanding the definition of heating oil in 40 CFR 80.1401 to 
include fuels that differ from those meeting the current definition 
only because they are used to cool, rather than heat, interior spaces 
of homes or buildings. The first

[[Page 7062]]

sentence of the definition of heating oil thus now reads: ``A fuel oil 
that is used to heat or cool interior spaces of homes or buildings to 
control ambient climate for human comfort.'' We are also making minor 
modifications to the registration, reporting, PTD, and recordkeeping 
requirements for renewable heating oil to correspond with this change. 
We had received questions related to the use of renewable heating oil 
in equipment that cools interior spaces and believe that displacing the 
use of petroleum based fuel oil with renewable heating oil for cooling 
is consistent with CAA section 211(o)'s provision for home heating oil 
to be treated as additional renewable fuel and should be allowed.
3. Separated Food Waste Plans
    We are amending the RFS registration procedures for separated food 
waste plans at 40 CFR 80.1450(b)(1)(vii)(B) and the recordkeeping 
requirements for separated food waste at 40 CFR 80.1454(j). We are also 
adding requirements for renewable fuel produced from biogenic waste 
oils/fats/greases at 40 CFR 80.1450(b)(1)(vii)(B) and 80.1454(d)(4) and 
(j).
    The RFS regulations promulgated in the RFS2 rulemaking required 
that separated food waste plans include: ``(1) The location of any 
municipal waste facility or other facility from which the waste stream 
consisting solely of separated food waste is collected; and (2) A plan 
documenting how the waste will be collected, how the cellulosic and 
non-cellulosic portions of the waste will be quantified, and for 
ongoing verification that such waste consists only of food waste (and 
incidental other components such as paper and plastics) that is kept 
separate since generation from other waste materials.'' \229\ In 
addition to the initial submission of separated food waste plans during 
RFS registration, we also required that renewable fuel producers using 
separated food waste feedstock update the registration information 
whenever there was a change to the plan, including to the location(s) 
of establishments from which the separated food waste is collected, and 
in some cases the newly updated plan must have been reviewed by a 
third-party engineer in accordance with EPA registration procedures. We 
have received numerous company updates for production facilities with 
separated food waste plans, and some parties noted that the requirement 
to identify and update suppliers of feedstocks through a plan was 
overly burdensome.
---------------------------------------------------------------------------

    \229\ See 40 CFR 80.1450(b)(1)(vii)(B).
---------------------------------------------------------------------------

    Recognizing that business relationships for recovery of food wastes 
evolve and that a renewable fuel producer may elect over time to 
purchase feedstocks from different or multiple parties, we are removing 
the requirement to provide the location of every facility from which 
separated food waste feedstock is collected as part of the information 
required for registration. Removing this registration requirement 
alleviates the need for numerous company registration updates as a 
facility's feedstock supplier list evolves, as well as makes it easier 
for EPA to review renewable fuel producers' separated food waste plans 
in a timely manner. However, the recordkeeping section of the 
regulations requires renewable fuel producers to keep documents 
associated with feedstock purchases and transfers that identify where 
the feedstocks were produced; these documents must be sufficient to 
verify that the feedstocks meet the definition of renewable 
biomass.\230\ Thus, renewable fuel producers will still be required to 
maintain records that demonstrate that they used a qualifying feedstock 
to produce renewable fuels for the generation of RINs pursuant to the 
recordkeeping requirements at 40 CFR 80.1454(d)(4) and (j). We are also 
adding a provision at 40 CFR 80.1454(j)(1)(ii) that will require 
renewable fuel producers to maintain records demonstrating the location 
of any establishment from which the waste stream is collected. Since 
many renewable fuel producers receive wastes used as feedstocks from an 
aggregator, we interpret the term ``location'' to mean the physical 
address that the aggregator obtained the wastes used as feedstocks 
from, not the physical or company address of the aggregator.
---------------------------------------------------------------------------

    \230\ See 40 CFR 80.1454(d)(4) and (j).
---------------------------------------------------------------------------

    In addition to removing the registration requirement to provide the 
locations of establishments from which separated food waste is 
collected, we are also modifying the registration regulations to 
require that separated food waste plans identify the type(s) of 
separated food waste(s) to be used and the type(s) of establishment(s) 
the waste will be collected from. For instance, CAA section 211(o) 
identifies ``recycled cooking and trap grease'' as a type of separated 
food waste. Examples of types of establishments could be restaurants, 
slaughterhouses, or specific food production plants (the kind of food 
production should be provided). We believe this information is 
necessary for EPA to determine at registration whether a renewable fuel 
producer can make fuel from its proposed feedstock under currently 
approved separated food waste pathways. Without this information, we 
would not know what the specific feedstock is (e.g., tallow, yellow 
grease, etc.) or whether it qualifies as a separated food waste.
    We are also requiring under 40 CFR 80.1450(b)(1)(vii)(B) that 
producers of renewable fuels made from biogenic waste oils/fats/greases 
that are not separated food waste submit a plan at registration with 
the same requirements as the plan for producers of renewable fuels made 
from separated food waste. We are henceforth referring to such plans as 
``waste oils/fats/greases feedstock plans.'' There is significant 
overlap between the two categories of feedstock, with a considerable 
quantity of biogenic waste oils/fats/greases qualifying as renewable 
biomass as a result of its additional qualification as separated food 
waste. For these reasons, as a matter of practice we have required 
parties intending to use biogenic waste oils/fats/greases as a 
renewable fuel feedstock to submit separated food waste plans at 
registration. In addition to helping EPA determine if the feedstock in 
question meets renewable biomass requirements, we have found that the 
plans help us assess whether the feedstocks specified by a prospective 
producer qualify as biogenic waste oils/fats/greases. This assessment 
is made on a case-by-case basis. This amendment conforms the 
regulations to EPA's current practice. A party fully describing its 
feedstock in a separated food waste plan will not be required to submit 
an additional waste oils/fats/greases plan. Since most, if not all, 
producers of renewable fuel from biogenic waste oils/fats/greases have 
submitted a separated food waste plan at registration, we do not 
believe that this revision will add much, if any, burden to existing 
registered facilities. Those few registered producers using biogenic 
waste oils/fats/greases that have not previously submitted a separated 
food waste plan at registration or in a subsequent registration update 
will be required to do so as part of their next periodic registration 
update.
    In addition to adding the registration requirement for a waste 
oils/fats/greases feedstock plan to 40 CFR 80.1540(b)(1)(vii)(B), we 
are also adding the same recordkeeping requirements for biogenic oils/
fats/greases as for separated food waste at 40 CFR 80.1454(d)(4) and 
(j), and providing further clarity that the locations from which 
separated food waste or biogenic oils/fats/greases was sourced is a 
recordkeeping requirement.

[[Page 7063]]

4. Additional Registration Deactivation Justifications
    We are adding additional circumstances in which EPA may deactivate 
the registration of any party required to register under 40 CFR 
80.1450. These amendments will help parties better understand when EPA 
intends to restrict a party's participation in the RFS program as well 
as the procedures that will be used in such circumstances.
    In July 2014, we finalized requirements that described 
circumstances under which EPA may deactivate a company registration and 
an administrative process to initiate deactivation that provides 
companies an opportunity to respond to and/or submit the required 
information in a timely manner.\231\ Since finalizing these 
requirements, we have identified a number of other cases in which it is 
appropriate to deactivate the registration of a company. In addition, 
we believe the provisions should be extended to cover deactivation of 
registrations for any party required to register with EPA under 40 CFR 
80.1450 (e.g., third-party auditors).\232\ Specifically, we are 
amending 40 CFR 80.1450(h)(1) to provide that EPA may deactivate 
registrations of a party for the following reasons in addition to those 
previously listed:
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    \231\ Under this administrative process, the party has 14 
calendar days from the date of the notification to correct the 
deficiencies identified or explain why there is no need for 
corrective action. See 40 CFR 80.1450(h)(2)(i).
    \232\ In the REGS proposal, we proposed to use the term 
``company, third-party auditor, or third-party engineer'' in the 
registration deactivation provisions; however, we are now using the 
term ``party'' to refer more generally to any person that may be 
required to register with EPA.
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     The party fails to comply with the registration 
requirements of 40 CFR 80.1450.
     The party fails to submit any required report within 
thirty days of the required submission date.
     The party fails to pay a penalty or to perform any 
requirements under the terms of a court order, administrative order, 
consent decree, or administrative settlement agreement between the 
party and EPA.
     The party submits false or incomplete information.
     The party denies EPA access or prevents EPA from 
completing authorized activities under CAA section 114 despite our 
presenting a warrant or court order. This includes a failure to provide 
reasonable assistance.
     The party fails to keep or provide EPA with the records 
required in 40 CFR part 80, subpart M.
     The party otherwise circumvents the intent of the CAA or 
40 CFR part 80, subpart M.
    These deactivation circumstances are consistent with cases where 
EPA may deny or revoke a certificate of conformity under 40 CFR 
1051.255(c) and 86.442-78 for engines and vehicles manufactured in or 
imported into the U.S. In addition, we are finalizing requirements that 
state that in instances of willful violation of an applicable 
requirement or those in which public health, interest, or safety 
requires otherwise, EPA may also deactivate the registration of a party 
without providing notice to the party prior to deactivation and will 
send written notification to the RCO describing the reasons for the 
deactivation. Parties can still submit new registrations after 
appropriate actions are taken by the party to remedy the deficiency.
5. New RIN Retirement Section
    We are creating a new section in the RFS regulations for RIN 
retirements. The regulations have specific sections that address when 
and how parties may generate and separate RINs. However, the cases 
where parties must retire RINs were identified in various sections 
throughout the regulations. The new section of the RFS regulations for 
RIN retirements, 40 CFR 80.1434, simply organizes these current 
sections into one place and will provide beneficial clarification by 
enumerating the specific instances in which a party must retire RINs in 
a new section of the regulations and by making those retirements 
consistent with how parties administratively retire RINs in EMTS. We 
are aware of some confusion for some parties causing those parties to 
improperly retire RINs or fail to retire RINs when they have a 
responsibility to do so under the regulations. Improper retirements can 
lead to a time-consuming remediation process, both for EPA and 
responsible parties. This new section organizes these requirements into 
one location in the regulations to make the circumstances under which 
RINs must be retired simpler to locate and understand. The section also 
includes new regulatory language for cases requiring RIN retirement 
that are identified in EMTS, but may not be clear in the regulations, 
given their current organization (e.g., in the case of contaminated or 
spoiled fuel). Our intent is not to add additional burden on parties 
that must retire RINs under the RFS program, but rather to make the 
regulations consistent with how parties already retire RINs in EMTS and 
help reduce potential confusion regarding the situations in which 
parties must retire RINs.
    We are finalizing the elements of the new RIN retirement section at 
40 CFR 80.1434 as proposed, with the exception of the provisions for 
expired RINs and redesignated renewable fuel, which we are not 
finalizing because we have determined they are not necessary for 
program implementation at this time.
6. New Pathway for Co-Processing Biomass With Petroleum To Produce Co-
Processed Cellulosic Diesel, Jet Fuel, and Heating Oil
    We are creating a new definition of ``co-processed cellulosic 
diesel'' to refer to biodiesel or non-ester renewable diesel fuels that 
meet the definition for cellulosic biofuel but not the definition of 
biomass-based diesel. We are also finalizing new pathways that allow 
co-processed cellulosic diesel, jet fuel, and heating oil that are 
derived from co-processing biomass with petroleum to qualify as 
cellulosic biofuel and generate cellulosic (D-code 3) RINs, provided 
certain production process requirements are satisfied. Fuels that meet 
the cellulosic diesel definition will continue to be able to generate 
D7 RINs, while fuels that meet the co-processed cellulosic diesel 
definition but not the cellulosic diesel definition due to co-
processing with petroleum will be able to generate D3 RINs. Fuels 
produced through co-processing with petroleum will also be required to 
meet, among other requirements, the requirements of 40 CFR 
80.1426(f)(4) to determine the number of RINs that can be generated.
    While pathways existed for renewable gasoline and gasoline 
blendstock (row M in Table 1 to 40 CFR 80.1426) and naphtha (row N in 
Table 1 to 40 CFR 80.1426) produced from cellulosic biomass that is co-
processed with petroleum, there was no pathway for diesel, jet fuel, or 
heating oil produced in this manner. The pathway for cellulosic diesel, 
jet fuel, and heating oil (Pathway L in Table 1 to 40 CFR 80.1426) 
excludes processes that co-process renewable biomass and petroleum. To 
qualify as cellulosic diesel, a fuel must meet the requirements for 
both cellulosic biofuel and biomass-based diesel. The definition of 
biomass-based diesel explicitly excludes renewable fuels that are 
derived from co-processing biomass with petroleum, and therefore a 
process that produced diesel, jet fuel, or heating oil by co-processing 
renewable biomass with petroleum could not qualify as biomass-based 
diesel or cellulosic diesel under Pathway L in Table 1 to 40 CFR 
80.1426. However, cellulosic biofuels other than cellulosic diesel are 
not

[[Page 7064]]

prohibited from being derived from biomass co-processed with petroleum.
    In the 2016 REGS proposed rule, we proposed to add a new row U to 
Table 1 to 40 CFR 80.1426 that would have allowed for cellulosic 
diesel, jet fuel and heating oil produced from any of the feedstocks 
listed in row L via any process that co-processes renewable biomass 
with petroleum and converts cellulosic biomass to fuel to qualify for 
cellulosic biofuel (D-code 3) RINs.\233\ While most commenters 
supported this proposed addition, several commenters disagreed. The 
dissenting commenters stated that EPA had not conducted a sufficient 
lifecycle GHG analysis to support the pathways proposed for row U. 
After reviewing these comments, we have decided to finalize a narrower 
set of pathways for co-processed cellulosic diesel. Instead of adding a 
new row U to Table 1 to 40 CFR 80.1426, we are instead adding ``Co-
Processed Cellulosic Diesel, Jet Fuel, and Heating Oil'' as fuel types 
in row M. Thus, as we had proposed, we are finalizing new pathways for 
co-processed cellulosic diesel, jet fuel, and heating oil, but for a 
narrower set of feedstocks and production process requirements. 
Compared to the proposed row U, row M contains the same feedstocks 
except that it does not include any energy grasses (i.e., switchgrass, 
miscanthus, energy cane, Arundo donax, Pennisetum purpureum), and row M 
contains a more narrowly defined set of production process 
requirements. Note that the energy grass feedstocks are the only ones 
in the proposed row U that include significant indirect land use change 
emissions based on EPA's lifecycle GHG analysis of switchgrass for the 
March 2010 RFS2 rule. Finalizing this narrower set of pathways 
addresses the commenters concerns about insufficient analysis because 
approval of these pathways is supported by the extensive analyses that 
we conducted for a previous rule.
---------------------------------------------------------------------------

    \233\ Another part of the 2016 REGS proposal, which we are not 
finalizing here, would have amended the definition of ``cellulosic 
diesel'' so that it no longer required that such fuel meet the 
definition of biomass-based diesel.
---------------------------------------------------------------------------

    The pathways in row M were approved in the March 2013 Pathways I 
rule and may include fuels produced through the co-processing renewable 
biomass and petroleum.\234\ The analysis supporting that rulemaking 
found that the pathways evaluated for corn stover feedstock reduced 
lifecycle GHG emissions by at least 65 to 129 percent compared to the 
statutory petroleum baseline, and the results for corn stover were 
extended to the other feedstocks listed in row M. We are now extending 
those results to cover co-processed cellulosic diesel, jet fuel, and 
heating oil produced from the same feedstocks and processes listed in 
row M. The analysis for the March 2013 Pathways I rule did not 
explicitly evaluate co-processing but the upgrading processes were 
modeled as using the same types of equipment and processes as petroleum 
refining.\235\ Indeed, the analysis was largely based on a report that 
evaluated processes that co-produce gasoline and diesel products.\236\ 
The most likely processes in row M to include co-processing are the 
ones that have upgrading as the final step, as upgrading is a common 
part of petroleum refining. Our analysis for the March 2013 Pathways I 
rule estimated a 67 percent GHG reduction compared to conventional 
gasoline for renewable gasoline and renewable gasoline blendstock 
produced from corn stover through catalytic pyrolysis and upgrading. 
Producing cellulosic diesel instead of renewable gasoline through this 
same pathway would produce similar results satisfying the 60 percent 
GHG reduction threshold. When energy allocation is used for GHG 
accounting, which is the approach we have used for co-produced RIN 
generating fuels,\237\ co-produced gasoline and diesel products will 
have the same, or nearly the same GHG emissions per unit of energy. 
Studies looking at petroleum refining have also found that upgrading to 
diesel fuel is less GHG-intensive than upgrading to gasoline.\238\ 
Based on these assessments we conclude that the lifecycle GHG emissions 
associated with the new pathways being added to row M satisfy the 
statutory 60 percent GHG reduction requirement to qualify as cellulosic 
biofuel. In summary, the analyses conducted for the March 2013 Pathways 
I rule support the addition of ``co-processed cellulosic diesel, jet 
fuel and heating oil'' as feedstocks to row M of Table 1 to 40 CFR 
80.1426, and commenters did not provide sufficient data or information 
to support a different conclusion.
---------------------------------------------------------------------------

    \234\ See 78 FR 14190 (March 5, 2013).
    \235\ Kinchin, Christopher. Catalytic Fast Pyrolysis with 
Upgrading to Gasoline and Diesel Blendstocks. National Renewable 
Energy Laboratory (NREL). 2011. EPA-HQ-OAR-2011-0542-0007
    \236\ Id.
    \237\ See for example discussion of hydrotreated camelina oil in 
that March 2013 Pathways I rule at 78 FR 14198.
    \238\ For example, for the 2010 RFS2 rule EPA estimated slightly 
lower refining emissions (9.2 gCO2e/MJ) for 2005 average U.S. 
gasoline than for 2005 U.S. average diesel (9.0 gCO2e/MJ). Other 
studies have found an even larger reduction for refining diesel as 
compared to gasoline. See for example: Cooney, G., et al. (2017). 
``Updating the U.S. Life Cycle GHG Petroleum Baseline to 2014 with 
Projections to 2040 Using Open-Source Engineering-Based Models.'' 
Environmental Science & Technology 51(2): 977-987. While this may be 
different when biogenic feedstocks are used, it is reasonable to 
conclude that any differences would not be large enough to 
disqualify the fuel from satisfying the 60 percent GHG reduction 
threshold.
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    The 2016 REGS proposal also included a revised definition for 
``cellulosic diesel'' and a new term, ``cellulosic biomass-based 
diesel.'' \239\ These proposed revisions would have, among other 
things, removed the requirement for ``cellulosic diesel'' to meet the 
definitions of both cellulosic biofuel and biomass-based diesel. The 
new term, ``cellulosic biomass-based diesel,'' would have effectively 
replaced ``cellulosic diesel'' and would have required that the 
renewable fuel meet both definitions. However, after considering the 
implementation issues associated with revising an existing definition 
within EPA's IT systems (e.g., changing existing registrations), we 
have decided not to finalize either of the definitional changes 
proposed in the 2016 REGS rule. Instead, we are accomplishing the same 
result by leaving the definition of ``cellulosic diesel'' as-is and are 
adding a new term, ``co-processed cellulosic diesel,'' which is, among 
other things, a renewable fuel that meets the definitions of cellulosic 
biofuel and either biodiesel or non-ester renewable diesel.\240\ 
Importantly, co-processed cellulosic diesel can be produced as a result 
of co-processing cellulosic feedstocks with petroleum and is eligible 
for D-code 3 RINs, but not D-code 7 RINs. It is thus ``co-processed 
cellulosic diesel, jet fuel, and heating oil'' that we are adding to 
row M of Table 1 to 40 CFR 80.14626.
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    \239\ 81 FR 80927 (November 16, 2016).
    \240\ This new definition for ``co-processed cellulosic diesel'' 
is essentially the same as the revised definition of ``cellulosic 
diesel'' that we proposed in the 2016 REGS proposal; creating a new 
term rather than revising an existing definition allows us to avoid 
legacy issues within our IT system.
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7. Other Revisions to the Fuels Program
a. Testing Revisions
    We are removing the requirement for periodic resubmitting of non-
voluntary consensus standard body (non-VCSB) test methods that have not 
been approved by VCSBs in 40 CFR 80.585(d)(4). Currently, non-VCSB test 
methods are required to resubmit accuracy and precision qualification 
information every 5 years if the non-VCSB test method has not been 
approved by a VCSB organization. At this time, VCSBs, such as ASTM, 
have yet to qualify any non-VCSB test methods for measuring the sulfur 
content in diesel, gasoline, or butane. Moreover, we require minimal 
statistical quality control requirements on every

[[Page 7065]]

type test method approved under the diesel sulfur accuracy and 
precision requirements \241\ to ensure proper test method 
instrumentation use is as intended in practice. We are, therefore, 
amending the regulatory requirement by eliminating the provision for 
non-VCSB test methods to re-submit accuracy and precision qualification 
information every 5 years.
---------------------------------------------------------------------------

    \241\ See 40 CFR 80.584.
---------------------------------------------------------------------------

    We are also removing the sunset date for designated primary test 
methods in 40 CFR 80.47. EPA fuels regulations exempted those 
designated primary test methods that were in use prior to October 28, 
2013, from meeting the accuracy and precision qualification 
requirements.\242\ We provided this sunset exemption date in the Tier 3 
final rule because we were confident that test facilities were 
utilizing designated primary test methods prior to this date. However, 
since the statistical quality control (SQC) requirements at 40 CFR 
80.47 are intended to ensure proper utilization of designated primary 
test methods in practice, we are removing this sunset exemption date. 
This action exempts all designated primary test methods from the 
accuracy and precision requirements of 40 CFR 80.47.
---------------------------------------------------------------------------

    \242\ See, e.g., 40 CFR 80.47(j)(2).
---------------------------------------------------------------------------

b. Oxygenate Added Downstream in Tier 3
    After the Tier 3 final rule was published,\243\ we received several 
questions concerning the language at 40 CFR 80.1603(d) about accounting 
for downstream oxygenate blending in refiners' and importers' average 
annual sulfur calculations. Specifically, some refiners asked whether 
40 CFR 80.1603(d) is consistent with the related reformulated gasoline 
(RFG) provisions for downstream oxygenate blending in 40 CFR 80.69. 
Currently, refiners may certify RFG after the addition of oxygenate to 
the reformulated blendstock for oxygenate blending (RBOB) sample at the 
refinery lab (creating a so-called ``hand blend''), as allowed in 40 
CFR 80.69(a). The Tier 3 regulations at 40 CFR 80.1603(d) require that 
refiners and importers account for downstream oxygenate blending to any 
gasoline or blendstock for oxygenate blending (BOB) by volume weighting 
the sulfur content of the gasoline or BOB with the sulfur content of 
the added oxygenate. Under the Tier 3 regulations, refiners and 
importers may either rely upon test results of batches of oxygenate 
supplied by the producer of the oxygenate or use an assumed value of 
5.00 ppm added at 10 volume percent ethanol concentration if actual 
sulfur results are not available. These refiners and importers 
suggested that the regulatory language at 40 CFR 80.1603(d) may be 
interpreted to continue to allow the use of hand-blended RBOB samples 
for determining oxygenate sulfur content added downstream by arguing 
that the language at 40 CFR 80.1603(d) only applied to conventional 
gasoline and conventional blendstock for oxygenate blending (CBOB).
---------------------------------------------------------------------------

    \243\ See 79 FR 23414 (April 28, 2014).
---------------------------------------------------------------------------

    We intended for the downstream oxygenate blending regulations at 40 
CFR 80.1603(d) to apply to all gasoline and BOBs, not just conventional 
gasoline and CBOB. In the preamble to the Tier 3 final rule, we 
explained that the ``final rule requires that in determining their 
compliance with today's sulfur standards, refiners and importers must 
either use the actual sulfur content of the denatured fuel ethanol 
(DFE) established through testing of the DFE actually blended or assume 
a 5 ppm sulfur content for the DFE added downstream. To prevent 
potential bias, a refiner or importer must choose to use only one 
method during each annual compliance period.'' \244\ The regulations at 
40 CFR 80.101(d)(4) set forth the criteria that a refiner must meet to 
include downstream ethanol in their conventional gasoline compliance 
calculations, and 40 CFR 80.69 sets forth the criteria a refiner must 
meet to include downstream ethanol in their RFG or RBOB compliance 
calculations. If a refiner satisfies these criteria, 40 CFR 80.1603(d) 
sets forth the mechanism for accounting for downstream ethanol in 
annual compliance calculations for all gasoline and BOBs. This section 
of the regulations was designed to ensure that all refiners calculate 
their annual average sulfur levels by including the ethanol that is 
actually added to their gasoline or BOBs, or to use the default value 
of 5 ppm sulfur content. This would alleviate the need for refiners to 
use hand blends prepared with ethanol that has less sulfur than is 
actually blended with the refiner's gasoline or BOB for their 
compliance calculations.
---------------------------------------------------------------------------

    \244\ See 79 FR 23544 (April 28, 2014).
---------------------------------------------------------------------------

    Although we believe that 40 CFR 80.1603(d) clearly applies to all 
gasoline and BOBs, not just RFG or RBOB, we are making minor amendments 
to ensure that these requirements are as clear as possible to the 
regulated community. We are also making minor amendments to the Tier 3 
sulfur reporting requirements at 40 CFR 80.1652 to better accommodate 
the inclusion of downstream oxygenate blending in annual average sulfur 
compliance demonstrations. These added requirements will help align the 
reported batch information with the annual average compliance report 
and is necessary to ensure that refiners met both the per-gallon and 
annual average sulfur standards.
c. Technical Corrections and Clarifications
    We are making numerous technical corrections to EPA's fuels 
programs. These amendments are being made to correct inaccuracies and 
oversights in the current regulations. These changes are described in 
Table IX.F.7-2 below.

 Table IX.F.7-2--Miscellaneous Technical Corrections and Clarifications
                               to Title 40
------------------------------------------------------------------------
      Part and section of Title 40           Description of revision
------------------------------------------------------------------------
79.51(f)(6)(iii), 79.59(a)(1),           Redirecting the mailing
 80.27(e)(1)(i), 80.69(a)(11)(viii)(C),   addresses to the new address
 80.93(d)(4), 80.174(b), 80.174(c),       section in 80.10.
 80.235(b), 80.290(b), 80.533(b),
 80.574(b), 80.595(b), 80.607(a),
 80.855(c)(2), 80.1285(b), 80.1340(b),
 80.1415(c)(4), 80.1441(h), 80.1442(i),
 80.1443(d)(2), 80.1449(d),
 80.1454(h)(6)(iii), 80.1501(b)(5)(i),
 80.1501(b)(5)(ii), 80.1622(g),
 80.1625(c)(2), and 80.1656(h).
80.10..................................  Adding a new address section
                                          that reflects the address
                                          change.
80.27(b)...............................  Clarifying the Performance-
                                          Based Analytical Test Method
                                          Approach (PBATMA)
                                          implementation for Reid vapor
                                          pressure (RVP) compliance
                                          assurance measurements.

[[Page 7066]]

 
80.46..................................  Clarifying that the PBATMA
                                          requirements in 80.47 are now
                                          effective, removing the VCSB
                                          alternative analytical test
                                          methods from 80.46, as the
                                          VCSB analytical test methods
                                          in 80.46 must now meet the
                                          requirements in 80.47.
80.47(b)(2)(i) and 80.47(b)(2)(ii).....  Clarifying accuracy criterion
                                          for sulfur in gasoline by
                                          adding examples with accuracy
                                          criterion.
80.47(b)(3), 80.47(c)(3), 80.47(d)(2),   Removing the reference to the
 80.47(e)(2), 80.47(f)(2), 80.47(g)(2),   October 28, 2013, date and
 80.47(h)(2), 80.47(i)(2), 80.47(j)(2),   making the designated primary
 and 80.47(l)(4).                         test methods exempt from the
                                          applicable accuracy and
                                          precision requirements of 40
                                          CFR 80.47, given that there
                                          are SQC requirements for these
                                          methods that will verify if
                                          they are being carried out
                                          properly.
80.47(c)(2)(i) and 80.47(c)(2)(ii).....  Clarifying accuracy criterion
                                          for sulfur in butane by adding
                                          examples with accuracy
                                          criterion.
80.47(l)(2)(i).........................  Clarifying that test facilities
                                          meet applicable precision
                                          requirements for VCSB method
                                          defined and non-VCSB absolute
                                          fuel parameters.
80.47(n)(1)(i), 80.47(o)(1)(i),          Removing the accuracy SQC
 80.47(p)(1)(i), and 80.47(p)(2)(i).      requirement for pre-treatment
                                          and assessment of results from
                                          the check standard testing
                                          after at least 15 testing
                                          occasions as described in
                                          section 8.2 of ASTM D6299.
80.47(n)(1)(ii), 80.47(o)(1)(ii), and    Clarifying the expanded
 80.47(p)(1)(ii).                         uncertainty of the accepted
                                          reference value of consensus
                                          named fuels shall be included
                                          in the accuracy SQC
                                          qualification criterion.
80.47(o)(1)(i).........................  Clarifying participation in a
                                          commercially available Inter
                                          Laboratory Crosscheck Program
                                          (ILCP) at least three times a
                                          year meeting the ASTM D6299
                                          requirements for ILCP check
                                          standards that meet the
                                          requirements for absolute
                                          differences between test
                                          results and the accepted
                                          reference value of the check
                                          standard based on the
                                          designated primary test method
                                          obtained through participation
                                          in the ILCP satisfies the
                                          accuracy SQC requirement as
                                          well as appropriate
                                          calculation for adherence to
                                          SQC criteria. Also clarifying
                                          the accuracy SQC criteria is
                                          0.75 times the published
                                          reproducibility of the
                                          applicable designated primary
                                          test method for each method
                                          defined fuel parameter to be
                                          consistent with non-VCSB
                                          method defined fuel parameter
                                          accuracy SQC requirements.
80.47(n)(2)(i), 80.47(o)(2)(i), and      Clarification in Precision SQC
 80.47(p)(3)(i).                          requirements that the test
                                          facility's long term precision
                                          standard deviation, as
                                          demonstrated by control
                                          charts, is expected to meet
                                          applicable precision criterion
                                          for the test method.
80.585(d)(1) and (2)...................  Removing reference to expired
                                          provisions related to approval
                                          of test methods approved by
                                          VCSBs.
80.1240(a)(1)(i) and 80.1603(f)(1).....  Clarifying that gasoline
                                          benzene and sulfur credits
                                          must be used for compliance
                                          purposes (i.e., retired)
                                          instead of simply being
                                          obtained.
80.1401................................  Adding definition of foreign
                                          renewable fuel producer, non-
                                          renewable feedstock, non-RIN-
                                          generating foreign producer,
                                          and RIN-generating foreign
                                          producer; amended by revising
                                          the definition of foreign
                                          ethanol producer and renewable
                                          fuel.
80.1426(a)(2), 80.1426(c)(4)-(5),        Applying the new and revised
 80.1450(b), 80.1450(d)(1), 80.1451(b),   definitions in 80.1401.
 80.1451(b)(1)(ii)(D),
 80.1451(g)(1)(ii)(D), 80.1454(q),
 80.1466, 80.1472(b)(3)(i),
 80.1472(b)(3)(ii)(B), and
 80.1472(b)(3)(iii).
80.1440................................  Adding a new paragraph related
                                          to RIN responsibilities for
                                          renewable fuel used for
                                          purposes subject to national
                                          security exemptions.
80.1450(b)(1)(ix)(A),                    Clarifying the term
 80.1451(b)(1)(ii)(I),                    ``denaturant'' to mean
 80.1451(g)(1)(ii)(I), 80.1452(b)(11),    ``ethanol denaturant.''
 and 80.1464(b)(1)(ii).
80.1450(g)(9)..........................  Clarifying the third-party
                                          auditor registration updates
                                          language to make QAP updates
                                          consistent with registration
                                          updates.
80.1466(d)(3)(ii)......................  Revising erroneous reference
                                          for third-party independence
                                          requirements from
                                          80.65(e)(2)(iii) to
                                          80.65(f)(2)(iii).
80.1469(f)(1)..........................  Clarifying to clearly link
                                          updates to quality assurance
                                          plans with updates to a third-
                                          party auditor's registration
                                          under 80.1450(g)(9).
80.1501(b)(3)(i).......................  Clarifying that the word
                                          ``ATTENTION'' should be in
                                          black font, not orange.
80.1600................................  Removing the duplicative
                                          definition of ``Ethanol
                                          denaturant,'' which is already
                                          defined in 80.2(iiii).
80.1609(a).............................  Revising cross-reference to
                                          80.1603(d)(3).
80.1616(c)(3)..........................  Clarifying that Tier 2 credits
                                          generated from January 1, 2017
                                          through December 31, 2019,
                                          must be used between January
                                          1, 2017 and December 31, 2019.
80.1650(b)(3)..........................  Clarifying that the oxygenate
                                          blender registration dates
                                          also apply to persons who
                                          blend oxygenate into CBOB and
                                          conventional gasoline.
80.1650(e)(1)(iii)(A) and                Clarifying that records are
 80.1650(g)(1)(iii)(A).                   kept at the oxygenate
                                          production ``facility''
                                          (instead of the oxygenate
                                          production ``refinery'').
------------------------------------------------------------------------


[[Page 7067]]

X. Public Participation

    Many interested parties participated in the rulemaking process that 
culminates with this final rule. This process provided opportunity for 
submitting written public comments following the proposal that we 
published on July 29, 2019 (84 FR 36762) and the supplemental notice of 
proposed rulemaking published on October 28, 2019. We also held public 
hearings on July 31, 2019 and October 30, 2019, at which many parties 
provided both verbal and written testimony. All comments received, both 
verbal and written, are available in Docket ID No. EPA-HQ-OAR-2019-0136 
and we considered these comments in developing the final rule. Public 
comments and EPA responses are discussed throughout this preamble and 
in the accompanying RTC document, which is available in the docket for 
this action.

XI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted 
to the Office of Management and Budget (OMB) for review. Any changes 
made in response to OMB recommendations have been documented in the 
docket. EPA prepared an analysis of illustrative costs associated with 
the 2020 percentage standards. This analysis is presented in Section V.

B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs

    This action is considered an Executive Order 13771 regulatory 
action. Details on the estimated costs of the 2020 percentage standards 
can be found in EPA's analysis of the illustrative costs. This analysis 
is presented in Section V.

C. Paperwork Reduction Act (PRA)

    The existing Information Collection Request (ICR) covering the RFS 
program is entitled ``Recordkeeping and Reporting for the Renewable 
Fuel Standard Program,'' EPA ICR No. 2546.01, OMB Control Number 2060-
0725; expires August 31, 2022. The existing RFS ICR covers 
registration, recordkeeping, and reporting requirements currently in 40 
CFR part 80, subpart M. The changes affecting RVO calculations will not 
change the recordkeeping and reporting burdens vis-[agrave]-vis the 
existing collection. However, certain of the amendments in this action 
will result in an additional burden. The information collection 
activities related to the amendments to the RFS regulations in this 
rule have been submitted for approval to the Office of Management and 
Budget (OMB) under the PRA. You can find a copy of the ICR in the 
docket for this rule, identified by EPA ICR Number 2595.02, OMB Control 
Number 2060-NEW, and it is briefly summarized here. The parties for 
whom we anticipate an increase in burden are generally described as RIN 
generators (specifically, those who are producers of renewable fuel) 
due the amendments related to pathways, and those who are generally 
described as obligated parties (specifically, those who are refiners 
and importers) due to the provisions for certified NTDF. The supporting 
statement clearly indicates the amendments and includes detailed tables 
with regulatory burden laid out by type of party, regulatory citation, 
description of information to be collected, estimated burden in hours 
and dollars, and reporting form or format. Certain amendments in this 
action are related to non-RFS fuels programs, but these amendments are 
mostly technical corrections (e.g., address corrections) and do not 
impose any additional recordkeeping and reporting burden.
The Following Summarizes the Burden
    Respondents/affected entities: The respondents to this information 
collection are RIN generators and obligated parties under the RFS 
program, and fall into the following general industry categories: 
Petroleum refineries, ethyl alcohol manufacturers, other basic organic 
chemical manufacturing, chemical and allied products merchant 
wholesalers, petroleum bulk stations and terminals, petroleum and 
petroleum products merchant wholesalers, gasoline service stations, and 
marine service stations.
    Respondent's obligation to respond: Mandatory.
    Estimated number of respondents: 6,042.
    Total number of responses: 357,512.
    Frequency of response: Annually and occasionally.
    Total estimated burden: 32,548 hours (per year). Burden is defined 
at 5 CFR 1320.3(b).
    Total estimated cost: $3,511,813 (per year).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves 
this ICR, EPA will announce that approval in the Federal Register and 
publish a technical amendment to 40 CFR part 9 to display the OMB 
control number for the approved information collection activities 
contained in this final rule.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, the impact of concern is any significant 
adverse economic impact on small entities. An agency may certify that a 
rule will not have a significant economic impact on a substantial 
number of small entities if the rule relieves regulatory burden, has no 
net burden, or otherwise has a positive economic effect on the small 
entities subject to the rule.
    With respect to the amendments to the RFS regulations and other 
fuels programs, this action makes relatively minor corrections and 
modifications to those regulations, and we do not anticipate that there 
will be any significant adverse economic impact on directly regulated 
small entities.
    The small entities directly regulated by the annual percentage 
standards associated with the RFS volumes are small refiners, which are 
defined at 13 CFR 121.201. With respect to the 2020 percentage 
standards, we have evaluated the impacts on small entities from two 
perspectives: As if the standards were a standalone action or if they 
are a part of the overall impacts of the RFS program as a whole.
    When evaluating the standards as if they were a standalone action 
separate and apart from the original rulemaking that established the 
RFS2 program, the standards could be viewed as increasing the 
cellulosic biofuel, advanced biofuel, and total renewable fuel volume 
requirements by 170 million gallons between 2019 and 2020. To evaluate 
the impacts of the volume requirements on small entities relative to 
2019, we have conducted a screening analysis \245\ to assess whether we 
should make a finding that this action will not have a significant 
economic impact on a substantial number of small entities. Currently 
available information shows that the impact on small entities from 
implementation of this rule will not be significant. We have reviewed 
and

[[Page 7068]]

assessed the available information, which shows that obligated parties, 
including small entities, are generally able to recover the cost of 
acquiring the RINs necessary for compliance with the RFS standards 
through higher sales prices of the petroleum products they sell than 
would be expected in the absence of the RFS program.\246\ This is true 
whether they acquire RINs by purchasing renewable fuels with attached 
RINs or purchase separated RINs. The costs of the RFS program are thus 
generally being passed on to consumers in the highly competitive 
marketplace. Even if we were to assume that the cost of acquiring RINs 
was not recovered by obligated parties, and we used the maximum values 
of the costs discussed in Section V and the gasoline and diesel fuel 
volume projections and wholesale prices from the October 2019 version 
of EIA's Short Term Energy Outlook, along with current wholesale 
biofuel prices, a cost-to-sales ratio test shows that the costs to 
small entities of the RFS standards are far less than 1 percent of the 
value of their sales.
---------------------------------------------------------------------------

    \245\ ``Screening Analysis for the Final Renewable Fuel 
Standards for 2020,'' memorandum from Dallas Burkholder and Nick 
Parsons to EPA Air Docket EPA-HQ-OAR-2018-0205.
    \246\ For a further discussion of the ability of obligated 
parties to recover the cost of RINs see ``Denial of Petitions for 
Rulemaking to Change the RFS Point of Obligation,'' EPA-420-R-17-
008, November 2017.
---------------------------------------------------------------------------

    While the screening analysis described above supports a 
certification that this rule will not have a significant economic 
impact on small refiners, we continue to believe that it is more 
appropriate to consider the standards as a part of our ongoing 
implementation of the overall RFS program. When considered this way, 
the impacts of the RFS program as a whole on small entities were 
addressed in the RFS2 final rule, which was the rule that implemented 
the entire program as required by EISA 2007.\247\ As such, the Small 
Business Regulatory Enforcement Fairness Act (SBREFA) panel process 
that took place prior to the 2010 rule was also for the entire RFS 
program and looked at impacts on small refiners through 2022.
---------------------------------------------------------------------------

    \247\ 75 FR 14670 (March 26, 2010).
---------------------------------------------------------------------------

    For the SBREFA process for the RFS2 final rule, we conducted 
outreach, fact-finding, and analysis of the potential impacts of the 
program on small refiners, which are all described in the Final 
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners, 
including small refiners, through the year 2022 and found that the 
program would not have a significant economic impact on a substantial 
number of small entities, and that this impact was expected to decrease 
over time, even as the standards increased. For gasoline and/or diesel 
small refiners subject to the standards, the analysis included a cost-
to-sales ratio test, a ratio of the estimated annualized compliance 
costs to the value of sales per company. From this test, we estimated 
that all directly regulated small entities would have compliance costs 
that are less than one percent of their sales over the life of the 
program (75 FR 14862, March 26, 2010).
    We have determined that this final rule will not impose any 
additional requirements on small entities beyond those already 
analyzed, since the impacts of this rule are not greater or 
fundamentally different than those already considered in the analysis 
for the RFS2 final rule assuming full implementation of the RFS 
program. This rule increases the 2020 cellulosic biofuel, advanced 
biofuel, and total renewable fuel volume requirements by 170 million 
gallons relative to the 2019 volume requirements, but those volumes 
remain significantly below the statutory volume targets analyzed in the 
RFS2 final rule. Compared to the burden that would be imposed under the 
volumes that we assessed in the screening analysis for the RFS2 final 
rule (i.e., the volumes specified in the Clean Air Act), the volume 
requirements in this rule reduce burden on small entities. Regarding 
the BBD standard, we are maintaining the volume requirement for 2021 at 
the same level as the 2020 volume requirement we finalized in the 2019 
final rule.\248\ While this volume is an increase over the statutory 
minimum value of 1 billion gallons, the BBD standard is a nested 
standard within the advanced biofuel category, which we are 
significantly reducing from the statutory volume targets. As discussed 
in Section VI, the BBD volume requirement is below what is anticipated 
to be produced and used to satisfy the advanced biofuel requirement. 
The net result of the standards being finalized in this action is a 
reduction in burden as compared to implementation of the statutory 
volume targets assumed in the RFS2 final rule analysis.
---------------------------------------------------------------------------

    \248\ Moreover, we note that the 2021 BBD volume only 
establishes the maximum BBD volume for that year and may be adjusted 
in subsequent actions. This volume does not directly regulate any 
entity. We intend to translate this volume, subject to any 
appropriate adjustments, into a percentage standard in the 2021 
annual rulemaking. We also acknowledge that today's action does 
impose the 2020 BBD percentage standard. As we explain in Section VI 
and in the preamble to the 2019 final rule, this percentage standard 
is not practically binding, as we expect obligated parties to rely 
on BBD RINs, in excess of this standard, to satisfy the 2020 
advanced biofuel standard. Thus, any impact on directly regulated 
entities from the 2020 BBD percentage standard is subsumed into the 
impact of the 2020 advanced biofuel standard. As we explain in this 
section and the screening memo, we find that the 2020 advanced 
biofuel standard will not have a significant economic impact on a 
substantial number of small entities under the RFA.
---------------------------------------------------------------------------

    While the rule will not have a significant economic impact on a 
substantial number of small entities, there are compliance 
flexibilities in the program that can help to reduce impacts on small 
entities. These flexibilities include being able to comply through RIN 
trading rather than renewable fuel blending, 20 percent RIN rollover 
allowance (up to 20 percent of an obligated party's RVO can be met 
using previous-year RINs), and deficit carry-forward (the ability to 
carry over a deficit from a given year into the following year, 
provided that the deficit is satisfied together with the next year's 
RVO). In the RFS2 final rule, we discussed other potential small entity 
flexibilities that had been suggested by the SBREFA panel or through 
comments, but we did not adopt them, in part because we had serious 
concerns regarding our authority to do so.
    Additionally, we realize that there may be cases in which a small 
entity may be in a difficult financial situation and the level of 
assistance afforded by the program flexibilities is insufficient. For 
such circumstances, the program provides hardship relief provisions for 
small entities (small refiners), as well as for small refineries.\249\ 
As required by the statute, the RFS regulations include a hardship 
relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small 
refinery to petition for an extension of its small refinery exemption 
at any time based on a showing that the refinery is experiencing a 
``disproportionate economic hardship.'' EPA regulations provide similar 
relief to small refiners that are not eligible for small refinery 
relief (see 40 CFR 80.1442(h)). We have currently identified a total of 
9 small refiners that own 11 refineries subject to the RFS program, all 
of which are also small refineries.
---------------------------------------------------------------------------

    \249\ See CAA section 211(o)(9)(B).
---------------------------------------------------------------------------

    We evaluate these petitions on a case-by-case basis and may approve 
such petitions if it finds that a disproportionate economic hardship 
exists. In evaluating such petitions, we consult with the U.S. 
Department of Energy and consider the findings of DOE's 2011 Small 
Refinery Study and other economic factors. To date, EPA has adjudicated 
petitions for exemption from 37 small refineries for the 2018 RFS 
standards (10 of which are owned by a small refiner).\250\ We have not 
yet

[[Page 7069]]

adjudicated any small refinery exemption petitions for the 2019 or 2020 
RFS standards.
---------------------------------------------------------------------------

    \250\ Information about the number of SREs granted can be found 
at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
---------------------------------------------------------------------------

    In sum, this final rule will not change the compliance 
flexibilities currently offered to small entities under the RFS program 
(including the small refinery hardship provisions we continue to 
implement) and available information shows that the impact on small 
entities from implementation of this rule will not be significant 
viewed either from the perspective of it being a standalone action or a 
part of the overall RFS program. We have therefore concluded that this 
action will not have any significant adverse economic impact on 
directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or 
more as described in UMRA, 2 U.S.C. 1531-1538, and does not 
significantly or uniquely affect small governments. This action 
implements mandates specifically and explicitly set forth in CAA 
section 211(o) and we believe that this action represents the least 
costly, most cost-effective approach to achieve the statutory 
requirements.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

G. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. This action will be implemented at the Federal 
level and affects transportation fuel refiners, blenders, marketers, 
distributors, importers, exporters, and renewable fuel producers and 
importers. Tribal governments will be affected only to the extent they 
produce, purchase, or use regulated fuels. Thus, Executive Order 13175 
does not apply to this action.

H. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that EPA has reason to believe may disproportionately affect children, 
per the definition of ``covered regulatory action'' in section 2-202 of 
the Executive Order. This action is not subject to Executive Order 
13045 because it implements specific standards established by Congress 
in statutes (CAA section 211(o)) and does not concern an environmental 
health risk or safety risk.

I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy. This action establishes the required 
renewable fuel content of the transportation fuel supply for 2020, 
consistent with the CAA and waiver authorities provided therein. The 
RFS program and this rule are designed to achieve positive effects on 
the nation's transportation fuel supply, by increasing energy 
independence and security and lowering lifecycle GHG emissions of 
transportation fuel.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    EPA believes that this action does not have disproportionately high 
and adverse human health or environmental effects on minority 
populations, low income populations, and/or indigenous peoples, as 
specified in Executive Order 12898 (59 FR 7629, February 16, 1994). 
This regulatory action does not affect the level of protection provided 
to human health or the environment by applicable air quality standards. 
This action does not relax the control measures on sources regulated by 
the RFS and other fuels regulations.

L. Congressional Review Act (CRA)

    This action is subject to the CRA, and the EPA will submit a rule 
report to each House of the Congress and to the Comptroller General of 
the United States. This action is a ``major rule'' as defined by 5 
U.S.C. 804(2).

XII. Statutory Authority

    Statutory authority for this action comes from sections 114, 203-
05, 208, 211, and 301 of the Clean Air Act, 42 U.S.C. 7414, 7522-24, 
7542, 7545, and 7601.

List of Subjects

40 CFR Part 79

    Environmental protection, Fuel additives, Gasoline, Motor vehicle 
pollution, Penalties, Reporting and recordkeeping requirements.

40 CFR Part 80

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports, 
Oil imports, Petroleum, Renewable fuel.

    Dated: December 19, 2019.
Andrew R. Wheeler,
Administrator.

    For the reasons set forth in the preamble, EPA amends 40 CFR parts 
79 and 80 as follows:

PART 79--REGISTRATION OF FUEL AND FUEL ADDITIVES

0
1. The authority citation for part 79 continues to read as follows:

    Authority: 42 U.S.C. 7414, 7524, 7545 and 7601.

Subpart F--Testing Requirements for Registration

0
2. Section 79.51 is amended by revising the last sentence of paragraph 
(f)(6)(iii) to read as follows:


Sec.  79.51  General requirements and provisions.

* * * * *
    (f) * * *
    (6) * * *
    (iii) * * * The registrants' communications should be sent to the 
following address: Attn: Fuel/Additives Registration, U.S. 
Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Mail Code 
6405A, Washington, DC 20460.
* * * * *

0
3. Section 79.59 is amended by revising the last sentence of paragraph 
(a)(1) introductory text to read as follows:


Sec.  79.59  Reporting requirements.

    (a) * * *
    (1) * * * Forms for submitting this data may be obtained from EPA 
at the following address: Attn: Fuel/Additives Registration, U.S. 
Environmental Protection Agency, 1200 Pennsylvania Ave., NW, Mail Code 
6405A, Washington, DC 20460.
* * * * *

[[Page 7070]]

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
4. The authority citation for part 80 continues to read as follows:

    Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart A--General Provisions

0
5. Section 80.10 is added to read as follows:


Sec.  80.10  Addresses.

    (a) For submitting notifications, applications, petitions, or other 
communications with EPA, use one of the following addresses for 
mailing:
    (1) For U.S. Mail: Attn: [TITLE AS DIRECTED], U.S. Environmental 
Protection Agency, 1200 Pennsylvania Ave. NW, Mail Code 6405A, 
Washington, DC 20460.
    (2) For commercial service: Attn: [TITLE AS DIRECTED], U.S. 
Environmental Protection Agency, William Jefferson Clinton Building 
North, Mail Code 6405A, Room 6520V, 1200 Pennsylvania Ave. NW, 
Washington, DC 20004; Phone: 1-800-385-6164.
    (b) [Reserved]

Subpart B--Controls and Prohibitions

0
6. Section 80.27 is amended by revising paragraphs (b) and (e)(1)(i) to 
read as follows:


Sec.  80.27  Controls and prohibitions on gasoline volatility.

* * * * *
    (b) Determination of compliance. Compliance with the standards 
listed in paragraph (a) of this section shall be determined by the use 
of the sampling methodologies specified in Sec.  80.8 and the testing 
methodology specified in Sec.  80.46(c) until December 31, 2015, and 
Sec.  80.47 beginning January 1, 2016.
* * * * *
    (e) * * *
    (1) * * *
    (i) Any person may request a testing exemption by submitting an 
application that includes all the information listed in paragraphs 
(e)(3) through (6) of this section to the attention of ``Test 
Exemptions'' to the address in Sec.  80.10(a).
* * * * *

Subpart D--Reformulated Gasoline

0
7. Section 80.46 is amended by:
0
a. Revising paragraphs (a), (b), (d), (e), (f), and (g); and
0
b. Removing and reserving paragraphs (h)(1)(iv), (v), (vii), (viii), 
(x), (xiii), (xv), and (xvi).
    The revisions read as follows:


Sec.  80.46  Measurement of reformulated gasoline and conventional 
gasoline fuel parameters.

    (a) Sulfur. Sulfur content of gasoline and butane must be 
determined by use of the following methods:
    (1)(i) Through December 31, 2015, the sulfur content of gasoline 
must be determined by ASTM D2622.
    (ii) Beginning January 1, 2016, the sulfur content of gasoline must 
be determined by a test method approved under Sec.  80.47.
    (2)(i) Through December 31, 2015, the sulfur content of butane must 
be determined by ASTM D6667.
    (ii) Beginning January 1, 2016, the sulfur content of butane must 
be determined by a test method approved under Sec.  80.47.
    (b) Olefins. Olefin content must be determined by use of the 
following methods:
    (1) Through December 31, 2015, olefin content must be determined 
using ASTM D1319.
    (2) Beginning January 1, 2016, olefin content must be determined by 
a test method approved under Sec.  80.47.
* * * * *
    (d) Distillation. Distillation parameters must be determined by use 
of the following test methods:
    (1) Through December 31, 2015, distillation parameters must be 
determined using ASTM D86.
    (2) Beginning January 1, 2016, distillation parameters must be 
determined by a test method approved under Sec.  80.47. (Note: The 
precision estimates for reproducibility in ASTM D86-12 do not apply; 
see Sec.  80.47(h).)
    (e) Benzene. Benzene content must be determined by use of the 
following test methods:
    (1) Through December 31, 2015, benzene content must be determined 
using ASTM D3606, except that instrument parameters shall be adjusted 
to ensure complete resolution of the benzene, ethanol, and methanol 
peaks because ethanol and methanol may cause interference with ASTM 
D3606 when present.
    (2) Beginning January 1, 2016, benzene content must be determined 
by a test method approved under Sec.  80.47.
    (f) Aromatic content. Aromatic content must be determined by use of 
the following methods:
    (1) Through December 31, 2015, aromatic content must be determined 
using ASTM D5769, except the sample chilling requirements in section 8 
of this standard method are optional.
    (2) Beginning January 1, 2016, aromatic content must be determined 
by a test method approved under Sec.  80.47.
    (g) Oxygen and oxygenate content analysis. Oxygen and oxygenate 
content must be determined by use of the following methods:
    (1) Through December 31, 2015, oxygen and oxygenate content must be 
determined using ASTM D5599.
    (2) Beginning January 1, 2016, oxygen and oxygenate content must be 
determined by a test method approved under Sec.  80.47.
* * * * *

0
8. Section 80.47 is amended by revising paragraphs (b), (c)(2)(i) and 
(ii), (c)(3), (d)(2), (e)(2), (f)(2), (g)(2), (h)(2), (i)(2), (j)(2), 
(l)(2)(i), (l)(4), (n)(1), (n)(2)(i), (o)(1), (o)(2)(i), (p)(1), 
(p)(2)(i), and (p)(3)(i) to read as follows:


Sec.  80.47  Performance-based Analytical Test Method Approach.

* * * * *
    (b) Precision and accuracy criteria for approval for the absolute 
fuel parameter of gasoline sulfur--(1) Precision. Beginning January 1, 
2016, for motor vehicle gasoline, gasoline blendstock, and gasoline 
fuel additives subject to the gasoline sulfur standard at Sec. Sec.  
80.195 and 80.1603, the maximum allowable standard deviation computed 
from the results of a minimum of 20 tests made over 20 days (tests may 
be arranged into no fewer than five batches of four or fewer tests 
each, with only one such batch allowed per day over the minimum of 20 
days) on samples using good laboratory practices taken from a single 
homogeneous commercially available gasoline must be less than or equal 
to 1.5 times the repeatability ``r'' divided by 2.77, where ``r'' 
equals the ASTM repeatability of ASTM D7039 (Example: A 10 ppm sulfur 
gasoline sample: Maximum allowable standard deviation of 20 
tests<=1.5*(1.73ppm/2.77) = 0.94 ppm). The 20 results must be a series 
of tests with a sequential record of analysis and no omissions. A 
laboratory facility may exclude a given sample or test result only if 
the exclusion is for a valid reason under good laboratory practices and 
it maintains records regarding the sample and test results and the 
reason for excluding them.
    (2) Accuracy. Beginning January 1, 2016, for motor vehicle 
gasoline, gasoline blendstock, and gasoline fuel additives subject to 
the gasoline sulfur standard at Sec. Sec.  80.195 and 80.1603:
    (i) The arithmetic average of a continuous series of at least 10 
tests performed using good laboratory practices on a commercially 
available gravimetric sulfur standard in the range of 1-10 ppm shall 
not differ from the accepted reference value (ARV) of the standard by 
more than 0.47 ppm sulfur,

[[Page 7071]]

where the accuracy criteria is 0.75*(1.5*r/2.77), where ``r'' is the 
repeatability for ARV of the commercially available gravimetric sulfur 
standard (Example: 0.75*(1.5*1.15ppm/2.77) = 0.47 ppm);
    (ii) The arithmetic average of a continuous series of at least 10 
tests performed using good laboratory practices on a commercially 
available gravimetric sulfur standard in the range of 10-20 ppm shall 
not differ from the ARV of the standard by more than 0.94 ppm sulfur, 
where the accuracy criteria is 0.75*(1.5*r/2.77), where ``r'' is the 
repeatability for ARV of the commercially available gravimetric sulfur 
standard (Example: 0.75*(1.5*2.30ppm/2.77) = 0.94 ppm); and
    (iii) In applying the tests of paragraphs (b)(2)(i) and (ii) of 
this section, individual test results shall be compensated for any 
known chemical interferences using good laboratory practices.
    (3) The test method specified at Sec.  80.46(a)(1) is exempt from 
the requirements of paragraphs (b)(1) and (2) of this section.
    (c) * * *
    (2) * * *
    (i) The arithmetic average of a continuous series of at least 10 
tests performed using good laboratory practices on a commercially 
available gravimetric sulfur standard in the range of 1-10 ppm, say 10 
ppm, shall not differ from the ARV of the standard by more than 0.47 
ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where 
``r'' is the repeatability for ARV of the commercially available 
gravimetric sulfur standard (Example: 0.75*(1.5*1.15ppm/2.77) = 0.47 
ppm);
    (ii) The arithmetic average of a continuous series of at least 10 
tests performed using good laboratory practices on a commercially 
available gravimetric sulfur standard in the range of 10-20 ppm, say 20 
ppm, shall not differ from the ARV of the standard by more than 0.94 
ppm sulfur, where the accuracy criteria is 0.75*(1.5*r/2.77), where 
``r'' is the repeatability for ARV of the commercially available 
gravimetric sulfur standard (Example: 0.75*(1.5*2.30ppm/2.77) = 0.94 
ppm); and
* * * * *
    (3) The test method specified at Sec.  80.46(a)(2) is exempt from 
the requirements of paragraphs (c)(1) and (2) of this section.
    (d) * * *
    (2) The test method specified at Sec.  80.46(b)(1) is exempt from 
the requirements of paragraph (d)(1) of this section.
    (e) * * *
    (2) The test method specified at Sec.  80.46(f)(1) is exempt from 
the requirements of paragraph (e)(1) of this section.
    (f) * * *
    (2) The test method specified at Sec.  80.46(g)(1) is exempt from 
the requirements of paragraph (f)(1) of this section.
    (g) * * *
    (2) The test method specified at Sec.  80.46(c)(1) is exempt from 
the requirements of paragraph (g)(1) of this section.
    (h) * * *
    (2) The test method specified at Sec.  80.46(d)(1) is exempt from 
the requirements of paragraph (h)(1) of this section.
    (i) * * *
    (2) The test methods specified at Sec.  80.46(e)(1) are exempt from 
the requirements of paragraph (i)(1) of this section.
    (j) * * *
    (2) The test method specified at Sec.  80.2(z) is exempt from the 
requirements of paragraph (j)(1) of this section.
* * * * *
    (l) * * *
    (2)(i) The test facility demonstrates that the test method meets 
the applicable precision information for the method-defined or non-VCSB 
absolute fuel parameter as described in this section.
* * * * *
    (4) The test methods specified at Sec. Sec.  80.2(z) and 
80.46(a)(1), (a)(2), (b)(1), (c)(1), (d)(1), (e)(1), (f)(1), and (g)(1) 
are exempt from the requirements of paragraphs (l)(1) through (3) of 
this section.
* * * * *
    (n) * * *
    (1)(i) Accuracy SQC. Every facility shall conduct tests on every 
instrument with a commercially available gravimetric reference 
material, or check standard as defined in ASTM D6299 at least three 
times a year using good laboratory practices. The facility must 
construct ``MR'' and ``I'' charts with control lines as described in 
section 8.4 and appropriate Annex sections of this standard practice. 
In circumstances where the absolute difference between the mean of 
multiple back-to-back tests of the standard reference material and the 
ARV of the standard reference material is greater than 0.75 times the 
published reproducibility of the test method, the cause of such 
difference must be investigated by the facility. Records of the 
standard reference materials measurements as well as any investigations 
into any exceedance of these criteria must be kept for a period of five 
years.
    (ii) The expanded uncertainty of the ARV of consensus named fuels 
shall be included in the following accuracy qualification criterion: 
Accuracy qualification criterion = square root 
[(0.75R)^caret2 + (0.75R)^caret2/L], where L = the 
number of single results obtained from different labs used to calculate 
the consensus ARV.
    (2)(i) Precision SQC. Every facility shall conduct tests of every 
instrument with a quality control material as defined in paragraph 
3.2.8 in ASTM D6299 either once per week or once per every 20 
production tests, whichever is more frequent. The facility must 
construct and maintain an ``I'' chart as described in section 8 and 
section A1.5.1 and a ``MR'' chart as described in section A1.5.4. Any 
violations of control limit(s) shall be investigated by personnel of 
the facility and records kept for a period of five years. The test 
facility's long term site precision standard deviation, as demonstrated 
by the ``I'' chart and ``M'' chart, must meet the applicable precision 
criterion as described in paragraph (b)(1) or (c)(1) of this section.
* * * * *
    (o) * * *
    (1)(i) Accuracy SQC. Every facility shall conduct tests of every 
instrument with a commercially available check standard as defined in 
ASTM D6299 at least three times a year using good laboratory practices. 
The check standard must be an ordinary fuel with levels of the fuel 
parameter of interest close to either the applicable regulatory 
standard or the average level of use for the facility. For facilities 
using a VCSB designated method defined test method, the ARV of the 
check standard must be determined by the respective designated test 
method for the fuel parameter following the guidelines of ASTM D6299. 
Facilities using a VCSB alternative method defined test method must use 
the ARV of the check standard as determined in a VCSB Inter Laboratory 
Crosscheck Program (ILCP) or a commercially available ILCP following 
the guidelines of ASTM D6299. If the ARV is not provided in the ILCP, 
accuracy must be assessed based upon the respective EPA-designated test 
method using appropriate production samples. The facility must 
construct ``MR'' and ``I'' charts with control lines as described in 
section 8.4 and appropriate Annex sections of this standard practice. 
In circumstances where the absolute difference between test results and 
the ARV of the check

[[Page 7072]]

standard based on the designated primary test method is greater than 
0.75 times the published reproducibility of the designated primary test 
method, the cause of such difference must be investigated by the 
facility. Participation in a VCSB ILCP or a commercially available ILCP 
meeting the ASTM D6299 requirements for ILCP check standards, based on 
the designated primary test method, at least three times a year, and, 
meeting the requirements in this section for absolute differences 
between the test results and the ARV of the check standard based on the 
designated primary test method of less than 0.75 times the published 
reproducibility of the designated primary test method obtained through 
participation in the ILCP satisfies this Accuracy SQC requirement 
(Examples of VCSB ILCPs: ASTM Reformulated Gasoline ILCP or ASTM motor 
gasoline ILCP). Records of the standard reference materials 
measurements as well as any investigations into any exceedance of these 
criteria must be kept for a period of five years.
    (ii) The expanded uncertainty of the ARV of consensus named fuels 
shall be included in the following accuracy qualification criterion: 
Accuracy qualification criterion = square root 
[(0.75R)^caret2 + (0.75R)^caret2/L], where L = the 
number of single results obtained from different labs used to calculate 
the consensus ARV.
    (2)(i) Precision SQC. Every facility shall conduct tests of every 
instrument with a quality control material as defined in paragraph 
3.2.8 in ASTM D6299 either once per week or once per every 20 
production tests, whichever is more frequent. The facility must 
construct and maintain an ``I'' chart as described in section 8 and 
section A1.5.1 and a ``MR'' chart as described in section A1.5.4. Any 
violations of control limit(s) shall be investigated by personnel of 
the facility and records kept for a period of five years. The test 
facility's long term site precision standard deviation, as demonstrated 
by the ``I'' chart and ``M'' chart, must meet the applicable precision 
criterion as described in paragraph (d)(1), (e)(1), (f)(1), (g)(1), 
(h)(1), (i)(1), or (j)(1) of this section.
* * * * *
    (p) * * *
    (1)(i) Accuracy SQC for Non-VCSB Method-Defined test methods with 
minimal matrix effects. Every facility shall conduct tests on every 
instrument with a commercially available check standard as defined in 
the ASTM D6299 at least three times a year using good laboratory 
practices. The check standard must be an ordinary fuel with levels of 
the fuel parameter of interest close to either the applicable 
regulatory standard or the average level of use for the facility. 
Facilities using a Non-VCSB alternative method defined test method must 
use the ARV of the check standard as determined in either a VCSB Inter 
Laboratory Crosscheck Program (ILCP) or a commercially available ILCP 
following the guidelines of ASTM D6299. If the ARV is not provided in 
the ILCP, accuracy must be assessed based upon the respective EPA 
designated test method using appropriate production samples. The 
facility must construct ``MR'' and ``I'' charts with control lines as 
described in section 8.4 and appropriate Annex sections of this 
standard practice. In circumstances where the absolute difference 
between the mean of multiple back-to-back tests of the standard 
reference material and the ARV of the standard reference material is 
greater than 0.75 times the published reproducibility of the fuel 
parameter's respective designated test method, the cause of such 
difference must be investigated by the facility. Records of the 
standard reference materials measurements as well as any investigations 
into any exceedance of these criteria must be kept for a period of five 
years.
    (ii) The expanded uncertainty of the ARV of consensus named fuels 
shall be included in the following accuracy qualification criterion: 
Accuracy qualification criterion = square root 
[(0.75R)^caret2 + (0.75R)^caret2/L], where L = the 
number of single results obtained from different labs used to calculate 
the consensus ARV.
    (2)(i) Accuracy SQC for Non-VCSB Method-Defined test methods with 
high sensitivity to matrix effects. Every facility shall conduct tests 
on every instrument with a production fuel on at least a quarterly 
basis using good laboratory practices. The production fuel must be 
representative of the production fuels that are routinely analyzed by 
the facility. The ARV of the production fuel must be determined by the 
respective reference installation of the designated test method for the 
fuel parameter following the guidelines of ASTM D6299. The facility 
must construct ``MR'' and ``I'' charts with control lines as described 
in section 8.4 and appropriate Annex sections of this standard 
practice. In circumstances where the absolute difference between the 
mean of multiple back-to-back tests of the standard reference material 
and the ARV of the standard reference material is greater than 0.75 
times the published reproducibility of the test method must be 
investigated by the facility. Documentation on the identity of the 
reference installation and its control status must be maintained on the 
premises of the method-defined alternative test method. Records of the 
standard reference materials measurements as well as any investigations 
into any exceedances of this criterion must be kept for a period of 
five years.
* * * * *
    (3)(i) Precision SQC. Every facility shall conduct tests of every 
instrument with a quality control material as defined in paragraph 
3.2.8 in ASTM D6299 either once per week or once per every 20 
production tests, whichever is more frequent. The facility must 
construct and maintain an ``I'' chart as described in section 8 and 
section A1.5.1 and a ``MR'' chart as described in section A1.5.4. Any 
violations of control limit(s) shall be investigated by personnel of 
the facility and records kept for a period of five years. The test 
facility's long term site precision standard deviation, as demonstrated 
by the ``I'' chart and ``M'' chart, must meet the applicable precision 
criterion as described in paragraph (b)(1), (c)(1), (d)(1), (e)(1), 
(f)(1), (g)(1), (h)(1), (i)(1), or (j)(1) of this section.
* * * * *

0
9. Section 80.69 is amended by revising paragraph (a)(11)(viii)(C) to 
read as follows:


Sec.  80.69  Requirements for downstream oxygenate blending.

    (a) * * *
    (11) * * *
    (viii) * * *
    (C) The survey plan must be sent to the attention of ``RFG Program 
(Survey Plan)'' to the address in Sec.  80.10(a);
* * * * *

Subpart E--Anti-Dumping

0
10. Section 80.93 is amended by revising paragraph (d)(4) to read as 
follows:


Sec.  80.93  Individual baseline submission and approval.

* * * * *
    (d) * * *
    (4) For U.S. Postal delivery, the petition shall be sent to the 
attention of ``RFG Program (Baseline Petition)'' to the address in 
Sec.  80.10(a).
* * * * *

Subpart G--Detergent Gasoline

0
11. Section 80.174 is amended by revising paragraphs (b) and (c) to 
read as follows:

[[Page 7073]]

Sec.  80.174  Addresses.

* * * * *
    (b) Other detergent registration and certification data, and 
certain other information which may be specified in this subpart, shall 
be sent to the attention of ``Detergent Additive Certification'' to the 
address in Sec.  80.10(a).
    (c) Notifications to EPA regarding program exemptions, detergent 
dilution and commingling, and certain other information which may be 
specified in this subpart, shall be sent to the attention of 
``Detergent Enforcement Program'' to the address in Sec.  80.10(a).

Subpart H--Gasoline Sulfur

0
12. Section 80.235 is amended by revising paragraph (b) to read as 
follows:


Sec.  80.235  How does a refiner obtain approval as a small refiner?

* * * * *
    (b) Applications for small refiner status must be sent to the 
attention of ``Gasoline Sulfur Program (Small Refiner)'' to the address 
in Sec.  80.10(a).
* * * * *

0
13. Section 80.290 is amended by revising paragraph (b) to read as 
follows:


Sec.  80.290  How does a refiner apply for a sulfur baseline?

* * * * *
    (b) The sulfur baseline request must be sent to the attention of 
``Gasoline Sulfur Program (Sulfur Baseline)'' to the address in Sec.  
80.10(a).
* * * * *

Subpart I--Motor Vehicle Diesel Fuel; Nonroad, Locomotive, and 
Marine Diesel Fuel; and ECA Marine Fuel

0
14. Section 80.533 is amended by revising paragraph (b) as follows:


Sec.  80.533  How does a refiner or importer apply for a motor vehicle 
or non-highway baseline for the generation of NRLM credits or the use 
of the NRLM small refiner compliance options?

* * * * *
    (b) The baseline must be sent to the attention of ``Nonroad Rule 
Diesel Fuel Baseline'' to the address in Sec.  80.10(a).
* * * * *

0
15. Section 80.574 is amended by revising paragraph (b) as follows:


Sec.  80.574  What labeling requirements apply to retailers and 
wholesale purchaser-consumers of ECA marine fuel beginning June 1, 
2014?

* * * * *
    (b) Alternative labels to those specified in paragraph (a) of this 
section may be used as approved by EPA. Send requests to the attention 
of ``ECA Marine Fuel Alternative Label Request'' to the address in 
Sec.  80.10(a).

0
16. Section 80.585 is amended:
0
a. In paragraph (d)(1), by removing ``paragraph (a) or (b)'' and adding 
``paragraph (b)'' in its place;
0
b. In the first sentence of paragraph (d)(2), by removing ``paragraph 
(a) or (b)'' and adding ``paragraph (b)'' in its place; and
0
c. By revising paragraph (d)(4).
    The revision reads as follows:


Sec.  80.585  What is the process for approval of a test method for 
determining the sulfur content of diesel or ECA marine fuel?

* * * * *
    (d) * * *
    (4) The approval of any test method under paragraph (b) of this 
section shall be valid from the date of approval from the 
Administrator.
* * * * *

0
17. Section 80.595 is amended by revising paragraph (b) to read as 
follows:


Sec.  80.595  How does a small or GPA refiner apply for a motor vehicle 
diesel fuel volume baseline for the purpose of extending their gasoline 
sulfur standards?

* * * * *
    (b) The volume baseline must be sent via certified mail with return 
receipt or express mail with return receipt to the attention of 
``Diesel Baseline'' to the address in Sec.  80.10(a).
* * * * *

0
18. Section 80.607 is amended by revising paragraph (a) to read as 
follows:


Sec.  80.607  What are the requirements for obtaining an exemption for 
diesel fuel used for research, development or testing purposes?

    (a) Written request for a research and development exemption. Any 
person may receive an exemption from the provisions of this subpart for 
diesel fuel or ECA marine fuel used for research, development, or 
testing purposes by submitting the information listed in paragraph (c) 
of this section to the attention of ``Diesel Program (Diesel Exemption 
Request)'' to the address in Sec.  80.10(a).
* * * * *

0
Subpart J--Gasoline Toxics

0
19. Section 80.855 is amended by revising paragraph (c)(2) to read as 
follows:


Sec.  80.855  What is the compliance baseline for refineries or 
importers with insufficient data?

* * * * *
    (c) * * *
    (2) Application process. Applications must be submitted to the 
attention of ``Anti-Dumping Compliance Period'' to the address in Sec.  
80.10(a).
* * * * *

Subpart L--Gasoline Benzene

0
20. Section 80.1240 is amended in paragraph (a)(1)(i) in the equation 
by revising the definition ``OC'' to read as follows:


Sec.  80.1240  How is a refinery's or importer's compliance with the 
gasoline benzene requirements of this subpart determined?

    (a) * * *
    (1)(i) * * *
    OC = Benzene credits used by the refinery or importer to show 
compliance (gallons benzene).
* * * * *

0
21. Section 80.1285 is amended by revising paragraph (b) to read as 
follows:


Sec.  80.1285  How does a refiner apply for a benzene baseline?

* * * * *
    (b) For U.S. Postal delivery, the benzene baseline application 
shall be sent to the attention of ``MSAT2 Benzene'' to the address in 
Sec.  80.10(a).
* * * * *

0
22. Section 80.1340 is amended by revising paragraph (b) to read as 
follows:


Sec.  80.1340  How does a refiner obtain approval as a small refiner?

* * * * *
    (b) Applications for small refiner status must be sent to the 
attention of ``MSAT2 Benzene'' to the address in Sec.  80.10(a).
* * * * *

Subpart M--Renewable Fuel Standard

0
23. Section 80.1401 is amended by:
0
a. Adding in alphabetical order definitions for ``Certified non-
transportation 15 ppm distillate fuel,'' ``Co-processed cellulosic 
diesel,'' and ``Covered location'';
0
b. Revising the definition of ``Exporter of renewable fuel'' and 
``Foreign ethanol producer'';
0
c. Adding in alphabetical order a definition for ``Foreign renewable 
fuel producer'';
0
d. Revising paragraph (2) in the definition of ``Heating oil'';
0
e. Adding in alphabetical order definitions for ``Non-renewable 
feedstock'' and ``Non-RIN-generating foreign producer'';
0
f. Revising paragraph (2) in the definition of ``Renewable fuel''; and
0
g. Adding in alphabetical order a definition for ``RIN-generating 
foreign producer''. The additions and revisions read as follows:

[[Page 7074]]

Sec.  80.1401  Definitions

* * * * *
    Certified non-transportation 15 ppm distillate fuel or certified 
NTDF means distillate fuel that meets all of the following:
    (1) It has been certified as complying with the 15 ppm sulfur 
standard, cetane/aromatics standard, and all applicable sampling, 
testing, and recordkeeping requirements of subpart I of this part.
    (2) It has been designated as 15 ppm heating oil, 15 ppm ECA marine 
fuel, or other non-transportation fuel (e.g., jet fuel, kerosene, 
heating oil, or No. 4 fuel) on its product transfer document and has 
not been designated as MVNRLM diesel fuel.
    (3) The PTD for the distillate fuel meets the requirements in Sec.  
80.1453(e).
* * * * *
    Co-processed cellulosic diesel is any renewable fuel that meets the 
definition of cellulosic biofuel, as defined in this section 80.1401, 
and meets all of the requirements of paragraph (1) of this definition:
    (1)(i) Is a transportation fuel, transportation fuel additive, 
heating oil, or jet fuel.
    (ii) Meets the definition of either biodiesel or non-ester 
renewable diesel.
    (iii) Is registered as a motor vehicle fuel or fuel additive under 
40 CFR part 79, if the fuel or fuel additive is intended for use in a 
motor vehicle.
    (2) Co-processed cellulosic diesel includes heating oil and jet 
fuel made from cellulosic feedstocks and cellulosic biofuel produced as 
a result of co-processing cellulosic feedstocks with petroleum.
* * * * *
    Covered location means the contiguous 48 states, Hawaii, and any 
state or territory that has received an approval from the Administrator 
to opt-in to the RFS program under Sec.  80.1443.
* * * * *
    Exporter of renewable fuel means all buyers, sellers, and owners of 
the renewable fuel in any transaction that results in renewable fuel 
being transferred from a covered location to a destination outside of 
the covered locations.
* * * * *
    Foreign ethanol producer means a foreign renewable fuel producer 
who produces ethanol for use in transportation fuel, heating oil, or 
jet fuel but who does not add ethanol denaturant to their product as 
described in paragraph (2) of the definition of ``renewable fuel'' in 
this section.
    Foreign renewable fuel producer means a person from a foreign 
country or from an area outside the covered locations who produces 
renewable fuel (including neat (undenatured) ethanol for use in 
transportation fuel, heating oil, or jet fuel).
* * * * *
    Heating oil * * *
    (2) A fuel oil that is used to heat or cool interior spaces of 
homes or buildings to control ambient climate for human comfort. The 
fuel oil must be liquid at 60 degrees Fahrenheit and 1 atmosphere of 
pressure, and contain no more than 2.5% mass solids.
* * * * *
    Non-renewable feedstock means a feedstock that does not meet the 
definition of renewable biomass.
    Non-RIN-generating foreign producer means a foreign renewable fuel 
producer that has been registered by EPA to produce renewable fuel for 
which RINs have not been generated.
* * * * *
    Renewable fuel * * *
    (2) Ethanol covered by this definition shall be denatured using an 
ethanol denaturant as required in 27 CFR parts 19 through 21. Any 
volume of ethanol denaturant added to the undenatured ethanol by a 
producer or importer in excess of 2 volume percent shall not be 
included in the volume of ethanol for purposes of determining 
compliance with the requirements under this subpart.
* * * * *
    RIN-generating foreign producer means a foreign renewable fuel 
producer that has been registered by EPA to generate RINs for renewable 
fuel it produces.
* * * * *

0
24. Section 80.1405 is amended by adding paragraph (a)(11) and revising 
the definitions of GEi and DEi in the equation in 
paragraph (c) to read as follows:


Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) * * *
    (11) Renewable Fuel Standards for 2020. (i) The value of the 
cellulosic biofuel standard for 2020 shall be 0.34 percent.
    (ii) The value of the biomass-based diesel standard for 2020 shall 
be 2.10 percent.
    (iii) The value of the advanced biofuel standard for 2020 shall be 
2.93 percent.
    (iv) The value of the renewable fuel standard for 2020 shall be 
11.56 percent.
* * * * *
    (c) * * *
    GEi = The total amount of gasoline projected to be 
exempt in year i, in gallons, per Sec. Sec.  80.1441 and 80.1442.
    DEi = The total amount of diesel fuel projected to be 
exempt in year i, in gallons, per Sec. Sec.  80.1441 and 80.1442.
* * * * *

0
25. Section 80.1407 is amended by adding paragraphs (f)(9) through (11) 
to read as follows:


Sec.  80.1407.  How are the Renewable Volume Obligations calculated?

* * * * *
    (f) * * *
    (9) Distillate fuel with a sulfur content greater than 15 ppm that 
is clearly designated for a use other than transportation fuel, such as 
heating oil or ECA marine fuel.
    (10) Distillate fuel that meets a 15 ppm sulfur standard, is 
designated for non-transportation use, and that remains completely 
segregated from MVNRLM diesel fuel from the point of production through 
to the point of use for a non-transportation purpose, such as heating 
oil or ECA marine fuel.
    (11) Certified NTDF, if the refiner or importer has a reasonable 
expectation that the fuel will be used for non-transportation purposes. 
To establish a reasonable expectation that the fuel will be used for 
non-transportation purposes, a refiner or importer must, at a minimum, 
be able to demonstrate that they supply areas that use heating oil, ECA 
marine fuel, or 15 ppm distillate fuel for non-transportation purposes 
in quantities that are consistent with past practices or changed 
circumstances. EPA may consider any other relevant information, 
including the price of the fuel, in assessing whether a refiner or 
importer has a reasonable expectation that the fuel will be used for 
non-transportation purposes.

0
26. Section 80.1408 is added to read as follows:


Sec.  80.1408.  What are the requirements for parties that own and 
redesignate certified NTDF as MVNRLM diesel fuel?

    (a) Beginning January 1, 2021, a party that owns certified NTDF, 
and only a party that owns certified NTDF, may redesignate NTDF as 
MVNRLM diesel fuel if they meet all of the following requirements:
    (1) Register as a refiner and register each facility where 
redesignation occurs as a refinery under Sec.  80.76. NTDF may only be 
redesignated as MVNRLM diesel fuel at a facility registered as a 
refinery.
    (2) At each facility, calculate a balance of MVNRLM diesel fuel 
during each annual compliance period according to the following 
equation:

MVNRLMBAL = MVNRLMO + MVNRLMINVCHG-
MVNRLMI

Where:


[[Page 7075]]


MVNRLMBAL = the balance for MVNRLM diesel fuel for the 
compliance period.
MVNRLMI = the total volume of all batches of fuel 
designated as MVNRLM diesel fuel owned when the fuel was received at 
the facility and acquired at the facility during the compliance 
period. Any MVNRLM diesel fuel produced (apart from redesignation of 
NTDF to MVNRLM diesel fuel) or imported into the facility must also 
be included in this volume.
MVNRLMO = the total volume of all batches of fuel 
designated as MVNRLM diesel fuel owned and sold or transferred to 
other parties at the facility during the compliance period.
MVNRLMINVCHG = the volume of MVNRLM diesel fuel owned at 
the end of the compliance period minus the volume of MVNRLM diesel 
fuel owned at the beginning of the compliance period, including 
accounting for any corrections in inventory due to volume swell or 
shrinkage, difference in measurement calibration between receiving 
and delivering meters, and similar matters, where corrections that 
increase inventory are defined as positive.

    (i) If MVNRLMBAL is greater than 0, an RVO is incurred 
by the redesignating party for the volume of diesel fuel equal to 
MVNRLM. The redesignating party must also comply with all of the 
following:
    (A) The reporting requirements of Sec.  80.1451(a)(1)(xix).
    (B) The recordkeeping requirements of Sec.  80.1454(t).
    (C) The attest engagement requirements of Sec. Sec.  80.1464 and 
80.1475, as applicable.
    (ii) If MVNRLMBAL is less than or equal to 0, no RVO is 
incurred by the redesignating party for any redesignated certified 
NTDF. These parties must comply with all of the following:
    (A) The reporting requirements of Sec.  80.1451(i).
    (B) The recordkeeping requirements of Sec.  80.1454(t).
    (b) Parties that incur an RVO under paragraph (a)(2)(i) of this 
section must comply with all applicable requirements for obligated 
parties under this subpart.
    (c) The provisions of this section do not apply to gasoline or 
diesel fuel that is designated for export.

0
27. Section 80.1415 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  80.1415  How are equivalence values assigned to renewable fuel?

* * * * *
    (c) * * *
    (4) Applications for equivalence values must be sent to the 
attention of ``RFS2 Program (Equivalence Value Application)'' to the 
address in Sec.  80.10(a).
* * * * *

0
28. Section 80.1426 is amended:
0
a. By revising the section heading and paragraphs (a)(1)(iii), (a)(2), 
and (c)(4) and (5); and
0
b. In paragraph (f)(1), in Table 1 to Sec.  80.1426, by revising the 
entries F, H, I, and M.
    The revisions read as follows:


Sec.  80.1426  How are RINs generated and assigned to batches of 
renewable fuel?

    (a) * * *
    (1) * * *
    (iii) The fuel was produced in compliance with the registration 
requirements of Sec.  80.1450, the reporting requirements of Sec.  
80.1451, the recordkeeping requirements of Sec.  80.1454, all 
conditions set forth in an approval document for a pathway petition 
submitted under Sec.  80.1416, and all other applicable regulations of 
this subpart M.
* * * * *
    (2) To generate RINs for imported renewable fuel, including any 
renewable fuel contained in imported transportation fuel, heating oil, 
or jet fuel, importers must obtain information from a non-RIN-
generating foreign renewable fuel producer that is registered pursuant 
to Sec.  80.1450 sufficient to make the appropriate determination 
regarding the applicable D code and compliance with the renewable 
biomass definition for each imported batch for which RINs are 
generated.
* * * * *
    (c) * * *
    (4) Importers shall not generate RINs for renewable fuel imported 
from a non-RIN-generating foreign renewable fuel producer unless the 
foreign renewable fuel producer is registered with EPA as required in 
Sec.  80.1450.
    (5) Importers shall not generate RINs for renewable fuel that has 
already been assigned RINs by a RIN-generating foreign renewable fuel 
producer.
* * * * *
    (f) * * *
    (1) * * *

         Table 1 to Sec.   80.1426--Applicable D Codes for Each Fuel Pathway for Use in Generating RINs
----------------------------------------------------------------------------------------------------------------
                                                                             Production process
                         Fuel type                  Feedstock                   requirements            D-code
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
F...............  Biodiesel, renewable     Soy bean oil; Oil from       One of the following:                  4
                   diesel, jet fuel and     annual covercrops; Oil       Transesterification with
                   heating oil.             from algae grown             or without esterification
                                            photosynthetically;          pre-treatment, or
                                            Biogenic waste oils/fats/    Hydrotreating; excludes
                                            greases; Camelina sativa     processes that co-process
                                            oil; Distillers corn oil;    renewable biomass and
                                            Distillers sorghum oil;      petroleum.
                                            Commingled distillers corn
                                            oil and sorghum oil.
 
                                                  * * * * * * *
H...............  Biodiesel, renewable     Soy bean oil; Oil from       One of the following:                  5
                   diesel, jet fuel and     annual covercrops; Oil       Transesterification with
                   heating oil.             from algae grown             or without esterification
                                            photosynthetically;          pre-treatment, or
                                            Biogenic waste oils/fats/    Hydrotreating; includes
                                            greases; Camelina sativa     only processes that co-
                                            oil; Distillers corn oil;    process renewable biomass
                                            Distillers sorghum oil;      and petroleum.
                                            Commingled distillers corn
                                            oil and sorghum oil.
I...............  Naphtha, LPG...........  Camelina sativa oil;         Hydrotreating..............            5
                                            Distillers sorghum oil;
                                            Distillers corn oil;
                                            Commingled distillers corn
                                            oil and distillers sorghum
                                            oil.
 

[[Page 7076]]

 
                                                  * * * * * * *
M...............  Renewable Gasoline and   Crop residue, slash, pre-    Catalytic Pyrolysis and                3
                   Renewable Gasoline       commercial thinnings, tree   Upgrading, Gasification
                   Blendstock; Co-          residue, and separated       and Upgrading, Thermo-
                   Processed Cellulosic     yard waste; biogenic         Catalytic
                   Diesel, Jet Fuel, and    components of separated      Hydrodeoxygenation and
                   Heating Oil.             MSW; cellulosic components   Upgrading, Direct
                                            of separated food waste;     Biological Conversion,
                                            and cellulosic components    Biological Conversion and
                                            of annual cover crops.       Upgrading utilizing
                                                                         natural gas, biogas, and/
                                                                         or biomass as the only
                                                                         process energy sources
                                                                         providing that process
                                                                         used converts cellulosic
                                                                         biomass to fuel; any
                                                                         process utilizing biogas
                                                                         and/or biomass as the only
                                                                         process energy sources
                                                                         which converts cellulosic
                                                                         biomass to fuel.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------

* * * * *

0
29. Section 80.1427 is amended by revising the definition of 
``RVOi'' in paragraph (b)(2) and by revising paragraph 
(c)(2) to read as follows:


Sec.  80.1427  How are RINs used to demonstrate compliance?

* * * * *
    (b) * * *
    (2) * * *
    RVOi = The Renewable Volume Obligation for the obligated 
party or exporter of renewable fuel for calendar year i, in gallons.
* * * * *
    (c) * * *
    (2) In fulfillment of its ERVOs, each exporter of renewable fuel is 
subject to the provisions of paragraphs (a)(2), (3), (6), and (8) of 
this section.
* * * * *

0
30. Section 80.1429 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  80.1429  Requirements for separating RINs from volumes of 
renewable fuel.

* * * * *
    (b) * * *
    (3) Any exporter of renewable fuel must separate any RINs that have 
been assigned to the exported renewable fuel volume. An exporter of 
renewable fuel may separate up to 2.5 RINs per gallon of exported 
renewable fuel.
* * * * *

0
31. Section 80.1430 is amended by paragraph (a), the definition of 
``k'' in paragraph (b)(1), and paragraphs (c), (d)(1), and (e) 
introductory text and adding paragraph (h) to read as follows:


Sec.  80.1430  Requirements for exporters of renewable fuels.

    (a) Any exporter of renewable fuel, whether in its neat form or 
blended shall acquire sufficient RINs to comply with all applicable 
Renewable Volume Obligations under paragraphs (b) through (e) of this 
section representing the exported renewable fuel. No provision of this 
section applies to renewable fuel purchased directly from the renewable 
fuel producer and for which the exporter of renewable fuel can 
demonstrate that no RINs were generated through the recordkeeping 
requirements of Sec.  80.1454(a)(6).
    (b) * * *
    (1) * * *
    k = A discrete volume of renewable fuel that the exporter of 
renewable fuel knows or has reason to know is cellulosic biofuel that 
is exported in a single shipment.
* * * * *
    (c) If the exporter of renewable fuel knows or has reason to know 
that a volume of exported renewable fuel is cellulosic diesel, the 
exporter of renewable fuel must treat the exported volume as either 
cellulosic biofuel or biomass-based diesel when determining his 
Renewable Volume Obligations pursuant to paragraph (b) of this section.
    (d) * * *
    (1) If the equivalence value for a volume of exported renewable 
fuel can be determined pursuant to Sec.  80.1415 based on its 
composition, then the appropriate equivalence value shall be used in 
the calculation of the exporter of renewable fuel's Renewable Volume 
Obligations under paragraph (b) of this section.
* * * * *
    (e) For renewable fuels that are in the form of a blend at the time 
of export, the exporter of renewable fuel shall determine the volume of 
exported renewable fuel based on one of the following:
* * * * *
    (h) Each person meeting the definition of exporter of renewable 
fuel for a particular export transaction is jointly and severally 
liable for completion of the requirements of this section and all 
associated RIN retirement demonstration, registration, reporting, and 
attest engagement obligations under this subpart. However, these 
requirements for exporters of renewable fuel must be met only once for 
any export transaction.

0
32. Section 80.1431 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  80.1431  Treatment of invalid RINs.

* * * * *
    (b) * * *
    (2) Invalid RINs cannot be used to achieve compliance with the 
Renewable Volume Obligations of an obligated party or exporter of 
renewable fuel, regardless of the party's good faith belief that the 
RINs were valid at the time they were acquired.
* * * * *

0
33. Section 80.1434 is added to read as follows:


Sec.  80.1434  RIN retirement.

    (a) A RIN must be retired in any of the following cases:
    (1) Demonstrate annual compliance. Except as specified in paragraph 
(b) of this section or Sec.  80.1456, each party that is an obligated 
party under Sec.  80.1406 and is obligated to meet the RVO under Sec.  
80.1407 must retire a sufficient number of RINs to demonstrate 
compliance with an applicable RVO.
    (2) Exported renewable fuel. Any exporter of renewable fuel that 
incurs an ERVO as described in Sec.  80.1430(a) shall retire RINs 
pursuant to Sec. Sec.  80.1430(b) through (g) and 80.1427(c).
    (3) Volume error correction. A RIN must be retired when it was 
based on incorrect volumes or volumes that have not been standardized 
to 60 [deg]F as described in Sec.  80.1426(f)(8).
    (4) Import volume correction. Where the port of entry volume is the 
lesser of the two volumes in Sec.  80.1466(e)(1)(i), the importer shall 
calculate the

[[Page 7077]]

difference between the number of RINs originally assigned by the 
foreign producer and the number of RINs calculated under Sec.  80.1426 
for the volume of renewable fuel as measured at the port of entry, and 
retire that amount of RINs in accordance with Sec.  80.1466(k)(4).
    (5) Spillage or disposal of renewable fuels. Except as provided in 
Sec.  80.1432(c), in the event that a reported spillage or disposal of 
any volume of renewable fuel, the owner of the renewable fuel must 
notify any holder or holders of the attached RINs and retire a number 
of gallon-RINs corresponding to the volume of spilled or disposed of 
renewable fuel multiplied by its equivalence value in accordance with 
Sec.  80.1432(b).
    (6) Contaminated or spoiled fuel. In the event that contamination 
or spoliation of any volume of renewable fuel is reported, the owner of 
the renewable fuel must notify any holder or holders of the attached 
RINs and retire a number of gallon-RINs corresponding to the volume of 
contaminated or spoiled renewable fuel multiplied by its equivalence 
value.
    (i) If the equivalence value for the contaminated or spoiled volume 
may be determined pursuant to Sec.  80.1415 based on its composition, 
then the appropriate equivalence value shall be used.
    (ii) If the equivalence value for a contaminated or spoiled volume 
of renewable fuel cannot be determined, the equivalence value shall be 
1.0.
    (iii) If the owner of a volume of renewable fuel that is 
contaminated or spoiled and reported establishes that no RINs were 
generated to represent the volume, then no gallon-RINs shall be 
retired.
    (7) Delayed RIN generation. In the event that a party generated a 
delayed RIN as described in Sec.  80.1426(g)(1) through (4), parties 
must retire RINs as described in accordance with Sec.  80.1426(g)(5) 
and (6).
    (8) Invalid RIN. In the case that a RIN is invalid as described in 
Sec.  80.1431(a), the RIN will be considered invalid and must be 
retired as described in Sec.  80.1431(b).
    (9) Potentially invalid RINs. In the case that a RIN is identified 
as a PIR under Sec.  80.1474(b)(1), the PIRs or replacement RINs must 
be retired as described in Sec.  80.1474(b)(2) through (5).
    (10) Replacement. As required by Sec.  80.1431(b) or Sec.  80.1474, 
any party that must replace an invalid RIN or PIR that was used for 
compliance must retire valid RINs to replace the invalid RINs 
originally used for any RVO.
    (11) Other. Any other instance identified by EPA.
    (b) In the case that retirement of a RIN is necessary, the 
following provisions apply:
    (1) Any party affected by such retirement must keep copies and 
adjust its records, reports, and compliance calculations in which the 
retired RIN was used.
    (2) The retired RIN must be reported in the applicable reports 
under Sec.  80.1451.
    (3) The retired RIN must be reported in the EPA Moderated 
Transaction System pursuant to Sec.  80.1452(c).
    (4) Where the importer of renewable fuel is required to retire RINs 
under paragraph (a)(5) of this section, the importer must report the 
retired RINs in the applicable reports under Sec. Sec.  80.1451, 
80.1466(k), and 80.1466(m).

0
34. Section 80.1440 is amended by revising the section heading and 
paragraph (a) and adding paragraph (f) to read as follows:


Sec.  80.1440  What are the provisions for blenders who handle and 
blend less than 250,000 gallons of renewable fuel per year or who 
handle renewable fuel blended for fuels under a national security 
exemption?

    (a)(1) Renewable fuel blenders who handle and blend less than 
250,000 gallons of renewable fuel per year, and who do not have one or 
more reported or unreported Renewable Volume Obligations, are permitted 
to delegate their RIN-related responsibilities to the party directly 
upstream of them who supplied the renewable fuel for blending.
    (2) Renewable fuel blenders who handle and blend renewable fuel for 
parties that have a national security exemption under paragraph (f) of 
this section, or a national security exemption under any other subpart 
of 40 CFR part 80 (e.g., Sec. Sec.  80.606, 80.1655), and who do not 
have one or more reported or unreported Renewable Volume Obligations, 
are permitted to delegate their RIN-related responsibilities to the 
party directly upstream of them who supplied the renewable fuel for 
blending.
* * * * *
    (f) The requirements described in paragraph (b) of this section may 
be delegated directly upstream for renewable fuel (neat or blended) 
that is produced, imported, sold, offered for sale, supplied, offered 
for supply, stored, dispensed, or transported for use in any of the 
following:
    (1) Tactical military vehicles, engines, or equipment having an EPA 
national security exemption from emission standards under 40 CFR 
85.1708, 89.908, 92.908, 94.908, 1042.635, or 1068.225.
    (2) Tactical military vehicles, engines, or equipment that are not 
subject to a national security exemption from vehicle or engine 
emissions standards as described in paragraph (f)(1) of this section 
but, for national security purposes (for purposes of readiness for 
deployment overseas), need to be fueled on the same transportation 
fuel, heating oil, or jet fuel as the vehicles, engines, or equipment 
for which EPA has granted such a national security exemption.

0
35. Section 80.1441 is amended by revising paragraph (h) to read as 
follows:


Sec.  80.1441  Small refinery exemption.

* * * * *
    (h) Verification letters under paragraph (b) of this section, 
petitions for small refinery hardship extensions under paragraph (e) of 
this section, and small refinery exemption waiver notices under 
paragraph (f) of this section shall be sent to the attention of ``RFS 
Program'' to the address in Sec.  80.10(a).

0
36. Section 80.1442 is amended by revising paragraph (i) to read as 
follows:


Sec.  80.1442  What are the provisions for small refiners under the RFS 
program?

* * * * *
    (i) Small refiner status verification letters, small refiner 
exemption waivers, or applications for extensions of the small refiner 
temporary exemption under this section must be sent to the attention of 
``RFS Program'' to the address in Sec.  80.10(a).

0
37. Section 80.1443 is amended by revising paragraph (d)(2) to read as 
follows:


Sec.  80.1443  What are the opt-in provisions for noncontiguous states 
and territories?

* * * * *
    (d) * * *
    (2) A petition submitted under this section should be sent to the 
attention of ``RFS Program'' to the address in Sec.  80.10(a).
* * * * *

0
38. Section 80.1449 is amended by revising paragraph (d) to read as 
follows:


Sec.  80.1449  What are the Production Outlook Report requirements?

* * * * *
    (d) Production outlook reports shall be sent to the attention of 
``RFS Program (Production Output Reports)'' to the address in Sec.  
80.10(a).
* * * * *

0
39. Section 80.1450 is amended by revising paragraphs (b) introductory 
text, (b)(1)(vii)(A)(1), (b)(1)(vii)(B), (b)(1)(viii)(A), (b)(1)(ix)(A) 
introductory

[[Page 7078]]

text, (b)(1)(xi)(A) and (B), the first sentence of paragraph (d)(1), 
and paragraphs (g)(9) and (h) to read as follows:


Sec.  80.1450  What are the registration requirements under the RFS 
program?

* * * * *
    (b) Producers. Any RIN-generating foreign producer, any non-RIN-
generating foreign producer, or any domestic renewable fuel producer 
that generates RINs must provide EPA the information specified under 
Sec.  80.76 if such information has not already been provided under the 
provisions of this part, and must receive EPA-issued company and 
facility identification numbers prior to the generation of any RINs for 
their fuel or for fuel made with their ethanol. Unless otherwise 
specifically indicated, all the following registration information must 
be submitted and accepted by EPA by July 1, 2010, or 60 days prior to 
the generation of RINs, whichever date comes later, subject to this 
subpart:
    (1) * * *
    (vii) * * *
    (A) * * *
    (1) The location of any establishment from which the waste stream 
consisting solely of separated yard waste is collected.
* * * * *
    (B) For a producer of renewable fuel or a foreign producer of 
ethanol made from separated food waste per Sec.  80.1426(f)(5)(i)(B) or 
from biogenic waste oils/fats/greases:
    (1) A plan documenting the type(s) of separated food waste or 
biogenic waste oils/fats/greases, the type(s) of establishment from 
which the waste is collected, how the waste will be collected, a 
description of ongoing verification measures that demonstrate such 
waste consists only of food waste (and an incidental amount of other 
components such as paper and plastics) or biogenic waste oils/fats/
greases that is kept separate from other waste materials, and if 
applicable, how the cellulosic and non-cellulosic portions of the waste 
will be quantified.
    (2) [Reserved]
* * * * *
    (viii) * * *
    (A) The location of the municipal waste establishment(s) from which 
the separated municipal solid waste is collected or from which material 
is collected that will be processed to produce separated municipal 
solid waste.
* * * * *
    (ix) * * *
    (A) For a producer of ethanol from grain sorghum or a foreign 
ethanol producer making product from grain sorghum and seeking to have 
it sold as renewable fuel after addition of ethanol denaturant, provide 
a plan that has been submitted and accepted by U.S. EPA that includes 
the following information:
* * * * *
    (xi) * * *
    (A) An affidavit from the producer of the fuel oil meeting 
paragraph (2) of the definition of ``heating oil'' in Sec.  80.1401 
stating that the fuel oil for which RINs have been generated will be 
sold for the purposes of heating or cooling interior spaces of homes or 
buildings to control ambient climate for human comfort, and no other 
purpose.
    (B) Affidavits from the final end user or users of the fuel oil 
stating that the fuel oil meeting paragraph (2) of the definition of 
``heating oil'' in Sec.  80.1401 is being used or will be used for 
purposes of heating or cooling interior spaces of homes or buildings to 
control ambient climate for human comfort, and no other purpose, and 
acknowledging that any other use of the fuel oil would violate EPA 
regulations and subject the user to civil and/or criminal penalties 
under the Clean Air Act.
* * * * *
    (d) * * *
    (1) Any producer of renewable fuel or any foreign ethanol producer 
that makes changes to their facility that will allow them to produce 
renewable fuel that is not reflected in the producer's registration 
information on file with EPA must update their registration information 
and submit a copy of an updated independent third-party engineering 
review on file with EPA at least 60 days prior to producing the new 
type of renewable fuel. * * *
* * * * *
    (g) * * *
    (9) Registration updates. (i) Any independent third-party auditor 
who makes changes to its quality assurance plan(s) that will allow it 
to audit new renewable fuel production facilities, as defined in Sec.  
80.1401, that is not reflected in the independent third-party auditor's 
registration information on file with EPA must update its registration 
information and submit a copy of an updated QAP on file with EPA at 
least 60 days prior to auditing new renewable fuel production 
facilities.
    (ii) Any independent third-party auditor who makes any changes 
other than those specified in paragraphs (g)(9)(i), (iii), and (iv) of 
this section that will affect the third-party auditor's registration 
information must update its registration information 7 days prior to 
the change.
    (iii) Independent third-party auditors must update their QAPs at 
least 60 days prior to verifying RINs generated by a renewable fuel 
facility for a pathway not covered in the independent third-party 
auditor's QAPs.
    (iv) Independent third-party auditors must update their QAPs at 
least 60 days prior to verifying RINs generated by any renewable fuel 
facility not identified in the independent third-party auditor's 
existing registration.
* * * * *
    (h) Deactivation of registration. (1) EPA may deactivate the 
registration of any party required to register under this section Sec.  
80.1450, using the process in paragraph (h)(2) of this section, if any 
of the following criteria are met:
    (i) The party has reported no activity in EMTS for twenty-four 
consecutive months.
    (ii) The party has failed to comply with the registration 
requirements of this section.
    (iii) The party has failed to submit any required notification or 
report within 30 days of the required submission date under Sec.  
80.1451.
    (iv) The attest engagement required under Sec.  80.1464 has not 
been received within 30 days of the required submission date.
    (v) The party fails to pay a penalty or to perform any requirements 
under the terms of a court order, administrative order, consent decree, 
or administrative settlement between the party and EPA.
    (vi) The party submits false or incomplete information.
    (vii) The party denies EPA access or prevents EPA from completing 
authorized activities under sections 114 or 208 of the Clean Air Act 
despite presenting a warrant or court order. This includes a failure to 
provide reasonable assistance.
    (viii) The party fails to keep or provide the records required by 
this subpart.
    (ix) The party otherwise circumvents the intent of the Clean Air 
Act or of this subpart.
    (2) Except as provided in paragraph (h)(3) of this section, EPA 
will use the following process whenever it decides to deactivate the 
registration of a party:
    (i) EPA will provide written notification to the responsible 
corporate officer identifying the reasons or deficiencies for which EPA 
intends to deactivate the party's registration. The party will have 
fourteen calendar days from the date of the notification to correct the 
deficiencies identified or explain why there is no need for corrective 
action.
    (ii) If the basis for EPA's notice of intent to deactivate 
registration is the

[[Page 7079]]

absence of EMTS activity under paragraph (h)(1)(i) of this section, a 
stated intent to engage in activity reported through EMTS will be 
sufficient to avoid deactivation of registration.
    (iii) If the party does not correct identified deficiencies under 
paragraphs (h)(1)(ii) through (ix) of this section, or does not provide 
an adequate explanation regarding why such correction is not necessary 
within the time allotted for response, EPA may deactivate the party's 
registration without further notice to the party.
    (3) In instances of willfulness or those in which public health, 
interest, or safety requires otherwise, EPA may deactivate the 
registration of the party without any notice to the party. EPA will 
provide written notification to the responsible corporate officer 
identifying the reasons EPA deactivated the registration of the party.
    (4) Impact of registration deactivation:
    (i) A party whose registration is deactivated shall still be liable 
for violation of any requirements of this subpart.
    (ii) A party whose registration is deactivated will not be listed 
on any public list of actively registered parties that is maintained by 
EPA.
    (iii) A party whose registration is deactivated will not have 
access to any of the electronic reporting systems associated with the 
renewable fuel standard program, including the EPA Moderated 
Transaction System (EMTS).
    (iv) A party whose registration is deactivated must submit any 
corrections of deficiencies to EPA on forms, and following policies, 
established by EPA.
    (v) If a party whose registration has been deactivated wishes to 
re-register, they may seek to do so by submitting a new registration 
pursuant to the requirements in paragraphs (a) through (c), (e), and 
(g) of this section, as applicable.
* * * * *

0
40. Section 80.1451 is amended by:
0
a. Revising paragraphs (a)(1)(i) and (v);
0
b. Adding paragraph (a)(1)(xix);
0
c. Revising paragraphs (a)(4), (b) introductory text, (b)(1)(ii)(D) and 
(I), (g)(1)(ii)(D) and (I);
0
d. Redesignating paragraphs (i) and (j) as paragraphs (j) and (k); and
0
e. Adding new paragraph (i). The revisions and additions read as 
follows:


Sec.  80.1451  What are the reporting requirements under the RFS 
program?

    (a) * * *
    (1) * * *
    (i) The obligated party's or exporter of renewable fuel's name.
* * * * *
    (v)(A) For the 2010 through 2019 compliance periods, the production 
volume and import volume of all of the products listed in Sec.  
80.1407(c) and (e) for the compliance period.
    (B) For the 2020 compliance period, separately, the production 
volume and import volume of all of the gasoline products listed in 
Sec.  80.1407(c), the production volume and import volume of all of the 
MVNRLM diesel fuel products listed in Sec.  80.1407(e), and the 
combined volume of all gasoline products and MVNRLM diesel fuel listed 
in Sec.  80.1407(c) and (e) for the compliance period.
    (C) Beginning with the 2021 compliance period, separately, the 
production volume and import volume for the compliance period of all of 
the following:
    (1) All of the gasoline products listed in Sec.  80.1407(c).
    (2) All of the MVNRLM diesel fuel products listed in Sec.  
80.1407(e).
    (3) The combined production volume of all gasoline products and 
MVNRLM diesel fuel.
    (4) Distillate fuel that is not transportation fuel.
    (5) Distillate fuel that is certified NTDF.
* * * * *
    (xix) For parties that redesignate certified NTDF as MVNRLM diesel 
fuel under Sec.  80.1408 at any time during the compliance period, the 
volumes MVNRLMBAL, MVNRLMO, 
MVNRLMINVCHG, and MVNRLMI as calculated in Sec.  
80.1408(a)(2).
* * * * *
    (4) Reports required under this paragraph (a) must be signed and 
certified as meeting all the applicable requirements of this subpart by 
the owner or a responsible corporate officer of the obligated party or 
exporter of renewable fuel.
    (b) Renewable fuel producers (domestic and foreign) and importers. 
Any domestic producer or importer of renewable fuel who generates RINs, 
or any RIN-generating foreign producer must submit to EPA reports 
according to the schedule, and containing all of the following 
information:
    (1) * * *
    (ii) * * *
    (D) The importer EPA facility registration number and foreign 
renewable fuel producer company registration number, if applicable.
* * * * *
    (I) The volume of ethanol denaturant and applicable equivalence 
value of each batch.
* * * * *
    (g) * * *
    (1) * * *
    (ii) * * *
    (D) The importer EPA facility registration number and foreign 
renewable fuel producer company registration number, if applicable.
* * * * *
    (I) The volume of ethanol denaturant and applicable equivalence 
value of each verified batch.
* * * * *
    (i) Parties that redesignate certified NTDF as MVNRLM diesel fuel 
under Sec.  80.1408 at any time during the compliance period, but do 
not incur an RVO under Sec.  80.1408(a)(2)(i), must submit a report to 
EPA stating that they redesignated certified NTDF to MVNRLM diesel fuel 
during the compliance period, but that their net redesignated volume 
was less than or equal to zero, and they therefore did not incur an RVO 
for the compliance period.
* * * * *

0
41. Section 80.1452 is amended by revising paragraph (b)(11) and the 
last sentence in paragraph (c) introductory text to read as follows:


Sec.  80.1452  What are the requirements related to the EPA Moderated 
Transaction System (EMTS)?

* * * * *
    (b) * * *
    (11) The volume of ethanol denaturant and applicable equivalence 
value of each batch.
* * * * *
    (c) * * * The reportable event for a RIN separation or retirement 
occurs on the date of separation or retirement as described in Sec.  
80.1429 or Sec.  80.1434.
* * * * *

0
42. Section 80.1453 is amended by revising paragraphs (b) and (d) and 
adding paragraph (e) to read as follows:


Sec.  80.1453  What are the product transfer document (PTD) 
requirements for the RFS program?

* * * * *
    (b) Except for transfers to truck carriers, retailers, or wholesale 
purchaser-consumers, product codes may be used to convey the 
information required under paragraphs (a)(1) through (11) and (e) of 
this section if such codes are clearly understood by each transferee.
* * * * *
    (d) For fuel oil meeting paragraph (2) of the definition of 
``heating oil'' in Sec.  80.1401, the PTD of the fuel oil shall state: 
``This volume of renewable fuel oil is designated and intended to be 
used to heat or cool interior spaces of homes or buildings to control 
ambient

[[Page 7080]]

climate for human comfort. Do NOT use for process heat or cooling or 
any other purpose, as these uses are prohibited pursuant to 40 CFR 
80.1460(g).''.
    (e) Beginning January 1, 2021, on each occasion when any party 
transfers custody or ownership of certified NTDF, except when such fuel 
is dispensed into motor vehicles or nonroad vehicles, engines, or 
equipment, the transferor must provide to the transferee documents that 
include all the following information, as applicable:
    (1) The transferor of certified NTDF must list all applicable 
required information as specified at Sec.  80.590 and, if the 
distillate fuel contains renewable fuel, all applicable required 
information in paragraphs (a), (b), and (d) of this section.
    (2) The transferor must include the following statement on the PTD: 
``15 ppm sulfur (maximum) certified NTDF--This fuel is designated for 
non-transportation use.''

0
43. Section 80.1454 is amended by:
0
a. Revising paragraphs (a) introductory text, (a)(1), (d)(4), 
(h)(6)(iii), (j) introductory text, (j)(1), and (j)(2) introductory 
text;
0
b. Removing vacant paragraph (k) designation;
0
c. Revising paragraphs (n) and (q);
0
d. Redesignating paragraph (t) as paragraph (w); and
0
e. Adding new paragraph (t).
    The revisions and addition reads as follows:


Sec.  80.1454  What are the recordkeeping requirements under the RFS 
program?

    (a) Requirements for obligated parties and exporters of renewable 
fuel. Beginning July 1, 2010, any obligated party (as described at 
Sec.  80.1406) or exporter of renewable fuel (as described at Sec.  
80.1430) must keep all of the following records:
    (1) Product transfer documents consistent with Sec.  80.1453 and 
associated with the obligated party's or exporter of renewable fuel's 
activity, if any, as transferor or transferee of renewable fuel or 
separated RINs.
* * * * *
    (d) * * *
    (4) Domestic producers of renewable fuel made from any other type 
of renewable biomass must have documents from their feedstock supplier 
certifying that the feedstock qualifies as renewable biomass as defined 
in Sec.  80.1401, describing the feedstock. Separated yard and food 
waste, biogenic oils/fats/greases, and separated municipal solid waste 
are also subject to the requirements in paragraph (j) of this section.
* * * * *
    (h) * * *
    (6) * * *
    (iii) The survey plan must be sent to the attention of ``RFS 
Program'' to the address in Sec.  80.10(a).
* * * * *
    (j) A renewable fuel producer that produces fuel from separated 
yard waste (as described in Sec.  80.1426(f)(5)(i)(A)), separated food 
waste (as described in Sec.  80.1426(f)(5)(i)(B)), separated municipal 
solid waste (as described in Sec.  80.1426(f)(5)(i)(C)), or biogenic 
waste oils/fats/greases must keep all the following additional records:
    (1) For separated yard waste, separated food waste, and biogenic 
waste oils/fats/greases:
    (i) Documents demonstrating the amounts, by weight, purchased of 
separated yard waste, separated food waste, or biogenic waste oils/
fats/greases for use as a feedstock in producing renewable fuel.
    (ii) Documents demonstrating the location of any establishment(s) 
from which the waste stream consisting solely of separated yard waste, 
separated food waste, or biogenic waste oils/fats/greases is collected.
    (iii) Such other records as may be requested by the Administrator.
    (2) For separated municipal solid waste:
* * * * *
    (n) The records required under paragraphs (a) through (d), (f) 
through (l), and (t) of this section and under Sec.  80.1453 shall be 
kept for five years from the date they were created, except that 
records related to transactions involving RINs shall be kept for five 
years from the date of the RIN transaction.
* * * * *
    (q) The records required in paragraphs (b)(3) and (c)(1) of this 
section must be transferred with any renewable fuel sent to the 
importer of that renewable fuel by any non-RIN-generating foreign 
producer.
* * * * *
    (t) Requirements for parties that redesignate certified NTDF as 
MVNRLM diesel fuel. Parties that redesignate certified NTDF as MVNRLM 
diesel fuel under Sec.  80.1408 must keep all of the following 
additional records:
    (1) Records related to all transactions in which certified NTDF is 
redesignated as MVNRLM diesel fuel.
    (2) Records related to all transactions in which MVNRLM diesel fuel 
is redesignated to a non-transportation use.
    (3) Records related to the volume of MVNRLM diesel fuel received.
    (4) Records related to the volume of MVNRLM diesel fuel delivered.
    (5) Records related to the volume of certified NTDF received.
    (6) Records related to the volume of certified NTDF delivered.
* * * * *

0
44. Section 80.1460 is amended by adding paragraph (b)(7), revising 
paragraph (g), and adding paragraph (j) to read as follows:


Sec.  80.1460  What acts are prohibited under the RFS program?

* * * * *
    (b) * * *
    (7) Generate a RIN for fuel that fails to meet all the conditions 
set forth in an approval document for a pathway petition submitted 
under Sec.  80.1416.
* * * * *
    (g) Failing to use a renewable fuel oil for its intended use. No 
person shall use fuel oil that meets paragraph (2) of the definition of 
``heating oil'' in Sec.  80.1401 and for which RINs have been generated 
in an application other than to heat or cool interior spaces of homes 
or buildings to control ambient climate for human comfort.
* * * * *
    (j) Redesignation violations. No person may exceed the balance 
requirements at Sec.  80.1408(a)(2)(i) without incurring an RVO.

0
45. Section 80.1461 is amended by revising paragraphs (a)(1) and (2) to 
read as follows:


Sec.  80.1461.  Who is liable for violations under the RFS program?

    (a) * * *
    (1) Any person who violates a prohibition under Sec.  80.1460(a) 
through (d) or Sec.  80.1460(g) through (j) is liable for the violation 
of that prohibition.
    (2) Any person who causes another person to violate a prohibition 
under Sec.  80.1460(a) through (d) or Sec.  80.1460(g) through (j) is 
liable for a violation of Sec.  80.1460(e).
* * * * *

0
46. Section 80.1463 is amended by revising paragraph (d) to read as 
follows:


Sec.  80.1463  What penalties apply under the RFS program?

* * * * *
    (d) Any person liable under Sec.  80.1461(a) for a violation of 
Sec.  80.1460(b)(1) through (4), (6), or (7) is subject to a separate 
day of violation for each day that an invalid RIN remains available for 
an obligated party or exporter of renewable fuel to demonstrate 
compliance with the RFS program.

0
47. Section 80.1464 is amended by revising paragraphs (a) introductory 
text, (a)(1)(i)(A), (a)(1)(iii), (a)(1)(iv)

[[Page 7081]]

introductory text, (a)(1)(iv)(A) and (D), and (a)(1)(v), adding 
paragraph (a)(1)(vii), and revising the first sentence of paragraph 
(b)(1)(ii) to read as follows:


Sec.  80.1464  What are the attest engagement requirements under the 
RFS program?

* * * * *
    (a) Obligated parties and exporters of renewable fuel. The 
following attest procedures shall be completed for any obligated party 
(as described at Sec.  80.1406(a)) or exporter of renewable fuel (as 
described at Sec.  80.1430):
    (1) * * *
    (i) * * *
    (A) The obligated party's volume of all products listed in Sec.  
80.1407(c) and (e), or the exporter of renewable fuel's volume of each 
category of exported renewable fuel identified in Sec.  80.1430(b)(1) 
through (b)(4).
* * * * *
    (iii) For obligated parties, compare the volumes of products listed 
in Sec.  80.1407(c), (e), and (f) reported to EPA in the report 
required under Sec.  80.1451(a)(1) with the volumes, excluding any 
renewable fuel volumes, contained in the inventory reconciliation 
analysis under Sec.  80.133 and the volume of non-renewable diesel 
produced or imported. Verify that the volumes reported to EPA agree 
with the volumes in the inventory reconciliation analysis and the 
volumes of non-renewable diesel produced or imported, and report as a 
finding any exception.
    (iv) For exporters of renewable fuel, perform all of the following:
    (A) Obtain the database, spreadsheet, or other documentation that 
the exporter of renewable fuel maintains for all exported renewable 
fuel.
* * * * *
    (D) Select sample batches in accordance with the guidelines in 
Sec.  80.127 from each separate category of renewable fuel exported and 
identified in Sec.  80.1451(a); obtain invoices, bills of lading and 
other documentation for the representative samples; state whether any 
of these documents refer to the exported fuel as advanced biofuel or 
cellulosic biofuel; and report as a finding whether or not the exporter 
of renewable fuel calculated an advanced biofuel or cellulosic biofuel 
RVO for these fuels pursuant to Sec.  80.1430(b)(1) or (3).
    (v) Compute and report as a finding the RVOs for the obligated 
party or exporter of renewable fuel, and any deficit RVOs carried over 
from the previous year or carried into the subsequent year, and verify 
that the values agree with the values reported to EPA.
* * * * *
    (vii) For obligated parties that redesignate certified NTDF as 
MVNRLM diesel fuel under Sec.  80.1408, perform the additional attest 
engagement procedures described at Sec.  80.1475 and report any 
findings in the report described in paragraph (d) of this section. 
Parties that do not incur an RVO under Sec.  80.1408(a)(2)(i) and do 
not otherwise need to complete an attest engagement under this 
paragraph (a) do not need to arrange for the additional attest 
engagement procedures under Sec.  80.1475 to be performed.
* * * * *
    (b) * * *
    (1) * * *
    (ii) Obtain production data for each renewable fuel batch by type 
of renewable fuel that was produced or imported during the year being 
reviewed; compute the RIN numbers, production dates, types, volumes of 
ethanol denaturant and applicable equivalence values, and production 
volumes for each batch; report the total RINs generated during the year 
being reviewed; and state whether this information agrees with the 
party's reports to EPA. * * *
* * * * *

0
48. Section 80.1466 is amended by:
0
a. Revising the section heading, paragraphs (a) and (b), the paragraph 
(c) subject heading, paragraphs (c)(1), (d)(1)(iii) and (v), 
(d)(1)(vi)(B), (d)(3)(ii), (e)(2)(ii), (f) introductory text, (f)(1) 
introductory text, (f)(1)(ii)(C), (f)(1)(v)(A) and (C), (f)(1)(vii), 
(f)(2), (f)(4) through (8), (g), and (h) introductory text;
0
b. In the equation in paragraph (h)(1) revising the definition ``G'';
0
c. Revising paragraphs (h)(3)(iii), (h)(4), (i), (j)(2) through (4), 
(k)(1), (k)(2)(ii), (k)(4)(ii), the paragraph (l) subject heading, 
paragraphs (l)(1) introductory text, (l)(2)(i), (l)(3), (m)(3)(ii), 
(m)(6)(i), (n) introductory text, (n)(1), (3), and (4), (o) 
introductory text, and (o)(2); and
0
d. Adding paragraph (p).
    The revisions and addition read as follows:


Sec.  80.1466  What are the additional requirements under this subpart 
for foreign renewable fuel producers and importers of renewable fuels?

    (a) Applicability. This section only applies to foreign renewable 
fuel producers that are located outside the United States, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
and the Commonwealth of the Northern Mariana Islands (collectively 
referred to in this section as ``the United States'').
    (b) General requirements. A registered foreign renewable fuel 
producer under this section must meet all requirements that apply to 
renewable fuel producers under this subpart.
    (c) Designation, RIN-generating foreign producer certification, and 
product transfer documents. (1) Any registered foreign renewable fuel 
producer must designate each batch of such renewable fuel as ``RFS-
FRRF'' at the time the renewable fuel is produced.
* * * * *
    (d) * * *
    (1) * * *
    (iii) Obtain the EPA-assigned registration number of the foreign 
renewable fuel producer.
* * * * *
    (v) Determine the date and time the vessel departs the port serving 
the RIN-generating foreign producer.
    (vi) * * *
    (B) That the RFS-FRRF remained segregated from Non-RFS-FRRF and 
other RFS-FRRF produced by a different foreign producer.
* * * * *
    (3) * * *
    (ii) Be independent under the criteria specified in Sec.  
80.65(f)(2)(iii); and
* * * * *
    (e) * * *
    (2) * * *
    (ii) Where the port of entry volume is the lesser of the two 
volumes in paragraph (e)(1)(i) of this section, the importer shall 
calculate the difference between the number of RINs originally assigned 
by the RIN-generating foreign producer and the number of RINs 
calculated under Sec.  80.1426 for the volume of renewable fuel as 
measured at the port of entry, and acquire and retire that amount of 
RINs in accordance with paragraph (k)(3) of this section.
    (f) Foreign producer commitments. Any foreign renewable fuel 
producer shall commit to and comply with the following provisions as a 
condition to being registered as a foreign renewable fuel producer 
under this subpart:
    (1) Any EPA inspector or auditor must be given full, complete, and 
immediate access to conduct inspections and audits of the foreign 
renewable fuel producer facility.
* * * * *
    (ii) * * *
    (C) Renewable fuel is stored or transported between the foreign 
renewable fuel producer and the United States, including storage tanks, 
vessels and pipelines.
* * * * *
    (v) * * *
    (A) The volume of renewable fuel.
* * * * *

[[Page 7082]]

    (C) Transfers of title or custody to renewable fuel.
* * * * *
    (vii) Any employee of the foreign renewable fuel producer must be 
made available for interview by the EPA inspector or auditor, on 
request, within a reasonable time period.
* * * * *
    (2) An agent for service of process located in the District of 
Columbia shall be named, and service on this agent constitutes service 
on the foreign renewable fuel producer or any employee of the foreign 
renewable fuel producer for any action by EPA or otherwise by the 
United States related to the requirements of this subpart.
* * * * *
    (4) United States substantive and procedural laws shall apply to 
any civil or criminal enforcement action against the foreign renewable 
fuel producer or any employee of the foreign renewable fuel producer 
related to the provisions of this section.
    (5) Applying to be an approved foreign renewable fuel producer 
under this section, or producing or exporting renewable fuel under such 
approval, and all other actions to comply with the requirements of this 
subpart relating to such approval constitute actions or activities 
covered by and within the meaning of the provisions of 28 U.S.C. 
1605(a)(2), but solely with respect to actions instituted against the 
foreign renewable fuel producer, its agents and employees in any court 
or other tribunal in the United States for conduct that violates the 
requirements applicable to the foreign renewable fuel producer under 
this subpart, including conduct that violates the False Statements 
Accountability Act of 1996 (18 U.S.C. 1001) and section 113(c)(2) of 
the Clean Air Act (42 U.S.C. 7413).
    (6) The foreign renewable fuel producer, or its agents or 
employees, will not seek to detain or to impose civil or criminal 
remedies against EPA inspectors or auditors for actions performed 
within the scope of EPA employment or contract related to the 
provisions of this section.
    (7) The commitment required by this paragraph shall be signed by 
the owner or president of the foreign renewable fuel producer company.
    (8) In any case where renewable fuel produced at a foreign 
renewable fuel production facility is stored or transported by another 
company between the production facility and the vessel that transports 
the renewable fuel to the United States, the foreign renewable fuel 
producer shall obtain from each such other company a commitment that 
meets the requirements specified in paragraphs (f)(1) through (7) of 
this section, and these commitments shall be included in the foreign 
renewable fuel producer's application to be an approved foreign 
renewable fuel producer under this subpart.
    (g) Sovereign immunity. By submitting an application to be an 
approved foreign renewable fuel producer under this subpart, or by 
producing and exporting renewable fuel to the United States under such 
approval, the foreign renewable fuel producer, and its agents and 
employees, without exception, become subject to the full operation of 
the administrative and judicial enforcement powers and provisions of 
the United States without limitation based on sovereign immunity, with 
respect to actions instituted against the foreign renewable fuel 
producer, its agents and employees in any court or other tribunal in 
the United States for conduct that violates the requirements applicable 
to the foreign renewable fuel producer under this subpart, including 
conduct that violates the False Statements Accountability Act of 1996 
(18 U.S.C. 1001) and section 113(c)(2) of the Clean Air Act (42 U.S.C. 
7413).
    (h) Bond posting. Any RIN-generating foreign producer shall meet 
the following requirements as a condition to approval as a RIN-
generating foreign producer under this subpart:
    (1) * * *
    G = the greater of: the largest volume of renewable fuel produced 
by the RIN-generating foreign producer and exported to the United 
States, in gallons, during a single calendar year among the five 
preceding calendar years, or the largest volume of renewable fuel that 
the Rin-generating foreign producers expects to export to the United 
States during any calendar year identified in the Production Outlook 
Report required by Sec.  80.1449. If the volume of renewable fuel 
exported to the United States increases above the largest volume 
identified in the Production Outlook Report during any calendar year, 
the RIN-generating foreign producer shall increase the bond to cover 
the shortfall within 90 days.
* * * * *
    (3) * * *
    (iii) Include a commitment that the bond will remain in effect for 
at least five years following the end of latest annual reporting period 
that the RIN-generating foreign producer produces renewable fuel 
pursuant to the requirements of this subpart.
    (4) On any occasion a RIN-generating foreign producer bond is used 
to satisfy any judgment, the RIN-generating foreign producer shall 
increase the bond to cover the amount used within 90 days of the date 
the bond is used.
    (i) English language reports. Any document submitted to EPA by a 
foreign renewable fuel producer shall be in English, or shall include 
an English language translation.
    (j) * * *
    (2) No foreign renewable fuel producer or other person may cause 
another person to commit an action prohibited in paragraph (j)(1) of 
this section, or that otherwise violates the requirements of this 
section.
    (3) No foreign renewable fuel producer or importer may generate 
RINs for the same volume of renewable fuel.
    (4) A foreign renewable fuel producer is prohibited from generating 
RINs in excess of the number for which the bond requirements of this 
section have been satisfied.
    (k) * * *
    (1) Renewable fuel shall be classified as RFS-FRRF according to the 
designation by the RIN-generating foreign producer if this designation 
is supported by product transfer documents prepared by the foreign 
producer as required in paragraph (c) of this section.
    (2) * * *
    (ii) Use the RIN-generating foreign producer's RFS-FRRF 
certification to determine the name and EPA-assigned registration 
number of the RIN-generating foreign producer that produced the RFS-
FRRF.
* * * * *
    (4) * * *
    (ii) The RIN-generating foreign producer, containing the 
information determined under paragraph (k)(2)(i) of this section, and 
including identification of the port at which the product was 
offloaded, and any RINs retired under paragraph (e)(2) of this section.
* * * * *
    (l) Truck imports of RFS-FRRF produced by a RIN-generating foreign 
producer. (1) Any RIN-generating foreign producer whose RFS-FRRF is 
transported into the United States by truck may petition EPA to use 
alternative procedures to meet all the following requirements:
* * * * *
    (2) * * *
    (i) Contracts with any facilities that receive and/or transport 
RFS-FRRF that prohibit the commingling of RFS-FRRF with Non-RFS-FRRF or 
RFS-FRRF from other foreign renewable fuel producers.
* * * * *
    (3) The petition described in this section must be submitted to EPA 
along

[[Page 7083]]

with the application for approval as a RIN-generating foreign producer 
under this subpart.
    (m) * * *
    (3) * * *
    (ii) Obtain the documents used by the independent third party to 
determine transportation and storage of the RFS-FRRF from the RIN-
generating foreign producer's facility to the load port, under 
paragraph (d) of this section. Obtain tank activity records for any 
storage tank where the RFS-FRRF is stored, and activity records for any 
mode of transportation used to transport the RFS-FRRF prior to being 
loaded onto the vessel. Use these records to determine whether the RFS-
FRRF was produced at the RIN-generating foreign producer's facility 
that is the subject of the attest engagement, and whether the RFS-FRRF 
was mixed with any Non-RFS-FRRF or any RFS-FRRF produced at a different 
facility.
* * * * *
    (6) * * *
    (i) Be independent of the RIN-generating foreign producer;
* * * * *
    (n) Withdrawal or suspension of foreign renewable fuel producer 
approval. EPA may withdraw or suspend a foreign renewable fuel 
producer's approval where any of the following occur:
    (1) A foreign renewable fuel producer fails to meet any requirement 
of this section.
* * * * *
    (3) A foreign renewable fuel producer asserts a claim of, or a 
right to claim, sovereign immunity in an action to enforce the 
requirements in this subpart.
    (4) A foreign renewable fuel producer fails to pay a civil or 
criminal penalty that is not satisfied using the foreign renewable fuel 
producer bond specified in paragraph (h) of this section.
    (o) Additional requirements for applications, reports, and 
certificates. Any application for approval as a foreign renewable fuel 
producer, alternative procedures under paragraph (l) of this section, 
any report, certification, or other submission required under this 
section shall be:
* * * * *
    (2) Signed by the president or owner of the foreign renewable fuel 
producer company, or by that person's immediate designee, and shall 
contain the following declarations:
    (i) ``I hereby certify:
    (A) That I have actual authority to sign on behalf of and to bind 
[NAME OF FOREIGN RENEWABLE FUEL PRODUCER] with regard to all statements 
contained herein;
    (B) That I am aware that the information contained herein is being 
Certified, or submitted to the United States Environmental Protection 
Agency, under the requirements of 40 CFR part 80, subpart M, and that 
the information is material for determining compliance under these 
regulations; and
    (C) That I have read and understand the information being Certified 
or submitted, and this information is true, complete and correct to the 
best of my knowledge and belief after I have taken reasonable and 
appropriate steps to verify the accuracy thereof.''
    (ii) ``I affirm that I have read and understand the provisions of 
40 CFR part 80, subpart M, including 40 CFR 80.1465 apply to [NAME OF 
FOREIGN RENEWABLE FUEL PRODUCER]. Pursuant to Clean Air Act section 
113(c) and 18 U.S.C. 1001, the penalty for furnishing false, incomplete 
or misleading information in this certification or submission is a fine 
of up to $10,000 U.S., and/or imprisonment for up to five years.''.
    (p) Requirements for non-RIN-generating foreign producer. Any non-
RIN-generating foreign producer must comply with the requirements of 
this section beginning on the effective date of the final rule or prior 
to EPA acceptance, whichever is later.

0
49. Section 80.1469 is amended by revising paragraphs (c)(1)(ii) and 
(f)(1) introductory text to read as follows:


Sec.  80.1469  Requirements for Quality Assurance Plans.

* * * * *
    (c) * * *
    (1) * * *
    (ii) If applicable, plans under Sec.  80.1426(f)(5)(ii) are 
accepted and up to date.
* * * * *
    (f) * * *
    (1) A new QAP shall be submitted to EPA according to paragraph (e) 
of this section and the third-party auditor shall update their 
registration according to Sec.  80.1450(g)(9) whenever any of the 
following changes occur at a production facility audited by a third-
party independent auditor and the auditor does not possess an 
appropriate pathway-specific QAP that encompasses the changes:
* * * * *

0
50. Section 80.1472 is amended by revising paragraphs (b)(3)(i) 
introductory text, (b)(3)(ii)(B), and (b)(3)(iii) to read as follows:


Sec.  80.1472  Requirements for quality assurance audits.

* * * * *
    (b) * * *
    (3) * * *
    (i) The independent third-party auditor shall conduct an on-site 
visit at the renewable fuel production facility or foreign ethanol 
production facility:
* * * * *
    (ii) * * *
    (B) 380 days after the previous on-site visit if a previously 
approved (by EPA) remote monitoring system is in place at the renewable 
fuel production facility or foreign ethanol production facility, as 
applicable. The 380-day period shall start the day after the previous 
on-site visit ends.
    (iii) An on-site visit shall include verification of all QAP 
elements that require inspection or evaluation of the physical 
attributes of the renewable fuel production facility or foreign ethanol 
production facility.
* * * * *

0
51. Section 80.1475 is added as follows:


Sec.  80.1475  What are the additional attest engagement requirements 
for parties that redesignate certified NTDF as MVNRLM diesel fuel?

    (a) General requirements. (1) In addition to the attest engagement 
requirements under Sec.  80.1464, all obligated parties required to 
arrange for additional attest engagement procedures under Sec.  
80.1464(a)(1)(vii) must have an annual attest engagement conducted by 
an auditor using the minimum attest procedures specified in this 
section.
    (2) All applicable requirements and procedures outlined in 
Sec. Sec.  80.125 through 80.127 and Sec.  80.130 apply to the auditors 
and attest engagement procedures specified in this section.
    (3) Obligated parties must include any additional information 
required under this section in the attest engagement report under Sec.  
80.1464(d).
    (4) Report as a finding if the party failed to either incur or 
satisfy an RVO if required.
    (b) EPA reports. Auditors must perform the following:
    (1) Obtain and read a copy of the obligated party's reports filed 
with EPA as required by Sec.  80.1451(a)(1)(xix) for the reporting 
period.
    (2) In the case of an obligated party's report to EPA that 
represents aggregate calculations for more than one facility, obtain 
the facility-specific volume and property information that was used by 
the refiner to prepare the aggregate report. Foot and crossfoot the 
facility-specific totals and agree to the values in the aggregate 
report. The procedures in paragraphs (b) and (c) of this section are 
then performed separately for each facility.

[[Page 7084]]

    (3) Obtain a written representation from a company representative 
that the report copies are complete and accurate copies of the reports 
filed with EPA.
    (4) Identify, and report as a finding, the name of the commercial 
computer program used by the refiner or importer to track the data 
required by the regulations in this part, if any.
    (c) Inventory reconciliation analysis. Auditors must perform the 
following:
    (1) Obtain an inventory reconciliation analysis for the facility 
for the reporting period for each of the following and perform the 
procedures at paragraphs (c)(2) through (4) of this section separately 
for each of the following products:
    (i) The volume of certified NTDF that was redesignated as MVNRLM 
diesel fuel.
    (ii) The volume of MVNRLM diesel fuel that was redesignated to a 
non-transportation use.
    (iii) The volume of MVNRLM diesel fuel owned when the fuel was 
received at the facility and acquired at the facility during the 
compliance period.
    (iv) The volume of MVNRLM diesel fuel owned and sold or transferred 
to other parties at the facility during the compliance period.
    (v) The volume of certified NTDF received.
    (vi) The volume of certified NTDF delivered.
    (2) Foot and crossfoot the volume totals reflected in the analysis.
    (3) Agree the beginning and ending inventory amounts in the 
analysis to the facility's inventory records.
    (4) If the obligated party delivered more MVNRLM diesel fuel than 
received, agree the annual balance with the reports obtained at Sec.  
80.1475(b)(1) and verify whether the obligated party incurred and 
satisfied its RVO under Sec.  80.1408(a)(2)(i).
    (5) Report as a finding each of the volume totals along with any 
discrepancies.
    (d) Listing of tenders. Auditors must perform the following:
    (1) For each of the volumes listed in paragraphs (b)(1)(iii) 
through (b)(1)(vi) of this section, obtain a separate listing of all 
tenders from the refiner or importer for the reporting period. Each 
listing should provide for each tender the volume shipped and other 
information as needed to distinguish tenders.
    (2) Foot to the volume totals per the listings.
    (3) Agree the volume totals on the listing to the tender volume 
total in the inventory reconciliation analysis obtained in paragraph 
(b) of this section.
    (4) For each of the listings select a representative sample of the 
tenders in accordance with the guidelines in Sec.  80.127, and for each 
tender selected perform the following:
    (i) Obtain product transfer documents associated with the tender 
and agree the volume on the tender listing to the volume on the product 
transfer documents.
    (ii) Note whether the product transfer documents include the 
information required by Sec.  80.590 and, for tenders involving the 
transfer of certified NTDF, the information required by Sec.  
80.1453(e).
    (5) Report as a finding any discrepancies.

Subpart N--Additional Requirements for Gasoline-Ethanol Blends

0
52. Section 80.1501 is amended by revising the section heading and 
paragraphs (b)(3)(i) and (b)(5)(i) and removing and reserving paragraph 
(b)(5)(ii). The revisions read as follows:


Sec.  80.1501  Labeling requirements that apply to retailers and 
wholesale purchaser-consumers of gasoline that contains greater than 10 
volume percent ethanol and not more than 15 volume percent ethanol.

* * * * *
    (b) * * *
    (3) * * *
    (i) The word ``ATTENTION'' shall be capitalized in 20-point, black, 
Helvetica Neue LT 77 Bold Condensed font, and shall be placed in the 
top 1.25 inches of the label as further described in paragraph 
(b)(4)(iii) of this section.
* * * * *
    (5) * * *
    (i) A request for approval of an alternative label shall be sent to 
the attention of ``E15 Alternative Label Request'' to the address in 
Sec.  80.10(a).
* * * * *

Subpart O--Gasoline Sulfur


Sec.  80.1600  [Amended]

0
53. Section 80.1600 is amended by removing the definition for ``Ethanol 
denaturant''.

0
54. Section 80.1603 is amended by:
0
a. Revising paragraph (d)(1);
0
b. Redesignating paragraph (d)(2) as paragraph (d)(3) and adding a new 
paragraph (d)(2); and
0
c. In the equation in paragraph (f)(1) revising the definition of 
``OC''. The revisions and addition read as follows:


Sec.  80.1603  Gasoline sulfur standards for refiners and importers.

* * * * *
    (d) * * *
    (1) The refiner or importer shall calculate the sulfur content of 
the batch by volume weighting the sulfur content of the gasoline or BOB 
and the sulfur content of the added oxygenate pursuant to one of the 
methods listed in paragraphs (d)(1)(i) and (ii) of this section. A 
refiner or importer must choose to use only one method during each 
annual compliance period.
    (i) Testing the sulfur content of a sample of the oxygenate 
pursuant to Sec.  80.46 or Sec.  80.47, as applicable. The refiner or 
importer must demonstrate through records relating to sampling, 
testing, and blending that the test result was derived from a 
representative sample of the oxygenate that was blended with the batch 
of gasoline or BOB.
    (ii) If the oxygenate is denatured fuel ethanol, and the sulfur 
content has not been tested under paragraph (d)(1)(i) of this section, 
then the sulfur content must be assumed to be 5.00 ppm.
    (2) For denatured fuel ethanol, the refiner or importer may assume 
that the denatured fuel ethanol was blended with gasoline or BOB at a 
concentration of 10 volume percent, unless the refiner or importer can 
demonstrate that a different amount of denatured fuel ethanol was 
actually blended with a batch of gasoline or BOB.
    (i) The refiner or importer of conventional gasoline or CBOB must 
comply with the requirements of Sec.  80.101(d)(4)(ii).
    (ii) The refiner or importer of reformulated gasoline or RBOB must 
comply with the requirements of Sec.  80.69(a).
    (iii) Any gasoline or BOB must meet the per-gallon sulfur standard 
of paragraph (a)(2) of this section prior to calculating any dilution 
from the oxygenate added downstream.
    (iv) The reported volume of the batch is the combined volume of the 
reformulated gasoline, RBOB, conventional gasoline, or CBOB and the 
downstream added oxygenate.
* * * * *
    (f) * * *
    (1) * * *
    OC = Sulfur credits used by the refinery or importer to show 
compliance, in ppm-gallons.
* * * * *

0
55. Section 80.1609 is amended by revising the last sentence of 
paragraph (a) to read as follows:


Sec.  80.1609  Oxygenate blender requirements.

    (a) * * * Such oxygenate blenders are subject to the requirements 
of paragraph (b) of this section, the requirements and prohibitions 
applicable to downstream parties, the requirements of

[[Page 7085]]

Sec.  80.1603(d)(3), and the prohibition specified in Sec.  80.1660(e).
* * * * *

0
56. Section 80.1616 is amended by revising paragraph (c)(3) to read as 
follows:


Sec.  80.1616  Credit use and transfer.

* * * * *
    (c) * * *
    (3) CRT2 credits generated under Sec.  80.1615(d) from 
January 1, 2017, through December 31, 2019, may only be traded to and 
ultimately used from January 1, 2017, through December 31, 2019, by 
small refiners and small volume refineries approved under Sec.  
80.1622.

0
57. Section 80.1622 is amended by revising paragraph (g) to read as 
follows:


Sec.  80.1622  Approval for small refiner and small volume refinery 
status.

* * * * *
    (g) Small refiner and small volume refinery status applications, 
and any other correspondence required by this section, Sec.  80.1620, 
or Sec.  80.1621 shall be sent to the attention of ``Tier 3 Program 
(Small Refiner/Small Volume Refinery Application)'' to the address in 
Sec.  80.10(a).

0
58. Section 80.1625 is amended by revising paragraph (c)(2) to read as 
follows:


Sec.  80.1625  Hardship provisions.

* * * * *
    (c) * * *
    (2) Hardship applications under this section must be sent to the 
attention of ``Tier 3 Program (Hardship Application)'' to the address 
in Sec.  80.10(a).

0
59. Section 80.1650 is amended by revising paragraphs (b)(3), 
(e)(1)(iii)(A), and (g)(1)(iii)(A) to read as follows:


Sec.  80.1650  Registration.

* * * * *
    (b) * * *
    (3) Any oxygenate blender required to register shall do so by 
November 1, 2016, or at least 90 days in advance of the first date that 
such person will blend oxygenate into gasoline, RBOB, or CBOB where the 
resulting gasoline is subject to the gasoline sulfur standards under 
this subpart O.
* * * * *
    (e) * * *
    (1) * * *
    (iii) * * *
    (A) Whether records are kept on-site or off-site of the facility.
* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (A) Whether records are kept on-site or off-site of the facility.
* * * * *

0
60. Section 80.1652 is amended by revising paragraph (a)(7) 
introductory text and adding paragraphs (a)(7)(v) and (vi) to read as 
follows:


Sec.  80.1652  Reporting requirements for gasoline refiners, gasoline 
importers, oxygenate producers, and oxygenate importers.

* * * * *
    (a) * * *
    (7) For each batch of BOB or gasoline produced or imported during 
the averaging period, all the following:
* * * * *
    (v) The type and amount of oxygenate, along with identification of 
the method used to determine the type and amount of oxygenate content 
of the batch, as determined under Sec.  80.1603(d).
    (vi) The sulfur content of the oxygenate, reported to two decimal 
places, along with identification of the method used to determine the 
sulfur content of the oxygenate, as determined under Sec.  80.1603(d).
* * * * *

0
61. Section 80.1656 is amended by revising paragraph (h) to read as 
follows:


Sec.  80.1656  Exemptions for gasoline used for research, development, 
or testing purposes.

* * * * *
    (h) Submission. Requests for research and development exemptions 
shall be sent to the attention of ``Tier 3 Program (R&D Exemption 
Request)'' to the address in Sec.  80.10(a).

[FR Doc. 2020-00431 Filed 2-5-20; 8:45 am]
BILLING CODE 6560-50-P

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