[Federal Register Volume 76, Number 127 (Friday, July 1, 2011)]
[Proposed Rules]
[Pages 38844-38890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16018]
[[Page 38843]]
Vol. 76
Friday,
No. 127
July 1, 2011
Part IV
Environmental Protection Agency
-----------------------------------------------------------------------
40 CFR Part 80
Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards;
Proposed Rule
Federal Register / Vol. 76 , No. 127 / Friday, July 1, 2011 /
Proposed Rules
[[Page 38844]]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[EPA-HQ-OAR-2010-0133; FRL-9324-3]
RIN 2060-AQ76
Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel
Standards
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: Under the Clean Air Act Section 211(o), the Environmental
Protection Agency is required to set the renewable fuel standards each
November for the following year. In general the standards are designed
to ensure that the applicable volumes of renewable fuel specified in
the statute are used. However, the statue specifies that EPA is to
project the volume of cellulosic biofuel production for the upcoming
year and must base the cellulosic biofuel standard on that projected
volume if it is less than the applicable volume set forth in the Act.
EPA is today proposing a projected cellulosic biofuel volume for 2012
and annual standards for cellulosic biofuel, biomass-based diesel,
advanced biofuel, and renewable fuels that would apply to all gasoline
and diesel produced or imported in year 2012. In addition, today's
action proposes an applicable volume of biomass-based diesel that would
apply in 2013. This action also presents a number of proposed changes
to the RFS2 regulations that are designed to clarify existing
provisions and to address several unique circumstances that have come
to light since the RFS2 program became effective on July 1, 2010.
Finally, today's rule also proposes to make a minor amendment to the
gasoline benzene regulations regarding inclusion of transferred
blendstocks in a refinery's early benzene credit generation
calculations.
DATES: Comments must be received on or before August 11, 2011.
Hearing: We intend to hold a public hearing on July 12, 2011 in the
Washington, DC area, Details of the time and location of the hearing be
announced in a separate notice.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2010-0133, by one of the following methods:
http://www.regulations.gov: Follow the on-line
instructions for submitting comments.
E-mail: [email protected].
Mail: Air and Radiation Docket and Information Center,
Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania
Ave., NW., Washington, DC 20460.
Hand Delivery: EPA Docket Center, EPA West Building, Room
3334, 1301 Constitution Ave., NW., Washington, DC 20460. Such
deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2010-0133. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
http://www.regulations.gov, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site
is an ``anonymous access'' system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through http://www.regulations.gov your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses. For additional information about EPA's public
docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm. For additional instructions on submitting
comments, go to Section I.B of the SUPPLEMENTARY INFORMATION section of
this document.
Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hard copy at the Air and Radiation
Docket and Information Center, EPA/DC, EPA West, Room 3334, 1301
Constitution Ave., NW., Washington, DC. The Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the Air Docket is (202) 566-
1742.
FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI
48105; Telephone number: 734-214-4131; Fax number: 734-214-4816; E-mail
address: [email protected], or Assessment and Standards
Division Hotline; telephone number 734 214-4636; E-mail address
[email protected].
SUPPLEMENTARY INFORMATION:
I. General Information
A. Does this action apply to me?
Entities potentially affected by this proposed rule are those
involved with the production, distribution, and sale of transportation
fuels, including gasoline and diesel fuel or renewable fuels such as
ethanol and biodiesel. Potentially regulated categories include:
------------------------------------------------------------------------
Examples of
Category NAICS \1\ SIC \2\ potentially
codes codes regulated entities
------------------------------------------------------------------------
Industry.................... 324110 2911 Petroleum
Refineries.
Industry.................... 325193 2869 Ethyl alcohol
manufacturing.
Industry.................... 325199 2869 Other basic organic
chemical
manufacturing.
Industry.................... 424690 5169 Chemical and allied
products merchant
wholesalers.
Industry.................... 424710 5171 Petroleum bulk
stations and
terminals.
Industry.................... 424720 5172 Petroleum and
petroleum products
merchant
wholesalers.
[[Page 38845]]
Industry.................... 454319 5989 Other fuel dealers.
------------------------------------------------------------------------
\1\ North American Industry Classification System (NAICS).
\2\ Standard Industrial Classification (SIC) system code.
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
proposed action. This table lists the types of entities that EPA is now
aware could potentially be regulated by this proposed action. Other
types of entities not listed in the table could also be regulated. To
determine whether your activities would be regulated by this proposed
action, you should carefully examine the applicability criteria in 40
CFR part 80. If you have any questions regarding the applicability of
this proposed action to a particular entity, consult the person listed
in the preceding section.
B. What should I consider as I prepare my comments for EPA?
1. Submitting CBI
Do not submit confidential business information (CBI) to EPA
through http://www.regulations.gov or e-mail. Clearly mark the part or
all of the information that you claim to be CBI. For CBI information in
a disk or CD ROM that you mail to EPA, mark the outside of the disk or
CD ROM as CBI and then identify electronically within the disk or CD
ROM the specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.
2. Tips for Preparing Your Comments
When submitting comments, remember to:
Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
Describe any assumptions and provide any technical
information and/or data that you used.
If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
Provide specific examples to illustrate your concerns, and
suggest alternatives.
Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
Make sure to submit your comments by the comment period
deadline identified.
Outline of This Preamble
I. Executive Summary
A. Standards For 2012
1. Assessment Of 2012 Cellulosic Biofuel Volume
2. Advanced Biofuel And Total Renewable Fuel In 2012
3. Proposed Percentage Standards For 2012
B. Proposed 2013 Biomass-Based Diesel Volume
C. Proposed Regulatory Changes
D. Petition For Reconsideration
II. Projection Of Cellulosic Volume Production And Imports For 2012
A. Statutory Requirements
B. Cellulosic Biofuel Volume Assessment
1. Existing Cellulosic Biofuel Facilities
2. Potential New Facilities In 2012
3. Imports Of Cellulosic Biofuel
4. Summary Of Volume Projections
C. Potential Limitations In 2012
D. Advanced Biofuel And Total Renewable Fuel In 2012
E. Biomass-Based Diesel In 2012
III. Proposed Percentage Standards For 2012
A. Background
B. Calculation Of Standards
1. How Are The Standards Calculated?
2. Small Refineries And Small Refiners
3. Proposed Standards
IV. Biomass-Based Diesel Volume For 2013
A. Statutory Requirements
B. Factors Considered In Assessing 2013 Biomass-Based Diesel
Volumes
1. Demand For Biomass-Based Diesel
2. Availability Of Feedstocks To Produce 1.28 Billion Gallons Of
Biodiesel
3. Production Capacity
4. Consumption Capacity
5. Biomass-Based Diesel Distribution Infrastructure
C. Impacts Of 1.28 Billion Gallons Of Biomass-Based Diesel
1. Climate Change
2. Energy Security 4
3. Agricultural Commodities And Food Prices
4. Air Quality
5. Transportation Fuel Cost
6. Deliverability And Transport Costs Of Materials, Goods, And
Products Other Than Renewable Fuel
7. Wetlands, Ecosystems, And Wildlife Habitats
8. Water Quality And Quantity
a. Impacts On Water Quality And Water Quantity Associated With
Soybean Production
b. Impacts On Water Quality And Water Quantity Associated With
Biodiesel Production
9. Job Creation And Rural Economic Development
D. Proposed 2013 Volume For Biomass-Based Diesel
E. 2014 And Beyond
V. Proposed Changes To Rfs2 Regulations
A. Summary Of Amendments
B. Technical Justification For Equivalence Value Application
C. Changes To Definitions Of Terms
1. Definition Of Annual Cover Crop
2. Definition Of ``Naphtha''
D. Technical Amendments Related To Rin Generation And Separation
1. Rin Separation Limit For Obligated Parties
2. Rin Retirement Provision For Error Correction
3. Production Outlook Reports Submission Deadline
4. Attest Procedures
5. Treatment Of Canola And Rapeseed
E. Technical Amendments Related To Registration
1. Construction Discontinuance & Completion Documentation
2. Third-Party Engineering Reviews
3. Foreign Ethanol Producers
F. Additional Amendments And Clarifications
1. Third-Party Engineering Review Addendum
2. Rin Generation For Fuel Imported From A Registered Foreign
Producer
3. Bond Posting
4. Acceptance Of Separated Yard Waste And Food Waste Plans
5. Transferred Blendstocks In Early Benzene Credit Generation
Calculations
VI. Petition For Reconsideration
A. Legal Considerations Of Petition
B. Advanced Biofuel Standard And Delayed Rins
C. 2011 Cellulosic Biofuel Requirement
VII. Public Participation
A. How Do I Submit Comments?
B. How Should I Submit Cbi To The Agency?
VIII. Statutory And Executive Order Reviews
A. Executive Order 12866: Regulatory Planning And Review And
Executive Order 13563: Improving Regulation And Regulatory Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act
D. Unfunded Mandates Reform Act
E. Executive Order 13132: Federalism
[[Page 38846]]
F. Executive Order 13175: Consultation And Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection Of Children From
Environmental Health Risks And Safety Risks
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, Or Use
I. National Technology Transfer Advancement Act
J. Executive Order 12898: Federal Actions To Address
Environmental Justice In Minority Populations And Low-Income
Populations
IX. Statutory Authority
I. Executive Summary
The Renewable Fuel Standard (RFS) program began in 2006 pursuant to
the requirements in Clean Air Act (CAA) section 211(o) which were added
through the Energy Policy Act of 2005 (EPAct). The statutory
requirements for the RFS program were subsequently modified through the
Energy Independence and Security Act of 2007 (EISA), resulting in the
promulgation of revised regulatory requirements on March 26, 2010.\1\
The transition from the RFS1 requirements of EPAct to the RFS2
requirements of EISA generally occurred on July 1, 2010.
---------------------------------------------------------------------------
\1\ 75 FR 14670.
---------------------------------------------------------------------------
Under RFS2, EPA is required to determine and publish the applicable
annual percentage standards for each compliance year by November 30 of
the previous year. As part of this effort, EPA must determine the
projected volume of cellulosic biofuel production for the following
year. If the projected volume of cellulosic biofuel production is less
than the applicable volume specified in section 211(o)(2)(B)(i)(III) of
the statute, EPA must lower the applicable volume used to set the
annual cellulosic biofuel percentage standard to the projected volume
of production. When we lower the applicable volume of cellulosic
biofuel in this manner, we are also authorized to lower the applicable
volumes of advanced biofuel and/or total renewable fuel by the same or
a lesser amount. Since these evaluations will be based on evolving
information about emerging segments of the biofuels industry, and may
result in the applicable volumes differing from those in the statute,
we believe that it is appropriate to establish the applicable volumes
through a notice-and-comment rulemaking process. Today's notice
provides our proposed evaluation of the projected production of
cellulosic biofuel for 2012, our proposed evaluation of whether to
lower the applicable volumes of advanced biofuel and total renewable
fuel, and the proposed percentage standards for compliance year 2012.
We will complete our evaluation based on comments received in response
to this proposal, the estimate of projected biofuel volumes that the
EIA is required to provide to EPA by October 31, and other information
that becomes available, and will make final determinations of
applicable volumes and percentage standards for 2012 by November 30,
2011.
The statute also requires EPA to determine and promulgate the
applicable volume of biomass-based diesel that will be required in 2013
and beyond, as the statute does not specify the applicable volumes for
years after 2012. This determination must be made at least 14 months
prior to the year in which the volume will be required. Thus, for the
2013 compliance year, we must specify the applicable volume of biomass-
based diesel by November 1, 2011. The statute identifies a number of
factors that EPA must take into consideration in establishing the
applicable volume of biomass-based diesel for years after 2012. Today's
notice includes our proposed assessment of these factors and proposed
applicable volume of biomass-based diesel for 2013.
Today's proposed rule does not include an assessment of the
environmental impacts of the percentage standards we are proposing for
2012. All of the impacts of the RFS2 program were addressed in the RFS2
final rule published on March 26, 2010, including impacts of the
biofuel standards specified in the statute. Today's rulemaking simply
proposes the standards for 2012 whose impacts were already analyzed
previously. However, as described more fully in Section IV.A, we are
required to analyze a specified set of environmental and economic
impacts for the biomass-based diesel volume we are proposing for 2013.
Today's notice also proposes a number of changes to the RFS2
regulations. These changes are designed to reduce confusion among
regulated parties and streamline implementation by clarifying certain
terms and phrases and addressing unique circumstances that came to
light after the RFS2 program went into effect on July 1, 2010.
Additionally, this notice also proposes to make a minor amendment to
the gasoline benzene regulations regarding inclusion of transferred
blendstocks in a refinery's early benzene credit generation
calculations. Further discussion of all of these proposed changes can
be found in Section V.
Finally, we note that in the RFS2 final rule we also stated our
intent to make two announcements each year:
Set the price for cellulosic biofuel waiver credits that
will be made available to obligated parties in the event that we reduce
the volume of cellulosic biofuel below the volume required by EISA.
Announce the results of our assessment of the aggregate
compliance approach for verifying renewable biomass requirements for
U.S. crops and crop residue, and our conclusion regarding whether the
aggregate compliance provision will continue to apply.
For both of these determinations, EPA will use specific sources of data
and a methodology laid out in the RFS2 final rule. Since the necessary
data for these determinations are not yet available, and the
methodology for making them is specified by rule or statute, we are not
including proposed determinations in this Notice. We will present the
results of both of these determinations in the final rule without a
prior proposal.
A. Standards for 2012
1. Assessment of 2012 Cellulosic Biofuel Volume
To estimate the volume of cellulosic biofuel that could be made
available in the U.S. in 2012, we researched all potential production
sources by company and facility. This included sources that were still
in the planning stages, those that were under construction, and those
that are already producing some volume of cellulosic ethanol,
cellulosic diesel, or some other type of cellulosic biofuel. Facilities
primarily focused on research and development work with no intention of
marketing any fuel produced were not considered for this assessment.
From this universe of potential cellulosic biofuel sources we
identified the subset that had a possibility of producing some volume
of qualifying cellulosic biofuel for use as transportation fuel in
2012. For the final rule, we will specify the projected available
volume for 2012 that will be the basis for the percentage standard for
cellulosic biofuel. To determine this final projected available volume,
we will consider additional factors such as the current and expected
state of funding, the status of the technology, and progress towards
construction and production goals along with any other significant
factors that could potentially impact fuel production or the ability of
the produced fuel to generate cellulosic RINs. This information, to the
extent that it is publically available, is
[[Page 38847]]
discussed in further detail in Section II.B.
In our assessment we focused on domestic sources of cellulosic
biofuel. While imports of cellulosic biofuels are possible and would be
eligible to generate RINs, we believe this is unlikely due to local
demand for cellulosic biofuels in the countries in which they are
produced as well as the cost associated with transporting these fuels
to the U.S. Of the domestic sources, we estimated that nine facilities
have the potential to make volumes of cellulosic biofuel available for
transportation use in the U.S. in 2012. These facilities are listed in
Table I.A.1-1 along with our estimate of the potentially available
volume.
Table I.A.1-1--Potentially Available Cellulosic Biofuel Plant Volumes for 2012
----------------------------------------------------------------------------------------------------------------
Potentially
available
volume
Company Location Fuel type (million
ethanol-
equivalent
gallons)
----------------------------------------------------------------------------------------------------------------
DuPont Danisco Cellulosic Ethanol........ Vonore, TN................. Ethanol.................... 0.25
Fiberight................................ Blairstown, IA............. Ethanol.................... 3.0
Fulcrum Bioenergy........................ McCarran, NV............... Ethanol.................... 0.5
INEOS Bio................................ Vero Beach, FL............. Ethanol.................... 3.0
KiOR..................................... Houston, TX................ Gasoline, Diesel........... 0.3
KiOR..................................... Columbus, MS............... Gasoline, Diesel........... 6.4
KL Energy Corp........................... Upton, WY.................. Ethanol.................... 1.0
Terrabon................................. Port Arthur, TX............ Gasoline................... 1.0
ZeaChem.................................. Boardman, OR............... Ethanol.................... 0.25
----------------------------------------------------------------------
Total................................ ........................... ........................... 15.7
----------------------------------------------------------------------------------------------------------------
The volumes in Table I.A.1-1 for each facility represent the volume
that would be produced in 2012 based upon the owner's expected month of
startup and an assumed period of production rampup to full capacity for
testing and process validation purposes. However, none of the
facilities we evaluated are currently producing cellulosic biofuel at
the rates they project for 2012. Moreover, there are other
uncertainties associated with each facility's projected volume that
could result in less production volume in 2012 than the potentially
available values shown in Table I.A.1-1. Therefore, we are proposing a
range of volumes for cellulosic biofuel for 2012, with 15.7 million
ethanol-equivalent gallons as the upper end of the range. For the lower
end of the range, we believe that a volume of 3.55 million ethanol-
equivalent gallons could be justified based on currently available
information. This volume is based on consideration of only those
facilities that are structurally complete at the time of this proposal
and that anticipate commercial production of cellulosic biofuels by the
end of 2011. More complete information on the progress of the industry
in 2011 will be available for the final rule, and will allow us to make
a more accurate projection of cellulosic biofuel volume for 2012. A
more detailed discussion of these uncertainties is presented in Section
II.B.
2. Advanced Biofuel and Total Renewable Fuel in 2012
The statute indicates that we may reduce the applicable volume of
advanced biofuel and total renewable fuel if we determine that the
projected volume of cellulosic biofuel production for 2012 falls short
of the statutory volume of 500 million gallons. As shown in Table
I.A.1-1, we are proposing a determination that this is the case.
Therefore, we also must evaluate the need to lower the applicable
volumes for the advanced biofuel and total renewable fuel.
To address the need to lower the advanced biofuel standard, we
first consider whether it appears likely that the biomass-based diesel
volume of 1.0 billion gallons specified in the statute can be met in
2012. As discussed in Section II.E, we believe that the 1.0 billion
gallon standard can indeed be met. Since biodiesel has an Equivalence
Value of 1.5, 1.0 billion physical gallons of biodiesel would provide
1.5 billion ethanol-equivalent gallons that can be counted towards the
advanced biofuel standard of 2.0 billion gallons. Of the remaining 0.5
bill gallons, up to 0.016 bill gallons would be met with the proposed
volume of cellulosic biofuel. Based on our analysis as described in
Section II.D, it appears likely that there will be sufficient volumes
of other advanced biofuels, such as imported sugarcane ethanol,
additional biodiesel, or renewable diesel, such that the standard for
advanced biofuel could remain at the statutory level of 2.0 billion
gallons. However, uncertainty in the potential volumes of these other
advanced biofuels coupled with the range of potential production
volumes of cellulosic biofuel could provide a rationale for lowering
the advanced biofuel standard. If we lowered the applicable volume of
advanced biofuel without simultaneously lowering the applicable volume
for total renewable fuel, the result would be that additional volumes
of conventional renewable fuel, such as corn-starch ethanol, would be
produced, effectively replacing some advanced biofuels. In today's NPRM
we are proposing that neither the required 2012 volumes for advanced
biofuel nor total renewable fuel be lowered below the statutory
volumes. However, we request comment on whether the advanced biofuel
and/or total renewable fuel volume requirements should be lowered if,
as we propose, EPA lowers the required cellulosic biofuel volume from
that specified in the Act.
3. Proposed Percentage Standards for 2012
The renewable fuel standards are expressed as a volume percentage,
and are used by each refiner, blender or importer to determine their
renewable fuel volume obligations. The applicable percentages are set
so that if each regulated party meets the percentages, and if EIA
projections of gasoline and diesel use are accurate, then the amount of
renewable fuel, cellulosic biofuel, biomass-based diesel, and advanced
[[Page 38848]]
biofuel used will meet the volumes required on a nationwide basis.
To calculate the percentage standard for cellulosic biofuel for
2012, we have used a potential volume range of 3.55-15.7 million
ethanol-equivalent gallons (representing 3.45-12.9 million physical
gallons). For the final rule, EPA intends to pick a single value from
within this range to represent the projected available volume on which
the 2012 percentage standard for cellulosic biofuel will be based. We
are also proposing that the applicable volumes for biomass-based
diesel, advanced biofuel, and total renewable fuel for 2012 will be
those specified in the statute. These volumes are shown in Table I.A.3-
1.
Table I.A.3-1--Proposed Volumes for 2012
------------------------------------------------------------------------
Ethanol equivalent
Actual volume volume \a\
------------------------------------------------------------------------
Cellulosic biofuel.............. 3.45-12.9 mill gal 3.55-15.7 mill
gal.
Biomass-based diesel............ 1.0 bill gal...... 1.5 bill gal.
Advanced biofuel................ 2.0 bill gal...... 2.0 bill gal.
Renewable fuel.................. 15.2 bill gal..... 15.2 bill gal.
------------------------------------------------------------------------
\a\ Biodiesel and cellulosic diesel have equivalence values of 1.5 and
1.7 ethanol equivalent gallons respectively. As a result, ethanol-
equivalent volumes are larger than actual volumes for cellulosic
biofuel and biomass-based diesel.
Four separate standards are required under the RFS2 program,
corresponding to the four separate volume requirements shown in Table
I.A.3-1. The specific formulas we use to calculate the renewable fuel
percentage standards are contained in the regulations at Sec. 80.1405
and repeated in Section III.B.1. The percentage standards represent the
ratio of renewable fuel volume to projected non-renewable gasoline and
diesel volume. The projected volume of gasoline used to calculate the
standards in today's proposal is provided by EIA's Short-Term Energy
Outlook (STEO).\2\ The projected volume of transportation diesel used
to calculate the standards in today's proposal is provided by EIA's
2011 Annual Energy Outlook (early release version). For the final rule,
we will use updated projections of gasoline and diesel provided by EIA.
---------------------------------------------------------------------------
\2\ The April 2011 issue of STEO was used for today's proposal.
---------------------------------------------------------------------------
Because DOE's 2009 analysis \3\ concluded that small refineries
would not be disproportionately harmed by inclusion in the RFS program,
beginning in 2011, small refiners and small refineries participated in
the RFS program as full regulated parties, and there was no small
refiner/refinery volume adjustment to the 2011 standard as there was
for the 2010 standard. However, DOE recently re-evaluated the impacts
of the RFS program on small entities and concluded that some small
refineries would suffer a disproportionate hardship if required to
participate in the program.\4\ As a result, we are required to exempt
these few refineries from being obligated parties for a minimum of two
years, and must also exempt their gasoline and diesel volumes from the
calculation of the annual percentage standards. The proposed standards
for 2012 are shown in Table I.A.3-2 and include the adjustment for
exempt small refineries (which constitute about 2.5% of both gasoline
and diesel pools). Detailed calculations can be found in Section III.
---------------------------------------------------------------------------
\3\ DOE report ``EPACT 2005 Section 1501 Small Refineries
Exemption Study'', (January, 2009).
\4\ ``Small Refinery Exemption Study: An Investigation into
Disproportionate Economic Hardship,'' U.S. Department of Energy,
March 2011.
Table I.A.3-2--Proposed Percentage Standards for 2012
------------------------------------------------------------------------
------------------------------------------------------------------------
Cellulosic biofuel........................ 0.002 to 0.010%.
Biomass-based diesel...................... 0.91%.
Advanced biofuel.......................... 1.21%.
Renewable fuel............................ 9.21%.
------------------------------------------------------------------------
B. Proposed 2013 Biomass-Based Diesel Volume
While section 211(o)(2)(B) specifies the volumes of biomass-based
diesel (BBD) through year 2012, it directs the EPA to establish the
applicable volume of BBD for years after 2012 no later than 14 months
before the first year for which the applicable volume will apply. In
today's action we are proposing an applicable volume of 1.28 bill
gallons for biomass-based diesel (BBD) for 2013. This is the volume
that was projected for 2013 in the RFS2 final rulemaking, and we are
proposing it for 2013 based on consideration of the factors specified
in the statute, including a consideration of biodiesel production,
consumption, and infrastructure issues. As required under the statute,
we also assessed the likely impact of BBD production and use in a
variety of areas, including climate change, energy security, the
agricultural sector, air quality, and others. Section IV provides
additional discussion of our assessment of the proposed volume of 1.28
bill gallons of BBD.
C. Proposed Regulatory Changes
In today's action we are also proposing a number of changes to the
RFS2 regulations. These proposed changes are intended to:
Clarify certain provisions because we have learned that
there is some confusion among some regulated parties
Clarify the application of certain provisions to unique
circumstances
Provide greater specificity in the definition of certain
terms
Correct regulatory language that inadvertently
misrepresented our intent
Today's rule also proposes to make a minor amendment to the gasoline
benzene regulations regarding inclusion of transferred blendstocks in a
refinery's early benzene credit generation calculations. A detailed
discussion of these proposed regulatory changes is provided in Section
V.
D. Petition for Reconsideration
The American Petroleum Institute (API) and the National
Petrochemical and Refiners Association (NPRA) jointly submitted a
Petition for Reconsideration of EPA's final rule establishing the RFS
standards for 2011. The petition requests that we lower the 2011
cellulosic biofuel standard to no more than 3.94 mill gallons, lower
the 2011 advanced biofuel standard in concert with the reduction in the
cellulosic biofuel standard from 250 mill gallons, and reconsider the
regulatory provision for delayed RINs. We are proposing to deny this
petition. See Section VI for further discussion.
II. Projection of Cellulosic Volume Production and Imports for 2012
In order to project production volume of cellulosic biofuel in 2012
for use in setting the percentage standard, we collected information on
individual facilities that have the potential to produce qualifying
volumes for
[[Page 38849]]
consumption as transportation fuel, heating oil, or jet fuel in the
U.S. in 2012. This section describes the range of volumes that could be
produced and imported in 2012 as well as some of the uncertainties
associated with those volumes. For today's NPRM we have assessed the
range of potentially available volumes for 2012. Despite significant
advances in cellulosic biofuel production technology in recent years
the production of cellulosic biofuel remains highly uncertain. While we
expect that the volume we select in the final rule for use in setting
the 2012 cellulosic biofuel percentage standard will be within our
proposed range of volumes, we recognize the possibility that updated
information at the time of the final rule could result in the final
volume falling outside of the proposed range. Section III describes the
conversion of our proposed range of volumes for cellulosic biofuel into
a range of possible percentage standards.
While the proposed 2012 volume projections in today's NPRM were
based on our own assessment of the cellulosic biofuel industry, by the
time we announce the final 2012 volumes and percentage standards we
will have additional information. First, in addition to comments in
response to today's proposal, we will have updated and more detailed
information about how the industry is progressing in 2011. Second, all
registered producers and importers of renewable fuel must submit
Production Outlook Reports describing their expectations for new or
expanded biofuel supply for the next five years, according to Sec.
80.1449. Finally, by October 31, 2011, the Energy Information
Administration (EIA) is required by statute to provide EPA with an
estimate of the volumes of transportation fuel, biomass-based diesel,
and cellulosic biofuel that they project will be sold or introduced
into commerce in the U.S. in 2012.
A. Statutory Requirements
The volumes of renewable fuel to be used under the RFS2 program
each year (absent an adjustment or waiver by EPA) are specified in CAA
211(o)(2). These volumes for 2012 are shown in Table II.A-1.
Table II.A-1--Required Volumes in the Clean Air Act for 2012 (bill gal)
------------------------------------------------------------------------
Ethanol
Actual equivalent
volume volume
------------------------------------------------------------------------
Cellulosic biofuel............................ 0.5\a\ 0.5
Biomass-based diesel.......................... 1.0 1.5
Advanced biofuel.............................. 2.0\a\ 2.0
Renewable fuel................................ 15.2\a\ 15.2
------------------------------------------------------------------------
\a\ These values assume that the biofuels would be ethanol. If any
portion of the biofuels used to meet these applicable volumes has a
volumetric energy content greater than that for ethanol, these values
will be lower.
By November 30 of each year, the EPA is required under CAA 211(o)
to determine and publish in the Federal Register the renewable fuel
percentage standards for the following year. These standards are to be
based in part on transportation fuel volumes estimated by the Energy
Information Administration (EIA) for the following year. The
calculation of the percentage standards is based on the formulas in
Sec. 80.1405(c) which express the required volumes of renewable fuel
as a volume percentage of gasoline and diesel sold or introduced into
commerce in the 48 contiguous states plus Hawaii.
The statute requires that if EPA determines that the projected
volume of cellulosic biofuel production for the following year is less
than the applicable volume shown in Table II.A-1, then EPA is to reduce
the applicable volume of cellulosic biofuel to the projected volume
available during that calendar year. In addition, if EPA reduces the
required volume of cellulosic biofuel below the level specified in the
statute, the Act also indicates that we may reduce the applicable
volume of advanced biofuels and total renewable fuel by the same or a
lesser volume.
As described in the final rule for the RFS2 program, we intend to
examine EIA's projected volumes, comments on this proposal, production
outlook reports, and other available data in making a final
determination of the appropriate cellulosic biofuel volumes to require
for 2012.
B. Cellulosic Biofuel Volume Assessment
The task of projecting the volume of cellulosic biofuel production
for 2012 remains a difficult one. Currently there are very few, if any,
facilities consistently producing cellulosic biofuel for commercial
sale. Announcements of new projects and project funding, changes in
project plans, project delays, and cancellations occur frequently.
Biofuel producers face not only the challenge of the scale up of
innovative, first-of-a-kind technology, but also the challenge of
securing funding in a difficult economy. The cellulosic biofuel
industry also is influenced by various tax credits and subsidies, and
changes to these programs could have an impact on cellulosic biofuel
production.
In order to project cellulosic biofuel production for 2012, EPA has
tracked the progress of over 100 biofuel production facilities. From
this list of facilities we used publically available information, as
well as information provided by DOE and USDA, to make a preliminary
determination of which facilities are the most likely candidates to
produce cellulosic biofuel and make it commercially available in 2012.
Each of these companies was investigated further in order to determine
the current status of their facilities and their likely cellulosic
biofuel production volumes for the coming years. Information such as
the funding status of these facilities, announced construction and
production ramp up periods, and annual fuel production targets were
taken into account. Our projection of the range of cellulosic biofuel
production in 2012 is based on this information as well as our own
assessment of the likelihood of these facilities successfully producing
cellulosic biofuel in the volumes indicated. A brief description of
each of the companies we believe may produce cellulosic biofuel and
make it commercially available in 2012 can be found below. We will
continue to gather more information to help inform our decision on the
final cellulosic biofuel standard for 2012, and we will specify a
single volume in the final rule that will be the basis for the
cellulosic biofuel percentage standard for 2012.
1. Existing Cellulosic Biofuel Facilities
The rule that established the required 2011 cellulosic biofuel
volume identified five production facilities that we projected would
produce cellulosic biofuel and make the fuel commercially available in
2011. Each of these production facilities are now structurally
complete, however they are in various stages of biofuel production. All
of these facilities have either produced some volume of cellulosic
biofuel in 2011, or are on schedule to do so later in the year. Only
Range Fuels, however, has completed its registration as a cellulosic
biofuel production facility under the RFS2 program and as such they are
currently the only facility of the five listed here currently eligible
to generate cellulosic biofuel RINs. For
[[Page 38850]]
more background information on each of these facilities see the 2011
standards rule.\5\
---------------------------------------------------------------------------
\5\ 75 FR 76790, December 9, 2010.
---------------------------------------------------------------------------
DuPont Danisco Cellulosic Ethanol (DDCE) successfully started up
their small demonstration facility in Vonore, Tennessee in late 2010.
This facility has a maximum production capacity of 250,000 gallons of
ethanol per year and uses an enzymatic hydrolysis process to convert
corn cobs into ethanol. In conversations with EPA in early 2011 DDCE
indicated that they had not encountered any unexpected difficulties in
their production of cellulosic ethanol and were on target to meet their
2011 production goal of 150,000 gallons of cellulosic ethanol. It is
likely that in 2012 cellulosic biofuel production at this facility will
approach the production capacity of 250,000 gallons of cellulosic
ethanol.
Fiberight uses an enzymatic hydrolysis process to convert the
biogenic portion of separated municipal solid waste (MSW) into ethanol.
Construction on the first stage of Fiberight's Blairstown, Iowa
facility was completed in the summer of 2010. The production capacity
of the first stage of this project is 2 million gallons of ethanol per
year. Fiberight had planned to begin production of cellulosic biofuel
from this facility in late 2010 but poor economic conditions, due in
part to low cellulosic RIN values in 2010, caused them to postpone fuel
production. Fiberight had also planned to begin construction on an
expansion of this facility in late 2010 that would increase the
production potential to 6 million gallons of ethanol per year, but were
unable to secure funding to carry out the construction as planned. They
have since secured funding and began construction on the expansion of
their Blairstown facility in April 2011. Fiberight anticipates that
they will begin fuel production in the late summer of 2012 and will
ramp up production at this facility throughout 2012, producing
approximately 3 million gallons of cellulosic ethanol in 2012.
KiOR continues to produce a small volume of renewable crude from
agricultural residue at their demonstration facility in Houston, Texas
using a technology they call Biomass Catalytic Cracking (BCC). This
technology uses heat and a proprietary catalyst to convert biomass to a
renewable crude with a relatively low oxygen content. This facility
currently lacks the infrastructure to upgrade this renewable crude to
finished transportation fuel, however KiOR plans to add this capability
at this facility in late 2011. While KiOR has not yet registered under
the RFS2 program, their fuel, if refined to gasoline or diesel fuel
would be eligible to generate RINs. EPA currently projects a production
volume of 200,000 gallons of cellulosic fuel from KiOR, which could
potentially generate 300,000 RINs.
KL Energy has developed a process to convert cellulose and
hemicelluloses into cellulosic sugars using a thermal-mechanical
pretreatment process followed by an enzymatic hydrolysis. They had
initially planned to used woody biomass as their feedstock for
cellulosic biofuel production; however their production process is
versatile enough to allow for a wide variety of cellulosic feedstocks
to be used. In August 2010 KL Energy announced a joint development
agreement with Petrobras America Inc. As part of the agreement
Petrobras will invest $11 million to modify KL Energy's facility in
Upton, Wyoming to allow it to process bagasse and other waste products.
These modifications are expected to be completed in 2011, and fuel
production is likely to begin soon after. If successful, Petrobras and
KL Energy plan to work together to integrate the technology into
currently existing ethanol production facilities in Brazil. KL Energy
has also indentified several sites in the United States for possible
future expansion. EPA currently projects that KL Energy could produce
up to 1 million gallons of cellulosic ethanol in 2012 in the United
States.
Range Fuels began production of methanol at their Soperton, Georgia
facility in the third quarter of 2010. This facility uses a
thermochemical technology to produce syngas (consisting of mostly
hydrogen and carbon monoxide) from a woody biomass feedstock. The
syngas is then converted into fuel with the aid of a chemical catalyst
developed by Range. Range has developed the capability to produce both
methanol and ethanol, depending on the catalyst used. In January 2011,
after producing a small volume of ethanol from this facility and
proving this capability, Range Fuels shut down the Soperton facility in
order to work through technical difficulties they had been
experiencing. No timeline has been given for the restart of this
facility. EPA will continue to gather information and monitor progress
at the Soperton facility. At this time, however, since no timeline has
been provided for production from this facility, we are not projecting
any volume from this facility in 2012.
2. Potential New Facilities in 2012
EPA is also aware of five new cellulosic biofuel production
facilities that are currently planning to begin commercial production
at some point in 2012. These facilities are at various stages in the
construction process, and as such have various degrees of uncertainty
associated with any projected 2012 commercial production. While it is
possible that several of these facilities will not begin production of
cellulosic biofuels until 2013, they are nevertheless considered here
since some commercial volumes can potentially be produced in 2012.
Fulcrum Bioenergy is planning to build a facility capable of
producing 10.5 million gallons of cellulosic ethanol and 16 megawatts
of renewable electricity per year. They have developed a thermochemical
technology to produce ethanol from separated MSW via syngas using a
chemical catalyst. In November 2010 Fulcrum announced that they had
received a term sheet for a $80 million loan guarantee from DOE and
were entering into the final phase of the loan guarantee program. Prior
to that Fulcrum had announced that they had signed long term feedstock
supply contracts for this facility as well as engineering, procurement,
and construction contracts. In January 2011 Fulcrum announced they had
closed on a $75 million Series C financing that would provide the
remaining necessary capital for the construction of their first
commercial production facility pending the closing of their DOE loan
guarantee. They announced that they are now planning to begin
construction in the second quarter of 2011 and complete the facility by
late 2012. EPA currently projects a potential production volume of up
to 0.5 million gallons of cellulosic ethanol from this facility in
2012.
INEOS Bio has developed a process for producing cellulosic ethanol
by first gasifying feedstock material into a syngas and then using
naturally occurring bacteria to ferment the syngas into ethanol. In
January 2011 USDA announced a $75 million loan guarantee for the
construction of INEOS Bio's first commercial facility to be built in
Vero Beach, Florida. This facility will be capable of producing 8
million gallons of cellulosic biofuel as well as 6 megawatts of
renewable electricity from a variety of feedstocks including yard,
agricultural, and wood waste, as well as separated MSW. On February 9,
2011 INEOS Bio broke ground on this facility. INEOS Bio expects to
complete construction on this facility in April 2012 and plans to begin
commercial production of cellulosic ethanol soon
[[Page 38851]]
after construction is complete. EPA currently projects a potential
production volume of up to 3 million gallons of cellulosic ethanol from
this facility in 2012.
After successful operation of their demonstration plant in Houston,
Texas KiOR is planning to begin construction on their first commercial
scale facility in early 2011. This facility, located in Columbus,
Mississippi, will convert biomass to a low oxygen biocrude using a
process KiOR calls Biomass Catalytic Cracking (BCC). BCC uses a
catalyst developed by KiOR in a process similar to Fluid Catalytic
Cracking currently used in the petroleum industry. KiOR's Columbus
facility will also be capable of upgrading this biocrude into finished
gasoline and diesel as well as a small quantity of fuel oil. KiOR plans
to begin production from this facility sometime in the first half of
2012. KiOR has also announced plans to construct several more
commercial scale biofuel production facilities in Mississippi and
across the southeastern United States. However, it is unlikely any of
these facilities will begin production of biofuel in 2012. Given this
timeline EPA currently projects a potential production of up to 4.0
million gallons of gasoline and diesel (6.4 million ethanol equivalent
gallons) from the Columbus facility in 2012.
Terrabon completed construction of a small demonstration scale
facility for the conversion of MSW and other waste materials into
gasoline in 2010 and is planning to begin production at their first
commercial scale facility in 2012. Terrabon utilizes a unique
production process that can be used to produce gasoline, diesel, or jet
fuel. Feedstock is first fermented into carboxylic acids by a variety
of micro organisms. These carboxylic acids are then neutralized to form
carboxylate salts that are dewatered, dried, and thermally converted to
ketones. Finally, the ketones are hydrogenated to form alcohols which
can then be refined into gasoline, diesel, or jet fuel. While currently
no pathway exists for the generation of RINs representing cellulosic
gasoline in the RFS2 regulations, EPA is planning to initiate a
rulemaking to create such a pathway in our regulations. This would
allow for facilities such as Terrabon and others who may produce
cellulosic gasoline in the future to register and generate RINs under
the RFS2 program (provided they meet the fuel registration, renewable
biomass, and other requirements of the program as well). EPA currently
projects the production of up to 0.7 million gallons (1.0 million
ethanol equivalent gallons) of cellulosic gasoline in 2012 from
Terrabon's first commercial facility.
ZeaChem has begun construction on a small demonstration scale
facility in Boardman, Oregon capable of producing 250,000 gallons of
cellulosic ethanol per year. Their production process uses a
combination of biochemical and thermochemical technologies to produce
ethanol and other renewable chemicals from cellulosic materials. The
feedstock is first fractionated into two separate streams containing
cellulosic sugars and lignin. The cellulosic sugars are fermented into
ethyl acetate using a naturally occurring acetogen, which can then be
hydrogenated into ethanol. The hydrogen necessary for this process is
produced by gasifying the lignin stream from the cellulosic biomass.
ZeaChem's process is flexible and is capable of producing a wide range
of renewable chemical and fuel molecules in addition to ethanol.
ZeaChem plans to begin production of cellulosic ethanol from their
facility in Boardman, Oregon in late 2011, and EPA currently projects a
potential production volume of up to 0.25 million gallons of ethanol
from this facility in 2012.
Another potential source of cellulosic biofuel in 2012 is a
technology being developed by EdeniQ. EdeniQ is developing a suite of
enzymes capable of breaking down cellulose into simple sugars that can
then be fermented into ethanol. Rather than build their own production
facilities EdeniQ plans to license their enzymes to existing corn
ethanol facilities. Such licensing would be accompanied by the
Cellunator, an advanced milling device they have developed to reduce
the particle size of corn kernels to enable greater conversion of
starch to ethanol as well as the conversion of cellulose to simple
sugars. EdeniQ claims that their technology would allow corn ethanol
facilities to increase ethanol production by 1-2% by converting the
cellulosic portion of the corn kernel into ethanol. They are also
working to increase the effectiveness of their enzymes in order to
enable ethanol production increases of 3-4% from the cellulose in the
corn kernel in the future. EdeniQ plans to begin commercial trials of
their technology in the second half of 2011. This technology has the
potential to be implemented rapidly and produce significant amounts of
cellulosic ethanol in 2012 as it requires relatively small capital
additions to already existing corn ethanol facilities. While this
technology is promising, there is currently no pathway in the RFS2
regulations for the generation of cellulosic biofuel RINs using the
cellulosic portion of the corn kernel as a feedstock. Moreover, EdeniQ
has not announced any agreements with corn ethanol producers to install
this technology to enable the production of cellulosic ethanol. For
these reasons, EPA has not included any cellulosic ethanol production
from EdeniQ's technology in our 2012 projections. We will continue to
monitor their process in the coming months for signs of progress
towards commercialization of their technology and will consider adding
production volumes from EdeniQ into our final projections if
appropriate.
In addition to the facilities mentioned above, EPA is also aware of
three companies planning to begin the production of cellulosic biofuels
in early 2013. Coskata, Enerkem, and Poet are planning on completing
construction on their first commercial scale cellulosic biofuel
facilities in late 2012 or early 2013 and producing commercial volumes
of biofuels in 2013. While it is possible that construction of any of
these facilities could be completed ahead of schedule and a small
volume of fuel could be produced in 2012, history in this industry
suggests that this is unlikely. EPA has therefore not projected that
any volume of cellulosic biofuel will be produced from these facilities
in 2012. These facilities, along with several other commercial
cellulosic biofuel facilities planning to begin production in 2013,
notably the first commercial scale facilities from Abengoa and Mascoma,
indicate that the potential exists for the rapid expansion of
production volumes in future years.
3. Imports of Cellulosic Biofuel
While domestically produced cellulosic biofuels are the most likely
source of cellulosic biofuel available in the United States, producers
and/or importers of cellulosic biofuel produced in other countries may
also generate RINs and participate in the RFS2 program. While the RFS2
program does provide a financial incentive for companies to import
cellulosic biofuels into the United States, the combination of local
demand, financial incentives from other governments, and transportation
costs for the cellulosic biofuel has resulted in no cellulosic biofuel
being imported to the United States thus far. EPA believes this
situation is likely to continue in the near future. Additionally, the
majority of internationally based cellulosic biofuel facilities that
currently exist or plan to complete construction by the end of 2012 are
small research and development or pilot facilities not designed for the
commercial production of fuel.
[[Page 38852]]
Two notable exceptions, both located in Canada, are Enerkem and
Iogen. Enerkem has a currently existing commercial production facility
in Westbury, Quebec and is expecting to complete construction on a
second facility in Edmonton, Alberta in late 2011. Iogen has a small
demonstration facility in Ottawa and is currently exploring the
possibility of building their first commercial facility near Prince
Albert, Saskatchewan. The large expected production volumes and
relatively small distance this fuel would have to be transported to
reach the United States make these facilities the most likely
candidates to import cellulosic biofuel into the United States. In
conversations with EPA, however, both companies indicated that they had
no current intentions of importing fuel from their Canadian production
facilities into the United States. On September 1, 2010 the government
of Canada finalized regulations requiring all gasoline sold in Canada
to have a renewable content of 5% and all diesel fuel and heating oil
to have a renewable content of 2%. These regulations will further
increase local demand for any cellulosic biofuel produced from these
two facilities and decrease the likelihood of any of this fuel being
exported to the United States. For these reasons we have not included
any cellulosic biofuel production from foreign facilities in our
projections of cellulosic biofuel availability in 2012.
4. Summary of Volume Projections
The information EPA has gathered on the potential cellulosic
biofuel producers in 2012, described above, allows us to identify
potential volumes that could be achieved by each facility in 2012. This
information is summarized in Table II.B.4-1 below.
Table II.B.4-1--Cellulosic Biofuel 2012 Potentially Available Volume
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012
Capacity Earliest Potentially Ethanol
Company name Location Feedstock Fuel (MGY) production available equivalent
volume (MG) gallons (MG)
--------------------------------------------------------------------------------------------------------------------------------------------------------
DuPont Danisco Cellulosic Vonore, TN........... Corn Stover.......... Ethanol............. 0.25 Online 0.25 0.25
Ethanol.
Fiberight \a\.................. Blairstown, IA....... MSW.................. Ethanol............. 6 Online 3.0 3.0
Fulcrum Bioenergy.............. McCarran, NV......... MSW.................. Ethanol............. 10.5 Late 2012 0.5 0.5
INEOS Bio...................... Vero Beach, FL....... Ag Residue, MSW...... Ethanol............. 8 May 2012 3.0 3.0
KiOR........................... Houston, TX.......... Ag Residue........... Gasoline, Diesel.... 0.2 Online 0.2 0.3
KiOR........................... Columbus, MS......... Pulp Wood............ Gasoline, Diesel.... 10 Mid 2012 4.0 6.4
KL Energy...................... Upton, WY............ Wood Waste........... Ethanol............. 1.5 Online 1.0 1.0
Terrabon....................... Port Arthur, TX...... MSW.................. Gasoline............ 1.3 2012 0.7 1.0
ZeaChem........................ Boardman, OR......... Planted Trees........ Ethanol............. 0.25 2011 0.25 0.25
----------------------------------------------------
Total...................... ..................... ..................... .................... ......... ............ 12.9 15.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Based on company estimate.
The potentially available volume of 12.9 million gallons of
cellulosic biofuel, or 15.7 million ethanol equivalent gallons,
represents the higher end of the range of cellulosic biofuel volumes
that EPA believes at this time could reasonably be expected to be
produced or imported and made available for use as transportation fuel,
heating oil, or jet fuel in 2012. It incorporates reductions from the
annual production capacity of each facility based on when the
facilities anticipate fuel production will begin and assumptions
regarding a ramp up period to full production. Other factors such as
the funding status, risks associated with new technologies, and the
current status of project construction were considered for each
facility.
For the lower end of the range, we believe that a volume of 3.55
million ethanol-equivalent gallons could be justified based on
currently available information. This volume is based on a
consideration of only those facilities that are structurally complete
at the time of this proposal and which have indicated that they
anticipate commercial production of cellulosic biofuels by the end of
2011. The production facilities meeting these criteria include Dupont
Danisco Cellulosic Ethanol, Fiberight (2 million gallon per year first
stage), KiOR (Houston, TX facility), and KL Energy. While there is
still some uncertainty regarding the projected volumes from these
facilities, by completing construction and anticipating fuel production
by the end of 2011 there is less uncertainty associated with these
facilities than for the others listed as potential cellulosic biofuel
producers for 2012.
Therefore, in today's NPRM we are proposing a range of values, from
3.55 million ethanol equivalent gallons to 15.7 million ethanol
equivalent gallons for the 2012 cellulosic biofuel standard. The low
end of the range represents a projection of higher confidence and less
uncertainty, with greater emphasis placed on established/demonstrated
production capacity. The high end of the range represents a projection
of less confidence and higher uncertainty, with greater emphasis placed
on productions plans. As time progresses and we are able to track
whether or not the cellulosic biofuels producers are able to meet the
construction and ramp up schedules they have presented, and as we
consider public comments on this proposal and the EIA estimated 2012
volume of cellulosic biofuel production that they are required to
provide to us by October 31 of this year, we will have a better idea of
the appropriate volume of fuel that we can reasonably expect to be
produced and made commercially available in 2012. Congress did not
specify the degree of certainty that should be reflected in our
projections of cellulosic biofuel volumes. We expect that the volume
that we project in the final rule for 2012 will represent a reasonable
balance of the degree of uncertainty or confidence in the projected
production volume and the risk of unnecessarily reducing the applicable
volumes set forth in the Act.
Although we are proposing a range of values from 3.55 to 15.7
million ethanol equivalent gallons based on information available at
the time of this NPRM, we also request comment on alternative
[[Page 38853]]
options for setting the 2012 cellulosic biofuel volume requirement at a
higher level. It is possible that a cellulosic biofuel volume
requirement which reduces less of the 500 mill gallon applicable volume
from the statute could spur additional near and longer-term cellulosic
biofuel production capacity. We recognize that any method must take
into account the uncertainty in estimating future production potential.
Nevertheless, the purpose of setting a mandate is to stimulate more
rapid increases in the rate of production than the cellulosic biofuel
industry would likely experience in the absence of the mandate. We
request comment on whether a higher volume requirement for cellulosic
biofuel than we are proposing today would provide additional
stimulation of production volumes of cellulosic biofuel, and the basis
for setting such a higher volume requirement.
C. Potential Limitations in 2012
In addition to production capacity, a variety of other factors have
the potential to limit the amount of cellulosic biofuel that can be
produced and used in the U.S. For instance, there may be limitations in
the availability of qualifying cellulosic feedstocks at reasonable
prices. Most of the cellulosic biofuel producers that we anticipate
will produce commercial volumes in 2012 have indicated that they will
use some type of cellulosic waste, such as separated municipal solid
waste, wastes from the forestry industry, and agricultural residues.
Based on the analyses of cellulosic feedstock availability in the RFS2
final rule, we believe that there will be significantly more than
enough sources of these feedstocks for 2012. For producers that intend
to use dedicated energy crops, we do not believe that the amount of
qualifying cropland for renewable fuel production under RFS2 will limit
production in 2012. We plan to continue to evaluate the availability of
valid feedstocks in future years as the required volumes of cellulosic
biofuel increase.
We anticipate that the relatively small incremental increase in
total biofuel volumes in 2012 that would be attributed to cellulosic
biofuels can be accommodated by the fuel distribution system. The RFS2
final rule analysis concluded that biofuel distribution challenges as
the RFS2 volume requirements ramp up could be overcome in a timely
fashion. In the RFS2 final rule analysis, we assumed that most
cellulosic biofuel production facilities would be constructed in the
nation's heartland similar to corn ethanol production facilities. Based
on more recent information, we now believe that cellulosic production
facilities will be more geographically dispersed. This is the case for
the specific cellulosic biofuels production facilities that we expect
would produce fuel in 2012. The greater geographic dispersion would
tend to lessen the distance to transport biofuels to petroleum
terminals, thereby reducing the overall distribution burden. We believe
that the cellulosic biofuel volumes that would be produced in 2012
could be accommodated by fuel retailers without necessitating the
installation of new refueling infrastructure such as that which would
be needed for E85.
D. Advanced Biofuel and Total Renewable Fuel in 2012
Under CAA 211(o)(7)(D)(i), EPA has the discretion to reduce the
applicable volumes of advanced biofuel and total renewable fuel in the
event that the projected volume of cellulosic biofuel production is
determined to be below the applicable volume specified in the statute.
As described in Section II.B above, we are indeed projecting the volume
of cellulosic biofuel production for 2012 at significantly below the
statutory applicable volume of 500 million gallons. Because cellulosic
biofuel is used to satisfy the cellulosic biofuel standard, the
advanced biofuel standard, and the total renewable fuel standard, any
reductions in the applicable volume of cellulosic biofuel will also
affect the means through which obligated parties comply with the
advanced biofuel standard and the total renewable fuel standard.
Therefore, we have considered whether and to what degree to propose
lowering the advanced biofuel and total renewable fuel applicable
volumes for 2012.
If the required volume of cellulosic biofuel for a given year is
less than the volume specified in the statute, it is important to
evaluate whether there would be sufficient volume of advanced biofuels
to satisfy the applicable volume of advanced biofuel volume set forth
in the statute. Even with a reduced volume of cellulosic biofuel, other
advanced biofuels, such as biomass-based diesel, sugarcane ethanol, or
other biofuels, may be available in sufficient volumes to make up for
the shortfall in cellulosic biofuel. We believe that it would be
consistent with the energy security and greenhouse gas reduction goals
of EISA to not reduce the applicable volume of advanced biofuel set
forth in the statute if there are sufficient volumes of advanced
biofuels available, even if those volumes do not include the amount of
cellulosic biofuel that Congress may have desired. Our authority to
lower the advanced biofuel and/or total renewable fuel applicable
volumes is discretionary, and in general we believe that actions to
lower these volumes should only be taken if insufficient volumes of
qualifying biofuel can be made available, based on such circumstances
as insufficient production capacity, insufficient feedstocks, competing
markets, constrained infrastructure, or the like. As discussed below,
we project that sufficient volumes of advanced biofuel can be made
available in 2012 such that the 2.0 bill gallon advanced biofuel
requirement need not be reduced.
If we were to maintain the advanced biofuel, biomass-based diesel,
and total renewable fuel volume requirements at the levels specified in
the statute, while also lowering the cellulosic biofuel standard to
3.55-15.7 million ethanol-equivalent gallons, then 1,504-1,516 million
gallons of the 2.0 billion gallon advanced biofuel mandate would be
satisfied automatically through the satisfaction of the cellulosic and
biomass based diesel standards. An additional 484-496 million ethanol-
equivalent gallons of additional advanced biofuels would be needed. See
Table II.D-1.
Table II.D-1--Projected Fuel Mix If Only Cellulosic Biofuel Volume is
Adjusted in 2012
[Mill gallons]
------------------------------------------------------------------------
Ethanol-equivalent
volume Physical volume
------------------------------------------------------------------------
Total renewable fuel............ 15,200 14,536-14,701
Conventional renewable fuel \a\. 13,200 13,200
Total advanced biofuel.......... 2,000 1,336-1,501
Cellulosic biofuel.............. 3.55-15.7 3.45-12.9
Biomass-based diesel............ 1,500 1,000
[[Page 38854]]
Other advanced biofuel \b\...... 484-496 \c\ 323-496
------------------------------------------------------------------------
\a\ Predominantly corn-starch ethanol.
\b\ Rounded to nearest million gallons for simplicity.
\c\ Physical volume is a range because other advanced biofuel may be
ethanol, biodiesel, or some combination of the two.
The most likely sources of additional advanced biofuel would be
imported sugarcane ethanol and biomass-based diesel, though there may
also be some volumes of other types of advanced biofuel available as
discussed below. To determine if there are likely to be sufficient
volumes of these biofuels to meet the need for 484-496 million gallons
of other advanced biofuel, we first examined historical data on ethanol
imports and projections from EIA and USDA for 2012. Brazilian imports
have made up a sizeable portion of total ethanol imported into the U.S.
in the past, and these volumes were predominantly produced from
sugarcane. Ethanol imports averaged about 380 million gallons per year
over the last five years, and reached an all-time high of 730 million
gallons in 2006.\6\ These historical import volumes demonstrate that
Brazil has significant export potential under the appropriate economic
circumstances. However, ethanol imports were significantly lower in
2010 than in previous years. This decline in imports may be related to
the cessation of the duty drawback that became effective on October 1,
2008, or to changes in world sugar prices.\7\ However, Brazil continues
to be second worldwide in the production of ethanol, producing a total
of 6.9 bill gallons in 2009.\8\ By establishing an increased U.S.
demand for 484-496 million gallons of other advanced biofuel in 2012,
we would be re-establishing an export market for Brazillian sugarcane
ethanol that could compete with the use of sugarcane to produce sugar,
and thus it can once again be economical for Brazilian producers to
export higher volumes of sugarcane ethanol to the U.S. Moreover,
California's Low Carbon Fuel Standard went into effect in 2010, and may
result in some refiners importing additional volumes of sugarcane
ethanol from Brazil into California in 2012. These same volumes could
count towards the Federal RFS2 program as well.
---------------------------------------------------------------------------
\6\ ``Monthly U.S. Imports of Fuel Ethanol,'' EIA, released 3/
30/2011.
\7\ Lundell, Drake, ``Brazilian Ethanol Export Surge to End;
U.S. Customs Loophole Closed Oct. 1,'' Ethanol and Biodiesel News,
Issue 45, November 4, 2008.
\8\ Portal Brasil, Energy Matrix for Ethanol, http://www.brasil.gov.br/sobre/economy/energy-matrix/ethanol/br_model1?set_language=en.
---------------------------------------------------------------------------
Future projections from other sources also suggest that a large
portion of the 484-496 million gallons of advanced biofuel needed could
be supplied by imported sugarcane ethanol. For instance, in the Early
Release of its Annual Energy Outlook 2011, EIA projects ethanol imports
of approximately 400 million gallons for 2012.\9\ Similarly, the
university-based Food and Agricultural Policy Research Institute
(FAPRI) released its 2010 U.S. and World Agricultural Outlook report in
which it projects 2012 ethanol imports of 317 million gallons.\10\ The
volumes of imported ethanol projected by both of these sources is very
likely to be sugarcane ethanol, since this is by far the predominant
form of imported ethanol to date and is expected to continue to be so
for the foreseeable future.
---------------------------------------------------------------------------
\9\ Table 11 of AEO2011 Early Release, Report Number DOE/EIA-
0383ER(2011). http://www.eia.doe.gov/forecasts/aeo/tables_ref.cfm.
\10\ Table ``Ethanol trade'', World Biofuels, FAPRI 2010 U.S.
and World Agricultural Outlook. http://www.fapri.iastate.edu/outlook/2010/.
---------------------------------------------------------------------------
We also examined the potential for excess biodiesel to help meet
the need for 484-496 million gallons of advanced biofuel. The
applicable volume of biomass based diesel established in the statute
for 2012 is 1.0 billion gallons (which corresponds to 1500 ethanol-
equivalent gallons). As discussed more fully in Section II.E below, we
believe that the biodiesel industry has the potential for producing
volumes above 1.0 billion gallons if demand for such volume exists,
potentially up to an additional several hundred million gallons.
Another potential source of advanced biofuels is electricity
generated from renewable biomass that is used as a transportation fuel.
EIA data indicates that in 2009, the most recent year for which data is
available, 35.6 million megawatt-hours of electricity was generated
from wood and wood derived fuels, and an additional 18.4 million
megawatt-hours was generated from other biomass in the United
States.\11\ If all of this electricity were used as a transportation
fuel it would represent nearly 2.4 billion ethanol equivalent gallons
of advanced biofuel. While not all the feedstocks used to generate the
electricity included in these totals would meet the RFS2's renewable
biomass definition this remains a very large potential source of
advanced biofuel RINs.
---------------------------------------------------------------------------
\11\ Table ES1 of Electric Power Industry 2009: Year in Review.
Available online: http://www.eia.doe.gov/cneaf/electricity/epa/epayir.pdf.
---------------------------------------------------------------------------
In addition to verifying that the feedstocks used to generate
renewable electricity meet the renewable biomass definition producers
would also be required to document that the electricity they produce is
used as a transportation fuel in order to be eligible to generate RINs.
Until recently there were very few vehicles capable of using
electricity as a transportation fuel. Expected increases in the number
of vehicles with this capability, such as electric vehicles and plug in
hybrids, has the potential to dramatically increase the degree to which
electricity is able to be used as a transportation fuel. Verifying that
the renewable electricity produced is used as a transportation fuel
would still remain a challenge, however the potential for capitalizing
on the RIN value, without the necessity of making major changes in the
areas of fuel production, distribution, or end use, may be a large
enough incentive to overcome this challenge. While the many
uncertainties associated with the generation of advanced biofuel RINs
from renewable electricity prevent EPA from making a quantitative
projection for 2012, such RINs may nevertheless play a role in meeting
the advanced biofuel standard.
Finally, there are also other potential sources of advanced
biofuels. For instance, several companies are making progress on
opening advanced biofuel production facilities as early as 2012. Gevo
purchased a dry mill corn ethanol plant in Minnesota and is in the
process of converting it to produce up to 10 million gallons of
biobutanol per year. Solazyme produced over 150,000
[[Page 38855]]
gallons of algal oil in 2010-2011 that was then converted to jet fuel
by UOP and is planning for increased production in 2012. LS9 purchased
a fermentation facility in Florida that will enable them to produce
50,000 to 100,000 gallons of diesel fuel per year and plan to have this
facility full operational by 2012. Several other companies are also
planning on producing advanced biofuels using a variety of feedstocks,
including sugars, sweet sorghum, waste cooking oil or restaurant
grease, algal oils, and many others that have the potential to achieve
commercial production by the end of 2012. Insofar as such fuels are
registered under 40 CFR part 79 and meet all the requirements for RIN
generation under the RFS program, they could contribute to compliance
with the advanced biofuels standard in 2012.
By adding up the potential volumes of imported sugarcane ethanol,
excess biodiesel, and other sources of advanced biofuel, there are
likely to be sufficient volumes of advanced biofuels to meet the need
for 484-496 million gallons. As a result, we do not believe that the
advanced biofuel standard need be lowered below the 2.0 billion gallon
level specified in the Act. Thus, we are not proposing to reduce the
applicable volume of advanced biofuel for 2012. In addition, since we
are not proposing to lower the advanced biofuel standard for 2012, we
do not believe that there is a need to lower the total renewable fuel
standard. Nevertheless, since there is some uncertainty in both the
availability of advanced biofuels in 2012 and the market conditions
which would support their availability, we request comment on whether
the advanced biofuel and total renewable fuel standards should be
lowered, and the basis for such a reduction in the applicable volumes
from the statute.
E. Biomass-Based Diesel in 2012
As described more fully in Section II.D above, we must determine
whether the required volumes of advanced biofuel and/or total renewable
fuel should be reduced if we reduce the required volume of cellulosic
biofuel. The amount of biomass-based diesel that we project will be
available directly affected our proposed consideration for this NPRM of
adjustments to the volumetric requirements for advanced biofuel and
total renewable fuel.
To evaluate whether the applicable volume of 1.0 bill gallons for
biomass-based diesel is achievable in 2012, and whether even greater
volumes could be produced, we examined recent production rates,
production capacity of the industry, and projections for future
production. Although there are a variety of potential fuel types that
can qualify as biomass-based diesel, biodiesel is by far the
predominant type. Thus, our assessment focused primarily on biodiesel,
though we also investigated potential volumes of renewable diesel.
According to the Energy Information Administration, biodiesel
production in 2010 reached 311 mill gallons.\12\ However, we believe
that this value underestimates the volume of biomass-based diesel
actually produced in 2010 since it is based primarily on feedstocks
used in the production of biodiesel. Based on information from the EPA-
Moderated Transaction System (EMTS) and RIN generation reports
submitted to EPA from producers, we estimate that the volume of
biomass-based diesel produced in 2010 was about 380 mill gallons. While
this is higher than the 345 mill gallons that we projected would be
needed for compliance with the 2010 biomass-based diesel standard,\13\
there were also exports of biodiesel that would have reduced the
availability of RINs for compliance purposes. To the degree that the
volume of biomass-based diesel fell short of the 345 mill gallons that
we estimated would be needed, obligated parties would have needed to
carry a deficit into 2011.
---------------------------------------------------------------------------
\12\ Monthly Energy Review, May 2011. http://www.eia.doe.gov/emeu/mer/pdf/pages/sec10_8.pdf.
\13\ See question 6.7 in EPA's ``Questions and Answers on
Changes to the Renewable Fuel Standard Program (RFS2)'', http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-aq.htm#6.
---------------------------------------------------------------------------
However, many of the activities of the biodiesel industry in 2010
were due to unique circumstances that may not apply in 2012. It is
likely that a contributing factor to the lower production volumes in
2010 was the expiration of the biodiesel tax credit at the end of 2009,
and the uncertainty throughout 2010 regarding whether and when it might
be reinstated. This situation may have led to hesitation on the part of
obligated parties for establishing binding contracts for purchases of
biodiesel.
Historical production of biodiesel has varied significantly
depending on market demand as shown in Figure II.E-1 below.
[[Page 38856]]
[GRAPHIC] [TIFF OMITTED] TP01JY11.000
The fact that the U.S. biodiesel industry has produced higher volumes
when demand for it existed suggests that the industry has the
capability to produce greater volumes than it did in 2010 under the
appropriate circumstances. For instance, information from the EPA-
Moderated Transaction System (EMTS) indicates that monthly production
volumes of biodiesel have increased steadily in the first few months of
2011, reaching 74 mill gallons by April.\14\ This trend demonstrates
that the industry is responding to the higher demand created by the 800
mill gal biomass-based diesel volume requirement under the RFS program
in 2011.
---------------------------------------------------------------------------
\14\ 2011 RIN Generation and Renewable Fuel Volume Production,
http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfsdata.htm.
---------------------------------------------------------------------------
The biodiesel industry's production potential supports the view
that it can more than satisfy the applicable volume of biomass-based
diesel specified in the statute for 2012. As of January, 2011, the
aggregate production capacity of biodiesel plants in the U.S. was
estimated at 2.8 billion gallons per year across approximately 170
facilities. \15\ Of this aggregate production capacity, at least 1.8
billion gallons of production capacity has been registered under the
RFS2 program.\16\ Although some facilities are currently idle, and
ramping up production will require some time and potentially some
reinvestment, based on feedback from industry we nevertheless believe
that it can occur in time to meet a production goal of 1.0 billion
gallons in 2012.
---------------------------------------------------------------------------
\15\ Figures taken from National Biodiesel Board's Member Plant
List as of January 27, 2011. http://biodiesel.org/buyingbiodiesel/plants/showall.aspx.
\16\ Comments from National Biodiesel Board on the July 20, 2010
NPRM proposing the RFS standards for 2011. See Docket EPA-HQ-OAR-
2010-0133.
---------------------------------------------------------------------------
Projections of production for 2012 strongly suggest that 1.0 bill
gallons of biomass-based diesel is achievable. For instance, the U.S.
Department of Agriculture projects that over 400 mill gallons of
biodiesel will be produced from soybean oil in 2012, and adds that
``Although some other first-use vegetable oils are also used to produce
biodiesel, most of the remaining biodiesel production needed to reach
the 1-billion-gallon mandate of the 2007 Energy Act uses animal fats or
recycled vegetable oil as the feedstock.'' \17\ This projection is
further supported by the Agricultural Marketing Resource Center at Iowa
State University, which projects that soy-oil biodiesel production may
reach as high as 470 mill gallons and that non-soy biodiesel may reach
as high as 460 mill gallons.\18\ Both of these sources project more
growth in non-soy oil feedstock volumes than soy oil. Finally, EIA
projects that the total volume of biodiesel in 2012 would be about 840
mill gallons.\19\ While all of these projections suggest that volumes
of biodiesel may fall short of 1.0 bill gallons, we believe that
sufficient additional volumes of renewable diesel can also be available
to meet the 1.0 bill gal requirement for biomass-based diesel. For
instance, Dynamic Fuels has constructed one plant in Geismar, Louisiana
that started production of renewable diesel in November, 2010.\20\ In
the final RFS2 rule, we projected that annual renewable diesel
production could reach 150 mill gallons based on feedstock
availability. Since renewable diesel can also be produced at existing
refineries with little or no modification to processing equipment, we
believe
[[Page 38857]]
that 150 mill gallons of renewable diesel could be produced in 2012.
Thus, we currently believe that the total production volume of both
biodiesel and renewable diesel can reach 1.0 bill gal in 2012.
---------------------------------------------------------------------------
\17\ USDA Agricultural Projections to 2020, Long-Term
Projections Report OCE-2011-1, February 2011. See Table 24. Assumes
7.68 lb/gal.
\18\ Soybean Oil and Biodiesel Usage Projections and Balance
Sheet, updated 2/18/2011. http://www.extension.iastate.edu/agdm/crops/outlook/soybeanbalancesheet.pdf. Values cited are for the
``High'' case.
\19\ Short-Term Energy Outlook, February 2011. Table 8.
\20\ Project status updates are available via the Syntroleum Web
site, http://dynamicfuelsllc.com/wp-news/.
---------------------------------------------------------------------------
We also believe that there will be sufficient sources of qualifying
renewable biomass to more than meet the needs of the biodiesel industry
in 2012. The largest sources of feedstock for biodiesel in 2012 are
expected to be soy oil, canola oil, rendered fats, and potentially some
corn oil extracted during production of fuel ethanol, as this
technology continues to proliferate. Moreover, information we received
from a large rendering company suggests that there will be adequate
fats and greases feedstocks to supply biofuels production as well as
other historical uses.\21\
---------------------------------------------------------------------------
\21\ See Federal Register v. 74 n. 99 p. 24903. Comments are
available in docket EPA-HQ-OAR-2005-0161.
---------------------------------------------------------------------------
Based on our review of the production potential of the biodiesel
industry, and projections from several sources, and our assessment of
available feedstocks, we believe that the 1.0 billion gallons needed to
satisfy the applicable volume of biomass-based diesel specified in the
statute can be produced in 2012. Therefore, we are not proposing to
lower the biomass-based diesel standard of 1.0 billion gallons that is
specified in the Act. Moreover, based on production capacity and
availability of feedstocks, we believe that volumes of biomass-based
diesel in excess of 1.0 bill gallons could be made available given
sufficient market demand.
III. Proposed Percentage Standards for 2012
A. Background
The renewable fuel standards are expressed as a volume percentage,
and are used by each refiner, blender or importer to determine their
renewable volume obligations (RVO). Since there are four separate
standards under the RFS2 program, there are likewise four separate RVOs
applicable to each obligated party. Each standard applies to the sum of
all gasoline and diesel produced or imported. The applicable percentage
standards are set so that if each regulated party meets the
percentages, then the amount of renewable fuel, cellulosic biofuel,
biomass-based diesel, and advanced biofuel used will meet the volumes
required on a nationwide basis.
As discussed in Section II.B.4, we are proposing a required volume
of cellulosic biofuel for 2012 in the range of 3.45-12.9 million
gallons (3.55-15.7 million ethanol equivalent gallons). The single
volume we select for the final rule will be used as the basis for
setting the percentage standard for cellulosic biofuel for 2012. We are
also proposing that the advanced biofuel and total renewable fuel
volumes would not be reduced below the applicable volumes specified in
the statute. The proposed 2012 volumes used to determine the four
percentage standards are shown in Table III.A-1.
Table III.A-1--Proposed Volumes for 2012
----------------------------------------------------------------------------------------------------------------
Actual volume Ethanol equivalent volume
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel.................... 3.45-12.9 mill gal................. 3.55-15.7 mill gal.
Biomass-based diesel.................. 1.0 bill gal....................... 1.5 bill gal.
Advanced biofuel...................... 2.0 bill gal....................... 2.0 bill gal.
Renewable fuel........................ 15.2 bill gal...................... 15.2 bill gal.
----------------------------------------------------------------------------------------------------------------
The formulas used in deriving the annual renewable fuel standards
are based in part on estimates of the volumes of gasoline and diesel
fuel, for both highway and nonroad uses, that will be used in the year
in which the standards will apply. Producers of other transportation
fuels, such as natural gas, propane, and electricity from fossil fuels,
are not subject to the standards, and volumes of such fuels are not
used in calculating the annual standards. Since the standards apply to
producers and importers of gasoline and diesel, these are the
transportation fuels used to set the standards, and then again to
determine the annual volume obligations of an individual gasoline or
diesel producer or importer.
B. Calculation of Standards
1. How are the standards calculated?
The following formulas are used to calculate the four percentage
standards applicable to producers and importers of gasoline and diesel
(see Sec. 80.1405):
[[Page 38858]]
[GRAPHIC] [TIFF OMITTED] TP01JY11.004
Where:
StdCB,i = The cellulosic biofuel standard for year i, in
percent.
StdBBD,i = The biomass-based diesel standard (ethanol-
equivalent basis) for year i, in percent.
StdAB,i = The advanced biofuel standard for year i, in
percent.
StdRF,i = The renewable fuel standard for year i, in
percent.
RFVCB,i = Annual volume of cellulosic biofuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
RFVBBD,i = Annual volume of biomass-based diesel required
by section 211(o) of the Clean Air Act for year i, in gallons.
RFVAB,i = Annual volume of advanced biofuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
RFVRF,i = Annual volume of renewable fuel required by
section 211(o) of the Clean Air Act 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 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 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 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,
respectively. For 2012, this value is 3.27 bill gal. See further
discussion in Section III.B.2 below.
DEi = The amount of diesel 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,
respectively. For 2012, this value is 1.23 bill gal. See further
discussion in Section III.B.2 below.
The four separate renewable fuel standards for 2012 are based on
the 49-state gasoline and diesel consumption volumes projected by EIA.
The Act requires EPA to base the standards on an EIA estimate of the
amount of gasoline and diesel that will be sold or introduced into
commerce for that year. The projected volume of gasoline used to
calculate the final 2012 percentage standards will be provided directly
by EIA. For the purposes of this proposal, we have used the April 2011
issue of STEO for the gasoline projection. The projected volume of
transportation diesel used to calculate the final 2012 percentage
standards will be provided by EIA. For the purposes of this proposal,
we have used the Early Release version of AEO2011. Gasoline and diesel
volumes are adjusted to account for renewable fuel contained in the EIA
projections. The projected volumes of ethanol and biodiesel used to
calculate the final percentage standards will be provided by EIA; for
2011, the final values were based on EIA's Short-Term Energy Outlook
(STEO). For the purposes of this proposal, we have used the April 2011
values for ethanol and biodiesel provided in the STEO. Although EIA
will be providing fuel consumption projections for the final rule,
using the most recent available EIA data for purposes of this proposal
allows us to provide the affected industries with a reasonable estimate
of the standards for planning purposes.
2. Small Refineries and Small Refiners
In CAA section 211(o)(9), enacted as part of the Energy Policy Act
of 2005, Congress provided a temporary exemption to small refineries
(those refineries with a crude throughput of no more than 75,000
barrels of crude per day) through December 31, 2010. In RFS1, we
exercised our discretion under section 211(o)(3)(B) and extended this
temporary exemption to the few remaining small refiners that met the
Small Business Administration's (SBA) definition of a small business
(1,500 employees or less company-wide) but did not meet the statutory
small refinery definition as noted above. Because EISA did not alter
the small refinery exemption in any way, the RFS2 program regulations
exempted gasoline and diesel produced by small refineries and small
refiners in 2010 from the
[[Page 38859]]
renewable fuels standard (unless the exemption was waived), see 40 CFR
80.1141.
Under the RFS program, Congress provided two ways that small
refineries can receive a temporary extension of the exemption beyond
2010. One is based on the results of a study conducted by the
Department of Energy (DOE) to determine if small refineries would face
a disproportionate economic hardship under the RFS program. The other
is based on EPA determination of disproportionate economic hardship on
a case-by-case basis in response to refiner petitions.
In January 2009, DOE issued a study which did not find that small
refineries would face a disproportionate economic hardship under the
RFS program.\22\ The conclusions were based in part on the expected
robust availability of RINs and EPA's ability to grant relief on a
case-by-case basis. As a result, beginning in 2011 small refiners and
small refineries were required to participate in the RFS program as
obligated parties, and there was no small refiner/refinery volume
adjustment to the 2011 standard as there was for the 2010 standard.
---------------------------------------------------------------------------
\22\ DOE report ``EPACT 2005 Section 1501 Small Refineries
Exemption Study'', (January, 2009).
---------------------------------------------------------------------------
Following the release of DOE's 2009 small refinery study, Congress
directed DOE to complete a reassessment and issue a revised report. DOE
recently re-evaluated the impacts of the RFS program on small entities
and concluded that some small refineries would suffer a
disproportionate hardship if required to participate in the
program.\23\ As a result, these refineries will be exempt from being
obligated parties for a minimum of two additional years, 2011 and
2012.\24\ The proposed 2012 standards reflect the exemption of these
refineries. In addition, and separate from the DOE determination, EPA
may extend the exemption for individual small refineries on a case-by-
case basis if they demonstrate disproportionate economic hardship. A
few refineries have satisfactorily made this demonstration, and EPA has
acted on their requests. The gasoline and diesel volumes of those
refineries have been appropriately accounted for in the development of
the proposed standards. If additional individual refinery requests for
exemptions are approved following the release of this NPRM, the final
standards will be adjusted to account for those exempted volumes of
gasoline and diesel. However, any requests for exemptions that are
approved after the release of the final 2012 RFS standards will not
affect the 2012 standards. As stated in the final rule establishing the
2011 standards, ``EPA believes 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 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.'' Thus, after the 2012 standards are finalized, any additional
exemptions issued will not affect those standards.
---------------------------------------------------------------------------
\23\ ``Small Refinery Exemption Study: An Investigation into
Disproportionate Economic Hardship,'' U.S. Department of Energy,
March 2011.
\24\ Since the standards are applied on an annual basis, the
exemptions are likewise on an annual basis even though the
determination of which refineries would receive an extension to
their exemption did not occur until after January 1, 2011.
---------------------------------------------------------------------------
3. Proposed Standards
As finalized in the March 26, 2010 RFS2 rule, the standards are
expressed in terms of energy-equivalent gallons of renewable fuel, with
the cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the biomass-based diesel
standard based on biodiesel equivalence. However, all RIN generation is
based on ethanol-equivalence. More specifically, the RFS2 regulations
provide that production or import of a gallon of biodiesel will lead to
the generation of 1.5 RINs. In order to ensure that demand for 1.0
billion physical gallons of biomass-based diesel will be created in
2012, the calculation of the biomass-based diesel standard provides
that the required volume be multiplied by 1.5. The net result is a
biomass-based diesel gallon being worth 1.0 gallons toward the biomass-
based diesel standard, but worth 1.5 gallons toward the other
standards.\25\
---------------------------------------------------------------------------
\25\ 75 FR 14716, March 26, 2010.
---------------------------------------------------------------------------
The levels of the percentage standards would be reduced if Alaska
or a U.S. territory chooses to participate in the RFS2 program, as
gasoline and diesel produced in or imported into that state or
territory would then be subject to the standard. Neither Alaska nor any
U.S. territory has chosen to participate in the RFS2 program at this
time, and thus the value of the related terms in the calculation of the
standards is zero.
Note that the terms for projected volumes of gasoline and diesel
use include gasoline and diesel that has been blended with renewable
fuel. Because the gasoline and diesel volumes estimated by EIA include
renewable fuel use, we must subtract the total renewable fuel volume
from the total gasoline and diesel volume to get total non-renewable
gasoline and diesel volumes. The values of the variables described
above are shown in Table III.B.3-1.\26\ Terms not included in this
table have a value of zero.
---------------------------------------------------------------------------
\26\ To determine the 49-state values for gasoline and diesel,
the amounts of these fuels used in Alaska is subtracted from the
totals provided by DOE. The Alaska fractions are determined from the
most recent (2009) EIA State Energy Data, Transportation Sector
Energy Consumption Estimates. The gasoline and transportation
distillate fuel oil fractions are approximately 0.2% and 0.8%,
respectively. Ethanol use in Alaska is estimated at 8.4% of its
gasoline consumption (based on the same State data), and biodiesel
use is assumed to be zero.
Table III.B.3-1--Values for Terms in Calculation of the Standards
[Bill gal]
------------------------------------------------------------------------
Term Value
------------------------------------------------------------------------
RFVCB,2012............................................ 0.00355-0.0157
RFVBBD,2012........................................... 1.0
RFVAB,2012............................................ 2.0
RFVRF,2012............................................ 15.20
G2012................................................. 139.98
D2012................................................. 44.47
RG2012................................................ 14.17
RD2012................................................ 0.83
------------------------------------------------------------------------
Using the volumes shown in Table III.B.3-1, we have calculated the
proposed percentage standards for 2012 as shown in Table III.B.3-2.
Table III.B.3-2--Proposed Percentage Standards for 2012
------------------------------------------------------------------------
------------------------------------------------------------------------
Cellulosic biofuel........................ 0.002% to 0.010%.
Biomass-based diesel...................... 0.91%.
Advanced biofuel.......................... 1.21%.
Renewable fuel............................ 9.21%.
------------------------------------------------------------------------
IV. Biomass-Based Diesel Volume for 2013
In today's action we are proposing an applicable volume for
biomass-based diesel for 2013, based on the statutory requirement to
establish the applicable volume of biomass-based diesel for years after
2012 no later than 14 months before the first year for which the
applicable volume will apply. To do this, we have reviewed RFS program
implementation to date and analyzed a number of factors specified in
the statute as part of this effort. We have investigated what the
demand for biomass-based diesel is likely to be in 2013 taking into
consideration the applicable advanced biofuel volume specified in the
statute, the analyses we
[[Page 38860]]
conducted in the RFS2 final rulemaking, and a consideration of
biodiesel production, consumption, and infrastructure issues. In these
investigations, biodiesel was the primary focus since it is expected to
be the predominant type of biomass-based diesel through at least the
next few years. However, renewable diesel may also play a role in
meeting the biomass-based diesel standard. When appropriate, we have
discussed renewable diesel separately from biodiesel.
Note that, in proposing the 2013 applicable volume of biomass-based
diesel, we are not at this time proposing the percentage standards that
would apply to obligated parties in 2013. Instead, the percentage
standards will be determined after projections of gasoline and diesel
volume are provided by the Energy Information Administration (EIA) in
the fall of 2012, and will be announced by November 30, 2012. Moreover,
in today's proposal we are not addressing potential exemptions for
small refineries and/or small refiners in 2013, since such exemptions
are only relevant in the context of specifying the percentage standards
and their applicability. Finally, we are not proposing any applicable
volumes of biomass-based diesel for 2014 or later years.
A. Statutory Requirements
Section 211(o)(2)(B)(i) of the Clean Air Act specifies the
applicable volumes of renewable fuel on which the annual percentage
standards must be based, unless the applicable volumes are waived or
adjusted by EPA in accordance with specific authority and directives
specified in the statute.\27\ Applicable volumes are provided in the
statute for years through 2022 for cellulosic biofuel, advanced
biofuel, and total renewable fuel. For biomass-based diesel, applicable
volumes are provided through 2012. For years after those specified in
the statute (i.e. 2013+ for biomass-based diesel and 2023+ for all
others), EPA is required to determine the applicable volume, 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 applicable
volumes, and an analysis of the following:
---------------------------------------------------------------------------
\27\ For example, EPA may waive a given standard in whole or in
part following the provisions at 211(o)(7).
---------------------------------------------------------------------------
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;
The impact of renewable fuels on the energy security of
the United States;
The expected annual rate of future commercial production
of renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and biomass-based diesel);
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;
The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
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.
While EPA is given the authority to determine the appropriate volume of
renewable fuel for those years that are not specified in the statute
based on a review of program implementation and analysis of the factors
listed above, the statute also specifies that the applicable volume of
biomass-based diesel cannot be less than the applicable volume for
calendar year 2012, which is 1.0 bill gallons.
It is useful to note that the statutory provisions described above
are silent in two important areas. First, the statute does not provide
numerical criteria or thresholds that must be attained in the
determination of applicable volumes (other than specifying a minimum
volume of 1.0 bill gal), nor does it describe any overarching goals
such as maximizing GHG or energy security benefits or minimizing cost.
The EPA, in coordination with DOE and USDA, is thus effectively charged
with making a determination of the applicable volumes based on a
judgment of their reasonableness in the context of a review of program
implementation and analysis of the factors described above. Second, the
statute does not provide authority to raise the applicable volumes of
advanced biofuel or total renewable fuel above those specified in the
statute for years up to and including 2022. Thus, any increase in the
biomass-based diesel volume requirement above that specified for 2012
would not have any impact on the advanced biofuel or total renewable
fuel volume requirements. Rather, increasing the biomass-based diesel
volume requirement above 1.0 bill gallons would likely result in a
change in the makeup of biofuels used to meet the advanced biofuel and
the total renewable fuel standards, but would not change the total
required volumes of those fuels (in terms of ethanol-equivalent
gallons).
Finally, the statute also specifies the timeframe within which
these volumes must be promulgated: The rules establishing the
applicable volumes must be finalized no later than 14 months before the
first year for which such applicable volume will apply. For the
biomass-based diesel volume that would apply beginning on January 1,
2013, then, we must finalize the applicable volume by November 1, 2011.
B. Factors Considered in Assessing 2013 Biomass-Based Diesel Volumes
As described in Section IV.A, we are required to review the
implementation of the RFS program for years prior to 2013, and to use
information from this review in determining the applicable volume of
biomass-based diesel for 2013. However, given the short history of the
RFS program, we believe this review is of limited value. Prior to the
beginning of the RFS2 program on July 1, 2010, the RFS1 program had no
volume requirement specific to biomass-based diesel. Although RINs were
generated for biodiesel under the RFS1 program and those RINs were
available for use in satisfying obligated parties' RFS1 total renewable
fuel Renewable Volume Obligation (RVO), we do not believe that the RFS1
program contributed significantly to producers' production decisions.
Rather, biodiesel production was driven by market demand apart from the
RFS program requirements coupled with a tax credit for biodiesel
blends. We believe that little can be discerned from the RFS1 history
about the operation of the biodiesel industry under a future RFS2
volume mandate.
In the short time since the RFS2 program went into effect,
biodiesel production volumes have not increased substantially above
historical levels due most likely to factors such as the availability
of carryover RINs from 2008 and 2009 and the expiration of the
biodiesel tax credit (which was reinstituted at the end of 2010).
Domestic biodiesel consumption varied little in the 2008-2010
timeframe, averaging about 330 mill gallons each year.
Given the increases in the biomass-based diesel volumes that are
required in the statute for 2011 and 2012, we expect production and
consumption volumes of biodiesel to increase
[[Page 38861]]
substantially above these recent historic levels. A review of the RFS
program during 2011 and 2012 will, therefore, provide more relevant
information regarding implementation of the RFS program for purposes of
helping us to evaluate how the industry, as well as feedstock supplies
and infrastructure, can respond to potential requirements in 2014 and
beyond. For the purposes of proposing the 2013 biomass-based diesel
applicable volume in today's NPRM, however, this information is not
available.
With the limited information available on the current and
historical operation of the RFS program, we believe it would be prudent
for 2013 to consider only moderate increases above the statutory
minimum of 1.0 bill gallons. One possible benchmark is provided by the
increments and growth pattern of those increments that Congress
established for the years 2009-2012, shown in Table IV.B-1.
Table IV.B-1--Incremental Increases in Biomass-Based Diesel in the
Statute
[Bill gal]
------------------------------------------------------------------------
Applicable Increment
volume of from
biomass-based previous
diesel year
------------------------------------------------------------------------
2009....................................... 0.5 n/a
2010....................................... 0.65 0.15
2011....................................... 0.80 0.15
2012....................................... 1.0 0.20
------------------------------------------------------------------------
These increments provide a precedent for evaluating a reasonable
mandatory minimum growth pattern for 2013. The increments increased in
magnitude over the four-year period specified in the statute,
increasing from 0.15 bill gal to 0.20 bill gal. If this trend were to
continue, the 2013 volume could be more than 0.20 bill gal higher than
the 2012 volume. Thus our intention is to consider an incremental
increase in the applicable volume of biomass-based diesel between 2012
and 2013 that is not a dramatic change from the trend in increments
shown above.
In the final rulemaking establishing the RFS2 program, we developed
renewable fuel volume scenarios for all years between 2010 and 2022.
For 2013, we estimated a biomass-based diesel volume of 1.28 bill
gallons. This volume was based primarily on a projection of the
qualifying feedstocks that could be available. Our analyses of
feedstock availability in the RFS2 final rule concluded that the 2013
minimum biomass-based diesel volume of 1.0 bill gallons could be met
and, indeed, that 1.28 billion gallons could be reasonably
produced.\28\ The value of 1.28 bill gallons assumed for 2013 in the
RFS2 final rule appears to roughly follow the pattern in incremental
growth shown in Table IV.B-1 above. Moreover, this biomass-based diesel
volume has already been partially evaluated in the RFS2 rule.
Therefore, EPA decided to evaluate the appropriateness of proposing an
applicable volume for 2013 of 1.28 bill gallons. To this end, we
considered whether 1.28 bill gal of biomass-based diesel was reasonable
given likely market demand, availability of feedstocks, production
capacity, limitations related to storage and consumption,
infrastructure, and the impacts of biomass-based diesel in a variety of
areas as required under the statute. These impacts are discussed in the
subsequent Section IV.C.
---------------------------------------------------------------------------
\28\ Renewable Fuel Standard Program (RFS2) Regulatory Impact
Analysis. EPA-420-R-10-006, February 2010. See Table 1.2-3.
---------------------------------------------------------------------------
1. Demand for Biomass-Based Diesel
The demand for biomass-based diesel in 2013 will be a function of
not only the biomass-based diesel standard, but also the advanced
biofuel standard, since the standards under the RFS2 program are
nested. That is, every RIN that is valid for meeting the biomass-based
diesel standard is also valid for meeting the advanced biofuel
standard. Moreover, there are currently only a small number of biofuels
that are likely to be available for meeting the advanced biofuel
standard. In addition to biomass-based diesel, these would include any
RINs used to meet the cellulosic biofuel standard, coprocessed
renewable diesel, and sugarcane ethanol. To the degree that there are
limits in these other advanced biofuels, additional biomass-based
diesel may be needed to make up any shortfall.
Since the advanced biofuel standard is an important factor in
determining the demand for biomass-based diesel in 2013, we considered
how it should be treated in light of the fact that we must determine
the applicable 2013 volume for biomass-based diesel this year, but we
will not set the 2013 standards (including the advanced biofuel
standard for 2013) until next year. EPA has the authority to reduce the
applicable volume of advanced biofuel in the event that it reduces the
applicable volume of cellulosic biofuel. EPA will consider using this
authority at the time it evaluates whether the 2013 applicable volume
of cellulosic biofuel set in the statute should be lowered in light of
projected production volumes. In both 2010 and 2011 EPA lowered the
applicable volume of cellulosic biofuel without lowering the applicable
volume of advanced biofuel. EPA is today proposing the same approach
for 2012. In light of this history, and the fact that EPA cannot
finally evaluate the issue of potentially lowering the applicable
volume of advanced biofuel for 2013 until it sets the 2013 standards in
November of 2012, we assume for purposes of today's evaluation of
biomass-based diesel demand in 2013 that the applicable volume of 2.75
bill gallons of advanced biofuel specified in the statute for 2013 will
be used in setting the 2013 advanced biofuel standard.
As described in Section II, the cellulosic biofuel industry
continues to develop, with numerous projects under development, planned
or underway. Nevertheless, the actual production volumes continue to
fall far below the applicable volumes specified in the statute. For
instance, we are proposing a cellulosic biofuel volume of 3.55-15.7
mill gallons for 2012, compared to the applicable volume of 500 mill
gal specified in the statute. In 2013, the applicable volume doubles to
1.0 bill gallons. While we have not projected specific volumes of
cellulosic biofuel that may be available in 2013, it is highly likely
that they will fall significantly short of 1.0 bill gallons, and are
likely to comprise only a small portion of the 2.75 bill gal applicable
volume for advanced biofuel in 2013.
Imported sugarcane ethanol can also be used to meet the advanced
biofuel standard. Between years 2000 and 2009, the volume of ethanol
imported into the U.S. has ranged from 46-730 million gallons per year,
or on average, approximately 200 million gallons per year. These
volumes were comprised almost exclusively of sugarcane ethanol from
Brazil. In 2010, imports of ethanol into the U.S. were among the lowest
in the past 10 years, reaching only 17 million gallons.\29\ Some of
this recent decline in ethanol imports may be due to extremely wet
weather in 2009/10 and dry conditions in 2010/11 which cut into
Brazilian supplies of sugarcane and reduced sugar content. In addition,
some Brazilian sugarcane mills have the ability to switch between
producing sugars for sweetener markets and extracting sugars for
ethanol markets. The international price of sweetener was so attractive
in 2010 that mills may have given greater priority to sugar. Another
factor is the expanding sales of flex fuel vehicles in Brazil, which
has
[[Page 38862]]
continued to increase Brazilian domestic ethanol demand, thus likely
limiting amounts available for exports. Therefore, history shows that
the volume of imported ethanol can fluctuate greatly due to a variety
of market influences.
---------------------------------------------------------------------------
\29\ Official Statistics of the U.S. Department of Commerce U.S.
International Trade Commission. Data only available from January-
November 2010.
---------------------------------------------------------------------------
Longer-term market projections can help to better understand the
potential outlook for imports of sugarcane ethanol as a function of
international agricultural and energy markets. One source that
evaluates trends and issues for U.S. energy markets is the U.S. Energy
Information Administration's (EIA) Annual Energy Outlook (AEO).\30\
This report projects U.S. net ethanol imports in 2013 to be 332 million
gallons. Another source for U.S. and world commodity projections is the
Food and Agricultural Policy Research Institute's (FAPRI) U.S. and
World Agricultural Outlook. The most current version of the outlook,
the FAPRI 2010 Agricultural Outlook, projects for the year 2013 that
the U.S. will have net ethanol imports of 333 million gallons.\31\ In
comparison, for the RFS2 final rulemaking, we assumed 190 million
gallons of imported sugarcane ethanol could be available in 2013 based
on EIA's AEO2007.
---------------------------------------------------------------------------
\30\ U.S. Energy Information Administration (EIA). ``AEO2011
Early Release,'' December 2010. http://www.eia.doe.gov/forecasts/aeo/index.cfm.
\31\ Food and Agricultural Policy Research Institute. ``FAPRI
2010 U.S. and World Agricultural Outlook: World Biofuels,'' http://www.fapri.iastate.edu/outlook/2010/text/15Biofuels.pdf.
---------------------------------------------------------------------------
Since ethanol supplies can flow to countries other than the U.S.,
an important part of understanding potential imports into the U.S. are
the current and future biofuel mandates and goals of other nations.
Such mandates include, for instance, Canada's 5% fuel ethanol mandate
which started in late 2010, requiring approximately 500 million gallons
per year. Another goal is that of the EU, the renewable energy
directive, which includes a minimum target of 10% renewable energy use
in transport by 2020, a portion of which is expected to be met with
ethanol. Other countries with ethanol mandates and goals are India,
Indonesia, Philippines, Costa Rica, Peru, and Argentina, to name a few.
According to Hart Energy Consulting, most countries will be in a
potential supply deficit for ethanol by 2020, and the primary country
in a position to supply the global ethanol market will be Brazil.\32\
Chief competitors for the U.S. to receive Brazilian ethanol are
expected to be the EU, China, and Japan. This increasing international
demand for biofuels may limit export supplies available for the U.S. in
2013.
---------------------------------------------------------------------------
\32\ Hart Energy Consulting. ``Global Biofuels Outlook: 2010-
2020,'' October 2010.
---------------------------------------------------------------------------
The demand for ethanol in Brazil is also increasing, further
limiting volumes that will likely be exported. For instance, the sales
share of flex-fuel vehicles (FFVs) in Brazil are reported to have risen
dramatically in the last decade, contributing to an in-use fleet that
is increasingly capable of operating on pure ethanol. By 2014, 70% of
the in-use fleet is expected to be FFVs, compared to only 33% in 2009.
While the aforementioned FAPRI report projected that 2013 Brazilian
demand for ethanol could be 7.7 billion gallons, S&D estimated that
2013 demand could potentially reach as high as 11 billion gallons,
outpacing Brazilian production capacity.\33\
---------------------------------------------------------------------------
\33\ Sucres et Denr[eacute]es (S&D), ``Ethanol Report,''
November 2010.
---------------------------------------------------------------------------
We believe that given the discussions above, it is reasonable to
conclude that Brazilian sugarcane ethanol will continue to provide
limited volumes of advanced biofuel in the U.S. in the near term due to
other competitive uses. While imports of sugarcane ethanol into the
U.S. in 2013 could exceed the 190 million gallons estimated in RFS2,
they are unlikely to reach the historical high of 730 mill gallons for
the reasons described above.
In addition to cellulosic biofuel and imported sugarcane ethanol,
there is also some potential for other advanced biofuels that could be
used to meet the advanced biofuel standard of 2.75 bill gallons. The
most likely of these is sugar-based ethanol from domestic sugarcane.
Several companies have announced plans for sugar-based ethanol
production in California, Louisiana, and Florida. Two of these
companies have announced plans for multiple ethanol production
facilities, however none of these companies have yet begun
construction. In addition, coprocessed renewable diesel is uncertain,
though there could conceivably be up to a hundred million gallons by
2013. Potential production of other advanced biofuels such as renewable
butanol or ethanol from non-corn starches in biomass-fueled facilities
is even less certain for 2013. However, as described in Section II.D,
companies such as Gevo, Solazyme, and LS9 are in the process of
building or converting facilities to produce advanced biofuels in the
form of butanol, jet fuel, and renewable diesel, respectively, that may
count as advanced biofuel. We expect all these other sources of
advanced biofuel to contribute about one or two hundred million gallons
in 2013.
In summary, we believe that the total volume of cellulosic biofuel,
imported sugarcane ethanol, and other advanced biofuels that may be
available in 2013 is likely to be less than about 1 billion gallons. In
order to reach an advanced biofuel volume of 2.75 billion gallons,
then, it is likely that more than 1.0 bill gallons of biomass-based
diesel (representing more than 1.5 billion ethanol-equivalent gallons)
will be needed. The volume of biomass-based diesel that may be needed
in excess of 1.0 bill gallons could potentially be on the order of
hundreds of millions of gallons. This result is similar to the
assumption made by IHS Global Insight in their recent report, in which
they assume that an additional 300 million gallons of biodiesel will be
needed over and above the 1.0 billion gallons mandate for biomass-based
diesel in order for the advanced biofuel standard to be met.\34\
---------------------------------------------------------------------------
\34\ ``Biodiesel Production Prospects for the Next Decade,'' IHS
Global Insight, March 11, 2011.
---------------------------------------------------------------------------
As mentioned above, we do not believe it would be prudent to set
the biomass-based diesel applicable volume for 2013 such that the
increment over 2012 volumes is excessive in comparison to the
increments, and trajectory of increments, established by Congress for
the years 2009-2012. As a result, we believe that a biomass-based
diesel volume of 1.28 bill gallons would both reflect likely increased
demand for biomass-based diesel in 2013 and provide an increment that
is not excessive when compared to those established by Congress.
2. Availability of Feedstocks to Produce 1.28 Billion Gallons of
Biodiesel
As described above, in the final rulemaking establishing the RFS2
program we developed renewable fuel volume scenarios for all years
between 2010 and 2022. For 2013, we estimated a biomass-based diesel
volume of 1.28 bill gallons. This volume was based primarily on a
projection of the qualifying feedstocks that could be available, as
summarized in Table IV.B.2-1.
Table IV.B.2-1--Feedstocks Contributing to 2013 Volume of 1.28 Bill Gal
------------------------------------------------------------------------
Volume
Source (mill
gal)
------------------------------------------------------------------------
Yellow grease and other rendered fats........................ 380
Corn oil..................................................... 300
[[Page 38863]]
Virgin vegetable oil......................................... 600
----------
Total.................................................... 1,280
------------------------------------------------------------------------
We continue to believe that the feedstock volumes shown in Table
IV.B.2-1 are reasonable projections for 2013. For instance, according
to the U.S. Census Bureau, the total volume of yellow grease and other
greases (most likely trap grease) produced in 2010 was about 340 mill
gallons.\35\ The volume of inedible tallow produced in the same period
was over 400 mill gallons. Other potential sources could include edible
tallow, lard, and poultry fats. Taken together, the total volume of
available grease and fats for use in producing biomass-based diesel is
in excess of the 380 mill gallons we projected in the RFS2 final rule.
---------------------------------------------------------------------------
\35\ Current Industrial Reports, U.S. Census Bureau, M311K--Fats
and Oils: Production, Consumption, and Stocks, Table 2b. Assumes 7.5
lb/gal. December projection based on the average of January-
November. http://www.census.gov/manufacturing/cir/historical_data/m311k/index.html.
---------------------------------------------------------------------------
The 300 million gallons of biodiesel produced from corn oil
extracted from distillers grains produced at ethanol facilities is
based on projections of the percentage of the ethanol industry using
corn oil extraction technology and the amount of oil extracted per
bushel of corn in 2013. The RFS2 final rule projected that by 2013, 34%
of all dry mill ethanol facilities would extract corn oil from the by-
products of ethanol production. A recent survey of the ethanol industry
found that by 2008 over 30% of all dry mill ethanol plants were already
extracting corn oil from their co-products.\36\ EPA expects that the
percentage of dry mill ethanol facilities using some form of corn oil
extraction technology will increase to 60% by 2013. The corn oil
extraction technology currently being used at most dry mill ethanol
facilities is capable of extracting approximately one third of the oil
contained in the corn kernel from the whole stillage and/or its
derivatives (a significantly reduced rate than the two thirds of oil
extracted assumed to be technically feasible by 2022 in the RFS2 final
rule). If 60% of all dry mill corn ethanol facilities were extracting
one third of the oil in the corn kernel in 2013 the amount of corn oil
available for biodiesel production would be approximately 270 million
gallons. As corn oil extraction technology develops and higher oil
extraction rates are achieved, corn ethanol producers are likely to
adopt this new technology. EPA expects that by 2013 these technology
improvements will increase corn oil production levels to the 300
million gallons projected in the RFS2 rule. Alternatively, additional
corn oil could come from ethanol production facilities using corn
fractionation or wet milling technology. This corn oil was not
considered as a biodiesel feedstock in the RFS2 rule, but market
conditions may result in its availability to the biodiesel industry.
The high adoption rate of corn oil extraction and the promise of ever
increasing oil extraction yields indicate that the 300 million gallons
of corn oil extraction projected in the RFS2 rule in 2013 remains a
reasonable projection.
---------------------------------------------------------------------------
\36\ Mueller, Steffen. ``Detailed Report: 2008 National Dry Mill
Corn Ethanol Survey.'' University of Illinois at Chicago Energy
Resources Center (May 4, 2010). Available online: http://ethanolrfa.3cdn.net/2e04acb7ed88d08d21_99m6idfc1.pdf.
---------------------------------------------------------------------------
With regard to virgin vegetable oil, the modeling we conducted for
the RFS2 final rule assumed that it would be composed entirely of
soybean oil. For the purposes of today's proposal we examined recent
and historical soybean oil production and consumption volumes from the
U.S. Census Bureau to verify that 600 million gallons was a reasonable
potential volume for biodiesel production in 2013. As shown in Figure
IV.B.2-1, soy oil production has increased steadily over the last 30
years, reaching 2.5 bill gal in 2009. If these production trends
continue, domestic soy oil production could reach nearly 2.9 bill gal
by 2013.
[[Page 38864]]
[GRAPHIC] [TIFF OMITTED] TP01JY11.002
To determine what portion of domestically produced soy oil could be
available for use in the production of biomass-based diesel in 2013, we
also examined recent historical trends for domestic consumption and
exports. Domestic consumption of soy oil for purposes other than
biofuel has also increased steadily over the last 30 years, but was
notably lower in the period 2007-2009 compared to previous years. If
consumption returns to historical trends for years after 2009,
consumption could be as high as 2.5 bill gal by 2013. However, as shown
in Figure IV.B.2-2 below, this would require a significant increase in
consumption from 2009 to 2010. Thus 2013 consumption could be lower
than 2.5 bill gal.
[[Page 38865]]
[GRAPHIC] [TIFF OMITTED] TP01JY11.003
Based on these projections, then, the volume of soy oil that would
be available for the production of biomass-based diesel would be at
least 400 million gallons (2.9-2.5 bill gal). However, soy oil that has
historically been exported represents another potential source of soy
oil for biodiesel production. Exports of soy oil have followed only a
very weak increasing trend, averaging about 230 mill gal/year over the
same 30 year period, and about 250 mill gal/year over the last 10
years. If these exports were diverted to the production of biomass-
based diesel, the total volume of soy oil available for the production
of biodiesel and/or renewable diesel would exceed 600 mill gallons.
Although we assumed that all virgin vegetable oils used in biomass-
based diesel production would be soy oil in the RFS2 final rule, in
fact other seed oils may contribute meaningful volumes to the pool
available for the production of biomass-based diesel. For instance, on
September 28, 2010 we approved a RIN-generating pathway for biodiesel
made from canola oil.\37\ The volume of biodiesel made from canola oil
was 96 mill gallons in 2008.\38\ In addition, we are evaluating other
pathways for the production of biodiesel from oilseeds, such as
camelina, which could potentially be approved for RIN generation by
2013. Algal oil could also provide additional feedstocks if promising
technologies for production are commercialized.
---------------------------------------------------------------------------
\37\ 75 FR 59622.
\38\ EPA memorandum, ``Summary of Modeling Input Assumptions for
Canola Oil Biodiesel for the Notice of Supplemental Determination
for Renewable Fuels Produced Under the Final RFS2 Program,''
Document EPA-HQ-OAR-2010-0133-0049.
---------------------------------------------------------------------------
IHS Global Insight recently released an independent report in which
they conducted macroeconomic modeling to investigate biodiesel growth
scenarios and related impacts on commodities such as oilseed crops.
Their agricultural modeling indicated that a slightly more diverse mix
of feedstocks would be used to meet a total domestic biodiesel
production volume of 1.3 bill gallons in 2013. These volumes are shown
in Table IV.B.2-2.
Table IV.B.2-2--Feedstocks Contributing to 2013 Volume of 1.3 Bill Gal
From IHS Global Insight Modeling
------------------------------------------------------------------------
Volume
Source (mill
gal)
------------------------------------------------------------------------
Yellow grease and other rendered fats........................ 272
Corn oil..................................................... 185
Soybean oil.................................................. 624
Canola oil................................................... 68
Palm oil..................................................... 7
Other........................................................ 185
Total.................................................... 1,340
------------------------------------------------------------------------
Source: Table 2, ``Biodiesel Production Prospects for the Next Decade,''
IHS Global Insight, March 11, 2011.
This modeling concluded that soy oil production would be lower than the
trends shown in Figure IV.B.2-1, with a correspondingly lower volume of
soy oil being used for domestic non-biofuel consumption as well.
Nevertheless, their modeling concluded that soy oil availability for
biodiesel production would be 624 mill gallons, slightly higher than
what we assumed in the RFS2 final rule. While their modeling
[[Page 38866]]
concluded that the volumes of greases, fats, and corn oil would be
somewhat less than what we assumed in the RFS2 final rule, they were
able to quantify the available volumes of other feedstocks that we did
not explicitly investigate in the RFS2 final rule. As a result, this
report supports our finding that sufficient feedstocks will be
available to produce 1.28 bill gallons of biomass-based diesel in 2013.
3. Production Capacity
Total production capacity of the biodiesel industry has exceeded
1.28 bill gallons for a number of years. As of January 2011, total
production capacity was more than 2.8 bill gallons for 168 plants \39\.
According to the National Biodiesel Board, 90 of these plants had
registered with the EPA under the RFS2 program as of February 4, 2011,
and these plants had a combined production capacity of over 1.9 bill
gallons. The remaining plants are either producing extremely low
volumes that fall under the regulatory threshold for RIN generation,
are producing products other than biodiesel such as soaps or cosmetics,
or have shut down until such time as the demand for biodiesel rises.
---------------------------------------------------------------------------
\39\ USA Plants, biodieselmagazine.com, as of January 27, 2011.
---------------------------------------------------------------------------
Most of the 90 registered plants are currently producing at
significantly under capacity, as evidenced by the fact that total
production volumes in 2010 were 300-400 million gallons, and the
registered plants have a capacity of over 1.9 billion gallons. If these
plants increase production to meet the 800 million gallon volume
requirement for 2011, on average, then, registered biodiesel producers
will be producing at about half of their capacity this year.
Nevertheless, we believe based on the registered capacity of existing
plants and the relative ease of expanding current production within
this capacity that the biodiesel industry can produce at least 1.28
bill gallons in 2013 with little leadtime needed for facilities to ramp
up to higher production levels, and/or for currently idle facilities to
come back online.
4. Consumption Capacity
Biodiesel is registered with the EPA under 40 CFR part 79 as a
legal fuel for use in highway vehicles. Under this registration, it can
legally be used at any blend level, from 1% (B1) to 100% (B100).
However, other factors typically limit the concentration of biodiesel
in conventional diesel fuel. Since the consumption of biodiesel at
lower blend levels would tend to increase the geographic areas where
biodiesel must be marketed, it is an important consideration in how
much biodiesel can be consumed in the U.S. as a whole as well as how
the infrastructure may need to change to accommodate 1.28 bill gallons
in 2013.
Most engine manufacturers have explicit statements in their engine
warranties regarding acceptable biodiesel blend levels. Although a few
permit B100 to be used in their engines without any adverse impact on
their warranties, most limit biodiesel blends to B20 or less, and about
half allow no more than B5 \40\. For specific applications where a
party knows which engines will be using biodiesel blends, higher
concentrations of biodiesel may be possible. However, for general
distribution such as at retail facilities, these warranty conditions
create a disincentive to blend or sell biodiesel at higher
concentrations, and would tend to drive most blends towards low
concentrations of biodiesel such as B5.
---------------------------------------------------------------------------
\40\ ``Automaker's' and Engine Manufacturers' Positions of
Support for Biodiesel Blends,'' Biodiesel.org.
---------------------------------------------------------------------------
Cold weather operability represents another reason for preferential
use of B5 and even B2. The most common measure of cold weather
operability is the fuel cloud point. The cloud point is the temperature
at which gelling begins (as indicated by solid crystals beginning to
form in the fuel), and thus is an indicator of when potential engine
filter plugging issues could arise. The higher the cloud point
temperature of the fuel, the more likely such problems are to be
experienced in cold weather. Biodiesel generally has a higher cloud
point than conventional, petroleum-based diesel fuel, with fat-based
biodiesel such as tallow having a higher cloud point than virgin oil-
based biodiesel such as a fuel made with soybean and canola oil. While
cloud point issues with conventional, petroleum-based diesel are
generally mitigated through blending with lighter grades (i.e.
1 diesel fuel), the cloud point of biodiesel generally
requires more dramatic interventions such as heated storage tanks,
lines, and blending equipment, as well as heating rail cars and tank
trucks. However, some of these biodiesel cloud point mitigation efforts
may be reduced through the use of low biodiesel blend levels such as B2
or B5, since cloud point is strongly correlated with biodiesel
concentration in the final blend. Insofar as biodiesel is blended into
conventional diesel before being transported to its final destination
for sale, low biodiesel blend levels may reduce the need for heated
equipment at the final destination.
Based on highway and nonroad diesel consumption projections for
2013 from the EIA, a biodiesel volume of 1.28 bill gallons would
represent about 2.8% of all diesel fuel.\41\ If all biodiesel were to
be blended as B5, just over half of the diesel fuel consumed nationwide
in 2013 would contain biodiesel. However, today some biodiesel is
blended at concentrations higher than B5, and we expect that at least
these same volumes would be blended at concentrations higher than B5 in
the future. This would reduce the amount of diesel fuel that would
contain some biodiesel, and thus would also reduce the geographical
areas where biodiesel must be distributed.
---------------------------------------------------------------------------
\41\ Annual Energy Outlook (AEO) 2011 Early Release, Table 2.
---------------------------------------------------------------------------
We believe that distributing and consuming 1.28 bill gallons of
biodiesel in 2013 is achievable. A number of states already have
mandates for the use of biodiesel in 2013, and efforts are underway to
ensure that these mandates can be met. These include Minnesota, Oregon,
Washington, Pennsylvania, New Mexico, and Louisiana. Collectively,
these states account for approximately 13 percent of the nationwide
consumption of diesel. Other states have implemented other forms of
incentives as shown in Table IV.B.4-1.
---------------------------------------------------------------------------
\42\ U.S. Department of Energy, Alternative Fuels and Advanced
Vehicles Data Center.
Table IV.B.4-1--States With Rebates, Refunds, Reduced Tax Rates, or
Credits for Biodiesel Production or Blending \42\
------------------------------------------------------------------------
------------------------------------------------------------------------
Illinois
Indiana
Kansas
Kentucky
Maine
Maryland
Michigan
Montana
North Dakota
Oklahoma
Rhode Island
South Carolina
South Dakota
Texas
Virginia
Washington
------------------------------------------------------------------------
* Conditions and exemptions for all incentive programs vary by state.
Collectively, these states account for approximately 37% of the
nationwide consumption of biodiesel. A variety of states also have
requirements for the use of biodiesel in state fleets, provisions that
allow biodiesel to be used as an alternative to meeting alternative
fuel vehicle mandates, and credits/rebates
[[Page 38867]]
for the installation of biodiesel dispensing and blending equipment.
Altogether, therefore, more than half of the states in the U.S.
have mandates and/or incentives that will induce them to address
biodiesel infrastructure issues. Efforts in these areas will
directionally help the nation to meet a 1.28 bill gal biomass-based
diesel requirement in 2013.
5. Biomass-Based Diesel Distribution Infrastructure
Biodiesel/petroleum based diesel fuel blends have limited ability
to be transported using the existing petroleum product distribution
system. There has been limited transportation of up to B5 blends by
certain pipelines that do not carry jet fuel. However, concerns over
potential contamination of jet fuel with biodiesel currently prevent
biodiesel blends from being transported by the majority of
pipelines.\43\ The predominant means of biodiesel distribution is to
transport it separately by rail car, tank truck, or barge to a
petroleum terminal where it is blended with petroleum diesel fuel to
make B2, B5, B20 blends that are then transported by truck to retail or
fleet operators. For this analysis, we have assumed that all biodiesel
is transported in a segregated fashion to petroleum terminals. To the
extent that biodiesel is transported by pipeline, this may tend to
reduce the burden on the fuel distribution system.
---------------------------------------------------------------------------
\43\ Biodiesel contamination of jet fuel can contribute to fuel
gelling and engine deposits which can lead to jet engine operability
problems.
---------------------------------------------------------------------------
Heated and insulated rail cars, tank trucks, barges, storage tanks,
and blending equipment are required for biodiesel distribution to
protect against fuel gelling during the cold season. Following are the
cloud points of biodiesel manufactured from various feedstocks: Canola
oil biodiesel 32F, soy biodiesel 34F, yellow grease biodiesel 41F,
jatropha oil biodiesel 46F, tallow biodiesel 54F-63F, and palm oil
biodiesel 63F.\44\ Based on a review of these properties, climactic
data, and the likelihood that downstream parties will need to
accommodate biodiesel produced from various feedstocks, we believe that
heated/insulated biodiesel infrastructure would be needed throughout
most of the U.S.\45\
---------------------------------------------------------------------------
\44\ The cloud point refers to the temperature at which
biodiesel begins to gell. Biodiesel cloud points are taken from the
NC State University and A&T State University Cooperative Extension
Web page, updated December 9, 2010, http://www.extension.org/pages/Biodiesel_Cloud_Point_and_Cold_Weather_Issues, and the
Biodiesel cold weather blending study, Cold Flow Blending
Consortium, National Biodiesel Board, 2001, http://www.nrel.gov/vehiclesandfuels/npbf/pdfs/cftr_72805.pdf.
\45\ The ASTM International ``Standard Specification for Diesel
Fuel Oils'', ASTM D975, contains tenth percentile minimum ambient
air temperatures for the U.S.
---------------------------------------------------------------------------
Approximately 82 petroleum terminals blended biodiesel into
petroleum-based diesel fuel in 2010.\46\ Our evaluation of the changes
to the fuel distribution infrastructure that would be needed to support
the use of 920 mill gallons/yr of biodiesel in 2012 and 1,200 mill
gallons/yr in 2013 is based on the analysis conducted for the RFS2
final rule.\47\ See Table IV.B.5-1.
---------------------------------------------------------------------------
\46\ Communication from Larry Schafer of the National Biodiesel
Board, March 2, 2011.
\47\ Renewable Fuels Standard Program (RFS2), Regulatory Impact
Analysis (RIA), EPA-420-R-10-006, February 2010.
Table IV.B.5-1--Additional Infrastructure Needed To Distribute Biodiesel in 2012 and 2013
----------------------------------------------------------------------------------------------------------------
Additional Total
Additional distribution Total distribution
distribution assets needed distribution assets needed
assets needed in 2013 (with assets needed to support
in 2012 1.28 bill gal) to support the 1.28 bill gal
relative to relative to 2012 biodiesel biodiesel
2011 2012 volume volume
----------------------------------------------------------------------------------------------------------------
Petroleum Product Terminals with Biodiesel 74 130 428 558
Blending Capability \*\........................
Rail Cars....................................... 131 230 754 984
Tank Trucks..................................... 14 25 83 108
Barges.......................................... 4 7 23 29
----------------------------------------------------------------------------------------------------------------
* There are approximately 853 petroleum terminals that offer diesel fuel in the U.S.
The RFS2 final rule estimated that additional manifest rail and
barge receipt facilities would be needed to accept shipments of
biofuels of all types including biodiesel.\48\ We concluded that
manifest rail and barge shipments of biodiesel would be able to utilize
the manifest rail and barge receipt facilities that were initially
constructed to handle increased ethanol volumes.
---------------------------------------------------------------------------
\48\ Manifest rail refers to the shipment of a product in rail
cars in a train that includes rail cars containing other products.
---------------------------------------------------------------------------
We assume that terminals adding biodiesel capability would install
segregated biodiesel storage, in-line biodiesel blending equipment, and
facilities to receive shipments of biodiesel by tank truck. In-line
blending refers to the process of blending biodiesel into petroleum-
based diesel fuel in the delivery line that feeds into the tank truck
from the terminal storage tanks. This process ensures an accurate blend
ratio and a fully mixed biodiesel/petroleum diesel batch. We also
assume that all equipment at terminals as well as the vessels used to
transport biodiesel would be heated and insulated to prevent gelling
during the cold season. We anticipate that some terminals may splash
blend biodiesel before installing in-line biodiesel injection
equipment. Splash blending refers to the process of first loading
petroleum-based diesel fuel into a tank truck followed by biodiesel so
that the final blend meets the desired blend ratio. However, we expect
that this approach will be temporary due to the heightened concerns
over achieving a correct blend ratio and a fully mixed biodiesel blend
that accompanies splash blending. Some terminals may also delay the
need to install segregated/heated biodiesel storage by storing 50/50
blends of biodiesel/petroleum-based diesel fuel that is subsequently
used to manufacture B2/B5/B20 blends for distribution to end users.
These practices may provide additional flexibility if some terminals
wish to temporarily defer installing in-line blending equipment and
segregated biodiesel storage equipment.
The RFS2 FRM analysis concluded that industry would have the
capability to add the necessary facilities to distribute biodiesel in a
timely fashion to meet the envisioned volumes.\49\ Based on industry
input, we continue to believe that this is the case. Industry
activities are currently progressing to ramp up biodiesel consumption
from the approximately 380 mill gallons estimated to be used in the
U.S. in 2010 to the 760 mill gallons that is estimated
[[Page 38868]]
to be used in 2011 to meet the biomass-based diesel volume requirement.
For example, Kinder Morgan and the Renewable Energy Group opened a
substantial biodiesel distribution facility to serve the Chicago area
in December of 2010.\50\ Magellan also recently announced that it plans
to complete its biodiesel blending facility in Sioux Falls Minnesota in
2011.\51\ In addition, just as there has been considerable biodiesel
production capacity idled due to lack of demand which will be brought
back on line as biodiesel volumes ramp up, we believe that there are
also substantial idled biodiesel distribution assets that could be
readily brought back into service.
---------------------------------------------------------------------------
\49\ See sections 1.6 and 4.2.3 of the RIA to the RFS2 final
rule.
\50\ Biodiesel Magazine, November 17, 2010. http://www.biodieselmagazine.com/articles/4568/chicago-area-terminal-soon-to-offer-biodiesel.
\51\ Report to the Legislature, Annual Report on Biodiesel,
Minnesota Department of Agriculture, January 15, 2011. http://
www.mda.state.mn.us/en/news/government/~/media/Files/news/
govrelations/legrpt-biodiesel2011.ashx.
---------------------------------------------------------------------------
Renewable diesel/petroleum diesel fuel blends can be transported in
existing petroleum product transportation infrastructure from the point
of production to the end-user.\52\ The production facility that we
expect will account for the renewable diesel produced through 2013
currently ships its product short distances by tank truck to facilities
that produce blends with petroleum-based diesel fuel. To estimate the
infrastructure impacts of renewable diesel, we used the estimate from
the RFS2 final rule of 80 mill gallons of renewable diesel in 2013.\53\
This volume is close to the production volume estimated for the Dynamic
Fuels facility in Geismar, Louisiana that we referenced in the final
rulemaking setting the 2011 RFS standards. However, more recently the
U.S. Department of Energy awarded a $241 million loan guarantee for the
construction of a renewable diesel facility by Diamond Green.
Construction on this 137 million gallon per year project is scheduled
to begin in Norco, LA this year and fuel production is scheduled for
the first quarter of 2013. EPA does not expect that the production from
this facility will have a significant impact on overall biomass-based
diesel distribution infrastructure in the U.S. given that the renewable
diesel blends can be transported in existing petroleum product
transportation infrastructure. For the purposes of this analysis we
assumed 80 mill gallons of renewable diesel for consistency with the
RFS2 final rule and the final rule setting the RFS standards for 2011.
---------------------------------------------------------------------------
\52\ Colonial Pipeline began allowing shipment of 5% renewable
diesel fuel blends beginning January 3, 2011. Colonial pipeline
codes and specifications: http://www.colpipe.com/pdfs/Sect%203%20Prod%20Spec%20Jan%201%202011%20update%20ver%202.pdf.
\53\ Renewable Fuel Standard Program (RFS2) Regulatory Impact
Analysis, EPA-420-R-10-006, February 2010, Table 1.2-3.
---------------------------------------------------------------------------
We estimate that a total of 5 tank trucks will be needed to
transport 80 mill gallons/yr of renewable diesel to the locations where
it is blended with petroleum-based diesel fuel in 2012 and 2013.\54\
For the purposes of this analysis, we assumed that approximately one
half of this volume will be produced in 2011. We estimate that an
additional 2-3 tank trucks would be needed to transport renewable
diesel fuel in 2012/2013 compared to 2011. Once renewable diesel fuel
blends are created, further distribution is accomplished in the same
fashion as petroleum-based diesel fuel. In the future, the renewable
diesel fuel production facility identified may be connected by a short
pipeline directly to the Colonial pipeline and/or begin shipping by
barge/rail. If shipment by pipeline develops, then no additional
transportation vessels would be needed to ship renewable diesel fuel
compared to petroleum-based diesel fuel. We anticipate that the
infrastructure at petroleum terminals necessary to blend the 80 mill
gallons/yr of renewable diesel fuel projected for 2012/2013 with
petroleum-based diesel fuel will have been put in place by 2011.\55\
---------------------------------------------------------------------------
\54\ This is based on each tank truck carrying 7,800 gallons of
renewable diesel fuel making 6 deliveries per day. We anticipate
that the renewable diesel fuel will be blended directly into storage
tanks containing petroleum-based diesel fuel.
\55\ To manufacture a renewable diesel fuel blend at a petroleum
terminal, renewable diesel fuel may be delivered directly into
storage tanks that contain petroleum-based diesel fuel or injected
into a petroleum-based diesel fuel stream during delivery into a
tank truck or pipeline.
---------------------------------------------------------------------------
Based in the above discussion, we believe that sufficient fuel
distribution infrastructure will be available to support the use of 1
bill gal of biomass-based diesel in 2012 and 1.28 bill gal in 2013.
C. Impacts of 1.28 Billion Gallons of Biomass-Based Diesel
In order to evaluate the impacts of a biomass-based diesel volume
of 1.28 bill gal in the areas required under the statute (see Section
IV.A), we first considered what the appropriate reference would be.
Since the statute requires that the biomass-based diesel volume we set
for 2013 be no lower than 1.0 bill gal, this would appear to be a
reasonable reference point. Therefore, in the discussion that follows,
we have focused on either a volume of 1.28 bill gal biomass-based
diesel, or an increment of 0.28 bill gal biomass-based diesel,
depending on the specific sources of information and analyses
available.
As described in Section IV.B.1 above, even if we set the applicable
volume for biomass-based diesel at 1.0 bill gal, the demand for
biomass-based diesel in 2013 is likely to be on the order of 1.28 bill
gal or more due to the limited projected availability of other advanced
biofuels (including cellulosic biofuel, imported sugarcane ethanol, and
others). Since the actual demand for biomass-based diesel would likely
be 1.28 bill gal or higher regardless of whether we set the biomass-
based diesel requirement at 1.0 or 1.28 bill gal, the net impact of
setting the biomass-based diesel volume requirement at 1.28 bill
gallons in 2013 could be seen as zero.
We recognize that this conclusion is based on an applicable
advanced biofuel volume of 2.75 bill gallons. While we will be
considering the possibility of lowering the 2013 advanced biofuel
applicable volume below 2.75 bill gal in next year's rulemaking, we
have not presumed any such reduction in today's NPRM. Such reductions
in advanced biofuel must occur in the context of determining the
applicable volume of cellulosic biofuel for 2013, and using information
available at that time regarding advanced biofuel volumes that are
projected to be available in 2013.
Nevertheless, the statute requires that we analyze specified
environmental and other impacts in deriving an applicable biomass-based
diesel volume for 2013 and other years, and these analyses can be
conducted for 1.28 bill gal biomass-based diesel (or an increment of
0.28 bill gal). Most of the areas we are required to analyze were
covered in the RFS2 final rule in some form, and we believe that we can
use this information in satisfying our statutory obligations to analyze
specified factors in determining the applicable volume of biomass-based
diesel for 2013.
Some of the analyses presented in the RFS2 final rule were for the
specific case of 1.28 bill gallons in 2013. These analyses included an
investigation of the expected annual rate of commercial production of
biomass-based diesel in 2013, impacts on agricultural commodity supply
and price, and the cost to consumers of transportation fuel. Some of
these were discussed in Section IV.B above. Most of the analyses in the
RFS2 final rule, however, were conducted to represent full
implementation of the RFS2 program in 2022. In these analyses, the
biomass-based diesel volume was estimated to be 1.82 bill gallons, and
was compared to
[[Page 38869]]
a reference case in which biodiesel volume was 380 mill gallons. These
cases are shown in Table IV.C-1.
Table IV.C-1--Primary Reference and Control Cases From RFS2 Final Rulemaking (Billion Gallons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Advanced biofuel Non-
----------------------------------------------------------------------------------------------------------------------------------- advanced
Cellulosic biofuel Biomass-based diesel Other advanced biofuel
---------------------------------------------- biofuel ----------- Total
---------------------- renewable
Cellulosic Cellulosic FAME \a\ Other Corn fuel
ethanol diesel biodiesel NCRD \b\ biodiesel Imported ethanol
\c\ ethanol
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reference..................................................... 0.25 0 0.38 0 0 0.64 12.29 13.56
Control....................................................... 4.92 6.52 0.85 0.15 0.82 2.24 15.00 30.50
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Fatty acid methyl ester (FAME) biodiesel.
\b\ Non-Co-processed Renewable Diesel (NCRD).
\c\ Other Biodiesel is biodiesel produced in addition to the amount needed to meet the biomass-based diesel standard.
The biomass-based diesel volume of 1.82 bill gallons analyzed for 2022
in the RFS2 final rule is higher than the 1.28 bill gallons we chose to
evaluate for today's NPRM for 2013. More importantly, the change in
biodiesel production due to EISA mandates for biomass-based diesel plus
other diesel anticipated to meet the advanced biofuel volume (a total
increase of 1.44 billion gallons compared to the reference case without
the EISA mandates) is much larger than the change we are evaluating for
2013 (0.28 billion gallons). Additionally, many of the impacts analyzed
for the RFS2 final rule reflected the whole biofuel mandate, not the
relatively smaller portion just due to biodiesel. Other changes in
renewable fuels analyzed for 2022 were also larger than what would
likely occur in 2013. Therefore, the impacts we would expect in 2013
compared to a case without RFS2 in place would likely be similar to or
smaller than those we estimated for 2022. Given these considerations,
we believe that the impacts assessments in the RFS2 final rule can be
used to determine the directional impacts, and therefore the
reasonableness, of a 1.28 billion gallon volume requirement for
biomass-based diesel in 2013.
1. Climate Change
Since biodiesel has a GHG benefit exceeding 50% compared to the
petroleum-based diesel it is replacing, an increase in biomass-based
diesel of 0.28 Bill gal from 2012 to 2013 would lead to a displacement
of conventional diesel fuel, with corresponding GHG emissions
reductions. This increased use of biomass-based diesel will contribute
to lower climate change impacts in comparison to the petroleum-based
diesel it is replacing.
However, due to the nested nature of the RFS2 standards, biomass-
based diesel is also used to meet the advanced biofuel standard.
Moreover, both biomass-based diesel and advanced biofuel must meet a
GHG reduction threshold of 50%. If the 2013 advanced biofuel standard
were to remain at the 2.75 bill gal specified in the statute, an
increase in the biomass-based diesel volume requirement from 1.0 to
1.28 bill gal would not change the total volume of advanced biofuel,
and thus the total volume of biofuels that must meet a 50% reduction in
GHGs would remain unchanged. Under such circumstances, a standard of
1.28 bill gal of biomass-based diesel would have essentially no impact
on climate change in the context of the full mix of biofuels used to
meet the RFS2 requirements.
2. Energy Security4
An analysis of the energy security impacts of the increased use of
renewable fuels was conducted in support of the RFS2 rulemaking. Based
on that analysis, increasing usage of renewable fuels including
biomass-based diesel helps to reduce U.S. petroleum imports. A
reduction of U.S. petroleum imports reduces both financial and
strategic risks associated with a potential disruption in supply or a
spike in cost of a particular energy source. This reduction in risks is
a measure of improved U.S. energy security. In the RFS2 final rule, we
described in detail the methodology and the Agency's estimate of the
energy security impacts of the RFS2 rule. While EPA's analysis of
energy security benefits of the RFS2 volumes considered the full volume
of biofuels mandated by 2022 (of which biodiesel was only a part), the
production of biodiesel is largely from domestic feedstocks. In
contrast, the diesel fuel displaced is produced from petroleum sources
which are increasingly from foreign sources. Therefore biodiesel
production and use will contribute to a U.S. energy security benefit.
3. Agricultural Commodities and Food Prices
For the RFS2 rule, we examined the impacts of increased renewable
fuels production on commodity prices, food prices and trade in
agricultural products. This analysis considered the impacts of all the
biofuel feedstock sources anticipated to meet the 2022 biofuel volume
requirements, not just biodiesel. For the RFS2, EPA used two primary
models for its agricultural economic impacts analysis, the Food and
Agriculture Sector Optimization Model (FASOM), and the Food and
Agricultural Policy Research Institute-Center for Agriculture and Rural
Development (FAPRI-CARD) models. The FASOM model is a long-term
economic model of the U.S. forest and agriculture sectors that
maximizes the net present value of the sum of producer and consumer
surplus across the two sectors over time subject to market, technology,
and other constraints. The FAPRI-CARD models are a system of
econometric models covering many agricultural commodities in the U.S.
and internationally. They are based on historical data analysis,
current academic research, and a reliance on accepted economic,
agronomic, and biological relationships in agricultural production and
markets.\56\
---------------------------------------------------------------------------
\56\ (Add reference to FAPRI description document used in RFS2
FRM.)
---------------------------------------------------------------------------
To meet the RFS2 renewable fuel volumes, a number of price effects
on the agricultural commodities were estimated for 2022. For instance,
FASOM estimates that an increase in renewable fuel volumes to meet the
RFS2 would result in an increase in the U.S. soybean prices of $1.02
per bushel (10.3 percent) above the Reference Case price in 2022. FASOM
also projected the price of soybean oil would increase by $183 per ton
(37.9 percent) over the 2022 Reference Case price (all prices are
[[Page 38870]]
in 2007$). Most of the additional soybeans needed for increased
biodiesel production are diverted from U.S. exports to the rest of the
world. In FASOM, soybean exports decrease by 135 million bushels (-13.6
percent) in 2022 relative to the AEO2007 Reference Case. This change
represents a decrease of $453 million (-4.6 percent) in the total value
of U.S. soybean exports in 2022. However, these price effects are not
attributed to the demand for biodiesel feedstocks alone, rather the
compounding affect of all changes in feedstock demand estimated to
result from the total biofuel mandate in 2022. Since the impact on
soybeans due to biodiesel demand was only a portion of this total
feedstock impact and since the impact in 2013 will be less than
considered in 2022 (since the 2013 biodiesel volumes anticipated are
less than those for 2022), the impact on soybean prices and exports
from an increase to 1.28 bill gall in 2013 could also be less.
A recent report by IHS Global Insight \57\ also discusses potential
agricultural and economic impacts from increasing vegetable oil demand
for biodiesel production. According to this study, existing soybean
yield technologies are expected to be applied increasingly across the
U.S., resulting in roughly a 10% higher growth rate in soybean yields
than USDA's projections from 2010-2016 which were used by EPA in its
RFS2 analyses. Similarly, Global Insight predicts these higher yield
technologies to be implemented in other large soybean-producing
countries, such as Brazil and Argentina. If higher yields than modeled
for RFS2 indeed are realized, then it is likely the price increases for
soybean oil will be less than estimated for RFS2. Likewise, other price
impacts, such as those on food prices, would still move in the same
direction (i.e., an increase in price resulting from an increase in
demand) but could be smaller than in the RFS2 analysis.
---------------------------------------------------------------------------
\57\ ``Biodiesel Production Prospects for the Next Decade,'' IHS
Global Insight, March 11, 2011.
---------------------------------------------------------------------------
For the analyses performed for the RFS2 final rule, EPA estimated a
$10 per person per year increase in food costs due to the total annual
impact of the RFS2 program by 2022 compared to a Reference case that
assumed no RFS2 renewable fuel requirements. Again, the biodiesel
impacts would represent only a small portion of these overall impacts
and would like be even smaller in 2013 due to the smaller volume of
feedstock required.
4. Air Quality
This section discusses our assessment of the impacts of 1.28 bill
gal of biomass-based diesel on emissions and air quality. We are
relying on the analyses of renewable fuel impacts conducted in support
of the RFS2 rule \58\ to qualitatively discuss the expected impacts of
this biomass-based diesel volume. The RFS2 analyses reflect EPA's most
current assumptions regarding biodiesel emission impacts.\59\
---------------------------------------------------------------------------
\58\ 75 FR 14670, March 26, 2010.
\59\ 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. Section 3.1.1.2.4
---------------------------------------------------------------------------
In the RFS2 rule, we analyzed both changes in pollutant emissions
(measured in tons) and changes in ambient air quality associated with
the changes in pollutant emissions. The changes in pollutant emissions
were calculated by comparing the 2022 RFS2 renewable fuel volumes to
volumes if the RFS2 mandate was not in place (the reference
scenario).\60\ The analysis reflected full implementation of the RFS2
program in 2022 and accounted for impacts from multiple types of
renewable fuels, of which biodiesel was only one type. Specifically,
the RFS2 emissions inventory analysis assumed 1.82 bill gal of
biodiesel in the RFS2 scenario compared to 0.38 bill gal of biodiesel
in the reference scenario, reflecting a 1.44 bill gal increase in
biodiesel with the rule in place.
---------------------------------------------------------------------------
\60\ In the RFS2 Regulatory Impact Analysis, we analyzed the
mandated 2022 RFS2 renewable fuel volumes relative to volumes
required by two reference scenarios: RFS1 mandate (7.1 billion
gallons of renewable fuels) and AEO 2007 (13.6 billion gallons of
renewable fuels). Both reference scenarios assumed the same volume
of biodiesel, so the emission and air quality impacts described in
this section are the same for both reference scenarios.
---------------------------------------------------------------------------
Biodiesel emission impacts from the RFS2 rule emissions inventory
analysis are presented in Table IV.C.4-1. A complete discussion of the
emissions inventory analysis conducted for the RFS2 rule can be found
in Chapter 3 of the RFS2 Regulatory Impact Analysis (RIA).\61\ These
biomass-based diesel emission impacts, which reflect a 1.44 bill gal
increase in biodiesel, are all less than 1% of the total U.S. emissions
inventory for each pollutant. We expect the impacts of the 1.28 bill
gal of biomass-based diesel, as compared to the 1.0 bill gal statutory
minimum volume, to be smaller.
---------------------------------------------------------------------------
\61\ 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.
Table IV.C.4-1--Biodiesel Emission Impacts of the RFS2 Renewable Fuel Volumes (1.82 Bill Gal) Relative to the
Reference Case (0.38 Bill Gal)
----------------------------------------------------------------------------------------------------------------
Biodiesel impacts of RFS2 rule emissions
inventory analysis ([Delta] 1.44 bill gal
Biodiesel) Percent RFS2
------------------------------------------------ total U.S.
Upstream \a\ Downstream \b\ inventory
(tons) (tons) Total (tons)
----------------------------------------------------------------------------------------------------------------
VOC............................................. -1,049 -2,422 -3,471 -0.03%
CO.............................................. 913 -4,104 -3,191 -0.01%
NOx............................................. -290 1,346 1,056 0.01%
PM10............................................ 4,268 -569 3,699 0.10%
PM2.5........................................... 632 -315 317 0.01%
SO2............................................. 1,580 0 1,580 0.02%
NH3............................................. 4,171 0 4,171 0.10%
Benzene......................................... 10 -30 -20 -0.01%
Ethanol......................................... 0 0 0 0.00%
1,3-Butadiene................................... 0 -16 -17 -0.10%
Acetaldehyde.................................... 2 -66 -65 -0.14%
Formaldehyde.................................... 1 -182 -181 -0.21%
Naphthalene..................................... -1 0 -1 -0.01%
[[Page 38871]]
Acrolein........................................ 63 -9 54 0.84%
----------------------------------------------------------------------------------------------------------------
\a\ 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. Table 3.2-11. Note: units in Table 3.2-11 were mislabeled as tons/
mmBTU. Actual units are tons.
\b\ 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. Table 3.2-9.
The air quality analysis for the RFS2 rule used photochemical
modeling to characterize primary pollutants that are emitted directly
into the atmosphere and secondary pollutants that are formed as a
result of complex chemical reactions within the atmosphere. Included in
the air quality modeling scenarios for the RFS2 rule were large volumes
of ethanol as well as other renewable fuels, and the nature of these
complex chemical interactions makes it difficult to determine the air
quality impacts of biodiesel alone. Specifically, the RFS2 air quality
analysis reflects a roughly 21 bill gal increase in ethanol, far
outweighing the volume increase in biodiesel (0.43 bill gal). A
complete discussion of the RFS2 air quality analysis and its
limitations can be found in Chapter 3 of the RFS2 Regulatory Impact
Analysis (RIA).\62\
---------------------------------------------------------------------------
\62\ 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.
---------------------------------------------------------------------------
The RFS2 air quality analysis was completed earlier than the final
emissions inventory analysis because of the length of time needed to
conduct photochemical modeling.\63\ The air quality analysis assumed
0.81 bill gal of biodiesel in the RFS2 scenario compared to 0.38 bill
gal of biodiesel in the reference scenario, reflecting a 0.43 bill gal
increase in biodiesel use with the rule in place.
---------------------------------------------------------------------------
\63\ Emissions serve as inputs to the air quality modeling
analysis. However, the final fuel volume assumptions (upon which the
emission estimates were based) increased between the time that
emissions were estimated to support the air quality modeling
analysis and the time emissions were estimated to reflect the final
rulemaking.
---------------------------------------------------------------------------
Given the small emissions impact of a 0.43 bill gal increase in
biodiesel on the total U.S. emissions inventory (the basis for our air
quality modeling scenarios), we would expect the portion of air quality
impacts attributable to a move from 1.0 to 1.28 bill gal (a 0.28 bill
gal biodiesel increase) to be small enough that on a nationwide basis
the air quality impact would likely not be noticeable.
We note that Clean Air Act section 211(v) requires EPA to analyze
and mitigate, to the greatest extent achievable, adverse air quality
impacts of the renewable fuels required by the RFS2 rule. We intend to
address any potential adverse impacts from increased renewable fuel use
through that study and will promulgate appropriate mitigation measures
separate from today's NPRM.
5. Transportation Fuel Cost
For the RFS2 final rulemaking, we estimated the year-by-year per-
gallon costs for diesel fuel due to the RFS2 biofuel requirements. For
2013, we based our diesel fuel cost estimate on the production and use
of biodiesel, renewable diesel fuel and some cellulosic diesel fuel.
The unsubsidized cost increase is 0.2 cents per gallon, but accounting
for the subsidy, we estimated a cost savings to consumers for diesel
fuel of 1.7 cents per gallon. This assumes a crude oil price of 81
dollars per barrel, which is within the range of crude oil prices over
the last several years which have ranged from $35 per barrel to $147
per barrel.
6. Deliverability and Transport Costs of Materials, Goods, and Products
Other Than Renewable Fuel
EPA evaluated in the RFS2 final rule the impacts on the U.S.
transportation network from the distribution of the total additional
volume of biofuels that would be used to meet the RFS2 standards.
Oakridge National Laboratory (ORNL) conducted an analysis of biofuel
transportation activity from production plants to petroleum terminals
by rail, barge, and tank truck to identify potential distribution
constraints to help support the assessment in the RFS2 final rule.\64\
The ORNL analysis concluded that the increase in biofuel shipments due
to the RFS2 standards would have a minimal impact on U.S.
transportation infrastructure. The majority of biofuel transportation
is projected to be accomplished by rail. Nevertheless, it was estimated
that the biofuels transport would constitute only 0.4% of the total
freight tonnage for all commodities transported by the rail system
through 2022.\65\ Given the small increase in freight shipments due to
the transport of biofuels to meet the RFS2 standards, we believe that
the distribution of biofuels will not adversely impact the
deliverability and transport costs of materials, goods, and products
other than renewable fuels.
---------------------------------------------------------------------------
\64\ ``Analysis of Fuel Ethanol Transportation Activity and
Potential Distribution Constraints'', Oakridge National Laboratory,
March 9, 2009. To simplify the ORNL analysis, biomass-based diesel
volumes were assumed to originate at the same points of production
and to be shipped to the same petroleum terminals as the ethanol
projected to be used to meet the RFS2 standards. This may tend to
overstate the potential impact on the transportation system from the
shipment of biomass-based diesel fuels since biomass-based diesel
production plants were projected to be more geographically dispersed
than ethanol production facilities. In any event, the simplifying
assumption was assessed to have little impact on the results from
the analysis given that biomass-based diesel represented only 8% of
the total projected biofuel volumes.
\65\ See sections 1.6.4 and 1.6.5 of the RFS2 RIA.
---------------------------------------------------------------------------
7. Wetlands, Ecosystems, and Wildlife Habitats
As directed by CAA section 211(o)(2)(B)(ii), in setting the 2013
biodiesel volume requirements, EPA is to consider the impacts of
biodiesel production and use on wetlands, ecosystems and wildlife
habitat.
The most complete and up-to-date assessment of these impacts is
contained in the draft analysis prepared by EPA in response to the
requirements set out in CAA section 204. This report has been released
in draft form in order to allow interested parties to provide comments
on the analyses and policy implications. Concluding this review and the
peer review, updates will be made to the report, and then the final
report will be published in 2012 on the EPA Biofuels Web site.
Nevertheless, since this draft report includes an assessment of the
impact of biofuels on a number of the areas that we are required to
analyze in the process of determining the 2013 biomass-based
[[Page 38872]]
diesel volume, we believe it is appropriate to make use of this
information as it represents the most current EPA assessments
available.\66\
---------------------------------------------------------------------------
\66\ U.S. EPA. Biofuels and the Environment: the First Triennial
Report to Congress (External Review Draft). U.S. Environmental
Protection Agency, Washington, DC, EPA/600/R-10/183A, 2011. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=217443.
---------------------------------------------------------------------------
This draft report relies on information available as of July 2010.
The report does not attempt to quantify the impacts of biofuel
production and use as these impacts are dependent on local or regional
conditions. Nevertheless the draft provides qualitative assessments and
reasonable expectations of trends which can be used to consider the
environmental impacts of increases in biodiesel production and use.
These trends are only summarized here while the draft report provides
extensive detail.
The draft assessment focuses on the use of oil from soy beans as
the feedstock for biodiesel production. Other oil seed feedstock
sources represent a very small portion of biofuel production in 2013 so
would be expected to have much less of an impact than soy oil. Corn oil
extracted during the ethanol production process is increasing, adds a
very small increment of process GHG and will offset demands for soy and
other oil seed crops, thus reducing potential agricultural impact of
biodiesel production and adding to the net reduction in GHG emissions.
Finally, waste fats, oils and greases would be expected to have
negligible environmental impact as a feedstock since they do not impact
agricultural land use and would otherwise be used for some lower value
purpose or simply discarded.
Wetlands can be adversely affected by agricultural production
through runoff that can result in nutrient loading (particularly from
fertilizers) or from sedimentation (from erosion). Soy production tends
to use less fertilizer than corn production (the most likely
alternative crop) and can reduce the amount of fertilizer required for
corn when planted in rotation with corn. However, compared to other
crops, erosion can be higher from fields planted in row crops such as
corn and soy beans. While the impacts of nutrient loading and erosion
tend to be site specific, good farming practices including the optimum
fertilizer use and the set aside of sensitive lands via the CRP program
can significantly help control these adverse affects. Wetlands can also
be adversely affected through diversion of surface and ground water for
agricultural irrigation. Soy bean production less frequently relies on
irrigation than corn and some other crops. More discussion on water
usage is included below in the section on water use and water quality
impacts.
Ecosystems and wildlife habitat can be adversely affected if CRP
lands are converted to crop production, if row crops such as soy beans
replace grassy crops and in general if new lands with diverse
vegetation are converted to crop production. As noted in the RFS2 rule,
we do not expect the RFS program production to result in an increase in
total acres of agricultural land under production in the US compared to
a reference case without the impact of the RFS2 volumes. The relatively
small increase of 0.28 bill gall should not appreciably affect the
amount of land devoted to oil seed production. Further, since soy beans
are traditionally planted in rotation with other crops such as corn,
this small increase in soy oil demand for biodiesel production is
unlikely to replace grassy crops or result in the indirect increase in
land under crop production. Additionally, the USDA commitment to
support the CRP program should minimize the likelihood of any
significant change in the amount of CRP land. Therefore, while some
very local changes may result due to an individual farmer's planting
decisions, since no new crop land are expected in the U.S. due to this
increase in biodiesel production and sensitive lands will be protected
via programs such as CRP, no measureable impact in aggregate ecosystems
or wildlife habitat is expected.
8. Water Quality and Quantity
The water quality and quantity impacts of biodiesel are primarily
related to the type of feedstock and the production practices used to
both produce the feedstock and to convert the feedstock into biodiesel.
Soybeans are the principal feedstock used for biodiesel production and
are predicted to account for 600 million gallons of the 1.28 billion
gallons evaluated for 2013. Non-food grade corn oil extracted during
ethanol production, animal fats and recycled fats account for most of
the remaining biodiesel feedstocks. Since these fats are the byproduct
of another use and not produced specifically for biodiesel manufacture
and since corn oil extracted is a by-product of corn ethanol
production, this analysis will focus on soybeans.
From a water quality perspective, the primary pollutants of concern
from soybean production are fertilizers (nitrogen and phosphorus) and
sediment. There are three major pathways for these potential pollutants
to reach water from agricultural lands: runoff from the land's surface,
subsurface tile drains, or leaching to ground water. Climate,
hydrological, and management factors influence the potential for these
contaminants to reach water from agricultural lands.
a. Impacts on Water Quality and Water Quantity Associated With Soybean
Production
After corn, soybeans are the second largest agricultural crop in
terms of acreage in the U.S. As with the production of any agricultural
crop, the impact on water quality depends on a variety of factors
including production practices, use of conservation practices and crop
rotations by farmers, and acreage and intensity of tile drained lands.
Additional factors outside agricultural producers' control include soil
characteristics, climate, and proximity to water bodies.
Soybeans are typically grown in the same locations as corn since
farmers commonly rotate between the two crops. In 2005, the latest year
for which USDA collected data, the U.S. average nitrogen fertilization
rate for soybeans was 16 pounds per acre. In contrast, the average
nitrogen fertilization rate for corn was 138 pounds per acre.\67\
Soybeans fix nitrogen, so they do not require substantial added
fertilizer for adequate yields. Only 18 percent of soybean acres are
fertilized with nitrogen compared to 96 percent of corn acres.\68\
Since significantly less nitrogen fertilizer is applied to soybeans,
less nitrogen is available for runoff or leaching into water. Water
quality generally benefits when soybeans are rotated with corn, since
the next corn crop requires less fertilizer and fewer pesticides.
Therefore, crop rotation is one practice that is part of an effective
system to limit water quality impacts. However, soybeans have less
residue remaining on the field after harvest compared to corn, so
sediment runoff could be more of a concern.
---------------------------------------------------------------------------
\67\ U.S. Department of Agriculture, Economic Research Service.
Fertilizer Use and Price. http://www.ers.usda.gov/Data/FertilizerUse.
\68\ U. S. Department of Agriculture, National Agricultural
Statistics Service. 2007. Agricultural chemical usage 2006 field
crops summary. Available at: http://usda.mannlib.cornell.edu/usda/nass/AgriChemUsFC//2000s/2007/AgriChemUsFC-627 05-16-2007--
revision.pdf.
---------------------------------------------------------------------------
Agricultural conservation systems can reduce the impact of soybean
production on the environment. The systems components include (1)
controlled application of nutrients and pesticides through proper rate,
timing, and method of application, (2) controlling erosion in the field
(i.e.,
[[Page 38873]]
reduced tillage, terraces, or grassed waterways), and (3) trapping
losses of soil and fertilizer runoff at the edge of fields or in fields
through practices such as cover crops, riparian buffers, controlled
drainage for tile drains, and constructed/restored wetlands.\69\
---------------------------------------------------------------------------
\69\ Dinnes, DL; Karlen, DL; Jaynes, DB; Kaspar, TC; Hatfield,
JL; Colvin, TS; Cambardella, CA. 220 2002. Nitrogen management
strategies to reduce nitrate leaching in tile-drained 221 midwestern
soils. Agronomy Journal 94(1): 153-171.
---------------------------------------------------------------------------
The effectiveness of conservation practices, however, depends upon
their adoption. The USDA`s Conservation Effects Assessment Project
(CEAP) quantified the effects of conservation practices used on
cultivated cropland in the Upper Mississippi River Basin. It found
that, while erosion control practices are commonly used, there is
considerably less adoption of proper nutrient management to mitigate
nitrogen loss to water bodies.\70\ However, as noted above, the
relatively low amount of fertilizer used for soy bean production tends
to lessen the potential for nitrogen loss to water bodies
---------------------------------------------------------------------------
\70\ U.S. Department of Agriculture, National Resources
Conservation Service. 2010. Assessment of the effects of
conservation practices on cultivated cropland in the Upper
Mississippi River Basin. Available at: http://www.nrcs.usda.gov/technical/NRI/ceap/umrb/index.html.
---------------------------------------------------------------------------
Water for soybean cultivation predominately comes from rainfall,
although about 11 percent of soybean acres in the U.S. are
irrigated.\71\ Water use for irrigated soybean production in the U.S.
varies from 0.2 acre-feet per acre in Pennsylvania to about 1.4 acre-
feet per acre in Colorado, with a national average of 0.8 acre-feet of
water.\72\
---------------------------------------------------------------------------
\71\ U.S. Department of Agriculture. 2010. 2007 Census of
agriculture, Farm and ranch irrigation survey (2008). http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08.pdf.
\72\ U. S. Department of Energy. 2006. Energy demands on water
resources: Report to Congress on the interdependency of energy and
water. Available at: http://www.sandia.gov/energy-water/docs/121-RptToCongress-EWwEIAcomments-FINAL.pdf.
---------------------------------------------------------------------------
b. Impacts on Water Quality and Water Quantity Associated With
Biodiesel Production
Biological oxygen demand (BOD), total suspended solids, and
glycerin pose the major water quality concerns in wastewater discharged
from biodiesel facilities. Actual impacts depend on a range of factors,
including the type of feedstock processed, biorefinery technology,
effluent controls, and water re-use/recycling practices, as well as the
facility location and source and receiving water.
Despite the existing commercial market for glycerin and the likely
expanded uses for glycerin as discussed in the RFS2 final rule, the
rapid development of the biodiesel industry has caused a temporary glut
of glycerin production, resulting in some instances of facilities
disposing glycerin. Glycerin disposal may be regulated under several
EPA programs, depending on the practice. However, there have been
incidences of glycerin dumping, including an incident in Missouri that
resulted in a large fish kill.\73\ Some biodiesel facilities discharge
their wastewater to municipal wastewater treatment systems for
treatment and discharge. There have been several cases of municipal
wastewater treatment plant upsets due to high BOD loadings from
releases of glycerin.\74\ To mitigate wastewater issues, some
production systems reclaim glycerin from the wastewater. Closed-loop
systems in which water and solvents can be recycled and reused can
reduce the quantity of water that must be pretreated before discharge.
---------------------------------------------------------------------------
\73\ U.S. EPA. 2010b. Renewable fuel standard program (RFS2)
regulatory impact analysis. EPA-420-R-10-006. Available at: http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
\74\ U.S. EPA. 2010b. Renewable fuel standard program (RFS2)
regulatory impact analysis. EPA-420-R-10-006. Available at: http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
---------------------------------------------------------------------------
Biodiesel can also impact water bodies as a result of spills.
However, biodiesel degrades approximately four times faster than
petroleum diesel including in aquatic environments.\75\ Results of
aquatic toxicity testing of biodiesel indicate that it is less toxic
than regular diesel.\76\ Biodiesel does have a high oxygen demand in
aquatic environments, and can cause fish kills as a result of oxygen
depletion. Water quality impacts associated with spills at biodiesel
facilities generally result from discharge of glycerin, rather than
biodiesel itself.
---------------------------------------------------------------------------
\75\ Kimble, J. n.d. Biofuels and emerging issues for emergency
responders. U.S. EPA. Available at: http://www.epa.gov/oem/docs/oil/fss/fss09/kimblebiofuels.pdf.
\76\ Kahn, N; Warith, MA; Luk, G. 2007. A comparison of acute
toxicity of biodiesel, biodiesel blends, and diesel on aquatic
organisms. Journal of the Air and Waste Management Association
57(3): 286-296.
---------------------------------------------------------------------------
Biodiesel facilities use much less water than ethanol facilities to
produce biofuel. The primary consumptive water use at biodiesel plants
is associated with washing and evaporative processes. Water use is
variable, but is usually less than one gallon of water for each gallon
of biodiesel produced; some facilities recycle wash water, which
reduces overall water consumption.\77\
---------------------------------------------------------------------------
\77\ Renewable Fuels Standard Program (RFS2), Regulatory Impact
Analysis (RIA). EPA-420-R-10-006. Available at: http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
---------------------------------------------------------------------------
9. Job Creation and Rural Economic Development
The RFS2 is anticipated to increase employment and spur income
expansion in rural areas and farming communities. Income expansion in
rural areas from renewable fuel production will contribute to rural
economic development. As mentioned above, industry activities are
currently progressing to ramp up biodiesel consumption from the
approximately 380 mill gallons estimated to be used in the U.S. in 2010
to the 800 mill gallons that is estimated to be used in 2011 to meet
the RFS2 biomass-based diesel volume requirement. In addition, it is
anticipated that biodiesel production capacity idled due to lack of
demand will be brought back on line as biodiesel volumes ramp up. Also,
expansions to the fuel distribution infrastructure (i.e., more fuel
terminals, rail cars, tank trucks, barges etc.) will be needed to
support the use of 1 bill gal/yr of biodiesel in 2012 and 1.28 bill
gal/yr in 2013 based on the analysis conducted for the RFS2 final
rule.\78\ Bringing online idle biodiesel plants and expanding biodiesel
distribution infrastructure in the U.S. will increase both employment
and promote rural economic development. These increases in employment
are similar to what EPA anticipated when it analyzed the RFS2 rule.
---------------------------------------------------------------------------
\78\ Renewable Fuels Standard Program (RFS2), Regulatory Impact
Analysis (RIA), EPA-420-R-10-006, February 2010. Available at:
http://www.epa.gov/otaq/renewablefuels/420r10006.pdf.
---------------------------------------------------------------------------
D. Proposed 2013 Volume for Biomass-Based Diesel
We are proposing an applicable volume of 1.28 bill gal biomass-
based diesel for 2013, consistent with our projection for 2103 in the
RFS2 final rule. The 0.28 bill gal increment over the 2012 applicable
volume that is reflected in this proposal does not deviate
substantially from the trend in annual increments that Congress
established in specifying applicable volumes for biomass-based diesel
for 2009 through 2012. As noted in Section IV.B, because we are not
proposing to change the 2013 advanced biofuel applicable volume in this
rulemaking, we have used the 2.75 bill gallon applicable volume for the
analyses in today's proposal. Given an advanced biofuel applicable
volume of 2.75 bill gallons for 2013, the proposed 1.28 bill gal
biomass-based diesel volume requirement is not expected to force any
additional biomass-based diesel
[[Page 38874]]
volumes into the market in 2013. As a result, the increase in biomass-
based diesel from the statutory minimum of 1.0 bill gal to 1.28 bill
gal could be seen as not having any impact beyond what is anticipated
to result from meeting the current 2.75 bill gal advanced biofuel
applicable volume.
However, compared to a reference case without the RFS2 mandates,
1.28 bill gal of biomass-based diesel will lead to displacement of
fossil-based fuel, which will result in reduced GHG emissions from the
transportation sector and increased energy security. There are likely
to be some negative consequences associated with increased air and
water pollution, increased food prices, impacts to wetlands, etc., as
discussed above. However, EPA does not believe that these impacts
outweigh the benefits of moving to an applicable volume of 1.28 bill
gal for 2013. By requiring somewhat more biomass based diesel use in
2013 than the statutory minimum, we are also making it more likely that
we will not need to modify the advanced biofuel mandate in 2013 and,
therefore, that the Congressional goal for advanced biofuel use in 2013
can either be satisfied, or at least come closer to satisfaction. EPA
solicits comment on all issues related to this proposal.
E. 2014 and Beyond
EPA is directed under CAA 211(o)(2) to determine the required
biomass-based diesel volumes no less than 14 months ahead of the first
year that they would be applicable, and thus we could propose biomass-
based diesel volumes for 2014 and beyond in today's NPRM. Doing so
would provide certainty for the industry and stability for future
investments and contracts. However, we are not proposing biomass-based
diesel standards for 2014 and beyond in today's NPRM since we believe
we will be in a better position in the future to evaluate all of the
factors related to establishing an applicable volume for 2014 and later
years.
We are aware of two sources that provide projections of biomass-
based diesel for years after 2013: the RFS2 final rulemaking, and a
recent report released by the IHS Global Insight.\79\ The projections
from both of these sources are shown in Table IV.E-1
---------------------------------------------------------------------------
\79\ ``Biodiesel Production Prospects for the Next Decade,'' IHS
Global Insight, March 11, 2011.
Table IV.E-1--Projections of Biomass-Based Diesel After 2012 (Bill
Gallons)
------------------------------------------------------------------------
IHS global
RFS2 final insight
rule report
------------------------------------------------------------------------
2013.......................................... 1.28 1.34
2014.......................................... 1.39 1.50
2015.......................................... 1.53 1.81
2016.......................................... 1.56 2.18
2017.......................................... 1.60 2.53
2018.......................................... 1.64 2.74
2019.......................................... 1.68 3.00
2020.......................................... 1.72 3.14
2021.......................................... 1.77 3.23
2022.......................................... 1.82 3.30
------------------------------------------------------------------------
We will consider these and other sources when we determine the required
biomass-based diesel volumes for 2014 and beyond, whether in this or a
future rulemaking.
V. Proposed Changes to RFS2 Regulations
As the RFS2 program got underway in the second half of 2010, we
discovered that a number of regulatory provisions were causing
confusion among regulated parties. In some cases the confusion was due
to a lack of specificity in terms, while in others it was due to unique
circumstances that were not sufficiently addressed in the RFS2
regulations. A few amendments are being proposed in order to correct
regulatory language that inadvertently misrepresented our intent as
reflected in the preamble to the final RFS2 regulations. Finally, as we
have worked with regulated parties to ensure that the RFS program is
operating as intended, we identified areas in the regulations that
could benefit from clarification and/or streamlining. We also
identified one provision in the gasoline benzene regulations that
misrepresented our intent as stated in the preamble. As a result, we
are proposing a number of amendments to the RFS regulations, and one
amendment to the gasoline benzene regulations, in 40 CFR part 80.
A. Summary of Amendments
Below is a table listing the provisions that we are proposing to
amend in today's action. We have provided additional explanation for
several of these amendments in Sections V.B through V.F below.
Table V.A-1--Summary of Technical Amendments
------------------------------------------------------------------------
Section Description
------------------------------------------------------------------------
80.1275(d)(3)................ Removed to allow for the inclusion of
transferred blendstocks in the
calculation of benzene early credits.
80.1401...................... Amended definition of ``annual cover
crop'' to clarify that the crop has no
existing market to which it can be sold
except for its use as feedstock for the
production of renewable fuel.
80.1401...................... Amended definition of ``naphtha'' to
clarify that it applies to hydrocarbons
only, must be commonly or commercially
known as naphtha, and is used for
producing gasoline.
80.1405(a), (b), and (d)..... Amended to state the standards for 2012
and the date of the annual standards
calculation.
80.1405(c)................... Amended terms ``GEi'' and ``DEi'' to
reference the amount of gasoline and/or
diesel produced by small refineries and
small refiners that are exempt pursuant
to Sec. Sec. 80.1441 and 80.1442.
80.1415(c)(2)................ Amended to state the specific
requirements needed for technical
justifications for applications for
Equivalence Values.
80.1426, Table 1............. Amended to add ID letters to pathways to
facilitate references to specific
pathways and to change the reference to
``canola'' to ``canola/rapeseed''.
80.1426(f)(1)................ Corrected typographical error in cross
reference to paragraph (f)(6) of Sec.
80.1426.
80.1426(f)(5)(ii)............ Amended requirements so that the
separated yard waste plans and separated
food waste plans need not be approved by
EPA, but instead only need to be
accepted by EPA under the registration
provisions.
80.1429(b)(2)................ Amended to clarify that ``fossil-based''
diesel fuel is different from renewable
diesel fuel.
80.1429(b)(9)................ Amended to include RIN separation
limitations on parties whose non-export
RVOs are solely related to imports of
gasoline and diesel or the use of
blendstocks to produce gasoline or
diesel.
80.1449(a)................... Amended Production Outlook Report due
date; added allowance for unregistered
renewable fuel producers and importers
to submit Production Outlook Reports.
[[Page 38875]]
80.1450(b)(1)(vi)............ Amended to require submission of
additional evidence as part of
registration to verify eligibility for
exemptions in Sec. 80.1403(c) or (d).
80.1450(d)(1)-(d)(3)......... Amended to add more specificity on when
updates, addenda, or resubmittals are
required for engineering reviews and to
include references to foreign ethanol
producers.
80.1451(a)(1)(xi)............ Amended to clarify that this section
references RFS1 RINs retired for
compliance.
80.1452(b)(2)................ Corrected typographical error.
80.1452(b)(4)................ Amended to clarify that a RIN-generating
importer must submit to EMTS the EPA
facility registration number of the
facility at which the renewable fuel
producer or foreign ethanol producer
produced the batch.
Sec. 80.1452(b)(5)......... Amended to clarify that for imports of
renewable fuel, the RIN-generator must
submit to EMTS the EPA facility
registration number of the importer that
imported the batch.
80.1460(b)(6)................ Added to clarify that RINs cannot be
generated more than once for a single
batch of renewable fuel.
80.1464(a)(2)(iii), Added to clarify that auditors must
(a)(2)(iv), (b)(2)(iii), verify that product transfer documents
(b)(2)(iv), (c)(1)(iii), and for RIN transactions contain the
(c)(1)(iv). required information for obligated
parties/exporters and for renewable fuel
producers/importers.
80.1464(a)(2)(i), (a)(3)(ii), Amended to clarify that auditors must
(b)(2)(i), (b)(3)(ii). validate RIN separations for obligated
parties/exporters and for renewable fuel
producers/importers; amended to correct
typographical error.
80.1465(h)(2); 80.1466(h)(2); Amended to remove the option of using an
and 80.1467(e)(1), (e)(2), alternative commitment in lieu of paying
and (g)(2). a bond and to clarify the amount of bond
a foreign entity must post.
------------------------------------------------------------------------
B. Technical Justification for Equivalence Value Application
A producer or importer of renewable fuels is required to submit an
equivalence value (EV) application in accordance with Sec. 80.1415(c)
for any renewable fuel that does not have an EV listed in Sec.
80.1415(b). In addition, a producer or importer could apply for an
alternative EV if the producer or importer has reason to believe that a
different EV than that listed in Sec. 80.1415(b) is warranted. Section
80.1415(c) provides the calculation equation for the EV of the
renewable fuel and the requirements for the technical justification to
be submitted in the EV application.
We have received many inquiries from producers and importers of
renewable fuels requesting clarification of the specific requirements
for the technical justification listed in Sec. 80.1415(c). In
addition, based on the many EV applications we have evaluated, we have
found that we needed to request additional information from producers
and importers to better understand the composition of the renewable
fuel they produced, such as intermediate steps and energy inputs in
production process, sources of renewable and non-renewable feedstock,
and so forth, to better evaluate and assign the correct EV to the
producer or importer's renewable fuel.
Therefore, we are proposing to amend Sec. 80.1415(c)(2) to provide
clarification to the current requirements and to include additional
requirements for the technical justification to be submitted in the EV
application. The proposed amendments to Sec. 80.1415(c)(2) include:
--A calculation for the requested equivalence value according to the
equation in Sec. 80.1415(c)(1), including supporting documentation for
the energy content (EC) of the renewable fuel such as a certificate of
analysis from a laboratory that verifies the lower heating value in Btu
per gallon of the renewable fuel produced.
--For each feedstock, component or additive used to make the renewable
fuel, provide a description, the percent input and identify whether or
not it is renewable biomass or is derived from renewable biomass.
--For each feedstock that could independently qualify as a renewable
fuel, state whether or not RINs have been previously generated for the
feedstock.
--A description of renewable fuel and the production process, including
a block diagram that shows quantities of all inputs and outputs
required at each step of the production process for the production of
one batch of renewable fuel.
C. Changes to Definitions of Terms
1. Definition of Annual Cover Crop
As explained in the preamble of the RFS2 final rulemaking, EPA
extended modeling for cellulosic biofuel made from corn stover and
biodiesel/renewable diesel made from waste oils/fats/greases to annual
cover crops, based on the expectation that cultivation of annual cover
crops, as defined in Sec. 80.1401, will have little impact on the
agricultural commodity markets and therefore little or no land use
impact associated with them. Therefore, certain fuels (as specified in
Table 1 to Sec. 80.1426) derived from annual cover crop feedstocks
qualify for D-codes under the advanced biofuel, biomass-based diesel,
and cellulosic renewable fuel categories.
Section 80.1401 of the final RFS2 rule defines ``annual cover
crop.'' We are proposing to amend the definition of annual cover crop
in order to more clearly define those feedstocks that meet the intent
of including cover crops in several pathways in Table 1 to Sec.
80.1426.
In order to extend our modeling to cover crops, we used the
rationale that annual cover crops would have no land use impact since
they are planted on land otherwise used for crop production. Greenhouse
gas emissions would only be associated with growing, harvesting and
transporting the cover crop, and then processing into biofuel. (See 75
FR 14794 col. 3.) Thus, we assumed that no additional land would be
required to plant annual cover crops, that cover crops would not
displace primary crop production, and that the use of the cover crop as
a feedstock for renewable fuels would not have secondary impacts on
other agricultural commodity markets. This implies that annual cover
crops would not be planted and harvested for the purpose of being sold
to existing markets. If a cover crop already had an existing market,
then the increased use of cover crops as feedstocks for renewable fuel
production could potentially impact the existing markets. Therefore, we
propose to amend the current definition for ``annual cover crop'' to
clarify that for purposes of the RFS program the term only includes
crops that have no existing market to which they can be sold except for
the use of the feedstock
[[Page 38876]]
for renewable fuel. This will ensure that no unintended land use or
significant indirect effects result from the use of annual cover crops
as feedstocks for renewable fuel production.
EPA recognizes that there may be additional fuel pathways requiring
lifecycle greenhouse gas (GHG) assessments and the assignment of
appropriate RIN D-Codes, including those using feedstocks that do not
meet the proposed amended definition of annual cover crop. For further
guidance on the process for requesting EPA evaluation of new fuel
pathways, please refer to the following sites:
http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-lca-pathways.htm.
http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/lca-petition-instructions.htm#1.
2. Definition of ``Naphtha''
In the RFS2 final rule, we included several RIN-generating pathways
in Table 1 for naphtha made from renewable biomass. We also provided a
definition of naphtha in Sec. 80.1401. However, the definition we
finalized was overly broad and did not adequately represent our intent
to limit naphtha to gasoline blendstocks. As a result, some biofuel
producers have expressed interest in interpreting the term ``naphtha''
to include materials that, while falling within the boiling range of
gasoline, are not used as a blendstock to produce gasoline.
To remedy this situation, we are proposing to revise the definition
of naphtha to also specify that it applies only to blendstocks which
are composed of only hydrocarbons, are commonly or commercially known
as naphtha, and are used to produce gasoline.
D. Technical Amendments Related to RIN Generation and Separation
1. RIN Separation Limit for Obligated Parties
We propose to amend section 80.1429 to limit the amount of RINs a
company who is an obligated party solely by virtue of importation of
obligated fuel can separate to their Renewable Volume Obligation (RVO).
This change would address the instance where a party may import a small
amount of obligated volumes and then separate all the RINs that it
owns. This change is designed to prevent abuse of the obligated party
RIN separation provision by a company that imports a relatively small
amount of an obligated volume, but then separates a large amount of
RINs. The proposed provision is also designed to help prevent the
hoarding of RINs by parties that do not need them for compliance
purposes, and to generally increase liquidity of RINs.. EPA structured
the original RFS1 separation regulations around facilitating compliance
by obligated parties meeting their RVOs. The proposed change keeps with
the original design and also ensures that importers can separate enough
RINs to meet their obligations.
2. RIN Retirement Provision for Error Correction
In some instances, renewable fuel producers or importers may
improperly generate RINs in EMTS as a result of calculation errors,
meter malfunctions or clerical errors. Pursuant to Sec. 80.1431(a),
improperly generated RINs are invalid, and cannot be used to achieve
compliance with any Renewable Volume Obligations (RVOs). The
regulations also prohibit any party from creating or transferring
invalid RINs. These invalid RIN provisions apply regardless of the good
faith belief of a party that the RINs are valid. Because of the ``buyer
beware'' aspect of the RIN program, RIN generators should take all
appropriate actions to ensure that they are properly generating RINs,
and all parties in the RIN distribution system should take all
appropriate actions to ensure that they are not trading invalid RINs or
using invalid RINs for compliance purposes.
The ``buyer beware'' aspect of the RIN program provides an
important incentive for the regulated community to comply with the
regulations. Although EPA believes that these self-policing mechanisms
are a critical component of the RFS2 regulations, we seek comment on
the possibility of amending Sec. 80.1431 to provide the regulated
community with limited flexibility to allow certain RINs that were
improperly generated to nevertheless be transferred and used for
compliance. We envision that this type of flexibility could reduce
disruptions to the RIN market while, if appropriately limited,
continuing to apply appropriate pressure on parties that generate,
transfer and use RINs to comply with the regulations. Parties that
improperly generate RINs would remain liable for generating invalid
RINs.
We believe that the following general limitations should apply to
any flexibility to allow improperly generated RINs to be transferred
and used for compliance: (1) The RINs must have been improperly
generated as a result of an inadvertent error, (2) the improperly
generated RINs must have the correct D code, (3) the RIN generator must
correct the information submitted to EMTS and retire an equivalent
number and type of any excess RINs that were generated as a result of
the error within fixed time period, (4) the flexibility to allow
improperly generated RINs to be used for compliance would only apply if
the number of excess RINs generated for a particular batch exceeds the
number of RINs that should have been generated by some fixed
percentage, and (5) the flexibility to allow improperly generated RINs
to be used for compliance could not be repeatedly used by a renewable
fuel producer.
We are seeking comment on whether EPA should amend the regulations
to include this flexibility, whether the conditions set forth above are
appropriate, and whether there are additional or alternative conditions
that should be imposed if the flexibility is granted. We seek comment
on specifying a 60-day time period for a RIN-generator to correct RIN
information submitted to EMTS and limiting the availability of this
flexibility to situations where the number of excess RINs generated for
a particular batch exceeds the number of RINs that should have been
generated by no more than 2%. In addition, we seek comment on the
possibility of establishing a limit on the number of times this
flexibility could be used within a compliance period by a given RIN
generator. Such a limitation could encourage RIN generators to take
appropriate measures to avoid generating invalid RINs, and limit the
possibility that RIN generators would intentionally generate invalid
RINs to take advantage of short term RIN price spikes. EPA seeks
comment on all aspects of this proposal
3. Production Outlook Reports Submission Deadline
In the final RFS2 regulations, in Sec. 80.1449(a), EPA set the
annual deadline for submitting Production Outlook Reports as March 31
of each year. However, EPA has determined that, in order for the
information contained in the Production Outlook Reports to be most
useful when setting the RFS2 volume requirements and associated
percentage standards for the following calendar year, the reports
should contain the most accurate projections possible. Since the
accuracy of projections tends to increase the closer those projections
are made to the following calendar year, we believe that the March 31
deadline should be moved to June 1. This revised deadline would still
allow the information contained in the Production Outlook Reports to be
used in the development of the final
[[Page 38877]]
rulemaking setting the standards for the following year.
4. Attest Procedures
In the final RFS2 regulations, EPA required in Sec.
80.1464(c)(1)(i) and (c)(2)(ii) that RIN owners conduct attest
procedures for RIN transaction and RIN activity reports that involve
RIN separations. This requirement was intended to be included in the
attest procedures for obligated parties and exporters as well as for
renewable fuel producers and RIN-generating importers, in order to
confirm that RINs are being properly separated by all parties
participating in the RIN market. Thus, today's rule proposes amendments
to Sec. 80.1464(a)(2)(i) and (a)(3)(ii) for obligated parties and
exporters as well as to Sec. 80.1464(b)(2)(i) and (3)(ii) for
renewable fuel producers and RIN-generating importers to include attest
procedures concerning verification of RIN separation.
Additionally, in the final RFS2 regulations, EPA required in Sec.
80.1464 that auditors of RIN generation reports verify that product
transfer documents (PTDs) include the required information. EPA
believes it would be beneficial for auditors to verify the required
information is present on PTDs for RIN transactions for all parties,
including obligated parties, renewable fuel producers and importers and
RIN owners. Thus, today's rule proposes amendments to Sec.
80.1464(a)(2), (b)(2) and (c)(1) to require auditors to verify that the
PTDs for a representative sample of RINs sold and purchased contains
the information required in Sec. 80.1453.
5. Treatment of Canola and Rapeseed
On September 28, 2010, EPA published a ``Supplemental Determination
for Renewable Fuels Produced Under the Final RFS2 Program from Canola
Oil'' (FR Vol. 75, No. 187, pg 59622-59634). We are proposing to
clarify two aspects of the supplemental determination. First we propose
to amend the regulatory language in Table 1 to 40 CFR 80.1426 to
clarify that the currently-approved pathway for canola also applies
more generally to rapeseed. While ``canola'' was specifically described
as the feedstock evaluated in the supplemental determination, we had
not intended the supplemental determination to cover just those
varieties or sources of rapeseed that are identified as canola, but to
all rapeseed. We currently interpret the reference to ``canola'' in
Table 1 to 40 CFR 1426 to include any rapeseed. To eliminate ambiguity
caused by the current language, however, we propose to replace the term
``canola'' in that table with the term ``canola/rapeseed''. Canola is a
type of rapeseed. While the term ``canola'' is often used in the
American continent and in Australia, the term ``rapeseed'' is often
used in Europe and other countries to describe the same crop. We
believe that this change will enhance the clarity of the regulations
regarding the feedstocks that qualify under the approved canola
biodiesel pathway.
Second, we wish to clarify that although the GHG emissions of
producing fuels from canola feedstock grown in the U.S. and Canada was
specifically modeled as the most likely source of canola (or rapeseed)
oil used for biodiesel produced for sale and use in the U.S., we also
intended that the approved pathway cover canola/rapeseed oil from other
countries, and we interpret our regulations in that manner. We expect
the vast majority of biodiesel used in the U.S. and produced from
canola/rapeseed oil will come from U.S. and Canadian crops. Incidental
amounts from crops produced in other nations will not impact our
average GHG emissions for two reasons. First, our analyses considered
world-wide impacts and thus considered canola/rapeseed crop production
in other countries. Second, other countries most likely to be exporting
canola/rapeseed or biodiesel product from canola/rapeseed are likely to
be major producers which typically use similar cultivars and farming
techniques. Therefore, GHG emissions from producing biodiesel with
canola/rapeseed grown in other countries should be very similar to the
GHG emissions we modeled for Canadian and U.S. canola, though they
could be slightly (and insignificantly) higher or lower. At any rate,
even if there were unexpected larger differences, EPA believes the
small amounts of feedstock or fuel potentially coming from other
countries will not impact our threshold analysis. Therefore, EPA
interprets the approved canola pathway as covering canola/rapeseed
regardless of country origin.
E. Technical Amendments Related to Registration
1. Construction Discontinuance & Completion Documentation
The registration requirements in Sec. 80.1450(b)(1)(vi) state that
for facilities claiming the exemption described in Sec. 80.1403(c) or
(d), evidence must be submitted demonstrating the date that
construction commenced. However, the registration requirements do not
explicitly require the submission of evidence demonstrating that they
meet certain of the other requirements described in Sec. 80.1403(c)(1)
and (2) or (d)(1), (2) and (3).
In order to verify that facilities which claim to qualify for an
exemption under Sec. 80.1403(c) or (d) in fact meet all of the
qualification requirements for such an exemption, we are proposing to
amend Sec. 80.1450(b)(1)(vi) to include requirements that the owner or
operator of facilities claiming exemption under Sec. 80.1403(c) submit
evidence demonstrating that construction was not discontinued for a
period of 18 months after construction began, and that construction was
completed by December 19, 2010. Similarly, we are proposing that for
facilities claiming the exemption under Sec. 80.1403(d), evidence be
submitted demonstrating that construction was not discontinued for a
period of 18 months after construction began and that construction was
completed within 36 months of the date that construction commenced.
In addition, we are proposing to add a general provision in (Sec.
80.1450(b)(1)(vi)(D) requiring the submission of additional
documentation and information as requested by the Administrator. This
authority would be used in the event that documents submitted in
accordance with requirements Sec. 80.1450(b)(1)(vi)(A) and (B) are not
sufficient for EPA to verify that the facility has met all requirements
described in Sec. 80.1403(c) or (d).
2. Third-Party Engineering Reviews
The regulations stipulate that producers of renewable fuels and
foreign ethanol producers are required to update their registration
information, and submit an updated independent third-party engineering
review, every 3 years after their initial registration in accordance
with Sec. 80.1450(d)(3). We have received many inquiries regarding the
start date that EPA uses to determine the 3 year period after which the
producer must submit an updated independent third party engineering
review (such as the registration acceptance date, the third-party
professional engineer's signature date on the engineering review
report, or when the engineering review is due for grandfathered and
non-grandfathered facilities).
Given the lack of clarity in the current regulations, we are
proposing amendments to specify the time frame for submission of
updated independent third-party engineering reviews. We are proposing,
a simplified method that would group producers according to the
calendar year they were or will be registered, and setting a fixed time
[[Page 38878]]
frame for registration updates for each group. Therefore, we are
proposing to amend Sec. 80.1450(d)(3), to stipulate that for all
producers of renewable fuel and foreign ethanol producers in which
their registration was accepted by EPA in calendar year 2010, that the
updated registration information and independent third-party
engineering review shall be submitted to EPA within the three months
prior to January 1, 2014, and within three months prior to January 1 of
every third calendar year thereafter. For all producers of renewable
fuel and foreign ethanol producers registered in any calendar year
after 2010, the updated registration information and independent third-
party engineering review shall be submitted to EPA within three months
prior to January 1 of every third calendar year after the first year
the producer's registration was accepted by EPA. For example, a
producer registered in 2011 would be required to submit an updated
independent third-party engineering review by January 1, 2015, and by
January 1 every three calendar years thereafter.
3. Foreign Ethanol Producers
We are proposing that the amendments to the registration
requirements in Sec. 80.1450 also apply to foreign ethanol producers.
As defined in Sec. 80.1401, foreign ethanol producers are foreign
producers that produce ethanol for use in transportation fuel, heating
oil or jet fuel but who do not add denaturant to their product.
Therefore, foreign ethanol producers do not technically produce
``renewable fuel'' as defined in our regulations. As discussed in the
preamble to the Direct Final Rule published on May 1, 2010 (see 75 FR
26032), the result of the amendments made in the Direct Final Rule is
to require foreign ethanol facilities that produce ethanol that
ultimately becomes part of a renewable fuel for which RINs are
generated to provide EPA the same registration information as foreign
renewable fuel facilities that export their product to the United
States. In both cases the required registration information is
important for enforcement purposes, including verifying the use of
renewable biomass as feedstock and the assignment of appropriate D
codes. Therefore, we believe amendments to the registration
requirements that we make in this proposed rule should also be
applicable to foreign ethanol producers for same reasons.
F. Additional Amendments and Clarifications
1. Third-Party Engineering Review Addendum
We have received many inquires as to whether an addendum to the
existing independent third-party engineering review is sufficient to
meet the requirement that all producers of renewable fuel and foreign
ethanol producers submit an updated independent third-party engineering
review if they make changes to their facility that will qualify the
renewable fuel that is produced for a renewable fuel category or D code
that is not already reflected in the producer's registration
information. In some circumstances the majority of the information
verified in the existing independent third-party engineering review
would remain the same, and duplicating the entire effort does not
appear necessary. We believe the concept of allowing the submission of
an addendum in lieu of a updated independent third-party engineering
review is reasonable and therefore we are proposing to amend the
requirements in Sec. 80.1450(d)(1) to state that a producer of
renewable fuel or foreign ethanol producer may submit an addendum to
the existing independent third-party engineering review on file with
EPA provided the addendum meets all the requirements in Sec.
80.1450(b)(2) and verifies for EPA the most up-to-date information at
the producer's existing facility. The updated independent third-party
engineering review or addendum shall be submitted at least 60 days
prior to producing the new type of renewable fuel and must meet all the
same requirements stipulated in Sec. 80.1450(b)(2) for the independent
third-party engineering review, including a new site visit conducted by
the third-party to verify any changes to the facility that allows it to
produce a different renewable fuel that is not currently reflected in
their registration on file with EPA.
2. RIN Generation for Fuel Imported From a Registered Foreign Producer
In RFS2, EPA finalized provisions allowing importers to generate
RINs for renewable fuel imported from a foreign producer only under
certain circumstances. The importer may only generate RINs for fuel
imported from a foreign renewable fuel producer or foreign ethanol
producer if that producer is registered with EPA and has received EPA
company and facility identification numbers pursuant to Sec. 80.1450.
Pursuant to Sec. 80.1426(c)(4), the importer is prohibited from
generating RINs for fuel imported from a foreign producer that is not
registered with EPA. In today's rule, EPA is clarifying that when an
importer is generating RINs for fuel imported from a registered foreign
renewable fuel producer or foreign ethanol producer, the importer must
submit to EPA via EMTS the importer's company identification number,
the facility identification number of the import facility where the
batch was imported, and the facility identification number for the
foreign renewable fuel or ethanol producer that produced the batch of
fuel for which the importer is generating RINs. These clarifications
are being made in Sec. 80.1452(b)(4) and (5).
3. Bond Posting
We are proposing to amend paragraphs (e)(1), (e)(2) and (g)(2) of
Sec. 80.1467 to make them consistent with Sec. 80.1467(g)(1). These
amendments attempt to clarify that the amount of the posted bond must
post must cover the number of gallon RINs that are sold and/or
transferred, and also those RINs held and/or obtained by the foreign
entity, including those held and/or obtained to comply with a foreign
importer's RVO requirements. We are also proposing to amend Sec. Sec.
80.1465-80.1467 by striking Sec. Sec. 80.1465(h)(2)(iii),
80.1466(h)(2)(iii) and 80.1467(e)(2)(iii), which allowed entities to
make alternative commitments in lieu of posting bonds. EPA believes
that this method is vague, unnecessary, and unenforceable.
4. Acceptance of Separated Yard Waste and Food Waste Plans
We are proposing to amend Sec. 80.1426(f)(5)(ii)(A) to remove the
requirement that the separated yard waste plan and separated food waste
plan must be approved by EPA, and instead only require that these two
plans be submitted and accepted by EPA under the registration
procedures specified in Sec. 80.1450(b)(1)(vii). The details and
information required to be submitted in the separated yard waste plan
and separated food waste plan are not overly burdensome or complex, and
therefore we believe it does not warrant a specific EPA approval, but
that EPA acceptance of these plans through the registration procedures
is sufficient.
5. Transferred Blendstocks in Early Benzene Credit Generation
Calculations
Today's rule also proposes one minor correction to the gasoline
benzene regulations which would clarify how refiners should account for
transferred blendstocks in their early benzene credit generation
calculations. Under current rules, refineries which generated early
[[Page 38879]]
benzene credits are required to reduce gasoline benzene during an early
credit generation period by at least 10% compared to the refinery's
benzene baseline, and are also required to make specific operational
changes and/or improvements in benzene control technology to reduce
gasoline benzene levels.\80\ Refineries which reduce their gasoline
benzene by at least 10%, in part by transferring reformate to another
refinery, could also generate early benzene credits, provided the
transferee refinery treated the reformate in specific benzene-reduction
processing units.\81\ See 72 FR 8486-87 (Feb. 26, 2007). However, the
gasoline benzene regulations also contain an additional provision that
requires all blendstock streams transferred to, from or between
refineries to be excluded from a refinery's early credit generation
calculations (except for reformate as described previously). This led
to an inconsistent comparison of a refinery's benzene during an early
credit generation period with a refinery's benzene baseline (which
included blendstocks transferred to the refinery), which was not EPA's
intent.
---------------------------------------------------------------------------
\80\ Early credit generation periods were July 1, 2007 through
December 31, 2007, and calendar years 2008, 2009 and 2010.
\81\ Refineries produce gasoline by combining several different
blendstocks produced by various refinery processing units. Reformate
is a blendstock which contains approximately 80% of all benzene
found in gasoline, per the MSAT2 regulatory impact analysis.
---------------------------------------------------------------------------
As described in the preamble of the gasoline benzene final rule,
EPA intended that refineries not be allowed to generate early benzene
credits exclusively through blendstock trading, without making any
other qualifying reductions (see 72 FR 8487), but that refineries could
generate early benzene credits in part through qualifying reductions
and ``in part'' through other means such as blendstock transfers (see
72 FR 8496-97). However, the current regulations do not allow this
approach, and this inconsistency has caused confusion among refiners
about how to calculate the amount of early credits generated. Refiners
have generally followed the approach set out in the preamble (as EPA in
fact intended), and included all blendstocks transferred to a refinery
in the refinery's early credit generation calculations. Refiners
typically keep records on transferred blendstocks for 1-2 years, and
thus do not have sufficient data to exclude transferred blendstocks
from their early credit generation calculations.
EPA recently became aware of this inconsistency and is proposing to
change the regulations to make them consistent with EPA's intent as
described in the preamble. Today's proposed rule would amend the
gasoline benzene regulations at 40 CFR 80.1275(d)(3) by deleting that
provision. This would allow a refinery to include blendstocks
transferred to the refinery in the refinery's early benzene credit
generation calculations (all other conditions, including treatment
which removes benzene in transferred reformate streams still applying,
of course). Consistent with EPA's original intent, today's rule also
allows a refinery to include transferred blendstocks in past early
credit generation calculations, provided the refinery met all of the
other requirements for generating early benzene credits. EPA is
proposing to include transferred blendstocks in past early credit
generation calculation not only because this was EPA's intent at the
time of the benzene gasoline rulemaking, but because some refiners have
reasonably relied upon that stated intent in devising their compliance
strategies.
VI. Petition for Reconsideration
On February 7, 2011, the American Petroleum Institute (API) and the
National Petrochemical and Refiners Association (NPRA) jointly
submitted a Petition for Reconsideration of EPA's final rule
establishing the RFS standards for 2011.\82\ EPA is proposing to deny
the petition for the reasons described below, and solicits comment on
this proposal.
---------------------------------------------------------------------------
\82\ 75 FR 76790, December 9, 2010.
---------------------------------------------------------------------------
The petition is available in docket EPA HQ OAR 2010-0133. It makes
three primary assertions:
1. EPA's 2011 cellulosic biofuel volume requirement of 6.6 million
gallons (6.0 million ethanol-equivalent gallons) is unrealistically
high. At the most, EPA should have used the estimate of 3.94 mill
gallons provided by the Energy Information Administration (EIA).
2. EPA's determination that there are sufficient sources of
advanced biofuel to warrant not reducing the advanced biofuel standard
lacks adequate factual support.
3. EPA's treatment of delayed RINs injects undesirable uncertainty
into the regulatory environment, and is contrary to the basic
regulatory framework established by Congress.
The petition requests that EPA reconsider the regulatory
requirements in all three areas.
A. Legal Considerations of Petition
The API/NPRA petition was submitted under the reconsideration
provisions of section 307(d)(7)(B) of the Clean Air Act (CAA). This
section strictly limits petitions for reconsideration both in time and
scope. It states that:
Only an objection to a rule or procedure which was raised with
reasonable specificity during the period for public comment
(including any public hearing) may be raised during judicial review.
If the person raising an objection can demonstrate to the
Administrator that it was impracticable to raise such objection
within such time or if the grounds for such objection arose after
the period for public comment (but within the time specified for
judicial review) and if such objection is of central relevance to
the outcome of the rule, the Administrator shall convene a
proceeding for reconsideration of the rule and provide the same
procedural rights as would have been afforded had the information
been available at the time the rule was proposed. If the
Administrator refuses to convene such a proceeding, such person may
seek review of such refusal in the United States court of appeals
for the appropriate circuit (as provided in subsection (b)). Such
reconsideration shall not postpone the effectiveness of the rule.
The effectiveness of the rule may be stayed during such
reconsideration, however, by the Administrator or the court for a
period not to exceed three months.
Thus the requirement to convene a proceeding to reconsider a rule
is based on the petitioner demonstrating to EPA: (1) That it was
impracticable to raise the objection during the comment period, or that
the grounds for such objection arose after the comment period but
within the time specified for judicial review (i.e., within 60 days
after publication of the final rulemaking notice in the Federal
Register, see CAA section 307(b)(1); and (2) that the objection is of
central relevance to the outcome of the rule.
Regarding the first procedural criterion for reconsideration, a
petitioner must show why the issue could not have been presented during
the comment period, either because it was impracticable to raise the
issue during that time or because the grounds for the issue arose after
the period for public comment (but within 60 days of publication of the
final action). Thus, CAA section 307(d)(7)(B) does not provide a forum
to request EPA to reconsider issues that actually were raised, or could
have been raised, prior to promulgation of the final rule.
Regarding the second procedural criterion for reconsideration, in
EPA's view, an objection is of central relevance to the outcome of the
rule only if it provides substantial support
[[Page 38880]]
for the argument that the regulation should be revised.\83\
---------------------------------------------------------------------------
\83\ See Denial of Petitions to Reconsider Endangerment and
Cause or Contribute Findings for Greenhouse Gases under section
202(a), 75 FR 49556, 49560 (August 13, 2010); Denial of Petition to
Reconsider, 68 FR 63021 (November 7, 2003), Technical Support
Document for Prevention of Significant Deterioration (PSD) and
Nonattainment New Source Review (NSR): Reconsideration at 5 (Oct.
30, 2003) (EPA-456/R-03-005) (available at http://www.epa.gov/nsr/documents/petitionresponses10-30-03.pdf); Denial of Petition to
Reconsider NAAQS for PM, 53 FR 52698, 52700 (December 29, 1988),
citing Denial of Petition to Revise NSPS for Stationary Gas
Turbines, 45 FR 81653-54 (December 11, 1980), and decisions cited
therein. Also see EPA's February 17, 2011 denial of petitions by
Clean Air Taskforce, World Wildlife Fund, National Wildlife
Federation, and Friends of the Earth's to reconsider certain
elements of the RFS2 program.
---------------------------------------------------------------------------
B. Advanced Biofuel Standard and Delayed RINs
For the concerns raised in the petition related to the treatment of
the advanced biofuel requirement for 2011 and the provision for delayed
RINs, API and NPRA essentially restate the positions that they took in
their comments in response to the 2010 NPRM. For instance, with regard
to advanced biofuels, the petitioners did not reference any new data on
imports of sugarcane ethanol or the production potential of biodiesel
to demonstrate that the statutory applicable volume of 1.35 bill
gallons of advanced biodiesel cannot be met in 2011. Likewise with
regard to delayed RINs, the petitioners did not cite new circumstances
or new information in their assertion that this provision will inject
uncertainty into the regulatory system and RIN market. Thus the
petition does not provide new information with regard to these two
issues or assert arguments that could not have been raised during the
comment period. As a result, we do not believe that the petition's
request for a reconsideration of these regulatory requirements is
justified under CAA 307(d)(7)(B), and we propose to deny the petition
with respect to these two issues. We believe that our approach to these
matters in the final rulemaking establishing the 2011 RFS standards was
appropriate, for the reasons described in the preamble to that rule.
C. 2011 Cellulosic Biofuel Requirement
Regarding the 2011 cellulosic biofuel requirement of 6.0 million
ethanol-equivalent gallons, petitioners make two principal arguments:
(1) That the statutory requirement that the cellulosic biofuel
requirement be ``based on'' the estimate provided by the EIA requires
EPA to use the 3.94 million ethanol-equivalent gallon EIA estimate
regardless of any other information, and (2) that EPA lacked a
reasonable basis for its projection of 6.0 million ethanol-equivalent
gallons.
The first issue raised by petitioners was discussed in the RFS2
proposed rule. In the preamble to the 2010 RFS2 Notice of Proposed
Rulemaking, we stated that when projecting cellulosic biofuel
production volumes annually ``[w]e intend to examine EIA's projected
volumes and other available data including the production outlook
reports * * * '' that EPA proposed to require renewable fuel producers
to submit annually.\84\ EPA further explained that the production
outlook reports ``would be used * * * to set the annual cellulosic
biofuel'' standard.\85\ Neither API nor NPRA submitted comments
stating, as they do now, that EPA must in all cases rely on the EIA
projection and cannot consider or rely upon other information in
establishing the annual cellulosic biofuel standard. After evaluating
the comments that EPA did receive, we issued a final rule, including
applicable volumes and corresponding percentage standards consistent
with the proposal. We stated in the preamble to the final rule that
``[w]e will examine EIA's projected volumes and other available data
including the required production outlook reports to decide the
appropriate standard for the following year. The outlook reports from
all renewable fuel producers will assist EPA in determining what the
cellulosic biofuel standard should be * * * '' \86\
---------------------------------------------------------------------------
\84\ 74 FR 24966.
\85\ 74 FR 24970.
\86\ 75 FR 14726. See also 75 FR 14729 (production outlook
reports ``will help EPA set the annual cellulosic biofuel standard *
* * '' and ``essential to our annual cellulosic biofuel standard
setting * * *'').
---------------------------------------------------------------------------
Petitioners had another opportunity to raise this same issue in the
context of the rulemaking establishing the 2011 standards. EPA again
made it clear in its proposed rule that the projection that would be
provided to us by the EIA would only be one of several sources of
information we would use to determine the applicable cellulosic biofuel
volume for 2011:
We will complete our evaluation based on comments received in
response to this proposal, the Production Outlook Reports due to the
Agency on September 1, 2010, the estimate of projected biofuel
volumes that the EIA is required to provide to EPA by October 31,
and other information that becomes available, and will finalize the
standards for 2011 by November 30, 2010.\87\
---------------------------------------------------------------------------
\87\ 75 FR 42240.
---------------------------------------------------------------------------
These standards are to be based in part on transportation fuel
volumes estimated by the Energy Information Administration (EIA) for
the following year.\88\
---------------------------------------------------------------------------
\88\ Ibid.
---------------------------------------------------------------------------
As described in the final rule for the RFS2 program, we intend
to examine EIA's projected volumes and other available data
including the Production Outlook Reports required under Sec.
80.1449 in making the determination of the appropriate volumes to
require for 2011.\89\
\89\ Ibid.
* * * each year by October 31 EIA is required to provide an estimate
of the volume of cellulosic biofuel they expect to be sold or
introduced into commerce in the United States in the following year.
EPA will consider this information as well when finalizing a single
volume for use in setting the 2011 cellulosic biofuel standard.\90\
---------------------------------------------------------------------------
\90\ 75 FR 42246.
After considering all of the information before it, EPA proposed a
level for the cellulosic biofuel volume that was different from that
contained in the EIA projections. Once again, neither API nor NPRA
provided comments in response to the 2010 NPRM on this subject.
Accordingly, EPA proposes to deny the petition with respect to the
contention that EPA must rely exclusively on the EIA projections in
establishing the annual cellulosic biofuel volumes. That argument does
not satisfy the criteria for a petition for reconsideration specified
under CAA 307(d)(7)(B) since the issue could have been raised during
the comment period of the 2010 standards rule, but was not.
As a substantive matter, even if the petitioners were not
foreclosed from raising this argument at this time, EPA would propose
to deny their claim because the statute specifies that it is EPA, not
EIA, that is to make the determination of projected cellulosic biofuel
volumes. EPA's decision is to be ``based on'' the EIA estimate (as,
indeed it was), but EPA interprets the statute to allow it to consider
other available information as well in making its determination. EPA
looked at all available information, including public comments on its
proposal, and decided that 6.0 million ethanol-equivalent gallons was a
reasonable projection for 2011. This is a reasonable interpretation of
an ambiguous statutory provision, where Congress said ``based on'' the
estimate provided by EIA but did not mandate that the determination be
based solely upon this information. EPA carefully considered EIA's
projection and explained why EPA's determination was different. See,
for example, Nuclear Energy Institute v. EPA, 373 F.2d 1251, 1269 (DC
Cir. 2004).
The petition also contends that EPA is required to project the
volume of cellulosic biofuel that will ``actually'' be
[[Page 38881]]
sold or introduced into commerce in the following year, but that EPA
instead established the cellulosic biofuel volume at an
``aspirational'' level. EPA believes that petitioners' allegations are
not supported by either the statute or the facts. Under CAA
211(o)(7)(D)(i), for any calendar year for which EPA determines that
the projected volume of cellulosic biofuel production is less than the
minimum applicable volume established under the statute, EPA is to
reduce the applicable volume of cellulosic biofuel to the volume that
is projected to be available. The statute specifies that the projection
of cellulosic biofuel production is to be ``determined by the
Administrator based on the estimate provided by [EIA],'' and that it
must be made in time to set the annual standards by November 30
preceding the applicable compliance year. To fulfill its mandate under
this provision, EPA undertook an exhaustive evaluation of every
existing and potential cellulosic biofuel production facility that
could potentially supply cellulosic biofuel for use in the U.S., and
projected a production volume for 2011 that reflected a balance between
the uncertainty inherent in the projections and the objective of
avoiding unnecessary reductions in the applicable volume set forth in
the statute.
The requirement to make a projection of cellulosic biofuel volumes
for the following year necessarily means that the projection will be an
estimate, and may not be exactly the volume that is ``actually''
produced. As described in the 2010 NPRM, there are many factors that
may result in the actual volume deviating from the projected volume:
Difficulty/delays in securing necessary funding.
Delays in permitting and/or construction.
Difficulty in scale up, especially for 1st of their kind
technologies.
Volumes from pilot and demonstration plants may not be
sold commercially.
Not all feedstocks may qualify to produce cellulosic
Renewable Identification Numbers (RINs); some still awaiting evaluation
of lifecycle impacts.
Likelihood that fuels produced internationally will be
exported to the United States rather than consumed locally.\91\
---------------------------------------------------------------------------
\91\ 75 FR 42245.
We do not believe that the statute requires our projection to be 100%
accurate, or that it requires that EPA project only what is absolutely
or highly certain of production, as the petitioners would prefer.
Rather, as described in Section II.B.4, we believe that our projection
must be reasonable based on the information that is available at the
time that the cellulosic biofuel standard is set. The applicable volume
established by Congress for cellulosic biofuel is 250 mill gallons for
2011, and in projecting 6 mill gallons of production we lowered the
applicable volume by about 98%. The volume of 3.94 mill gallons
projected by EIA, and favored by petitioners, also represents a
reduction of about 98% from the statutory applicable volume of 250 mill
gallons. Moreover, with only one exception (Range Fuel, discussed
below), the petitioners do not present any new evidence to refute the
projected production estimates that EPA made for the various facilities
it anticipated would produce fuel in 2011. Their primary arguments are
that we are compelled to use EIA's projection which, as noted above,
the statute does not require, and that we are required to project a
level with a high degree of certainty.
As discussed in the rule that set the 2011 cellulosic standard, we
believe that the volume of cellulosic biofuel actually produced in a
given year is likely to be strongly influenced by the standard we set.
At this early point in the RFS program, the volume of cellulosic
biofuel actually made available will in general not exceed the standard
that we set, and there is no recourse for increasing the cellulosic
biofuel standard if our projection were to fall short of actual
production. Therefore, setting a standard that is lower than what the
industry could reasonably achieve could strand investments and/or
further delay the industry's ability to move towards the higher levels
of commercial production envisioned in the statute. We believe it is
appropriate to consider these factors in projecting production volumes,
and that we are not compelled to rely solely on volumes actually in
production at the time we make our decision, as petitioners would
prefer.
In the final rule establishing the 2011 projected volume of
cellulosic biofuel, we explained our approach to recognizing and
accounting for uncertainty in the projections:
In directing EPA to project cellulosic biofuel production for
purposes of setting the annual cellulosic biofuel standard, Congress
did not specify what degree of certainty should be reflected in the
projections. We believe that the cellulosic biofuel standard should
provide an incentive for the industry to grow according to the goals
that Congress established through EISA. However, we also believe
that the cellulosic biofuel standard that we set should be within
the range of what can be attained based on projected domestic
production and import potential. Any estimate we use to set the
biofuel standard for 2011 will have some uncertainty in terms of
actual attainment, and the level of such uncertainty generally rises
with the volume mandate. Our intention is to balance such
uncertainty with the objective of providing an incentive for growth
in the industry. To this end we explored the 2011 volumes for
individual companies as projected by EIA to determine not only what
volumes might be anticipated, but more importantly what volumes were
potentially attainable. Our final projected available volume of
cellulosic biofuel for 2011 reflects these considerations. \92\
---------------------------------------------------------------------------
\92\ 75 FR 76794.
Thus, our projection was not ``aspirational,'' as petitioners allege.
Instead, we projected a volume that we believed could be reasonably
achieved based on the information available at the time the standard
was finalized. We acknowledged there were uncertainties, but balanced
our consideration of that uncertainty against the goal of avoiding
unnecessarily lowering the applicable volume in the statute. This is a
reasonable approach to achieving Congress' goal of promoting the growth
of the use of cellulosic biofuel, taking into account the interests of
both the obligated parties and the producers of cellulosic biofuels.
The API/NPRA petition does not suggest that the projection of 6.0
mill ethanol-equivalent gallons of cellulosic biofuel was not
achievable or was not a reasonable balance as discussed above, based on
the information available at the time of the final rule. Instead, the
petition focuses on balancing these interests in a manner that places
the highest priority on achieving a low or very low degree of
uncertainty in whether the projected volumes will in fact be produced.
The petition focuses almost solely on the uncertainties associated with
this volume and requests that the uncertainties be reduced by lowering
the applicable volume of cellulosic biofuel to no more than the EIA
projection of 3.94 mill gallons. Little if any priority or emphasis is
placed on the importance of establishing conditions that reasonably can
promote the growth in the production of cellulosic renewable fuel. EPA
disagrees that this would be the appropriate balance to draw in
implementing this provision, at least in these early years of the RFS2
program.
In arguing for a lower volume based on the uncertainties, the
petition highlights the recent history for three companies: Bell
BioEnergy, Cello Energy, and Range Fuels. The
[[Page 38882]]
discussion of Bell BioEnergy and Cello Energy in the petition is an
update of the discussion of these same two companies in API's comments
submitted in response to the 2010 NPRM. As the petition points out,
while the information available at the time of the 2010 NPRM suggested
that these two companies could produce cellulosic biofuel in 2011, by
the time of the final rulemaking we had obtained updated information
and determined that it would not be reasonable to project any 2011
volume from these two companies. At the same time, we added two
companies in the final rule that were not included in the 2010 NPRM
list of companies that we projected could produce volume in 2011: KiOr
and Range Fuels. The changes between the proposed and final lists of
companies on which we based our projections for 2011 highlight the fact
that, in the emergent cellulosic biofuel industry, any projection of
cellulosic biofuel production is highly dependent upon the information
available at the time of the projection, and that for any given company
this information may change in one direction or another. Nevertheless,
changes in the projected volume from one company may be counterbalanced
or mitigated by production changes for other companies.
With regard to Range Fuels, we reasonably projected a 2011 volume
production of 2.3 mill ethanol-equivalent gallons out of the 6.0 mill
ethanol-equivalent gallon volume that we determined was achievable in
2011. Information made available since issuance of the final rule
indicates that the facility was idled early in 2011. Nevertheless, this
fact does not invalidate the projection of 6.0 mill gallons we made in
December 2010, since their facility was complete, operational, and had
produced some volume at that time. As indicated by the removal of Bell
BioEnergy and Cello Energy from the list of companies we considered in
the final rule, and the addition of KiOr and Range Fuels to this same
list, it is clear that projections made at any point in time for some
companies may ultimately prove too high while the projections for other
companies may ultimately prove too low.
This petition for reconsideration under CAA section 307(d) should
be considered in the context of the specific statutory provisions
related to the annual standard-setting process for the RFS program and
the compliance flexibilities in the program. Congress established a
standard-setting process for cellulosic biofuel that creates a
considerably shorter leadtime than in most other EPA programs, and a
standard that applies for only a single year. We are required to
project volumes of cellulosic biofuel and determine the applicable
percentage standard by November 30 of the year before the annual
standard applies. This structure is well designed to facilitate use of
the most up-to-date information available before the standard goes into
effect. In other contexts, API and NPRA have argued that it is
important that EPA not miss this November 30 deadline for setting the
annual standards, so as to provide industry with all of the lead time
in advance of the compliance year that is afforded by the statute.\93\
Since the standard only applies for one year, a petition to reconsider
can in practice affect only that single year's obligation, and given
the late date at which it is established, necessarily would involve a
modification of the annual standard during the year in which it is
applicable. Importantly, the statute contains a number of safeguards in
the event that an annual standard cannot be achieved. Under CAA section
211(o)(7)(D)(ii) and (iii), Congress established a mechanism through
which obligated parties can purchase credits from the EPA in lieu of
acquiring cellulosic biofuel RINs. Obligated parties can also carry a
deficit for cellulosic biofuel into 2012 under certain conditions as
stipulated in Sec. 80.1427(b). Finally, up to 20% of the 2011
cellulosic biofuel standard (1.2 million gallons) can be met with
excess cellulosic biofuel RINs from 2010 under the rollover provisions
of Sec. 80.1427(a)(5). Indeed, we have determined that at least 1.2
million excess cellulosic biofuel RINs from 2010 do exist, based on
reports of renewable fuel production in the first half of 2010 under
the RFS1 regulations.
---------------------------------------------------------------------------
\93\ See NPRA v. EPA, (DC Cir., No 10-1071). slip op. at 37-39.
---------------------------------------------------------------------------
The panoply of compliance flexibilities provided in the statute
provides meaningful options for industry in the event that that actual
production of cellulosic biofuel in 2011, or any year, falls below EPA
projected levels. This, combined with the relatively short period of
time at issue for a petition to reconsider a one-year volume standard,
and the fact that any change in the standards would occur within the
year in which it applies, impacts the kind of circumstances under which
it would be appropriate to reconsider the standard. The compliance
flexibilities, the short time period at issue, and the disruption that
would occur from a change in the standard within the compliance year,
indicate that a relatively larger change in circumstances with respect
to cellulosic production would need to occur before EPA would determine
that new circumstances provide substantial support for revising the
volume standard for cellulosic biofuel for a specific year.
EPA believes that the single change that petitioners have
identified in their petition, closure of the Range Fuels plant, is not
of a sufficiently large magnitude to warrant a standard revision. It
may be a substantial percentage of the volume standard, but it remains
a relatively minor change compared to the total volume that Congress
mandated for 2011. After reducing that volume by 98%, the remaining
change in circumstances amounts to a generally small change in an
absolute sense, compared to the total volume of renewable fuel and the
transportation fuel covered by the RFS2 program. In addition, it can be
reasonably addressed by industry through utilization of program
flexibilities, including use of carry over credits from 2010, use of
cellulosic biofuel RINs for 2011, and deficit carryover into 2012. This
approach will avoid the disruption and lack of certainty in the program
that could follow if EPA readily re-opened the annual standard to
revision during the single year it applied based on relatively small
modifications resulting from an individual company's plans. For all of
the reasons described above, EPA proposes to deny the petition for
reconsideration of the 2011 cellulosic biofuel standard. EPA requests
comment on this proposal.
While we are proposing to deny the petition to reconsider the
cellulosic biofuel volume requirement for 2011, we nevertheless must
take into account the current status of the cellulosic biofuel industry
when making our projections for 2012. This includes a review of the
progress being made in 2011 by the five companies we used to project
the cellulosic biofuel volume of 6.0 mill gallons, including Range
Fuels. As noted in Section II.B.1, based on the information we have
obtained to date on the status of their facility in Soperton, Georgia,
we have not included Range Fuels in the list of companies that we
project could produce cellulosic biofuel in 2012. We do not believe
that this is inconsistent with our proposal to deny the API/NPRA
petition for reconsideration. Our proposal to deny the petition is
based on the availability of program flexibilities to allow industry to
comply with the unadjusted 2011 standard, the relative magnitude of the
[[Page 38883]]
change, and the desire to avoid disruption in program implementation
that would follow from EPA too readily re-opening the standard based on
modifications in individual companies' operation plans. Our proposed
2012 projections, on the other hand, are based on the best information
available to us at this time, which includes the fact that the Range
Fuel facility is not currently operating and we have been unable to
confirm its future operational status.
In a similar fashion, we do not believe that identifying the low
end of the range of 2012 projected cellulosic biofuel volumes as 3.55
mill gallons is inconsistent with our proposal to deny the API/NPRA
petition for reconsideration. As described in Section II.B, we based
the low end of the range for applicable 2012 volumes on consideration
of only those facilities that are structurally complete at the time of
this proposal and which anticipate commercial production of cellulosic
biofuels by the end of 2011. While Range Fuel is structurally complete,
they have not explicitly provided information to date indicating that
they anticipate commercial production in 2011. Absent such information,
for today's proposal we have excluded Range Fuels from the low end of
the range of potential volumes for 2012.
VII. Public Participation
We request comment on all aspects of this proposal. This section
describes how you can participate in this process.
A. How do I submit comments?
We are opening a formal comment period by publishing this document.
We will accept comments during the period indicated under DATES in the
first part of this proposal. If you have an interest in the proposed
standards and technical amendments to the RFS regulations described in
this document, we encourage you to comment on any aspect of this
rulemaking. We also request comment on specific topics identified
throughout this proposal.
Your comments will be most useful if you include appropriate and
detailed supporting rationale, data, and analysis. Commenters are
especially encouraged to provide specific suggestions for any changes
that they believe need to be made. You should send all comments, except
those containing proprietary information, to our Air Docket (see
ADDRESSES in the first part of this proposal) before the end of the
comment period.
You may submit comments electronically, by mail, or through hand
delivery/courier. To ensure proper receipt by EPA, identify the
appropriate docket identification number in the subject line on the
first page of your comment. Please ensure that your comments are
submitted within the specified comment period. Comments received after
the close of the comment period will be marked ``late.'' EPA is not
required to consider these late comments. If you wish to submit
Confidential Business Information (CBI) or information that is
otherwise protected by statute, please follow the instructions in
Section VII.B.
B. How should I submit CBI to the agency?
Do not submit information that you consider to be CBI
electronically through the electronic public docket, http://www.regulations.gov, or by e-mail. Send or deliver information
identified as CBI only to the following address: U.S. Environmental
Protection Agency, Assessment and Standards Division, 2000 Traverwood
Drive, Ann Arbor, MI, 48105, Attention Docket ID EPA-HQ-OAR-2010-0133.
You may claim information that you submit to EPA as CBI by marking any
part or all of that information as CBI (if you submit CBI on disk or CD
ROM, mark the outside of the disk or CD ROM as CBI and then identify
electronically within the disk or CD ROM the specific information that
is CBI). Information so marked will not be disclosed except in
accordance with procedures set forth in 40 CFR part 2.
In addition to one complete version of the comments that include
any information claimed as CBI, a copy of the comments that does not
contain the information claimed as CBI must be submitted for inclusion
in the public docket. If you submit the copy that does not contain CBI
on disk or CD ROM, mark the outside of the disk or CD ROM clearly that
it does not contain CBI. Information not marked as CBI will be included
in the public docket without prior notice. If you have any questions
about CBI or the procedures for claiming CBI, please consult the person
identified in the FOR FURTHER INFORMATION CONTACT section.
VIII. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
action is a ``significant regulatory action.'' Accordingly, EPA
submitted this action to the Office of Management and Budget (OMB) for
review under Executive Orders 12866 and 13563 (76 FR 3821, January 21,
2011) and any changes made in response to OMB recommendations have been
documented in the docket for this action.
The economic impacts of the RFS2 program on regulated parties,
including the impacts of the required volumes of renewable fuel, were
already addressed in the RFS2 final rule promulgated on March 26, 2010
(75 FR 14670). This action proposes the percentage standards applicable
in 2012 based on the volumes that were analyzed in the RFS2 final rule.
This action also proposes technical amendments to the RFS2 regulations
that have been determined to have no adverse economic impact on
regulated parties since they generally clarify existing requirements.
B. Paperwork Reduction Act
This action does not impose any new information collection burden.
While there are three proposed regulatory changes in today's NPRM that
affect the recordkeeping and reporting burdens for regulated parties,
we believe that the information collections already approved for the
RFS2 program's general recordkeeping and reporting requirements, or the
information collection already under review, would also cover the
proposed changes in today's NPRM.
The proposed regulatory changes are listed in Table VIII.B-1.
Table VIII.B-1--Proposed Technical Amendments Affecting Recordkeeping
and Reporting
------------------------------------------------------------------------
Section Description
------------------------------------------------------------------------
80.1449(a)................... Amended Production Outlook Report due
date; added allowance for unregistered
renewable fuel producers and importers
to submit Production Outlook Reports.
80.1450(b)(1)(vi)............ Amended to require submission of
additional evidence as part of
registration to verify eligibility for
exemptions in Sec. 80.1403(c) or (d).
[[Page 38884]]
80.1450(d)(1)-(d)(3)......... Amended to add more specificity on when
updates, addenda, or resubmittals are
required for engineering reviews and to
include references to foreign ethanol
producers.
------------------------------------------------------------------------
With regard to production outlook reports, the change in due date is
not expected to have any impact on the reporting burden. In addition,
EPA recently prepared an Information Collection Request (ICR) document
to permit the submission of voluntary production outlook reports by
domestic and foreign renewable fuels producers. The parties affected by
the ICR are not regulated parties under the RFS2 program. The ICR has
been submitted for approval to OMB under the Paperwork Reduction Act,
44 U.S.C. 3501 et seq. and may be identified by EPA ICR number 2409.01.
Documents related to the ICR have been placed in docket number EPA-HQ-
OAR-2005-0161, which is accessible at http://www.regulations.gov.
On October 14, 2010, EPA published a notice in the Federal Register
announcing our intent to submit the proposed ICR for voluntary
production outlook reports to OMB for approval. (See 75 FR 63173). The
60-day comment period closed on December 14, 2010. No comments were
received. On February 8, 2011, EPA published a Federal Register notice
announcing submission of the ICR to OMB. Additional comments were
solicited via an additional comment period through March 10, 2011.\94\
---------------------------------------------------------------------------
\94\ See ``Agency Information Collection Activities; Submission
to OMB for Review and Approval; Comment Request; Production Outlook
Reports for Un-Registered Renewable Fuel Producers (New
Collection),'' 76 FR 6781 (February 8, 2011). The document
identification number for this notice is EPA-HQ-OAR-2005-0161-3221.
The document identification number for the supporting statement is
EPA-HQ-OAR-2005-0161-3222.
---------------------------------------------------------------------------
The Office of Management and Budget (OMB) has previously approved
the information collection requirements contained in the existing
regulations at 40 CFR part 80, Subpart M under the provisions of the
Paperwork Reduction Act, 44 U.S.C. 3501 et seq. This would include the
following approved information collections (with OMB control numbers
and expiration dates listed in parentheses): ``Renewable Fuels Standard
Program: Petition and Registration'' (OMB Control Number 2060-0367,
expires March 31, 2013); ``Renewable Fuels Standard (RFS2)'' (OMB
Control Number 2060-0640, expires July 31, 2013); ``Regulations of
Fuels and Fuel Additives: 2011 Renewable Fuels Standard--Petition for
International Aggregate Compliance Approach'' OMB Control Number 2060-
0655, expires February 28, 2014). Detailed and searchable information
about these and other approved collections may be viewed on the Office
of Management and Budget (OMB) Paperwork Reduction Act Web site, which
is accessible at http://www.reginfo.gov/public/do/PRAMain. With regard
to the proposed changes in Sec. 80.1450, we believe that these
information collections already approved for the RFS2 program's general
recordkeeping and reporting requirements would also cover the proposed
changes in today's NPRM.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of
a city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is
any not-for-profit enterprise, which is independently owned and
operated and is not dominant in its field.
After considering the economic impacts of today's proposed rule on
small entities, we certify that this proposed action will not have a
significant economic impact on a substantial number of small entities.
This rule proposes the annual standard for cellulosic biofuels for 2012
and biomass-based diesel for 2013, regulatory provisions for new RIN-
generating pathways, and clarifying changes and minor technical
amendments to the regulations. However, the impacts of the RFS2 program
on small entities were already addressed in the RFS2 final rule
promulgated on March 26, 2010 (75 FR 14670). Therefore, this proposed
rule will not impose any additional requirements on small entities. We
continue to be interested in the potential impacts of the proposed rule
on small entities and welcome comments on issues related to such
impacts.
D. Unfunded Mandates Reform Act
This rule does not contain a Federal mandate that may result in
expenditures of $100 million or more for State, local, and Tribal
governments, in the aggregate, or the private sector in any one year.
Thus, this action is not subject to the requirements of sections 202 or
205 of UMRA.
This action is also not subject to the requirements of section 203
of UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.
E. 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, as
specified in Executive Order 13132. This action only applies to
gasoline, diesel, and renewable fuel producers, importers, distributors
and marketers and makes relatively minor corrections and modifications
to the RFS2 regulations. Thus, Executive Order 13132 does not apply to
this rule.
In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this proposed rule
from State and local officials.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have Tribal implications, as specified in
Executive Order 13175 (65 FR 67249, November 9, 2000). This proposed
rule will be implemented at the Federal level and impose compliance
costs only on
[[Page 38885]]
transportation fuel refiners, blenders, marketers, distributors,
importers, exporters, and renewable fuel producers and importers.
Tribal governments would be affected only to the extent they purchase
and use regulated fuels. Thus, Executive Order 13175 does not apply to
this action.
EPA specifically solicits additional comment on this proposed
action from Tribal officials.
G. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying
only to those regulatory actions that concern health or safety risks,
such that the analysis required under section 5-501 of the EO has the
potential to influence the regulation. This action is not subject to EO
13045 because it does not establish an environmental standard intended
to mitigate health or safety risks and because it implements specific
standards established by Congress in statutes.
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy.
I. National Technology Transfer Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
This proposed rulemaking does not involve technical standards.
Therefore, EPA is not considering the use of any voluntary consensus
standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
Federal executive policy on environmental justice. Its main provision
directs Federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
EPA has determined that this proposed rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it does not
affect the level of protection provided to human health or the
environment. This action does not relax the control measures on sources
regulated by the RFS2 regulations and therefore will not cause
emissions increases from these sources.
IX. Statutory Authority
Statutory authority for this action comes from section 211 of the
Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural
and compliance related aspects of today's proposal, including the
proposed recordkeeping requirements, come from sections 114, 208, and
301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).
List of Subjects in 40 CFR Part 80
Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Diesel fuel,
Fuel additives, Gasoline, Imports, Labeling, Motor vehicle pollution,
Penalties, Petroleum, Reporting and recordkeeping requirements.
Dated: June 21, 2011.
Lisa P. Jackson,
Administrator.
For the reasons set forth in the preamble, 40 CFR part 80 is
proposed to be amended as follows:
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
1. The authority citation for part 80 continues to read as follows:
Authority: 42 U.S.C. 7414, 7542, 7545, and 7601(a).
Sec. 80.1275 [Amended]
2. In Sec. 80.1275, remove paragraph (d)(3).
Subpart M [Amended]
3. Section 80.1401 is amended by revising the definitions of
``Annual cover crop'' and ``Naphtha'' to read as follows:
Sec. 80.1401 Definitions.
* * * * *
Annual cover crop means an annual crop, planted as a rotation
between primary planted crops, or between trees and vines in orchards
and vineyards, typically to protect soil from erosion and to improve
the soil between periods of regular crops. An annual cover crop has no
existing market to which it can be sold except for its use as feedstock
for the production of renewable fuel.
* * * * *
Naphtha means a blendstock falling within the boiling range of
gasoline which is composed of only hydrocarbons, is commonly or
commercially known as naphtha, and is used to produce gasoline.
* * * * *
4. Section 80.1405 is amended by revising paragraphs (a) through
(c) to read as follows:
Sec. 80.1405 What are the Renewable Fuel Standards?
(a) (1) Renewable Fuel Standards for 2011.
(i) The value of the cellulosic biofuel standard for 2011 shall be
0.003 percent.
(ii) The value of the biomass-based diesel standard for 2011 shall
be 0.69 percent.
(iii) The value of the advanced biofuel standard for 2011 shall be
0.78 percent.
(iv) The value of the renewable fuel standard for 2011 shall be
8.01 percent.
(2) Renewable Fuel Standards for 2012.
(i) The value of the cellulosic biofuel standard for 2012 shall be
0.002-0.010 percent.
(ii) The value of the biomass-based diesel standard for 2012 shall
be 0.91 percent.
(iii) The value of the advanced biofuel standard for 2012 shall be
1.21 percent.
(iv) The value of the renewable fuel standard for 2012 shall be
9.21 percent.
(b) EPA will calculate the value of the annual standards and
publish these values in the Federal Register by November 30 of the year
preceding the compliance period.
(c) EPA will calculate the annual renewable fuel percentage
standards using the following equations:
[[Page 38886]]
[GRAPHIC] [TIFF OMITTED] TP01JY11.001
Where:
StdCB,i = The cellulosic biofuel standard for year i, in
percent.
StdBBD,i= The biomass-based diesel standard for year i,
in percent.
StdAB,i= The advanced biofuel standard for year i, in
percent.
StdRF,i= The renewable fuel standard for year i, in
percent.
RFVCB,i= Annual volume of cellulosic biofuel required by
42 U.S.C. 7545(o)(2)(B) for year i, or volume as adjusted pursuant
to 42 U.S.C. 7545(o)(7)(D), in gallons.
RFVBBD,i= Annual volume of biomass-based diesel required
by 42 U.S.C. 7545 (o)(2)(B) for year i, in gallons.
RFVAB,i= Annual volume of advanced biofuel required by 42
U.S.C. 7545(o)(2)(B) for year i, in gallons.
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, 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
[[Page 38887]]
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.
* * * * *
5. Section 80.1415 is amended by revising paragraph (c)(2) to read
as follows:
Sec. 80.1415 How are equivalence values assigned to renewable fuel?
* * * * *
(c) * * *
(2) The application for an equivalence value shall include a
technical justification that includes all the following:
(i) A calculation for the requested equivalence value according to
the equation in paragraph (c)(1) of this section, including supporting
documentation for the value of EC used in the calculation such as a
certificate of analysis from a laboratory that verifies the lower
heating value in Btu per gallon of the renewable fuel produced.
(ii) For each feedstock, component, or additive that is used to
make the renewable fuel, provide a description, the percent input, and
identify whether or not it is renewable biomass or is derived from
renewable biomass.
(iii) For each feedstock that also qualifies as a renewable fuel,
state whether or not RINs have been previously generated for such
feedstock.
(iv) A description of the renewable fuel and the production
process, including a block diagram that shows all inputs and outputs at
each step of the production process with a sample quantity of all
inputs and outputs for one batch of renewable fuel produced.
* * * * *
6. Section 80.1426 is amended as follows:
a. By revising paragraph (f)(1).
b. By revising Table 1 to Sec. 80.1426.
c. By revising paragraphs (f)(5)(ii)(A) and (f)(5)(ii)(B).
Sec. 80.1426 How are RINs generated and assigned to batches of
renewable fuel by renewable fuel producers or importers?
* * * * *
(f) * * *
(1) Applicable pathways. D codes shall be used in RINs generated by
producers or importers of renewable fuel according to the pathways
listed in Table 1 to this section, paragraph (f)(6) of this section, or
as approved by the Administrator. In choosing an appropriate D code,
producers and importers may disregard any incidental, de minimis
feedstock contaminants that are impractical to remove and are related
to customary feedstock production and transport. Tables 1 and 2 to this
section do not apply to, and impose no requirements with respect to,
volumes of fuel for which RINs are generated pursuant to paragraph
(f)(6) of this section.
Table 1 to Sec. 80.1426--Applicable D Codes for Each Fuel Pathway for
Use in Generating RINs
------------------------------------------------------------------------
Production
Fuel type Feedstock process D-Code
requirements
------------------------------------------------------------------------
A...... Ethanol......... Corn starch..... All of the 6
following: Dry
mill process,
using natural
gas, biomass,
or biogas for
process energy
and at least
two advanced
technologies
from Table 2 to
this section.
B...... Ethanol......... Corn starch..... All of the 6
following: Dry
mill process,
using natural
gas, biomass,
or biogas for
process energy
and at least
one of the
advanced
technologies
from Table 2 to
this section
plus drying no
more than 65%
of the
distillers
grains with
solubles it
markets
annually.
C...... Ethanol......... Corn starch..... All of the 6
following: Dry
mill process,
using natural
gas, biomass,
or biogas for
process energy
and drying no
more than 50%
of the
distillers
grains with
solubles it
markets
annually.
D...... Ethanol......... Corn starch..... Wet mill process 6
using biomass
or biogas for
process energy.
E...... Ethanol......... Starches from Fermentation 6
crop residue using natural
and annual gas, biomass,
covercrops. or biogas for
process energy.
F...... Biodiesel, and Soy bean oil; One of the 4
renewable Oil from annual following:
diesel. covercrops; Trans-
Algal oil; Esterification
Biogenic waste Hydrotreating
oils/fats/ Excluding
greases; Non- processes that
food grade corn co-process
oil. renewable
biomass and
petroleum.
G...... Biodiesel....... Canola/Rapeseed Trans- 4
oil. Esterification
using natural
gas or biomass
for process
energy.
H...... Biodiesel, and Soy bean oil; One of the 5
renewable Oil from annual following:
diesel. covercrops; Trans-
Algal oil; Esterification
Biogenic waste Hydrotreating
oils/fats/ Includes only
greases; Non- processes that
food grade corn co-process
oil. renewable
biomass and
petroleum.
I...... Ethanol......... Sugarcane....... Fermentation.... 5
J...... Ethanol......... Cellulosic Any............. 3
Biomass from
crop residue,
slash, pre-
commercial
thinnings and
tree residue,
annual
covercrops,
switchgrass,
and miscanthus;
cellulosic
components of
separated yard
waste;
cellulosic
components of
separated food
waste; and
cellulosic
components of
separated MSW.
[[Page 38888]]
K...... Cellulosic Cellulosic Any............. 7
Diesel, Jet Biomass from
Fuel and crop residue,
Heating Oil. slash, pre-
commercial
thinnings and
tree residue,
annual
covercrops,
switchgrass,
and miscanthus;
cellulosic
components of
separated yard
waste;
cellulosic
components of
separated food
waste; and
cellulosic
components of
separated MSW.
L...... Butanol......... Corn starch..... Fermentation; 6
dry mill using
natural gas,
biomass, or
biogas for
process energy.
M...... Cellulosic Cellulosic Fischer-Tropsch 3
Naphtha. Biomass from process.
crop residue,
slash, pre-
commercial
thinnings and
tree residue,
annual
covercrops,
switchgrass,
and miscanthus;
cellulosic
components of
separated yard
waste;
cellulosic
components of
separated food
waste; and
cellulosic
components of
separated MSW.
N...... Ethanol, The non- Any............. 5
renewable cellulosic
diesel, jet portions of
fuel, heating separated food
oil, and waste.
naphtha.
O...... Biogas.......... Landfills, Any............. 5
sewage waste
treatment
plants, manure
digesters.
------------------------------------------------------------------------
* * * * *
(5) * * *
(ii)(A) A feedstock qualifies under paragraph (f)(5)(i)(A) or
(f)(5)(i)(B) of this section only if it is collected according to a
plan submitted to and accepted by U.S. EPA under the registration
procedures specified in Sec. 80.1450(b)(1)(vii).
(B) A feedstock qualifies under paragraph (f)(5)(i)(C) of this
section only if it is collected according to a plan submitted to and
approved by U.S. EPA.
* * * * *
7. Section 80.1429 is amended by revising paragraphs (b)(2) and
(b)(9) introductory text to read as follows:
Sec. 80.1429 Requirements for separating RINs from volumes of
renewable fuel.
* * * * *
(b) * * *
(2) Except as provided in paragraph (b)(6) of this section, any
party that owns a volume of renewable fuel must separate any RINs that
have been assigned to that volume once the volume is blended with
gasoline or fossil-based diesel to produce a transportation fuel,
heating oil, or jet fuel. A party may separate up to 2.5 RINs per
gallon of blended renewable fuel.
* * * * *
(9) Except as provided in paragraphs (b)(2) through (b)(5) and
(b)(8) of this section, parties whose non-export renewable volume
obligations are solely related to either the importation of products
listed in Sec. 80.1407(c) or Sec. 80.1407(e) or to the addition of
blendstocks into a volume of finished gasoline, finished diesel fuel,
RBOB, or CBOB, can only separate RINs from volumes of renewable fuel if
the number of gallon-RINs separated in a calendar year is less than or
equal to a limit set as follows:
* * * * *
8. Section 80.1449 is amended by revising paragraph (a)
introductory text to read as follows:
Sec. 80.1449 What are the Production Outlook Report requirements?
(a) By June 1 of each year (September 1 for the report due in
2010), a registered renewable fuel producer or importer must submit and
an unregistered renewable fuel producer may submit all of the following
information for each of its facilities, as applicable, to EPA:
* * * * *
9. Section 80.1450 is amended as follows:
a. By revising paragraph (b)(1)(vi).
b. By revising paragraphs (d)(1)-(d)(3).
Sec. 80.1450 What are the registration requirements under the RFS
program?
* * * * *
(b) * * *
(1) * * *
(vi) For facilities claiming the exemption described in Sec.
80.1403(c) or (d), evidence demonstrating all of the following:
(A) The date that construction commenced (as defined in Sec.
80.1403(a)(1)), including all the following:
(1) Contracts with construction and other companies.
(2) Applicable air permits issued by the U.S. Environmental
Protection Agency, state, local air pollution control agencies, or
foreign governmental agencies that governed the construction and/or
operation of the renewable fuel facility during construction and when
first operated.
(B) That construction was not discontinued for a period of 18
months after commencement of construction.
(C) That construction was completed by December 19, 2010, for
facilities claiming an exemption pursuant to Sec. 80.1403(c); or
within 36 months of commencement of construction for facilities
claiming an exemption pursuant to Sec. 80.1403(d).
(D) Other documentation and information as requested by the
Administrator.
* * * * *
(d) * * *
(1) Any producer of renewable fuel, and any foreign ethanol
producer who makes changes to his facility that will allow him to
produce renewable fuel, as defined in Sec. 80.1401 that is not
reflected in the producer's registration information on file with EPA
must update his 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. The
producer may also submit an addendum to the independent third-party
engineering review on file with EPA provided the addendum meets all the
requirements in paragraph (b)(2) of this section and verifies for EPA
the most up-to-date information at the producer's existing facility.
(2) Any producer of renewable fuel and any foreign ethanol producer
who
[[Page 38889]]
makes any other changes to a facility that will affect the producer's
registration information but will not affect the renewable fuel
category for which the producer is registered per paragraph (b) of this
section must update his registration information 7 days prior to the
change.
(3) All producers of renewable fuel and foreign ethanol producers
must update registration information and submit an updated independent
third-party engineering review according to the schedule in paragraph
(d)(3)(i) or (d)(3)(ii) of this section, and including the information
specified in paragraph (d)(3)(iii) of this section:
(i) For all producers of renewable fuel and foreign ethanol
producers registered in calendar year 2010, the updated registration
information and independent third-party engineering review shall be
submitted to EPA by October 1, 2013, and by October 1 of every third
calendar year thereafter; or
(ii) For all producers of renewable fuel and foreign ethanol
producers registered in any calendar year after 2010, the updated
registration information and independent third-party engineering review
shall be submitted to EPA by October 1 of every third calendar year
after the first year of registration.
(iii) In addition to conducting the engineering review and written
report and verification required by paragraph (b)(2) of this section,
the updated independent third-party engineering review shall include a
detailed review of the renewable fuel producer's calculations used to
determine VRIN of a representative sample of batches of each
type of renewable fuel produced since the last registration. The
representative sample shall be selected in accordance with the sample
size guidelines set forth at Sec. 80.127.
* * * * *
10. Section 80.1451 is amended by revising paragraph (a)(1)(xi) to
read as follows:
Sec. 80.1451 What are the reporting requirements under the RFS
program?
(a) * * *
(1) * * *
(xi) A list of all RINs generated prior to July 1, 2010 that were
retired for compliance in the reporting period.
* * * * *
11. Section 80.1452 is amended revising paragraphs (b)(2), (b)(4),
and (b)(5) to read as follows:
Sec. 80.1452 What are the requirements related to the EPA Moderated
Transaction System (EMTS)?
* * * * *
(b) * * *
(2) The EPA company registration number of the renewable fuel
producer or foreign ethanol producer, as applicable.
* * * * *
(4) The EPA facility registration number of the facility at which
the renewable fuel producer or foreign ethanol producer produced the
batch, as applicable.
(5) The EPA facility registration number of the importer that
imported the batch, if applicable.
* * * * *
12. Section 80.1460 is amended by adding a new paragraph (b)(6) to
read as follows:
Sec. 80.1460 What acts are prohibited under the RFS program?
* * * * *
(b) * * *
(6) Generate a RIN for fuel for which RINs have previously been
generated.
* * * * *
13. Section 80.1464 is amended as follows:
a. By revising paragraphs (a)(2) introductory text and (a)(2)(i).
b. By adding paragraphs (a)(2)(iii) and (a)(2)(iv).
c. By revising paragraph (a)(3)(ii).
d. By revising paragraphs (b)(2) introductory text and (b)(2)(i).
e. By adding paragraphs (b)(2)(iii) and (b)(2)(iv).
f. By revising paragraph (b)(3)(ii).
g. By revising paragraph (c)(1) introductory text.
h. By adding paragraphs (c)(1)(iii) and (c)(1)(iv).
Sec. 80.1464 What are the attest engagement requirements under the
RFS program?
* * * * *
(a) * * *
(2) RIN Transaction Reports and Product Transfer Documents.
(i) Obtain and read copies of a representative sample, selected in
accordance with the guidelines in Sec. 80.127, of each RIN transaction
type (RINs purchased, RINs sold, RINs retired, RINs separated, RINs
reinstated) included in the RIN transaction reports required under
Sec. 80.1451(a)(2) for the compliance year.
* * * * *
(iii) Verify that the product transfer documents for the
representative samples under paragraph (a)(2)(i) of this section of
RINs sold and the RINs purchased contain the applicable information
required under Sec. 80.1453 and report as a finding any product
transfer document that does not contain the required information.
(iv) Verify the accuracy of the information contained in the
product transfer documents reviewed pursuant to paragraph (a)(2)(iii)
of this section and report as a finding any exceptions.
(3) * * *
(ii) Obtain the database, spreadsheet, or other documentation used
to generate the information in the RIN activity reports; compare the
RIN transaction samples reviewed under paragraph (a)(2) of this section
with the corresponding entries in the database or spreadsheet and
report as a finding any discrepancies; compute the total number of
current-year and prior-year RINs owned at the start and end of each
quarter, purchased, separated, sold, retired and reinstated, and for
parties that reported RIN activity for RINs assigned to a volume of
renewable fuel, the volume and type of renewable fuel (as defined in
Sec. 80.1401) owned at the end of each quarter; as represented in
these documents; and state whether this information agrees with the
party's reports to EPA.
(b) * * *
(2) RIN Transaction Reports and Product Transfer Documents.
(i) Obtain and read copies of a representative sample, selected in
accordance with the guidelines in Sec. 80.127, of each transaction
type (RINs purchased, RINs sold, RINs retired, RINs separated, RINs
reinstated) included in the RIN transaction reports required under
Sec. 80.1451(b)(2) for the compliance year.
* * * * *
(iii) Verify that the product transfer documents for the
representative samples under paragraph (b)(2)(i) of this section of
RINs sold and the RINs purchased contain the applicable information
required under Sec. 80.1453 and report as a finding any product
transfer document that does not contain the required information.
(iv) Verify the accuracy of the information contained in the
product transfer documents reviewed pursuant to paragraph (b)(2)(iii)
of this section and report as a finding any exceptions.
(3) * * *
(ii) Obtain the database, spreadsheet, or other documentation used
to generate the information in the RIN activity reports; compare the
RIN transaction samples reviewed under paragraph (b)(2) of this section
with the corresponding entries in the database or spreadsheet and
report as a finding any discrepancies; report the total number of each
RIN generated during each quarter and compute and report the total
number of current-year and prior-year RINs owned at the start and end
of each
[[Page 38890]]
quarter, purchased, separated, sold, retired and reinstated, and for
parties that reported RIN activity for RINs assigned to a volume of
renewable fuel, the volume of renewable fuel owned at the end of each
quarter, as represented in these documents; and state whether this
information agrees with the party's reports to EPA.
* * * * *
(c) * * *
(1) RIN Transaction Reports and Product Transfer Documents.
* * * * *
(iii) Verify that the product transfer documents for the
representative samples under paragraph (c)(1)(i) of this section of
RINs sold and RINs purchased contain the applicable information
required under Sec. 80.1453 and report as a finding any product
transfer document that does not contain the required information.
(iv) Verify the accuracy of the information contained in the
product transfer documents reviewed pursuant to paragraph (c)(1)(iii)
of this section and report as a finding any exceptions.
* * * * *
14. Section 80.1465 is amended by revising paragraph (h)(2) to read
as follows:
Sec. 80.1465 What are the additional requirements under this subpart
for foreign small refiners, foreign small refineries, and importers of
RFS-FRFUEL?
* * * * *
(h) * * *
(2) Bonds shall be posted by any of the following methods:
(i) Paying the amount of the bond to the Treasurer of the United
States.
(ii) Obtaining a bond in the proper amount from a third party
surety agent that is payable to satisfy United States administrative or
judicial judgments against the foreign refiner, provided EPA agrees in
advance as to the third party and the nature of the surety agreement.
* * * * *
15. Section 80.1466 is amended by revising paragraph (h)(2) to read
as follows:
Sec. 80.1466 What are the additional requirements under this subpart
for RIN-generating foreign producers and importers of renewable fuels
for which RINs have been generated by the foreign producer?
* * * * *
(h) * * *
(2) Bonds shall be posted by any of the following methods:
(i) Paying the amount of the bond to the Treasurer of the United
States.
(ii) Obtaining a bond in the proper amount from a third party
surety agent that is payable to satisfy United States administrative or
judicial judgments against the foreign producer, provided EPA agrees in
advance as to the third party and the nature of the surety agreement.
* * * * *
16. Section 80.1467 is amended by revising paragraphs (e)(1),
(e)(2), and (g)(2) to read as follows:
Sec. 80.1467 What are the additional requirements under this subpart
for a foreign RIN owner?
* * * * *
(e) * * *
(1) The foreign entity shall post a bond of the amount calculated
using the following equation:
Bond = G * $ 0.01
Where:
Bond = Amount of the bond in U.S. dollars.
G = The total of the number of gallon-RINs the foreign entity
expects to obtain, sell, transfer or hold during the first calendar
year that the foreign entity is a RIN owner, plus the number of
gallon-RINs the foreign entity expects to obtain, sell, transfer or
hold during the next four calendar years. After the first calendar
year, the bond amount shall be based on the actual number of gallon-
RINs obtained, sold, or transferred so far during the current
calendar year plus the number of gallon-RINs obtained, sold, or
transferred during the four calendar years immediately preceding the
current calendar year. For any year for which there were fewer than
four preceding years in which the foreign entity obtained, sold, or
transferred RINs, the bond shall be based on the total of the number
of gallon-RINs sold or transferred so far during the current
calendar year plus the number of gallon-RINs obtained, sold, or
transferred during any immediately preceding calendar years in which
the foreign entity owned RINs, plus the number of gallon-RINs the
foreign entity expects to obtain, sell or transfer during subsequent
calendar years, the total number of years not to exceed four
calendar years in addition to the current calendar year.
(2) Bonds shall be posted by any of the following methods:
(i) Paying the amount of the bond to the Treasurer of the United
States.
(ii) Obtaining a bond in the proper amount from a third party
surety agent that is payable to satisfy United States administrative or
judicial judgments against the foreign RIN owner, provided EPA agrees
in advance as to the third party and the nature of the surety
agreement.
* * * * *
(g) * * *
(2) Any RIN that is obtained, sold, transferred, or held that is in
excess of the number for which the bond requirements of this section
have been satisfied is an invalid RIN under Sec. 80.1431.
* * * * *
[FR Doc. 2011-16018 Filed 6-30-11; 8:45 am]
BILLING CODE 6560-50-P