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Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021, Response to the Remand of the 2016 Standards, and Other Changes

Under section 211 of the Clean Air Act, the Environmental Protection Agency (EPA) is required to set renewable fuel percentage standards every year. This action proposes the ann...

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Environmental Protection Agency
  1. 40 CFR Part 80
  2. [EPA-HQ-OAR-2019-0136; FRL-9996-53-OAR]
  3. RIN 2060-AU42

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Proposed rule.

SUMMARY:

Under section 211 of the Clean Air Act, the Environmental Protection Agency (EPA) is required to set renewable fuel percentage standards every year. This action proposes the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that apply to gasoline and diesel transportation fuel produced or imported in the year 2020. Relying on statutory waiver authority that is available when the projected cellulosic biofuel production volume is less than the applicable volume specified in the statute, EPA is proposing volume requirements for cellulosic biofuel, advanced biofuel, and total renewable fuel that are below the statutory volume targets. We are also proposing the applicable volume of biomass-based diesel for 2021. This action also proposes to address the remand of the 2016 standard-setting rulemaking, as well as several regulatory changes to the Renewable Fuel Standard (RFS) program including new pathways, flexibilities for regulated parties, and clarifications of existing regulations.

DATES:

 

Comments. Comments must be received on or before August 30, 2019.

Public hearing. EPA will announce the public hearing date and location for this proposal in a supplemental Federal Register document.

ADDRESSES:

You may send your comments, identified by Docket ID No. EPA-HQ-OAR-2019-0136, by any of the following methods:

  • Federal eRulemaking Portal: www.regulations.gov (our preferred method) Follow the online instructions for submitting comments.
  • Mail: U.S. Environmental Protection Agency, EPA Docket Center, Office of Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania Avenue NW, Washington, DC 20460.
  • Hand Delivery/Courier: EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. The Docket Center's hours of operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal Holidays).

Instructions: All submissions received must include the Docket ID No. for this rulemaking. Comments received may be posted without change to www.regulations.gov, including any personal information provided. For detailed instructions on sending comments and additional information on the rulemaking process, see the “Public Participation” information in Section X.

FOR FURTHER INFORMATION CONTACT:

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

SUPPLEMENTARY INFORMATION:

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, biodiesel, renewable diesel, and biogas. Potentially affected categories include:

Category NAICS 1 codes SIC 2 codes Examples of potentially affected entities
Industry 324110 2911 Petroleum refineries.
Industry 325193 2869 Ethyl alcohol manufacturing.
Industry 325199 2869 Other basic organic chemical manufacturing.
Industry 424690 5169 Chemical and allied products merchant wholesalers.
Industry 424710 5171 Petroleum bulk stations and terminals.
Industry 424720 5172 Petroleum and petroleum products merchant wholesalers.
Industry 221210 4925 Manufactured gas production and distribution.
Industry 454319 5989 Other fuel dealers.
1  North American Industry Classification System (NAICS).
2  Standard Industrial Classification (SIC).

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this proposed action. This table lists the types of entities that EPA is now aware could potentially be affected by this proposed action. Other types of entities not listed in the table could also be affected. To determine whether your entity would be affected 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 FOR FURTHER INFORMATION CONTACT section.

Outline of This Preamble

I. Executive Summary

A. Summary of Major Provisions in This Action

1. Approach To Setting Volume Requirements

2. Cellulosic Biofuel

3. Advanced Biofuel

4. Total Renewable Fuel

5. 2021 Biomass-Based Diesel

6. Annual Percentage Standards

7. Response to Remand of 2016 Standards Rulemaking

8. Amendments to the RFS Program Regulations

B. Obligation To Reset Statutory Volumes

II. Authority and Need for Waiver of Statutory Applicable Volumes

A. Statutory Authorities for Reducing Volume Targets

1. Cellulosic Waiver Authority

2. General Waiver Authority

B. Severability

C. Treatment of Carryover RINs

1. Carryover RIN Bank Size

2. EPA's Proposed Decision Regarding the Treatment of Carryover RINs

III. Cellulosic Biofuel Volume for 2020

A. Statutory Requirements

B. Cellulosic Biofuel Industry Assessment

1. Review of EPA's Projection of Cellulosic Biofuel in Previous Years

2. Potential Domestic Producers

3. Potential Foreign Sources of Cellulosic Biofuel

4. Summary of Volume Projections for Individual Companies

C. Cellulosic Biofuel Volume for 2020 ( printed page 36763)

1. Liquid Cellulosic Biofuel

2. CNG/LNG Derived From Biogas

3. Total Cellulosic Biofuel in 2020

IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

B. Attainable Volumes of Advanced Biofuel

1. Imported Sugarcane Ethanol

2. Other Advanced Biofuel

3. Biodiesel and Renewable Diesel

a. Historical Supply of Biodiesel and Renewable Diesel

b. Assessment of Qualifying Feedstocks for Biodiesel and Renewable Diesel

c. Biodiesel and Renewable Diesel Imports and Exports

d. Attainable Volume of Advanced Biodiesel and Renewable Diesel

C. Volume Requirement for Advanced Biofuel

D. Volume Requirement for Total Renewable Fuel

V. Response to Remand of 2016 Rulemaking

A. Reevaluating the 2016 Annual Rule

1. The 2016 Renewable Fuel Standard

2. Agency Responsibility

B. Consideration of the Burdens of a Retroactive Standard

VI. Impacts of 2020 Volumes on Costs

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

B. Illustrative Costs Analysis of the 2020 Proposed Volumes Compared to the 2019 Volumes Baseline Cellulosic Biofuel

VII. Biomass-Based Diesel Volume for 2021

A. Statutory Requirements

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

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

VIII. Percentage Standards for 2020

A. Calculation of Percentage Standards

B. Small Refineries and Small Refiners

C. Proposed Standards

IX. Amendments to the RFS Program Regulations

A. Clarification of Diesel RVO Calculations

1. Downstream Re-Designation of Certified Non-Transportation 15 ppm Distillate Fuel to MVNRLM Diesel Fuel

2. Presumptive Inclusion of 15 ppm Sulfur Diesel Fuel

3. Presumptive Exclusion of 15 ppm Sulfur Diesel Fuel

4. Potential Expansion of Scope of Proposed Clarification to Gasoline

B. Pathway Petition Conditions

C. Esterification Pathway

D. Distillers Corn Oil and Distillers Sorghum Oil Pathways

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

X. Public Participation

XI. Statutory and Executive Order Reviews

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

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

C. Paperwork Reduction Act (PRA)

D. Regulatory Flexibility Act (RFA)

E. Unfunded Mandates Reform Act (UMRA)

F. Executive Order 13132: Federalism

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

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

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

J. National Technology Transfer and Advancement Act (NTTAA)

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

XII. Statutory Authority

I. Executive Summary

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

The statute includes annual volume targets and requires EPA to translate those volume targets (or alternative volume requirements established by EPA in accordance with statutory waiver authorities) into compliance obligations that obligated parties must meet every year. In this action we are proposing the applicable volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel for 2020, and biomass-based diesel (BBD) for 2021.[3] We are also proposing the annual percentage standards (also known as “percent standards”) for cellulosic biofuel, BBD, advanced biofuel, and total renewable fuel that would apply to all gasoline and diesel produced or imported in 2020.[4]

In addition, we are also proposing to address the remand of the 2016 annual rule by the D.C. Circuit Court of Appeals, in Americans for Clean Energy v. EPA, 864 F.3d 691 (2017) (hereafter “ ACE”). After considering relevant factors, including the inability of the market to produce appreciably higher volumes of renewable fuel in 2020 than we are proposing and our obligation to consider the burdens placed on obligated parties when setting retroactive standards, we are proposing to retain the original 2016 required volumes. Finally, we are proposing several regulatory changes to the RFS program to facilitate the implementation of this program in going forward including new pathways, flexibilities for regulated parties, and clarifications of existing regulations.

Today, nearly all gasoline used for transportation purposes contains 10 percent ethanol (E10), and on average diesel fuel contains nearly 5 percent biodiesel and/or renewable diesel.[5] However, the market has fallen well short of the statutory volumes for cellulosic biofuel, resulting in shortfalls in the advanced biofuel and total renewable fuel volumes. In this action, we are proposing a volume requirement for cellulosic biofuel at the level we project to be available for 2020, along with an associated applicable percentage standard. For advanced biofuel and total renewable fuel, we are proposing reductions under the “cellulosic waiver authority” that would result in advanced biofuel and total renewable fuel volume requirements that are lower than the statutory targets by the same magnitude as the reduction in the cellulosic biofuel reduction. This would effectively maintain the implied statutory volumes for non-cellulosic advanced biofuel and conventional biofuel.[6]

The resulting proposed volume requirements for 2020 are shown in Table I-1. Relative to the levels ( printed page 36764) finalized for 2019, the proposed 2020 volume requirements for cellulosic biofuel, advanced biofuel and total renewable fuel would be higher by approximately 120 million gallons. This entire increase for each category is attributable to increased projection of cellulosic biofuel production in 2020 (see Section III for a further discussion of our cellulosic biofuel projection). We are also establishing the volume requirement for BBD for 2021 at 2.43 billion gallons. This volume is equal to the BBD volume finalized for 2020.

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

A. Summary of Major Provisions in This Action

1. Approach To Setting Volume Requirements

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

2. Cellulosic Biofuel

EPA must annually determine the projected volume of cellulosic biofuel production for the following year. If the projected volume of cellulosic biofuel production is less than the applicable volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must lower the applicable volume used to set the annual cellulosic biofuel percentage standard to the projected production volume. In this rule we are proposing a cellulosic biofuel volume requirement of 0.54 billion ethanol-equivalent gallons for 2020 based on our production projection. This volume is 0.12 billion ethanol-equivalent gallons higher than the cellulosic biofuel volume finalized for 2019. Our projection in Section III considers many factors, including RIN generation data for past years and 2019 to date that is available to EPA through the EPA Moderated Transaction System (EMTS); the information we have received regarding individual facilities' capacities, production start dates, and biofuel production plans; a review of cellulosic biofuel production relative to EPA's projections in previous annual rules; and EPA's own engineering judgment. To project cellulosic biofuel production for 2020 we used the same general methodology as in the 2019 final rule. However, we have used updated data to derive percentile values used in our production projection for liquid cellulosic biofuels and to derive the year-over-year change in the rate of production of compressed natural gas and liquified natural gas (CNG/LNG) derived from biogas that is used in the projection for CNG/LNG.

3. Advanced Biofuel

If we reduce the applicable volume of cellulosic biofuel below the volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the authority to reduce the applicable volumes of advanced biofuel and total renewable fuel by the same or a lesser amount. We refer to this as the “cellulosic waiver authority.” The conditions that caused us to reduce the 2019 volume requirement for advanced biofuel below the statutory target remain relevant in 2020. As in the 2019 final rule, we investigated the projected availability of non-cellulosic advanced biofuels in 2020. In Section IV, we considered many factors, including constraints on the ability of the market to make advanced biofuels available, the ability of the standards we set to bring about market changes in the time available, the potential impacts associated with diverting biofuels and/or biofuel feedstocks from current uses to the production of advanced biofuel used in the U.S., the fact that the biodiesel tax credit is currently not available for 2020, the tariffs on imports of biodiesel from Argentina and Indonesia, as well as the cost of advanced biofuels. Based on these considerations we are proposing to reduce the statutory volume target for advanced biofuel by the same amount as the reduction in the statutory volume target for cellulosic biofuel. This results in a proposed advanced biofuel volume requirement for 2020 of 5.04 billion gallons, which is 0.12 billion gallons higher than the advanced biofuel volume requirement for 2019 and is entirely the result of the increase in projected cellulosic biofuel.

4. Total Renewable Fuel

As we have articulated in previous annual standard-setting rulemakings, we believe that the cellulosic waiver authority is best interpreted to require equal reductions in advanced biofuel and total renewable fuel. Consistent with previous years, we are proposing in Section IV to reduce total renewable fuel by the same amount as the reduction in advanced biofuel, such that the resulting implied volume requirement for conventional renewable fuel would be 15 billion gallons, the same as the implied volume requirement in the statute. The result is that the proposed 2020 volume requirement is 20.04 billion gallons.

5. 2021 Biomass-Based Diesel

In EISA, Congress specified increasing applicable volumes of BBD through 2012. Beyond 2012 Congress stipulated that EPA, in coordination with DOE and USDA, was to establish the BBD volume based on a review of the implementation of the program during calendar years specified in the tables in CAA 211(o)(B)(i) and other statutory factors, provided that the required volume for BBD could not be less than 1.0 billion gallons. Starting in 2013, ( printed page 36765) EPA has set the BBD volume requirement above the statutory minimum, most recently resulting in 2.43 billion gallons for 2020. In this rule we are proposing to maintain the BBD volume for 2021 at 2.43 billion gallons.

We believe that this volume appropriately balances the factors set forth in the statute, which we detail in Section VII. Most notably, in recent years, the advanced biofuel volume requirement has driven the production and use of biodiesel and renewable diesel volumes over and above volumes required through the separate BBD standard, and we expect this to continue. EPA also continues to believe it is appropriate to maintain the opportunity for other advanced biofuels to compete for market share, potentially reducing the costs associated with the advanced biofuel volume in future years by maintaining this flexibility, and thus to establish the BBD volume at a level lower than the advanced biofuel volume. For these reasons, we are proposing an applicable volume of BBD for 2021 of 2.43 billion gallons.[7]

6. Annual Percentage Standards

The renewable fuel standards are expressed as a volume percentage and are used by each refiner and importer of fossil-based gasoline or diesel to determine their renewable fuel volume obligations.

Four separate percentage standards are required under the RFS program, corresponding to the four separate renewable fuel categories shown in Table I.A-1. The specific formulas we use in calculating the renewable fuel percentage standards are contained in the regulations at 40 CFR 80.1405. The percentage standards represent the ratio of the national applicable renewable fuel volume to the national projected non-renewable gasoline and diesel volume less any gasoline and diesel production attributable to small refineries granted an exemption prior to the date that the standards are set. The volume of transportation gasoline and diesel used to calculate the proposed percentage standards was based on Energy Information Administration's (EIA) April 2019 Short Term Energy Outlook (STEO), minus an estimate of fuel consumption in Alaska. The proposed applicable percentage standards for 2020 are shown in Table I.B.6-1. Details, including the projected gasoline and diesel volumes used, can be found in Section VIII.

Table I.B.6-1—Proposed 2020 Percentage Standards
  Proposed percentage standards
Cellulosic biofuel 0.29
Biomass-based diesel 1.99
Advanced biofuel 2.75
Renewable fuel 10.92

7. Response to Remand of 2016 Standards Rulemaking

In 2015, EPA finalized the total renewable fuel standard for 2016, relying in part on the general waiver authority under a finding of inadequate domestic supply.[8] Several parties challenged that action, and the D.C. Circuit, in ACE, vacated EPA's use of the general waiver authority under a finding of inadequate domestic supply, finding that such use exceeded EPA's authority under the Clean Air Act. Specifically, EPA had impermissibly considered demand-side factors in its assessment of inadequate domestic supply, rather than limiting that assessment to supply-side factors. The court remanded the rule back to EPA for further consideration in light of the court's ruling.

We have reconsidered the 2016 rulemaking as required by the court. The use of the general waiver authority reduced the 2016 volume requirement for total renewable fuel by 500 million gallons. In light of the retroactive nature of an increase in the volume requirement for total renewable fuel of 500 million gallons and the additional burden that such an increase would place on obligated parties, we are proposing to find that the applicable 2016 volume requirement for total renewable fuel and the associated percentage standard should not be changed. See Section V for further discussion.

8. Amendments to the RFS Program Regulations

In implementing the RFS program EPA has identified several areas where regulatory changes would assist EPA in implementing the RFS program in future years. These proposed regulatory changes comprise clarification of diesel RVO calculations, pathway petition conditions, a biodiesel esterification pathway, distillers corn oil and distillers sorghum oil pathways, and renewable fuel exporter provisions. Each of these proposed regulatory changes is discussed in greater detail in Section IX.

Additionally, we proposed a number of changes to the RFS regulations as part of the Renewables Enhancement and Growth Support (REGS) Rule.[9] EPA is considering whether several of those proposed changes, which we believe to be relatively straightforward and would reduce the burden of RFS program implementation, could be finalized along with the regulatory changes proposed in this action as part of the 2020 RVO final rule. In doing so we would address any previous comments received in response to the 2016 REGS proposal on the provisions. Specifically, we are considering finalizing with the 2020 RVO Rule the proposed REGS Rule provisions listed below. The other provisions proposed in the REGS Rule remain under consideration, but we do not intend to finalize them along with the 2020 RVO Rule.[10] Any comments received on REGS provisions other than those listed below will be deemed beyond the scope of this rulemaking.

Footnotes

1.  75 FR 14670, March 26, 2010.

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2.  Public Law 110-140, 121 Stat. 1492 (2007) (“EISA”).

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

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

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5.  Average biodiesel and/or renewable diesel blend percentages based on EIA's April 2019 Short Term Energy Outlook (STEO) and EPA's Moderated Transaction System (EMTS).

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6.  The statutory total renewable fuel, advanced biofuel and cellulosic biofuel requirements for 2020 are 30.0, 15.0 and 10.5 billion gallons respectively. This implies a conventional renewable fuel applicable volume (the difference between the total renewable fuel and advanced biofuel volumes, which can be satisfied by with conventional (D6) RINs) of 15.0 billion gallons, and a non-cellulosic advanced biofuel applicable volume (the difference between the advanced biofuel and cellulosic biofuel volumes, which can be satisfied with advanced (D5) RINs) of 4.5 billion gallons. Qualifying cellulosic biofuel can generate D3 RINs, biomass-based diesel can generate D4 RINs, advanced biofuel can generate D5 RINs, conventional renewable fuel can generate D6 RINs, and cellulosic diesel can generate D7 RINs.

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7.  The 330 million gallon increase for BBD from 2019 (2.1 billion gallons) to 2020 (2.43 billion gallons) would generate approximately 500 million RINs, due to the higher equivalence value of biodiesel (1.5 RINs/gallon) and renewable diesel (generally 1.7 RINs/gallon).

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

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9.  See 81 FR 80828 (November 16, 2016). While the REGS Rule proposal itself provided sufficient notice and opportunity for comment, this action gives additional notice regarding these provisions to provide greater transparency to stakeholders. EPA's decision to provide this additional notice is not required by law and does not require that we provide additional notice in similar circumstances going forward.

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10.  The provisions related to “RVO Reporting” (REGS Section VIII.A) have been subsumed by the “Clarification of Diesel RVO Calculations” provisions in Section IX.A of this action. The provisions related to “Oil from Corn Oil Extraction” (REGS Section VIII.B) were already finalized in a separate action (see 83 FR 37735, August 2, 2018).

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11.  The requirements to reset the volume of cellulosic biofuel and advanced biofuel were triggered in previous years. We intend to reset the cellulosic biofuel, advanced biofuel, and total renewable fuel volumes in the reset rule.

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12.  See supra n.6.

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13.  See 81 FR 89752-89753 (December 12, 2016).

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14.  Advanced biofuels are required to have lifecycle GHG emissions that are at least 50% less than the baseline defined in EISA. Non-advanced biofuels are required to have lifecycle GHG emissions that are at least 20% less than the baseline defined in EISA unless the fuel producer meets the grandfathering provisions in 40 CFR 80.1403. Beginning in 2015, all growth in the volumes established by Congress come from advanced biofuels.

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15.  CAA section 211(o)(5) requires that EPA establish a credit program as part of its RFS regulations, and that the credits be valid to show compliance for 12 months as of the date of generation. EPA implemented this requirement though the use of RINs, which can be used to demonstrate compliance for the year in which they are generated or the subsequent compliance year. Obligated parties can obtain more RINs than they need in a given compliance year, allowing them to “carry over” these excess RINs for use in the subsequent compliance year, although use of these carryover RINs is limited to 20 percent of the obligated party's RVO. For the bank of carryover RINs to be preserved from one year to the next, individual carryover RINs are used for compliance before they expire and are essentially replaced with newer vintage RINs that are then held for use in the next year. For example, if the volume of the collective carryover RIN bank is to remain unchanged from 2018 to 2019, then all of the vintage 2018 carryover RINs must be used for compliance in 2019, or they will expire. However, the same volume of 2019 RINs can then be “banked” for use in 2020.

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16.  See 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55 (December 12, 2016), 82 FR 58493-95 (December 12, 2017), and 83 FR 63708-10 (December 11, 2018).

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17.  See 72 FR 23900 (May 1, 2007), 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55 (December 12, 2016), 82 FR 58493-95 (December 12, 2017) and 83 FR 63708-10 (December 11, 2018).

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18.  See 79 FR 49793-95 (August 15, 2013).

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19.   Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014); ACE, 864 F.3d at 713.

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20.  Here we use the term “buffer” as shorthand reference to all of the benefits that are provided by a sufficient bank of carryover RINs.

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21.  The calculations performed to estimate the number of carryover RINs currently available can be found in the memorandum, “Carryover RIN Bank Calculations for 2020 NPRM,” available in the docket.

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22.  See “Carryover RIN Bank Calculations for 2019 Final Rule,” available in docket EPA-HQ-OAR-2018-0167.

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23.  Information about the number of small refinery exemptions granted and the volume of RINs not required to be retired as a result of those exemptions can be found at www.epa.gov/​ fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions .

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

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26.  CAA section 211(o)(7)(D)(i). The U.S. Court of Appeals for the District of Columbia Circuit evaluated this requirement in API v. EPA, 706 F.3d 474, 479-480 (D.C. Cir. 2013), in the context of a challenge to the 2012 cellulosic biofuel standard. The Court stated that in projecting potentially available volumes of cellulosic biofuel EPA must apply an “outcome-neutral methodology” aimed at providing a prediction of “what will actually happen.” Id. at 480, 479. The Court also determined that Congress did not require “slavish adherence by EPA to the EIA estimate” and that EPA could “read the phrase `based on' as requiring great respect but allowing deviation consistent with that respect.” EPA has consistently interpreted the term “projected volume of cellulosic biofuel production” in CAA section 211(o)(7)(D)(i) to include volumes of cellulosic biofuel likely to be made available in the U.S., including from both domestic production and imports ( see, e.g.,80 FR 77420 (December 14, 2015) and 81 FR 89746 (December 12, 2016)). We do not believe it would be reasonable to include in the projection all cellulosic biofuel produced throughout the world, regardless of likelihood of import to the U.S., since volumes that are not imported would not be available to obligated parties for compliance and including them in the projection would render the resulting volume requirement and percentage standards unachievable through the use of cellulosic biofuel RINs.

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27.  CAA section 211(o)(7)(D)(i).

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28.  See CAA section 211(o)(7)(D)(ii); 40 CFR 80.1456.

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

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30.  We note, however, that because the projected volume of liquid cellulosic biofuel in each year was very small relative to the total volume of cellulosic biofuel, these over-projections had a minimal impact on the accuracy of our projections of cellulosic biofuel for each of these years.

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31.  82 FR 58486 (December 12, 2017).

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

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33.  Although we do not apply the calculated growth rate to the most recent monthly data on the number of RINs generated for CNG/LNG derived from biogas that are available for compliance, we do use it to calculate the year-over-year growth rate used to project the production of CNG/LNG derived from biogas in 2020.

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34.  Average D3 RIN price in 2018 using EMTS data. To calculate the RIN value relative to the fuel value of CNG/LNG derived from biogas we converted the price of fossil natural gas in 2018 ($3.15 per MMBTU) from EIA's April 2019 STEO to the price per ethanol-equivalent gallon ($0.24 per 77,000 BTU) and compared this value to the average D3 RIN value in 2018 ($2.25).

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35.  The volume projection from CNG/LNG producers and facilities using Edeniq's production technology do not represent production from a single company or facility, but rather a group of facilities utilizing the same production technology.

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36.  For a further discussion of EPA's decision to focus on commercial scale facilities, rather than R&D and pilot scale facilities, see the 2019 proposed rule (83 FR 32031, July 10, 2018).

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37.  According to data from EMTS, the average price for a 2018 cellulosic biofuel RINs sold in 2018 was $2.25. Alternatively, obligated parties can satisfy their cellulosic biofuel obligations by purchasing an advanced (or biomass-based diesel) RIN and a cellulosic waiver credit. The average price for a 2018 advanced biofuel RINs sold in 2018 was $0.48 while the price for a 2018 cellulosic waiver credit is $1.96 (EPA-420-B-17-036).

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38.  The only known exception was a small volume of fuel produced at a demonstration scale facility exported to be used for promotional purposes.

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39.  Most of the facilities listed in Table III.B.3-1 are registered to produce cellulosic (D3 or D7) RINs with the exception of several of the producers of CNG/LNG derived from biogas and Red Rock Biofuels.

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

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41.  “Cellulosic Biofuel Producer Company Descriptions (May 2019),” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

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42.  The Facility Capacity is generally equal to the nameplate capacity provided to EPA by company representatives or found in publicly available information. Capacities are listed in physical gallons (rather than ethanol-equivalent gallons). If the facility has completed registration and the total permitted capacity is lower than the nameplate capacity, then this lower volume is used as the facility capacity. For companies generating RINs for CNG/LNG derived from biogas the Facility Capacity is equal to the lower of the annualized rate of production of CNG/LNG from the facility at the time of facility registration or the sum of the volume of contracts in place for the sale of CNG/LNG for use as transportation fuel (reported as the actual peak capacity for these producers).

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43.  Where a quarter is listed for the first production date EPA has assumed production begins in the middle month of the quarter ( i.e., August for the 3rd quarter) for the purposes of projecting volumes.

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44.  For more information on these facilities see “May 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020),” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

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45.  The nameplate capacity of Enerkem's facility is 10 million gallons per year. However, we anticipate that a portion of their feedstock will be non-biogenic municipal solid waste (MSW). RINs cannot be generated for the portion of the fuel produced from non-biogenic feedstocks. We have taken this into account in our production projection for this facility (See “May 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI”).

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46.  This date reflects the first production of ethanol from this facility. The facility began production of methanol in 2015.

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47.  “May 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI” and “Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel Production for the 2020 NPRM,” memorandums from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

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48.  Consistent with previous years, we have considered whether there is reason to believe any of the facilities considered as potential cellulosic biofuel producers for 2020 is likely to produce a smaller volume of cellulosic biofuel in 2020 than in the previous 12 months for which data are available. At this time, EPA is not aware of any information that would indicate lower production in 2020 from any facility considered than in the previous 12 months for which data are available.

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49.  As in our 2015-2019 projections, EPA calculated a high end of the range for each facility (or group of facilities) based on the expected start-up date and a six-month straight-line ramp-up period. The high end of the range for each facility (or group of facilities) is equal to the value calculated by EPA using this methodology, or the number of RINs the producer expects to generate in 2020, whichever is lower.

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50.  More information on the data and methods EPA used to calculate each of the ranges in these tables in contained in “May 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136. We have not shown the projected ranges for each individual company. This is because the high end of the range for some of these companies are based on the company's production projections, which they consider confidential business information (CBI). Additionally, the low end of the range for facilities that have achieved consistent commercial scale production is based on actual RIN generation data in the most recent 12 months, which is also claimed as CBI.

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51.  Actual production is calculated by subtracting RINs retired for any reason other than compliance with the RFS standards from the total number of cellulosic RINs generated.

52.  Companies characterized as new producers in the 2014-2016, 2017, and 2018 final rules were as follows: Abengoa (2016), CoolPlanet (2016), DuPont (2016, 2017), Edeniq (2016, 2017), Enerkem (2018), Ensyn Port Cartier (2018), GranBio (2016, 2017), IneosBio (2016), and Poet (2016, 2017).

53.  Companies characterized as consistent producers in the 2014-2016, 2017, and 2018 final rules were as follows: Edeniq Active Facilities (2018), Ensyn Renfrew (2016-2018), GranBio (2018), Poet (2018), and Quad County Corn Processors/Syngenta (2016-2018).

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54.  For more detail on the calculation of the percentile values used in this final rule see “Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel Production for 2020,” available in EPA docket EPA-HQ-OAR-2019-0136.

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55.  EPA used a similar projection methodology for 2015 as in 2016-2018, however we only projected cellulosic biofuel production volume for the final 3 months of the year, as actual production data were available for the first 9 months. We do not believe it is appropriate to consider data from a year for which 9 months of the data were known at the time the projection was made in determining the percentile values used to project volume over a full year.

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56.  Historically RIN generation for CNG/LNG derived from biogas has increased each year. It is possible, however, that RIN generation for these fuels in the most recent 12 months for which data are available could be lower than the preceding 12 months. We believe our methodology accounts for this possibility. In such a case, the calculated rate of growth would be negative.

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57.  This growth rate is higher than the growth rates used to project CNG/LNG volumes in the 2019 final rule (29.0%, see 83 FR 63717, December 11, 2018) and the 2018 final rule (21.6%, see 82 FR 58502, December 12, 2017).

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58.  Further detail on the data used to calculate each of these numbers in this table, as well as the projected volume of CNG/LNG derived from biogas used as transportation fuel in 2020 can be found in “May 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020)” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

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59.  To calculate this value, EPA multiplied the number of 2018 RINs generated and available for compliance for CNG/LNG derived from biogas (303.9 million), by 1.314 (representing a 31.4 percent year-over-year increase) to project production of CNG/LNG in 2019, and multiplied this number (399.3 million RINs) by 1.314 again to project production of CNG/LNG in 2020.

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60.  EPA is aware of several estimates for the quantity of CNG/LNG that will be used as transportation fuel in 2020. As discussed in a paper prepared by Bates White for the Coalition for Renewable Gas (“Renewable Natural Gas Supply and Demand for Transportation.” Bates White Economic Consulting, April 5, 2019) these estimates range from nearly 600 million ethanol-equivalent gallons in 2020 (February 2019 STEO) to over 1.5 billion gallons (Fuels Institute—US Share). While there is considerable uncertainty about the quantity of CNG/LNG that will be used in transportation fuel in 2020, all of these projections are greater than the volume of qualifying CNG/LNG derived from biogas projected to be used in 2020. Thus, the volume of CNG/LNG used as transportation fuel would not appear to constrain the number of RINs generated for this fuel in 2020.

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61.  In the 2019 Final Rule we projected that additional volumes of soybean biodiesel would increase costs by $0.74-$1.23 per ethanol equivalent gallon and additional volumes of and sugarcane ethanol would increase costs by $0.39-$1.04 per ethanol equivalent gallon (83 FR 63734 December 11, 2018).

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62.  For instance, see 81 FR 89750 (December 12, 2016).

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63.  See 82 FR 58504 (December 12, 2017).

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64.  See 83 FR 63719 (December 11, 2018).

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65.  As described further below, “reasonably attainable” volumes are not merely those that can be attained given available biofuel production capacity and feedstocks, but also take into consideration factors such as costs and feedstock and/or fuel diversions that could create disruptions in other markets.

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66.  While sugarcane ethanol, as well as a number of other fuel types, can also contribute to the supply of advanced biofuel, in recent years use of these other advanced biofuels has been considerably lower than use of advanced biodiesel or renewable diesel. See Table IV.B.3-1.

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67.  For instance, see the draft GHG assessment of palm oil biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012). Our consideration of lifecycle GHG emissions in today's action is limited to the discretionary exercise of our cellulosic waiver authority. We are not reopening or soliciting comment on the draft GHG assessment of palm oil biodiesel and renewable diesel, and any comments on that assessment will be deemed beyond the scope.

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68.  CAA section 211(o)(7)(D)(i).

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69.  See ACE, 864 F.3d at 730-35 (citing Monroe, 750 F.3d 909, 915-16).

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70.  Our consideration of “reasonably attainable” volumes is not intended to imply that “attainable” volumes are unreasonable or otherwise inappropriate. As we explain in this section, we believe that an advanced biofuel volume of 5.04 billion gallons, although not reasonably attainable, is attainable, and that establishing such volume would be an appropriate exercise of our cellulosic waiver authority.

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71.  81 FR 89762 (December 12, 2016). The maximum achievable volume may be relevant to our consideration of whether to exercise the general waiver authority on the basis of inadequate domestic supply. However, for 2020, we have determined that after exercising our cellulosic waiver authority to the full extent permitted, the resulting advanced biofuel volume is attainable. Therefore, further reductions using the general waiver authority on the basis of inadequate domestic supply would not be necessary.

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72.  The statute directs EPA to lower the cellulosic biofuel volume to the projected production level where that level falls short of the statutory volume. Under API v. EPA, 706 F.3d 474, 479-80 (D.C. Cir. 2013), we must project this production level with neutral aim at accuracy, that is, make a technical determination about the market's ability to produce cellulosic biofuels. By contrast, the discretionary portion of the cellulosic waiver authority does not explicitly require EPA to project the availability of advanced biofuels, but instead confers broad discretion on EPA. Moreover, while we have chosen to estimate reasonably attainable and attainable volumes of advanced biofuel, these volumes do not equate to projected production alone. Rather, in exercising the discretionary portion of the cellulosic waiver authority, we also consider a range of policy factors—such as costs, greenhouse gas emissions, energy security, market disruptions, etc., as described throughout this section.

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73.  See ACE, 864 F.3d at 735-36.

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74.  See id. at 730-35.

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75.  83 FR 63704 (December 11, 2018).

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

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

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78.  79 FR 42128 (July 18, 2014).

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79.  The imprecision in projecting volumes of other advanced biofuel has the same relative impact on our overall assessment of the attainability of advanced biofuel as our consideration of imports of sugarcane ethanol. Namely, even a significant deviation in the actual availability of other advanced biofuel would likely have negligible impact on the market's ability to meet the advanced biofuel volumes.

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

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81.  To calculate the volume of advanced biodiesel and renewable diesel that would generate the 4.38 billion RINs needed to meet the advanced biofuel volume EPA divided the 4.38 billion RINs by 1.55. 1.55 is the approximate average (weighted by the volume of these fuels expected to be produced in 2020) of the equivalence values for biodiesel (generally 1.5) and renewable diesel (generally 1.7).

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

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83.  Vegetable oils from oilseeds grown in the U.S. such as soybeans and canola are generally by-products or secondary products of the production of livestock feed. However, depending on the relative value of protein meal and vegetable oil, as well as the cost of production of oilseed crops, higher demand for vegetable oil can lead to increased planting of oilseed crops. Vegetable oil is the primary product of palm oil plantations, and demand for this oil is the primary driver for increased planting of palm oil plantations.

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84.  For instance, see the draft GHG assessment of palm oil biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012).

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85.  We believe palm or petroleum-derived products would likely be used replace advanced biodiesel and renewable diesel diverted to the U.S. as these products are currently the lowest cost sources.

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86.  If qualifying vegetable oils that are diverted to produce biodiesel and renewable diesel in the U.S. are replaced with vegetable oil or petroleum products that would otherwise have been used in the transportation fuel pool there would be no increase in energy security. Conversely, if diverting vegetable oils to produce biodiesel and renewable diesel results in the increased production of vegetable oils or increased extraction of crude oil we would expect some energy security benefits.

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87.  From 2011 through 2018 approximately 96 percent of all biodiesel and renewable diesel supplied to the U.S. (including domestically produced and imported biodiesel and renewable diesel) qualified as advanced biodiesel and renewable diesel (14,214 million gallons of the 14,869 million gallons) according to EMTS data.

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88.  From 2011 through 2018 over 99.9 percent of all the domestically produced biodiesel and renewable diesel supplied to the U.S. qualified as advanced biodiesel and renewable diesel (12,268 million gallons of the 12,275 million gallons) according to EMTS data.

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89.  The status of the tax credit does not impact our assessment of the reasonably attainable volume of advanced biodiesel and renewable diesel in 2020 as our assessment is primarily based on feedstock availability. The status of the tax credit may affect the maximum attainable volume of these fuels, but our assessment demonstrates that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable whether or not the tax credit is renewed prospectively (or retrospectively) for 2020.

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90.  We also acknowledge that EPA not finalizing the required volumes of renewable fuel under the RFS program for 2014 and 2015 until December 2015 likely affected the volume of advanced biodiesel and renewable diesel supplied in these years. Further, the preliminary tariffs on biodiesel imported from Argentina and Indonesia announced in August 2017 likely negatively affected the volume of biodiesel supplied in 2017 and 2018.

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91.  “Biodiesel from Argentina and Indonesia Injures U.S. Industry, says USITC,” Available online at: www.usitc.gov/​press_​room/​news_​release/​2017/​er1205ll876.htm.

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92.  See “EIA Biomass-Based Diesel Import Data” available in docket EPA-HQ-OAR-2019-0136.

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

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94.  The March 2019 WASDE projects production of vegetable oils in 2018/2019 in the World to be 203.93 million metric tons. This quantity of vegetable oil would be sufficient to produce approximately 58.3 billion gallons of biodiesel and renewable diesel. Global production of biodiesel is projected to be 39.0 billion liters (10.3 billion gallons) in 2019 according to the July 2018 OECD-FAO Agricultural Outlook. Based on the projected production of biodiesel by country we estimate that approximately 85% of this biodiesel (all biodiesel except that produced in Columbia, Indonesia, Malaysia, and Thailand) could qualify as advanced biofuel if the feedstocks meet the definition of renewable biomass.

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95.  The potential impacts of this tariff on the availability of biodiesel feedstocks is discussed in our discussion of available vegetable oils in Section IV.B.3.c.

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96.  For example, corn oil is a co-product of corn grown primarily for feed or ethanol production, while soy and canola are primarily grown as livestock feed.

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97.  According to EIA data 7,542 million pounds of soy bean oil and 2,085 million pounds of corn oil were used to produce biodiesel in the U.S. in 2018. Other significant sources of feedstock were yellow grease (1,668 million pounds), canola oil (total volume withheld, but monthly data suggests greater than 700 million pounds), and white grease (618 million pounds). Numbers from EIA's April 2019 Monthly Biodiesel Production Report (With data for February 2019).

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98.  This position is supported by several commenters, including the South Dakota Soybean Association (EPA-HQ-OAR-2018-0167-0389), the International Council on Clean Transportation (EPA-HQ-OAR-2018-0167-0531), and the Union of Concerned Scientists (EPA-HQ-OAR-2018-0167-0535).

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99.  According ot the February 2019 WASDE report, U.S. vegetable oil production in the 2018/2019 agricultural marketing year is projected to be 12.48 million metric tons. According to the January 2013 WASDE report, U.S. vegetable oil production in the 2010/2011 agricultural marketing year was 9.76 million metric tons.

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100.  To calculate this volume, we have used a conversion of 7.7 pounds of feedstock per gallon of biodiesel or renewable diesel. This is based on the expected conversion of soybean oil ( extension.missouri.edu/​p/​G1990), which is the largest source of feedstock used to produce advanced biodiesel and renewable diesel. Conversion rates for other types of vegetable oils used to produce biodiesel and renewable diesel are similar to those for soybean oil.

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101.  Distillers corn oil is non-food grade corn oil produced by ethanol production facilities.

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102.  For the purposes of this rule, EPA relied on WAEES modeling results submitted as comments by the National Biodiesel Board on the 2019 proposed rule (Kruse, J., “Implications of an Alternative Advanced and Biomass Based Diesel Volume Obligation for Global Agriculture and Biofuels,” August 13, 2018, World Agricultural Economic and Environmental Services (WAEES)).

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103.  Kruse, J., “Implications of an Alternative Advanced and Biomass Based Diesel Volume Obligation for Global Agriculture and Biofuels,” August 13, 2018, World Agricultural Economic and Environmental Services.

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104.  LMC International. Global Waste Grease Supply. August 2017 (EPA-HQ-OAR-2017-0091-3880).

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105.  “Projections of FOG biodiesel and renewable diesel,” memorandum from David Korotney to EPA Docket, EPA-HQ-OAR-2019-0136.

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106.  83 FR 63704 (December 11, 2018).

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107.  The March 2019 WASDE projects production of vegetable oils in 2018/19 in the U.S. and the World to be 12.54 and 203.93 million metric tons respectively. To convert projected vegetable oil production to potential biodiesel and renewable diesel production we have used a conversion of 7.7 pounds of feedstock per gallon of biodiesel or renewable diesel.

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108.  These reasons include the demand for vegetable oil in the food, feed, and industrial markets both domestically and globally; constraints related to the production, import, distribution, and use of significantly higher volumes of biodiesel and renewable diesel; and the fact that biodiesel and renewable diesel produced from much of the vegetable oil available globally would not qualify as an advanced biofuel under the RFS program.

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109.  This estimate assumes that the U.S. continues to export approximately 100 million gallons of biodiesel per year in 2020. Alternatively, if the U.S. consumes all domestically produced biodiesel and renewable diesel, rather than exporting any of this fuel, domestic production of advanced biodiesel and renewable diesel would have to increase by approximately 150 million gallons annually in 2019 and 2020.

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

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111.  See 81 FR 89752-89753 (December 12, 2016). See also 78 FR 49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015).

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112.  EPA also considered the availability of carryover RINs in determining whether reduced use of the cellulosic waiver authority would be warranted. For the reasons described in Section II.B, we do not believe this to be the case.

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113.  “Market impacts of biofuels in 2020,” memorandum from David Korotney to docket EPA-HQ-OAR-2019-0136. In prior actions, similar analyses indicated that the market was capable of both producing and consuming the required volume of renewable fuels, and that as a result there was no basis for finding an inadequate domestic supply of total renewable fuel. See 82 FR 34229 & n.82 (July 21, 2017). Given the D.C. Circuit's decision in ACE, however, assessment of demand-side constraints is no longer relevant for determining inadequate domestic supply. However, we believe consideration of the ways that the market could make this volume available may still be generally relevant to whether and how EPA exercises its waiver authorities, such as our consideration of whether the volumes will cause severe economic harm.

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114.  We note that the previously cited memorandum discusses the potential for total ethanol consumption in 2020, but does not make specific projections for E0, E15 and E85. Volumes of these ethanol blends are highly dependent upon consumer demand. In prior annual rules, we assessed volumes of these blends in determining whether and to what extent to exercise the inadequate domestic supply waiver authority. The D.C. Circuit's decision ACE precludes assessment of demand-side constraints in determining inadequate domestic supply, and consistent with that decision, we no longer assess such blend volumes. While we could still assess such blend volumes in deciding whether and to what extent to exercise our discretionary waiver authorities, and in evaluating the market's ability to meet the total renewable fuel requirement, doing so is not necessary. In terms of the market's ability to satisfy the total renewable fuel requirement, the more relevant consideration is whether the pool-wide ethanol volume, together with volumes of other biofuels, suffices. We note that EPA does not establish standards for E0, E15, or E85. Moreover, there has historically been a lack of reliable data on volumes of these blends.

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116.  See Id. at 77499.

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117.   Id at 77442-43.

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118.   Id.

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119.   Id. at 77444.

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120.   ACE, 864 F.3d 691.

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121.   Id. at 696.

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122.   Id. at 703.

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123.   Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C. Cir. 2014); NPRA v. EPA, 630 F.3d 145 (D.C. Cir. 2010).

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124.   E.g., in Monroe, the court held that EPA's action was reasonable because it “considered various ways to minimize the hardship caused to obligated parties.” Monroe at 920.

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126.  If 2017 compliance is reopened, 2018 compliance would then also need to be reopened due to the 2-year lifespan of RINs.

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127.  See, e.g., Comments from API/AFPM on the 2014-2016 annual rule suggesting that delayed compliance can make it difficult to assess the size of the RIN bank, Docket ID: EPA-HQ-OAR-2015-0111-1948.

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128.  See section IV (finding that the advanced biofuel volume resulting from the full reduction under the cellulosic waiver authority is not reasonably attainable, and further noting uncertainties relating to the attainable volume) and “Market impacts of biofuels in 2020,” available in the docket (describing limitations on the ability of the market to use biofuels).

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129.  In addition to today's response to the remand, we note that the precedential effect of the ACE decision has governed subsequent RFS annual rules. Compare, e.g.,82 FR 34229 & n.82 (July 21, 2017) (2018 annual rule proposal, issued prior to ACE) (soliciting comment on whether it would be appropriate to exercise the inadequate domestic supply waiver authority based on the “maximum reasonably achievable volume” of renewable fuel, which incorporates demand-side considerations), with 82 FR 46177 (Oct. 4, 2017) (2018 annual rule availability of supplemental information and request for comment, issued after ACE) (recognizing, under ACE, that EPA may not consider demand-side constraints in determining inadequate domestic supply).

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

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

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132.  Details of the data and assumptions used can be found in a Memorandum available in the docket entitled “Cost Impacts of the Proposed 2020 Annual Renewable Fuel Standards”, Memorandum from Michael Shelby, Dallas Burkholder, and Aaron Sobel available in docket EPA-HQ-OAR-2019-0136.

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133.  For the purposes of the cost estimates in this section, EPA has not attempted to adjust the price of the petroleum fuels to account for the impact of the RFS program, since the changes in the renewable fuel volume are relatively modest in comparison to the quantity of fuel associated with the petroleum market. Rather, we have simply used the wholesale price projections for gasoline and diesel as reported in EIA's April 2019 STEO.

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134.  For this table and all subsequent tables in this section, approximate costs in per-gallon cost difference estimates are rounded to the cents place.

135.  For this table and all subsequent tables in this section, approximate resulting costs (other than in per-gallon cost difference estimates) are rounded to two significant figures.

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136.  The implied non-cellulosic advanced biofuel and conventional renewable fuel volumes are the same for both years, so we do not need to estimate cost impacts for these volumes.

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137.  Although there is no increase for liquid cellulosic biofuel in this proposed RFS annual 2020 rule, it is unknown if this volume may change in the final rule. While we do not present associated costs in this document, the methodology and assumptions we would use to represent liquid cellulosic biofuel can be found in a Memorandum available in the docket entitled, “Cost Impacts of the Proposed 2020 Annual Renewable Fuel Standards”, Memorandum from Michael Shelby, Dallas Burkholder, and Aaron Sobel available in docket EPA-HQ-OAR-2019-0136.

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138.  Details of the data and assumptions used can be found in a Memorandum available in the docket entitled “Cost Impacts of the Proposed 2020 Annual Renewable Fuel Standards”, Memorandum from Michael Shelby, Dallas Burkholder, and Aaron Sobel available in docket EPA-HQ-OAR-2019-0136.

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139.  Henry Hub Spot price estimate for 2020. EIA, Short Term Energy Outlook (STEO), April 2019, available in docket EPA-HQ-OAR-2019-0136.

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140.  RFS2 Regulatory Impact Analysis (RIA). U.S. EPA 2010, Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332.

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141.  See CAA section 211(o)(2)(B)(v).

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142.  Available BBD RINs Generated, Exported BBD RINs, and BBD RINs Retired for Non-Compliance Reasons information from EMTS.

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143.  The biodiesel tax credit was reauthorized in January 2013. It applied retroactively for 2012 and for the remainder of 2013. It was once again extended in December 2014 and applied retroactively to all of 2014 as well as to the remaining weeks of 2014. In December 2015 the biodiesel tax credit was authorized and applied retroactively for all of 2015 as well as through the end of 2016. In February 2018 the biodiesel tax credit was authorized and applied retroactively for all of 2017. The biodiesel tax credit is not currently in place for 2018 or 2019.

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144.  See 80 FR 77490-92, 77495 (December 14, 2015).

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145.  We have done so even though the exported RINs could have been used for compliance prior to export.

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146.  This is because when an obligated party retires a BBD RIN (D4) to help satisfy their BBD obligation, the nested nature of the BBD standard means that this RIN also counts towards satisfying their advanced and total renewable fuel obligations. Advanced RINs (D5) count towards both the advanced and total renewable fuel obligations, while conventional RINs (D6) count towards only the total renewable fuel obligation.

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147.  We would still expect D4 RINs to be valued at a slight premium to D5 and D6 RINs in this case (and D5 RINs at a slight premium to D6 RINs) to reflect the greater flexibility of the D4 RINs to be used towards the BBD, advanced biofuel, and total renewable fuel standard. This pricing has been observed over the past several years.

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148.  Although we did not issue a rule establishing the final 2013 standards until August of 2013, we believe that the market anticipated the final standards, based on EPA's July 2011 proposal and the volume targets for advanced and total renewable fuel established in the statute. (76 FR 38844, 38843 July 1, 2011).

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149.  See 80 FR 33100 (2014-16 standards proposed June 10, 2015); 78 FR 71732 (2014 standards proposed Nov. 29, 2013).

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150.  EPA proposed a BBD standard of 1.28 billion gallons (1.92 billion RINs) for 2014 in our November 2013 proposed rule. The number of BBD RINs available in 2014 was 2.48 billion. EPA proposed a BBD standard of 1.70 billion gallons (2.55 billion RINs) for 2015 in our June 2015 proposed rule. The number of BBD RINs available in 2015 was 2.62 billion.

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151.  77 FR 59458, 59462 (September 27, 2012).

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152.  594 million advanced ethanol RINs were generated in 2012.

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153.  “BBD RIN Generation by Company in 2012 and 2018,” available in EPA docket EPA-HQ-OAR-2019-0136.

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154.  Id.

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155.  See, e.g., Comments from Advanced Biofuel Association, available in EPA docket EPA-HQ-OAR-2018-0167-1277.

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156.  All types of advanced biofuel, including BBD, must achieve lifecycle GHG reductions of at least 50 percent. See CAA section 211(o)(1)(B)(i), (D).

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157.  See CAA section 211(o)(2)(B)(i)(IV), (II).

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158.  While excess BBD production could also displace conventional renewable fuel under the total renewable standard, as long as the BBD applicable volume is lower than the advanced biofuel applicable volume our action in setting the BBD applicable volume is not expected to displace conventional renewable fuel under the total renewable standard, but rather is expected to displace other advanced biofuels. We acknowledge, however, that under certain market conditions excess volumes of BBD may also be used to displace conventional biofuels as may have been the case in 2013-16 when the prices of BBD, advanced, and conventional RINs converged. We have not, however, observed similar market dynamics in more recent years, and we think it is unlikely that BBD RINs will become the marginal biofuel used to meet the total renewable fuel standard in subsequent years. Rather, conventional biodiesel and renewable diesel have and will likely continue to play that role.

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159.  “Memorandum to docket: Draft Statutory Factors Assessment for the 2021 Biomass-Based Diesel (BBD) Applicable Volumes.” See Docket EPA-HQ-OAR-2019-0136.

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

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161.  See 75 FR 14670 (March 26, 2010).

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162.  Under 40 CFR 80.1415(b)(4), renewable diesel with a lower heating value of at least 123,500 Btu/gallon is assigned an equivalence value of 1.7. A minority of renewable diesel has a lower heating value below 123,500 BTU/gallon and is therefore assigned an equivalence value of 1.5 or 1.6 based on applications submitted under 40 CFR 80.1415(c)(2).

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163.  83 FR 63704, December 11, 2018.

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

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165.  We are not reopening this policy or any other aspect of the formula at 40 CFR 80.1405(c). Any comments received on such issues will be deemed beyond the scope of this rulemaking.

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166.  To determine the 49-state values for gasoline and diesel, the amount of these fuels used in Alaska is subtracted from the totals provided by EIA because petroleum based fuels used in Alaska do not incur RFS obligations. The Alaska fractions are determined from the June 29, 2018 EIA State Energy Data System (SEDS), Energy Consumption Estimates.

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167.  See “Calculation of proposed % standards for 2020” in docket EPA-HQ-OAR-2019-0136.

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168.  Any comments received on REGS provisions beyond the specific provisions listed in Section I.A.8 will be deemed beyond the scope of this rulemaking.

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169.  Subpart I includes an exception to this requirement that allows diesel fuel used in locomotive or marine engines to meet a 500 ppm sulfur standard if the fuel is produced from transmix processors and distributed under an approved compliance plan.

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172.  Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, the District of Columbia, and the city of Philadelphia.

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173.  See the New England Fuel Institute's (NEFI) “State Sulfur & Bioheat Requirements for No. 2 Heating Oil in the Northeast & Mid-Atlantic States,” available in the docket for this action.

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174.  ECA marine fuel is not transportation fuel under the RFS regulations. Therefore, refiners and importers do not incur an RVO for ECA marine fuel that they produce or import.

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176.  We have received requests from a number of regulated parties asking the agency to amend the fuels regulations to allow parties to more easily mix and fungibly ship HO, ECA marine fuel, and MVNRLM fuel that meet the 15 ppm sulfur standard. In a separate action, we intend to propose additional amendments that would significantly streamline these regulations (see RIN 2061-AT31 in EPA's Regulatory Agenda).

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

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179.  With the other exceptions listed in 40 CFR part 80.1407(f).

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180.  This requirement would be consistent with the prohibition in 40 CFR 80.1460(c) (“[n]o person shall cause another person to commit an act in violation of any prohibited act under this section.”).

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

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184.  In 2012, we issued a direct final rule and a parallel proposed rule (see 77 FR 700 and 77 FR 462, respectively; January 5, 2012) that would have determined that, among other regulatory changes, biodiesel produced from esterification met the GHG reduction requirements. Because we received adverse comment, we withdrew the direct final rule in its entirety (see 77 FR 13009, March 5, 2012). In the 2013 final rule based on the parallel proposal (78 FR 14190, March 5, 2013), we decided not to finalize a determination at that time on biodiesel produced from esterification and noted that we would instead make a final determination at a later time.

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185.  EPA. 2010. RFS Program (RFS2) Regulatory Impact Analysis, February 2010, EPA-420-R-10-006, Chapter 2 (Lifecycle GHG analysis), Section 2.4.7.3.3.

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186.  National Biodiesel Board, Comprehensive Survey on Energy Use for Biodiesel Production (2008) www.biodiesel.org/​news/​RFS/​rfs2docs/​NBB%20Energy%20Use%20Survey%20FINAL.pdf.

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187.  According to the survey, the maximum electricity use for a producer reached as high as 3,071 Btu per gallon biodiesel. This is about 5 times higher than the industry average. The maximum natural gas usage for a producer reached as high as 12,324 Btu per gallon biodiesel, which is about 3.5 times higher than the industry average. For “materials used” only an industry average for each material was provided in the survey. Therefore, as a conservative estimate, we totaled all the average material inputs to equal 0.51 kg/gal biodiesel even though not all facilities are likely to use each and every one of the process materials listed in the survey ( e.g., we totaled all the acids used even though a facility is not likely to use each different acid).

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188.  See 81 FR 80828 (November 16, 2018).

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189.  See 83 FR 37735 (August 2, 2018).

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190.  See 78 FR 14190 (March 5, 2013).

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191.  For the other reasons discussed in the sorghum oil rule preamble, see 83 FR 37737-39 (August 2, 2018).

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192.  See 82 FR 61205 (December 27, 2017).

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193.  See 83 FR 37738 (August 2, 2018).

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

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

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196.  See Table 4 of “Grain Sorghum Oil Pathway Petition,” Docket Item No. EPA-HQ-OAR-2017-0655-0005.

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197.  The source of the difference is the amount of corn needed to replace one pound of full-oil versus reduced-oiled DDGS in beef cattle diets. In our analysis for the sorghum oil rule, we assumed, based on the best available data provided by NSP, USDA and commenters, that reduced-oil DDGS are replaced at a lower rate (1.173 lbs corn per lbs DDGS) than full-oil DDGS (1.196 lbs corn per lbs DDGS). Increasing the rate of oil extraction produces less de-oiled DDGS and requires corn replacement at the lower rate of 1.173. Thus, all else equal, higher rates of oil extraction result in lower GHG emissions per pound of oil extracted. It's possible this effect would disappear if we had higher resolution data on corn displacement ratios for DDGS with different oil contents, but such data are currently not available.

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198.  We are not reconsidering or seeking comment on our well-settled policy of exporter RVOs. Exporters of renewable fuel must continue to acquire sufficient RINs to comply with all applicable RVOs, and as such we are not making any substantive changes to the relevant provisions at 40 CFR 80.1430(a) or (b). Any comments on the legality or propriety of the exporter renewable volume obligations, or the substance of 40 CFR 80.1430(a) or (b), are beyond the scope of this action.

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199.  See, e.g.,15 CFR 772.1 (defining exporter as “[t]he person in the United States who has the authority of a principal party in interest to determine and control the sending of items out of the United States”).

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

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201.  This example is meant to be a stylized illustration of how our proposed regulations could apply. It is not meant to exhaustively detail the entities that could meet the definition of exporter of renewable fuel in this type of transaction. To the extent that other parties meet the definition of exporter of renewable fuel, they would also be subject to the exporter provisions.

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

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204.  “Screening Analysis for the Proposed Renewable Fuel Standards for 2020,” memorandum from Dallas Burkholder and Nick Parsons to EPA Air Docket EPA-HQ-OAR-2018-0205.

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205.  For a further discussion of the ability of obligated parties to recover the cost of RINs see “Denial of Petitions for Rulemaking to Change the RFS Point of Obligation,” EPA-420-R-17-008, November 2017.

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206.  75 FR 14670 (March 26, 2010).

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207.  See CAA section 211(o)(9)(B).

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208.  EPA is currently evaluating 1 additional 2017 petition and 39 2018 petitions (10 of which are owned by a small refiner). More information on Small Refinery Exemptions is available on EPA's public website at: www.epa.gov/​fuels-registration-reporting-and-compliance-help/​rfs-small-refinery-exemptions.

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[FR Doc. 2019-15423 Filed 7-26-19; 8:45 am]

BILLING CODE 6560-50-P

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Use this for formal legal and research references to the published document.

84 FR 36762

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“Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021, Response to the Remand of the 2016 Standards, and Other Changes,” thefederalregister.org (July 29, 2019), https://thefederalregister.org/documents/2019-15423/renewable-fuel-standard-program-standards-for-2020-and-biomass-based-diesel-volume-for-2021-response-to-the-remand-of-th.